July 16th, 2007 by Analyst
The salient features and extracts from the Red Herring Prospectus of the issue are given hereunder:
Issue Opens On : July 17, 2007
Issue Closes On : July 20, 2007
Issue Size : 1,77,96,520 Equity shares
Face Value : Rs.10/-
Price Range : Rs. 265 to Rs. 310/-
Issue Type : Book Building
Tick Size : Re.1/-
Market Lot : 20
Minimum Order Qty : 20
Listing Stock Exchange : NSE, BSE
Objects Of the Issue :
For Payments related to Land
For Repayment of Loan
For Development and Construction Cost
For General Corporate Expenses/Working Capital Requirement
Basis for Issue Price :
Face Value : Rs.10/-
Issue Price : 26.5 Times(Lower Price Band) of the Face Value.
Issue Price : 31 Times(Higher Price Band) of the Face Value.
Issue Price : Rs. 265 to Rs. 310
EPS for the last financial year 2006-07 : Rs 16.60
EPS for the last year 2005-2006 : Rs 7.91
EPS for the financial year 2004-05 : Rs. 0.38
Weighted Average EPS for the years April 2004- March 2007 : Rs 11.00
Industry PE ratio:
Highest : 172.7
Lowest : 13.2
Industry Average : 59.1
PE ratio of Omaxe Ltd. on the higher side of price band comes out to 18.7 times and on the lower side of the price band comes out to 16 times on the basis of the EPS for the year ended 31st March 2007.
PE ratio of the Peer Group
Unitech : 59.4
Ansal Properties : 35.9
Mahindra Gesco : 172.7
D.S.Kulkarni : 14.5
Industry Overview :
The real estate sector in India has assumed growing importance with the liberalization of the economy. The consequent increase in business opportunities and migration of the labour force to towns and cities has, in turn, increased the demand for commercial and housing space, especially rental housing. Developments in the real estate sector are being influenced by the developments in the retail, hospitality and entertainment (e.g. hotels, resorts, cinema theatres) industries, community services (e.g. hospitals, schools) and IT and ITES (e.g. call centers) etc. and vice versa as well as owing to the fact that quality real estate development prompts raising of standards of retail, hospitality etc.
In the last 3 years, the construction activity in the real estate sector has been buoyant, after returning to normalcy in 2001 (Between 1995 and 1999, there was a severe recession). Rising demand from technology sectors, demographic shift (increasing disposable incomes and urbanisation), suburban developmental models and favourable government policies have changed the face of the real estate construction sector. The housing boom continued, despite a marginal firming up of the interest rate on housing loans. Over the next few years, too, rising residential demand, the continued demand from IT and ITES for commercial space, the rising retail demand percolating to urban and smaller cities and favourable policy in the form of FDI will drive the growth of the real estate construction industry. These three segments are expected to attract investments to the tune of Rs. 5,508 billion over the next 3 years as compared with Rs. 4,869 billion in the last 3 years.
Business Overview :
Omaxe ltd is a real estate development and construction company with operations in 30 cities and 9 states in India. The company is involved in residential and commercial real estate development projects ranging from integrated townships, group housing and retail and other commercial properties, hotels, information technology and bio-tech parks to special economic zones.
As of March 31, 2007, the company had 52 current residential and commercial projects consisting of 21 group housing projects, 16 integrated townships, 14 shopping malls and commercial complexes and 1 hotel. Its ‘current projects’ include 38 projects which are under development and 14 which are under various stages of approvals for development. The company expects to commence development on these 14 projects within Fiscal 2008. The 16 integrated townships are essentially ‘mixed use’ townships consisting of residential and commercial projects and are expected to include 10 group housing projects, 16 commercial projects, one bio-tech park and one information technology park. The company is also developing projects in the hospitality sector.
History :
The Company was incorporated on March 8, 1989 as Omaxe Builders Private Limited under the Companies Act, 1956. The name of the company was changed to Omaxe Construction Private Limited on March 4, 1997. It converted itself in to a public company with the name of Omaxe Construction Limited with effect from 10th August 1999. The name of the company was again changed to Omaxe Limited with effect from June 6, 2006.
Financial Information :
Total income of the Company for the year ended 31st March, 2007 : Rs. 14,396.79 mn
Total income of the Company for the year ended 31st March, 2006 : Rs. 8,198.62 mn
Total income of the Company for the year ended 31st March, 2005 : Rs. 3,965.99 mn
Net profit (after tax) for the year ended 31st March, 2007 : Rs. 2572.62 mn
Net profit (after Tax) for the year ended 31st March, 2006 : Rs. 1188.15 mn
Net profit (after Tax) for the year ended 31st March, 2005 : Rs. 50.36 mn
Comments :
After the successful issue by DLF, other smaller realty players have lined up to encash the opportunity. There is an ongoing boom in the real estate and construction sector and these companies will be the biggest beneficiaries of it. The issue has been priced at a PE multiple of 18.7 times of the EPS for the year ended 31st March 2007 on the higher end of the price band, which seems to be very attractive if compared to its peers. There is a concern about the slump in residential property market due to high interest rates, but the same might not last long as the interest rates seem to have peaked out and the experts of the sector believe that the renewed demand will be seen from the last quarter of this fiscal. Moreover the demand of commercial space is increasing day by day and there is no slump in the commercial property market, the rentals and valuations are rising with time. The financial statements of last couple of years show a steady and sound growth and on the basis of the current ongoing projects of the company, it is expected to continue its past performance. The pricing and fundamentals appear to be sound and we recommend subscribing to the issue.
Zerodha (Trading & Demat Account)
DRHP
