HDFC Securites Report

September 12, 2008

CMP (Rs): 868

Mkt Cap (Rs Bn): 58

Mkt Cap ($ Mn): 1289

The Company

Akruti City Ltd (formerly Akruti Nirman Ltd.) is a leading Mumbai based real estate developer with strong presence in Slum Rehabilitation Authority (SRA) schemes.

Land Bank Mix well suited to tide over the slowdown

Akruti City’s geographical presence in the Mumbai Metropolitan Region gives it an advantage and cushion against severe price correction. The rentals for its SEZs at Pune have been steady at Rs 40 per sq foot per month and have notseen any downward pressure. SEZs (commercial segment) including the Baroda Biotech Park form 45% of its 107mn sq ft land bank. Land for residential projects (~ 6mn sq ft) in Mumbai is primarily acquired through the slum rehabilitation route. This gives the company a cushion in a softening residential market.

Project Completion Status

The DLF Akruti Infotech Park at Pune is 40% complete and 1st phase of the Baroda Biotech Park is nearing completion.

Land bank addition

The company has moved into Gujarat, and Jaipur. It has acquired 4.72 mn sq ft of land in Gujarat and 1 mn sq ft in Jaipur. The land acquired in Gujarat excludes the land at the Baroda Biotech Park.

Recent SC judgment positive for Akruti

The SC order will open up 225 acres in the island city and see redevelopment of over 18,000 dilapidated buildings. Since Akruti has a proven record in redevelopment projects, it is in a position to bag development rights of old buildings in South Mumbai.

Valuation and Recommendation

The company’s land development schedule is front ended and has high visibility. Its commercial (SEZ) assets too have strong visibility as shown by the SEZs at Baroda and Pune. With 49% of its land bank in the commercial segment (highest among the listed real estate players) the company’s cash flows are strong.

Increasing commercial and corporate activities in Mumbai, Pune and adjoining cities led by IT, Banking and Financial sectors have resulted in huge demand for commercial and residential space with demand outpacing limited supply. Akruti City, with its land bank in these areas is in a position to tap this market. Given the visibility in project execution,
its diverse land bank and strong presence in SRA schemes, we believe the stock should trade at the NAV of Rs 1535 and hence we recommend a BUY on the stock. We expect revenues to grow at a CAGR of 118% and EPS by 113% (FY07-FY10E). Therefore, we recommend a switch from Indiabulls Real Estate to Akruti City