Kamanwala Housing Construction Ltd - Rs 90.00

Kamanwala Housing Construction Ltd (KHCL) was originally incorporated in 1984 as Kamanwala Housing Development Finance Company mainly to cater middle class buyers by constructing low cost housing and financing it at nominal rates. Attar Apartments and Kamanwala Nagar at Virar were built under this program. Subsequently it also ventured into acquiring few old building and tenements and then transferring the ownership to tenants at reasonable rates after carrying out repair and renovation. Later in 1995, company diversified into manufacturing of steel ingots for own construction requirement and got renamed as Kamanwala Industries Limited. However, company does not undertake this activity any longer. And hence in 2006 it finally changed its name KHCL, to reflect the focus on its core activity i.e. construction. Today, from the low cost housing projects it started out with, the company has now transitioned itself to executing prestigious projects of high quality in prime locations.

Having a track record of more than two decades, KHCL have completed the execution of 18 projects in Mumbai, with saleable area totaling more than one million square feet. Few of its well known constructions are Manavsthal-Andheri, Krishna Kunj-Goregaon, Mukta Apartment-Khar, Manavsthal I & II-Goregaon, Vaibhav Apartment-Bandra, Maker Kundan Garden-Anderi etc. However till now company was only into residential segment and that too in a small scale. But off-late, on the back of boom in real estate sector, company has entered into commercial segment as well and has drawn up ambitious expansion plan on a much larger scale. In the last couple of years, it has acquired good land bank in Mumbai for future projects. Its ongoing and future projects are:

Manavsthal - Saki Naka, Andheri(E): This project emerged as premier project which helped KHCL to come out of difficult times. It’s a residential project divided into three phases consisting of 240 Flats. Phases I and II have already been completed and sold off. Phase III is now on a completion stage with 70% area sold off.

Pinnacle Corporate Park – Bandra Kurla Complex: This is a commercial project comprising of 75,000 sq. ft. out of which 43,000 sq.ft. area has already been sold. It is expected to complete by 2008 and will enhance the image of the company in the construction Industry.

Rishi Tagore - Santacruz (W): Being in a prime location, company is planning to develop this into a luxurious 60,000 sq ft residential complex for which the land cost alone is 35 cr.

Residential Project - Malad (W): This project is being taken up at Marve Road under the Slum Rehabilitation Authority (SRA) scheme. Architectural plans for this Rs.33 cr project have already been approved, and financing obtained. Implementation is in full swing, and the project of 2,03,000 sq ft is slated for completion in September 2009.

Vallabh Terrace - Opera House: KHCL has purchased an existing building at Opera House admeasuring about 15,000 sq. ft. area for redevelopment/upliftment and subsequent conversion of tenancy rights into ownership rights. It will be completed during the current year.

Commercial cum Residential Project - Versova, Andheri(W): The total cost for this project is Rs. 40.50 cr for developing 1.00,000 sq. ft. area. As soon as the architectural plans are approved by the concerned authorities, the construction work will commence.

To de-risk the business model further, KHCL has undertaken geographical diversification as well and entered into a joint venture agreement having 20% share with M/s. Prajay Engineers & others for the development of a land admeasuring 35 acres at Patancheru, Hyderabad. It has also purchased additional 2 acre land in Hyderabad for 1.60 cr to construct commercial / residential buildings. Moreover KHCL has acquired some land in Mahim under SRA scheme. In a 33% joint venture with Aspen Property Pvt. Ltd., it is developing a property at the famous Filmistan Studio, comprising both residential and commercial units. Meanwhile it is negotiating for few projects at 4 bunglow, Andheri Kurla Road, Mulund, & BKC phase-II.

To conclude, KHCL has entered into an exponential growth trajectory and market is bound to re-rate this company sooner than later. For FY07 it made a strong turnaround for FY07 with sales of 83 cr (against 11 cr) and NP of 13 cr (against 0.50 cr) posting an EPS of 26 Rs on equity of 5 cr. To fund its working capital requirement, KHCL made pref allotment of 15.84 lakh equity shares and 19.95 lakh warrants @ 98 Rs per share in Dec 2006. Recently, company has amalgamated its subsidiary called M/s. Doongursee Diamond Tools Ltd with itself. Notably, this subsidiary is holding one lakh FSI for the Malad project. Meanwhile for nine months ending Dec 2007, its topline remained flat at Rs 67.50 cr but bottomline shot up 80% to Rs 15 cr. Being in the real estate & construction sector and following the revenue model on sale of agreement basis, company is bound to post erratic and lumpy results on quarterly basis. Accordingly for FY08 it is estimated to report total revenue of Rs 90 cr and PAT of Rs 18 cr. This works out to an EPS of Rs 25 on fully diluted equity of Rs 7.20 cr. Although its profit margin seems too high and company has a debt of more than 50 cr, still it has the potential to give handsome return over a period of time. Considering its 52 week H/L as Rs 229/68, investors are advised to buy at current levels as it can easily give 50% return within a year.

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