Incorporated in 1986, LHCL is the flagship company of the Lok Group and was among the first few realty companies to be corporatised in 1987. Promoted by Lalit Gandhi, the group has built several housing complexes in the suburbs of Mumbai like Khar, Andheri, Vikhroli and Mulund and outside Mumbai at Thane, Kalyan and Ambernath.
Till date, the Lok Group has executed and developed over 31 projects, of which 9 are currently under development; comprising 17,000 units spread over 8.93 million sq. ft. of townships, educational institutes, health centres and commercial units.
During Q4FY08, its net profit declined by 28% to Rs.13.1 cr. on 60% lower revenue of Rs.20 cr. The revenue was lower as the major portion of projects was under construction. During FY08, although income declined by 18% to Rs.223 cr., net profit jumped by 23% to Rs.112.9 cr. Its EPS stood at Rs.26.3.
LHCL’s equity capital has gone up to Rs.42.9 cr. on account of issue of preferential shares to the promoters and other investors at a premium of Rs.187. The book value of the share is Rs.46. The promoters hold 51% in the equity capital, foreign holding is 3%, non-corporate promoters hold 31% leaving 15% with the investing public.
To build a stronger brand image synonymous with its size, scale of operations and quality housing, LHCL is in the process of merging 3 of its group companies – Lok Shelter, LGNC and Lok Holdings with itself. Lok Shelter is involved in urban rehabilitation and reconstruction projects. LHCL is the vehicle to acquire land while LGNC handles the diverse infrastructure projects.
The merger will help address infrastructure projects, which is a new opportunity at a time when economic policies are directed at modern infrastructural development. It will enhance its land bank by 356 acres by bringing together lands acquired under different companies for further development and will expedite rehabilitation projects – another huge opportunity through Lok Shelter. The merged LHCL can take on more mega, ultra premium and landmark projects.
LHCL alone has a robust land bank of approximately 866 acres with development potential of 49 million sq. ft. (including properties where MOUs have been signed) at the most sought after realty destinations such as Mumbai, Pune and Bangalore. Post merger, the company, will have a land bank of 1222 acres across the country with development potential of 62.5 million sq. ft. and it has instituted six sigma quality systems for operational excellence, timely delivery and seamless execution of large scale projects.
Having established its presence in Mumbai and procured land in Pune & Bangalore, LHCL is looking to establish a strong pan India presence by foraying into other metro cities and then into Tier II & Tier III cities. It would participate in National Urban Renewal Projects comprising slum eradication projects, demolition and reconstruction of old and dilapidated buildings.
LHCL is currently executing a Slum Eradication Project in Khar, Mumbai, where through its group company, Lok Shelter, it has already completed construction of four buildings. This initiative has resulted in the sanction of an FSI of 4 acres in the most premium location in Mumbai on which the company is developing ultra premium residential houses (on 50% of the land) and plans to construct commercial units in the balance space.
The Maharashtra Government has renewed its thrust to transform Mumbai into a world-class city. It is mammoth challenge that requires rebuilding over 23,000 buildings (including 17,000 cessed buildings, mostly in South Mumbai) and 5,000 municipal tenanted properties, which are over 60 years old and in a dilapidated state especially after the 26 July 2005 rain. Huge funds with an estimated investment pegged at over Rs.2,20,000 cr. is required over the next 10 years for this transformation. Further, the Maharashtra Government's move to repeal the Urban Land Ceiling and Regulation Act (ULCRA) is expected to free close to 15,000 acres in Mumbai for development.
In May 2008, LHCL approved the issue of 3.5 million convertible warrants to promoters on a preferential basis at a price of Rs.354 each for an aggregate amount of Rs.123.9 cr. The convertible warrant of Rs.10 face value and will be converted into 1 share within a period of 18 months.
Considering LHCL’s expertise in mass housing and ultra premium projects, its efforts to enhance its land bank, its ability to complete projects on time, its geographic diversification and strategic investment in sites with international grade properties give strong visibility to its profitability in coming years.
Based on the ongoing projects, LHCL is expected to generate a revenue of Rs.265 cr. with a net profit of Rs.125 cr. and the EPS would work out to Rs.29 for FY09.
The share is traded at Rs.55.50 at a P/E of 1.8 on FY09 estimated EPS of Rs.29. Investment in this share has all the potential to appreciate by over 50% in the medium-to-long-term. The 52-week high/low of the share has been Rs.391/41.
by V H DAVE
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