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Thursday, April 7, 2011

Stock_for_YOU IB Real-BUY; Target Rs 290 (Deutsche Bank)

In Aug'10, IBREL won 2 NTC auctions for adjacent land blocks - Bharat (8.4acres for INR 15bn) and Poddar Mills (2.4acre, INR 4.7bn) - at Worli, Mumbai. As per DNA and Economic Times (23 Dec'10), Lodha, the nearest contender, has been asking for a re-tender stating that it would have bid higher had it known that soft launch was possible even before getting possession of the land. 

(a) Lodha filed a case against NTC and IBREL in Appellate Authority for Industrial & Financial Reconstruction (AAIFR) and the Delhi High Court (HC). With the HC seemingly disinclined, Lodha withdrew its petition on 16 Dec'10. 

(b) IBREL paid the final installment concluding the deal on 16 th Dec  

(c) On 21st, Appellate gave an order dated 16th asking NTC and IBREL to maintain status quo. On 22nd, IBREL appealed to HC. As per CNBC, HC stayed the Appellate order today. 

(e) With HC disallowing the petition twice, we believe that any further delay by appealing to Supreme Court seems unlikely. 

Fears of project viability are unfounded:

IBREL, the first developer to get higher FSI (2.66 under IT Park and 4.0 under Car Park) in Mumbai, expects higher FSI for this project. Post tentative approvals for minimum FSI of 1.33, IBREL soft launched the project. Latter phases would be launched consequentto getting approvals for higher FSI. We estimate significant upsides only with higher FSI (see table). Else low FSI will constrain the estimated supply boosting property prices and hence drive the project viability.

Pickup in leasing: Pre-leasing increases from 1.2msf in Sep'10 to ~1.5msf of its 3.3msf office space at Lower Parel. Rents range from ~ INR 140/sf/ m for larger spaces at Elphinstone to INR 175/sf/m for smaller spaces at fully completed Jupiter.
Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.


Prasanth KS
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