Anant Raj Industries, which has incidentally constructed Delhi's landmark India Gate, currently has 73 million square feet of projects in hand, the land cost of which is completely paid for. Out of its total land bank of 1,178 acres, 42% is in Delhi, 17% in outer Delhi, 24% in Manesar and 17% in Gurgaon. According to CLSA, out of its gross asset value of Rs76 billion (GAV), 58% comes from Delhi, 14% from outer Delhi, 12% from Manesar and 16% from Gurgaon. To arrive at a March 2012 net asset value of Rs230/share, CLSA has assumed 47 million square feet of development.
Between March 2007 and March 2010, Anant Raj added very little to its landbank—only 72 acres, or 8% of its total land bank. However, after land prices contracted substantially thereafter, it turned a little aggressive and has undertaken an addition of 150-200 acres in Gurgaon and Manesar at a cost of Rs10 billion. Even with these purchases its gearing is expected to stay low at 0.2x in March 2011. From a cash surplus level of Rs3.5 billion in FY10, CLSA assumes net debt at Rs6.9 billion in FY11 falling to Rs6.1 billion in FY12. CLSA believes that a lot of the new land that Anant Raj has purchased will have a low gestation period, or turnaround time, since it is very close to large developments by its competitors. Most have a development potential of just 2-3 years.
CLSA points out that Anant Raj's business model transformation to a faster turnover/residential portfolio started in early FY11 and it expects residential sales to scale up substantially from FY12 onwards. From nothing in FY10, the residential area sold is expected to be 9,00,000 square feet in FY11, 2.3 million square feet in FY12 and 2.5 million square feet in FY13. Comparative value sales are expected to be Rs5.3 billion in FY11 and Rs13.2 billion in FY12 against nothing in FY10. "The 150-200 acres of new land that Anant Raj is acquiring is entirely in the residential segment and will shift the percentage contribution of residential land to 38-41% from 25%," says the CLSA report.
A key trigger for the stock could be the launch of the Hauz Khas property that was stalled due to litigation. CLSA expects to re-launch in the fourth quarter of FY11. Another positive is its rapidly increasing rentals portfolio. "Anant Raj's portfolio of rental assets started maturing in FY10 with the company adding a 1.1 million square feet IT Park at Manesar and four hotels with 190 rooms to its rent-earning portfolio by March 2010 end. Its area on lease is to triple to 3.6 million square feet by March 2013."
A big risk is that 52% of Anant Raj's NAV comes from the commercial space, making it sensitive to the capitalisation rate. CLSA has assumed 11% cap rate, and estimates that a 1% compression in cap rates can lead to a 4.3% increase in NAV. But the reverse will also be true. Another overhang is that its Delhi land parcels have faced considerable delays in monetization on various regulatory and legal counts and further delays could be a big risk to expectations.
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