Omaxe Ltd. is entering the capital market on 17th July 07 with a public issue of 1.78 crore equity share of Rs.10 each with an additional green shoe option of upto 17.50 lakh equity shares in the band of Rs.265 to Rs.310 per share.
The total land bank owned by the company is 3,255 acres including land of 571 acres acquired under joint development and 2,684 acres of its own for which the company has complete ownership or have entered into development agreement. Total developable area is about 183.83 million sq. ft. As at 31-03-07 the total saleable area under development is about 149.82 million sq. ft. of which 66.60 million sq. ft. is for group housing, 77.30 million sq. ft is for township, 4.89 million sq. ft. is for commercial and 1.03 million sq. ft is for hotel with major presence in Haryana, U.P., Punjab and Rajasthan. Major presence of the company is mainly into tier II and tier III cities like Ajmer, Bhiwadi and Jaipur in Rajasthan while at Agra, Greater Noida, Lucknow, Mathura - Vrindavan and Noida in U.P. The largest housing project of the company is at Raipur in Chhatisgarh for 13.59 million sq. ft. The largest integrated township project is at Jaipur of about 14.13 million sq. ft while commercial project is at Greater Noida of 1.49 million sq. ft.
For FY 07 the total income of the company was placed at Rs.1,440 crores with PBT of Rs.322.32 crores and PAT of Rs.257.26 crores on equity of Rs.154.95 crores resulting in an EPS of Rs.16.60. Post issue, equity of the company will rise to Rs.174.50 crores, including green shoe option, and promoters stake in the expanded equity base would be 88.80%.
If we consider the price discovery at Rs.310 per share, the market capitalization of the company works out at Rs.5,410 crores. The company can very well be compared with Parsvanath Developers and HDIL which are also mild size realty companies. DLF and Unitech are large realty companies. Present market capitalization of Parsvanath is about Rs.7,200 crores and the company has saleable area in excess of 120 million sq. ft. mainly in the northern part of the country. HDIL have market capitalization of Rs.10,750, if valued at Rs.500 per share, and this company has about 112 million sq. ft. of saleable area, mainly in western parts of the country, where offtake and realization of the real estate is better. Prasvanath Developers had a total income of Rs.1,236 crores and PAT of Rs.272 crores for FY 07 resulting in an EPS of Rs.14.70 while HDIL had a topline of Rs.2,096 crores and PAT of Rs.548 crores resulting in an EPS of Rs.30.45 for FY 07.
Though the company claims to be in property business since 1989, they have very poor track record of execution and development. In 2001 the company diversified into real estate development with focus on residential projects. As of 31st March, 07 the company had completed 8 residential projects of which 7 were group housing and 1 integrated township and 2 commercial projects with total developed area being 5.13 million sq. ft. Now, the company is planning to develop 184 million sq. ft., a rise of 35 times. It seems that the company was busy in acquiring properties for the last over 2 -3 years with less focus on development, which may force the promoters to sell the developable land instead of developing it of its own, whereby unable to fully realize the value of the property.
It is difficult to compare realty companies, as the quality and location of the land bank makes huge difference in its valuation. Even in the same city, different location has difference of over 100%. Also, the company's presence in SEZ is also quite low when compared with Parsvanath, which has 24 SEZ with area of over 165 millions sq. ft. The company has received in principle permission from Board of Approvals, GoI for a multi-product SEZ in Rajasthan to be spread over 15,000 acres.
The concern on execution capability of the company would always remain. However, in view of huge land bank at its command with expected market cap of Rs.5,500 crores, the investment appears safe and rewarding in the short to medium term.