Indiabulls Realestate: Standalone Completley Distressed Valuation @rs61 (Add IBPOWER Yet to be demerged)

Indiabulls Realestate: Standalone Completely Distressed Valuation @Rs61 (Power yet to be DEMERGED)

I feel humbled after a real long time to be honest. I got the direction on the Nifty right. First the bottom as well when i said that it was time to go hedge shorting the Nifty a few weeks back around 5400 levels.

Over the stocks i have written on the multiplex twins did well especially PVR which outperformed BIG FROM the entire lot From the lot we have sold Pvr. Provogue too was a compelling BUY@ 34 and reached 48 levels in less than 2 weeks.On the other side Edelweiss underformance is correlated to the global space. Whereas Lanco was a risky Buy only if one was ready to buy at lower levels.

Now my biggest disappointment (OR SHOULD I SAY or wait one more month??)
I would in no case write about a company if i was not pretty sure.
Whats gone wrong???????????????????
1)Indiabulls always had issues with corporate governance etc.Its known from 2 years and doest warrant an excess fall either..

The company is sitting on huge assets, negligible debt(in companion to assets and peers). Even if one assumes a billion dollars investment to develop them the cash flow over the years is going to be 7-8x current market Cap.

2) The Board of IBPower has approved the scheme of amalgamation of Indiabulls
Infrastructure Development Ltd (IIDL). This is going to drain Parent Indiabulls balance sheet by close to 1000odd crs. This one big news was not factored by me as was announced in q1 results.

Now lets see the positives
1)As of last quarter company owns 530 acres of residential space and 40 odd acres of commercial space.

2)Indiabulls acquired Bharat mills for Rs 1500crs and Podar mills for 474crs. Both the mills are adjacent and covers 11acres of prime land at Worli.
1)At base FSI of 1.33 at 50% loading the company could develop 7,20,000 square feet of saleable land at Bharat mills and around 2,00,000 square feet at Podar mills.This is the bare minimum the company would be able to develop.
While bidding the company had hope of a 4x parking linked fsi which would have yielded 2.9million square feet that is close to 2million square feet more.
As of December 2010 the parking linked fsi was scrapped.

Now if one does a back of hand calculation on around 1million square feet at around 24,000rs a sqft it comes to just 2400crs. Now if i deduct constructions costs of around 4000 a sq ft im left with net realisable 2000crs when investment on land was 2000ccrs. So net net i am just getting my principal loosing the time value of money.

3)Lets see IPIT The commercial assets of Indiabulls one at Lower parel the Elphiston and Jupiter mills land. Its is under a singapore trust. 45% owned by the parent listed Ib realestate. one can read in detail downloading the annual report from the sgx(singapore stock exchange).

As of q2 2012 the leased area stood at around 1.9million square feet. Indiabulls realestate is entitled to a commission on the same.

http://www.sgx.com/wps/portal/sgxweb/home/company_disclosure/all_in_one/company/!ut/p/c5/hZHJjqpAAEW_pT_AUCBQsKQYBIRSkHlDQJChGW0oha9_Lt-m0znLk5Pc5FIJ9WHISFNlSzMOWUdFVMKnjCSxOpCBCISTAAw1CGxF02nBAR8f_-cvPg2B4SOHRYFPnyX2jzqkIsCmt1aY7G2JrF0mXrvfgK3EAO_2hluVxqJyLQLXR5LsHPiXQ5lUUnVj_tkWFglyPdZ-aUaUbsNegTwYQ7MmWsjGYTWiVi8FrEjvb9NFkhqlJKZPx3vO0NcYXsuyjCyjY5jxvu6rchpu2dQHBbaXgnm3YKR1-MpQcYTcON2207N5Qn-8MPrx0u2wkOn8Z4Up7g2tj1oxoEkkLrI7-7wmDZ26Tb4h2aFpypZ5dFByLt5MndHDhJUnER6pRypu4Fpe5-7WhY91h7FUrlMug_2YzYpdNRfN8mrWTaTGS-JYZw-z47A3gu0VllMmNxn5d0XZqp4QFGt29pKwq9XS3YJVcZBX9uebYGIf0WuR3yLrWIe3yQXgnPd1MOeZlakR65lbk89D8riKfRUM8MFvM3-QcF87o_BFYX3sSyqmEvjbvzKC1NT7pBeMr39TWOPv/dl3/d3/L0lDU0lKSkthWUEhIS9JTlNBQ0lpTXdxSkFDQUpvb0dBIS80QzFiOVdfTnJ4UUMvN18yQUE0SDBDMDlPVTE3MElVQlE0QlZVMUNCNy8xODMxNzYyNTYxMzI!/?CompanyCombons_7_2AA4H0C09OU170IUBQ4BVU1CB7_=INDIABUL&CO_ALLONE_SELECTED_INDEX=435&CO_AllONE_CHART_RET_CODE=INDIABUL&CO_AllONE_STOCK_NAME=INDIABULLS+PROPERTIES+INVTRUST&CO_AllONE_IBM_CODE=1W91&CO_AllONE_HP_CODE=F3EU&CO_AllONE_MASTER_CODE=42033

