D B Realty

D B Realty is entering the capital market on 29^th January, 2010 with a public issue of Rs. 1,500 crores in the price band of Rs. 468 to Rs. 486 per equity Share.

The present equity of the company is at Rs. 211.20 crores, which is likely to get raised to Rs. 243 crores, considering issue made at the lower price band of Rs. 468 per share. This will result in a 13.20% equity dilution and expected to have a market capitalisation of close to Rs. 11,500 crores.

The strong point goes in favour of the promoters of the company are, its strong presence in Mumbai City, especially in Central Mumbai, where selling price rules between Rs. 18,000 to Rs. 25,000 per sq. feet, coupled with almost debt free status and strong execution capability.

The company as on 31^st December 09, has 11 ongoing projects with saleable area of 19.51 million square feet, 8 forthcoming projects with saleable area of 19.28 million square feet and 6 upcoming projects of 22.24 million square feet of saleable area. The total area of 61.03 million sq. feet, represents the share of the company. Also, the company has presence in pockets of Mumbai like Jacob Circle (6.22 lakh sq. ft.) Mahalaxmi (14.84 lakh sq. ft.) Andheri (East) (12.49 lakh sq. ft.) Dahisar (16.16 lakh sq. ft.) Goregaon (East) (8.80 lakh sq. ft) Kandivali (West) (4.91 lakh sq.ft.) and Mahul with 87.01 lakh sq. feet. All these projects are being developed in the location most preferred by the prospective buyers, with average selling price in central Mumbai ruling above Rs. 20,000 per sq. feet. Even in suburban Mumbai, all the projects are in the western part, where average selling price is at around Rs. 10,000 per sq. ft.

The promoters of the company have the track record of developing composite housing complexes in the period of 1985 to 2005. About 37 lakh sq. ft. has been developed at Kandivali (West) with about 42 lakh sq. ft. in Goregaon (East). All these projects and complexes are equipped with school, shopping malls, commercial and shopping complexes, multiplexes, community hall, temples, medical centres etc., which has resulted in better saleability and preferred locations of the buyers.

Presently, HDIL has good presence in Mumbai, of which over 50% is in distant suburbs of western Mumbai at Vasai Virar. Also, redevelopment of Mumbai Airport land is in JV with GVK. So all these gives less of development land and more of TDRs, which are largely sold by HDIL. This results in low margin and inspite of this, HDIL has market cap of Rs. 11,000 crores and EV of Rs. 14,500 crores.

The company also has its forthcoming projects coming up at Goregaon, Dahisar, Malad, Mumbai Central, Byculla, Bandra, Kurla Complex and Mira Road. All these projects are going to give very good margins, as also fast selling of the units and apartments. Thus, the company has an advantage and edge of probably the only and largest company, amongst the listed peers, to have such a strong presence in Mumbai. Also, due to saleable area of close to 61 million sq. feet, it should be able to have strong pipeline of projects for next 7-8 years,of which, one third  are under development.

Considering all this, due to strong presence in Mumbai coupled with debt free status, issue looks good and recommended even at the upper band of Rs. 486. The issue should  be able to give good returns, if held with 6-12 months view, as also listing gains, as it is found to be reasonably priced while comparing it, with its listed peers.

One can subscribe the issue even at the upper band.