Lok Housing & Construction Ltd - 200.00 Rs

Incorporated in 1986, Lok Housing and Constructions Limited (LHCL) is the flagship company of the Mumbai based Lok group which specializes in mass - housing and primarily caters to the needs of middle-income group. It has contributed significantly to the development of Mumbai and its adjoining suburbs with over 40 mini and mega residential complexes, commercial centres, from single storey bungalows to multi storey towers, simple flats to pent houses and plush condominiums comprised of 17000 units spread across 9 million sq feet area. Lok Nagari(Ambernath), Lok Terraces(Vashi), Lok Upvan(Thane), Lok Vatika(Kalyan), Lok Nisarg & Lok Kailsah (Mulund), Lok Vihar(Powai), Lok Darshan(Andheri) etc are few of the popular and big projects executed by the company. It is among the first few real estate players to develop an estimated 1.2 million sq ft of land in a single year way back in 1994. It boasts of being the first to start an SRA (Slum Rehabilitation Authority) project in 1994. Notably, it is also among the very few construction companies in India to have instituted six sigma quality system for operational excellence, timely delivery and seamless execution of large scale projects. Presently, it has several residential projects under construction including Lok Everest(Mulund), Lok Amber(Ambernath), Lok Nirman(Khar), Lok Prabhat(Virar) and few others at Thane, Kalyan, Marol etc.

Ironically, LHCL is having a land bank of whopping 1222 acres across Mumbai, Pune and Bangalore with development potential of 62.5 million sq ft. Out of these, 356 acres came into company’s belt due to merger with group companies. Most of the land has been acquired long back at very low cost and are located at Ambernath(80 acres), Kalyan(92 acres), Vasai(136 acre), Turbhe(180 acre), Pune(425 acres), Bangalore(240 acres) and balance 69 acre spread across Andheri, Malad, Khar, Thane & Virar in Mumbai. In order to consolidate and emerge as a bigger player, group recently merged Lok Shelter-involved in urban rehabilitation and reconstruction projects, Lok Global- involved in diverse infrastructure projects and Lok Holding-key vehicle to acquire land with LHCL. Thus, company has now got into two new promising business segment – infrastructure development and rehabilitation project. Although both has huge potential but company is betting high on the latter and is looking to participate in National Urban Renewal Projects comprising slum eradication projects & demolition and reconstruction of old and dilapidated buildings. Hence, it has already submitted a proposal to the state government to rehabilitate tenants of about 300 unsafe cessed buildings in Mumbai and simultaneously develop 6 million sq ft in the heart of the city in association with MHADA. Importantly, against this government may cross subsidize the cost of redevelopment thru sanction of Floor Space Index (FSIs). Hence it’s a win-win situation for either of them.

On the other hand, although Maharashtra govt has approved a proposal to repeal the Urban Land Ceiling Act but still no decision has been taken regarding development of saltpan land and the issue is under consideration. Incidentally, LHCL is holding nearly 180 acre as a salt pan land in Turbhe which it intends to develop into a top quality township on getting clearance. In future company plans to come up with a grand project to be constructed on any of its 125-150 acres of land and to be called as “The Lok International City” which will be a landmark mega township, resembling a small independent civilization and possibly a first of its kind in the country. Apart from robust demand for housing, real estate industry is expected to grow substantially in future due to various factors such as 100% FDI investment, reduction of threshold for integrated townships, real estate investment trust, availability of housing loan at lower interest rate coupled with Income-Tax benefits etc.

Fundamentally, company’s equity has got enhanced to Rs 42.88 cr against Rs 11.70 cr due to merger of group companies / warrant conversion and at the same time promoter holding got increased to 51% against 23% last year. To fund its upcoming projects, company is looking to raise more than Rs 800 cr thru QIB/FCCB/GDR/private placement etc in future. Accordingly it made a pref allotment of 762,200 shares to Bennett & Coleman @ Rs 197 and is planning to allot 50 lakh warrants to promoters @ Rs 354 per share. Considering LHCL’s huge land bank position in metros like Mumbai, Bangalore and Pune coupled with rising property prices, this company is available fairly cheap at a market cap of Rs 800~850 cr. Sarcastically, scrip hit a new 52W high of Rs 390 on 1st Jan 2008 but collapsed 50% in the recent carnage. Although it can go down further, still investors can easily expect 50% return from hereon in 12~15 months.

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