4)Indiabulls has other projects in Panvel, Thane. I donot buy the expensive sqft rates at panvel just because of an airport. These are bound to correct.However even factoring 25-30% lower rates the co is trading at mispriced valuations

Adding all this this does not deserve to trade at a market cap of just 2400crs +1000crs debt +1 crs current liabilities (jump in q2 2011) so effective at a enterprise valuation of

wait.................................................

What got me to this stock?? Was the Power fizzled out????
Indiabulls Power demerger?-------------Sold out???????
see the demerger was approved earlier and each indiabulls realestate shareholder was to get 2.95 shares of Indiabulls Power ans Infra (holding co of Power)
1)Progress of power plant-------------------------good
2)PPA-------------------------------------------- Good
2)Coal------------------------------------------- Bad
Again i repeat this. Its got coal linkages and as per coal India if a company has fixed fuel agreement it is entitled to 90% fuel as per agreement. Coal india signed the last agreement in mid 2009.

Its atleast got solid power purchase agreements signes which is a positive. People talk about state electricity board looses xxx lac crs.
I should be bothered only about Maharshtra seb status as its linked to Ibpower.

Over the last 2 yrs coal india has been signing memorandum of understanding where it promises to deliver atleast 50 % of the requirement.

So where does this leave Indiabulls power
1)as i said earlier its got mittal backing with mines
2)i said this few months back----------
Indias got the world's largest coal reserves yet only 4% reserves are commercialy exploited.
enviournment clearances---------
our government is keen on helping companies with debt of rs 6000crs odd
by next yr many projects go on stream with more than 10billion$ on line (minimum)
does not make sense for many to import coal at 110$. So who will blink first.
I feel and could be very well be wrong that Coal India will get clearances to develop more mines.all power cos work on 70%debt 30% equity model.
NO COAL------NO POWER-----NO CASH FLOW-------NO REPAYMENT----BAD LOAN

holds true for all cos...............................................

In short on a stanalone realestate co you are getting
Indiabulls residential (ncr, panvel, chennai)
Indiabulls (Bharat mills and Podar mills)
Indiabulls IPIT Trust (Indiabulls one center)
Indiabulls Residential IPIT (Same trust) Indiabulls sky and forest

at 2400crs + 2000crs (debt inclusive of current liabilities)

What i like about this company is that it raised money for buying assets and minimum amount of debt in comparion to other players

========in addition-------------------------------------------Dark horse
Indiabulls Power

But even on a standalone basis even considering base fsi of 1.33 it would recover the invested money.(worst case)

In a weak market a stock held primarily with fiis is bound to take a beating. But it baffles me @ 61.Many stocks have corrected big time. So is it ok? Not in my opinion.

Its a matter of time for the demerger announcement.Hope i dont get it wrong.from this levels even it moves 50% will be a no profit/loss return but atleast would clear free capital.I continue to remain positive however the amalgamation announcement was a drag.

All was known and in my view the IPIT assets alone are worth more than todays stock price.