Kolte-Patil Developers Ltd - 110.00 Rs

Founded by Mr. Milind Kolte & Mr. Rajesh Patil in 1991, Kolte-Patil Developers Ltd. (KPDL) is a well known real estate development company in India that develops and constructs properties mainly in Pune and Bangalore. Till now it has developed and constructed 25 projects (22 in Pune and 3 in Bangalore) which constitutes 16 residential complexes, 4 commercial complexes, 3 commercial cum residential use and 2 IT parks covering a total of approximately 4 million sq. ft. of saleable area. As on today, it has presence in the entire gamut of construction ventures like residential projects, integrated townships, IT parks, commercial complexes and hospitality sector. Infact, company has even received the Government of Maharashtra’s First Prize for “Best IT Infrastructure in the State of Maharashtra” for its GigaSpace IT Park project in Viman Nagar, Pune.

To capitalize the ongoing boom in the real estate sector, KPDL has very aggressive plans of investing nearly Rs 3650 cr in coming 5~6 years. Currently it’s in the midst of developing 28 projects (24 in Pune and 4 in Bangalore), with a total saleable area of around 18 million sq. ft. (on 22 million sq. ft. of land area) consisting of 10 residential complexes, 11 commercial development, 5 IT parks, 1 integrated township & 1 service apartment. In other way, out of these 18 million, township accounts for 42%, residential projects contributes 35%, commercial adds 11%, IT parks 10% and the rest coming from service apt. Notably, for funding the projects KPDL has entered into a joint venture agreement with ICICI Venture Funds company for development of three of its larger project namely - 400-acre Township at Hinjewadi, Pune, 1.1 million sq. ft. IT Park at Kharadi, Pune and Bungalows scheme in 80 Acres area at Wagholi, Pune. Besides it has formed a joint venture with UK based Real Estate Fund - K2 Property Limited (subsidiary of Yatra Capital) for development of residential properties at Pune. Additionally, it has signed a term sheet with Arora Holdings of UK for setting up of two hotels - one in Pune and other in Bangalore with total investment of Rs. 600 cr. Apart from above 28 projects (18 million sq. ft.), KDPL has also entered into MOU or has acquired development rights for additional 22 million sq. ft. of saleable area on 33 million sq. ft. of land in and around Pune and Bangalore. Although the actual land bank owned by the company is less than 15 acre but the development right is equivalent to whopping 755 acres of land. With this company has a total developable space of almost 40 million sq. ft (18 million + 22 million). These reserves are likely to provide the company secured development pipeline for the next 5-6 years, ensuring the profitability of the company going forward.

For acquisition of development rights & to fund its ongoing project, KDPL raised Rs 275 cr in Nov 2007 via IPO route @ Rs 145 per share. Financially, company is doing extremely well and has ended FY08 on quite a buoyant note. Revenue jumped up 60% to Rs 369 cr and net profit shot up 55% to Rs 129 cr. This translates into EPS of Rs 17 on equity of Rs 75.30 cr. But importantly company is at the inflexion point and is estimated to register phenomenal growth in coming years. For FY09 it has the potential to clock a turnover of Rs 650 cr and profit of Rs 160 cr which works out to an EPS of Rs 21 cr on current equity. Because of the apprehension about sustainability of high real estate prices, most of the housing construction scrips are poorly discounted on the bourses. But at a modest discounting by 8x times against FY09 earnings, scrip has the potential to touch Rs 175 within a year. Investors are recommended to buy at current levels and add on sharp declines.

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