IVR Prime Urban Developers IPO: May Want to Avoid in the Short

Term

The India Street had previously analyzed three real estate developers
IPO’s: DLF, HDIL and Omaxe. In this article let us analyze IVR Prime
Urban Developers IPO.

IVRCL Infrastructure and Projects Limited is a Hyderabad based

company that is engaged in execution of infrastructure projects like
water supply, irrigation, buildings,
industrial structures, transportation Article Summary
projects like highways, railways,
The Issue: Should one
power transmission projects like
invest in this slightly
substations,
overpriced IPO?
transmission/distribution lines and
rural electrification. Its subsidiary The Solution: It’s pretty
company, IVR Prime Urban clear. Wait for a better
Developers Limited have come out opportunity!
with an IPO (Initial Public Offering) to raise about Rs.720 to Rs.850
crores.

Overview of Business:

IVRCL Infrastructure and Projects Limited has about 80% stake in IVR
Prime Urban Developers Limited. After the IPO it will come down to
about 62%. IVRCL had an order book of Rs.6,637 crores as on
September 30, 2006.

IVR Prime has 6 projects in Hyderabad:

Hitec City Project: This is located close to the Hitec (Hyderabad

Information Technology and Engineering Consultancy) city and it is a
residential cum commercial project. About 266,000 square foot of built
up area is available for residential premises; similar area is allocated
for commercial purpose.

Hill Ridge Project: Located at Gachibowli, Hyderabad, it is a commercial

project with built up area of 866,000 square foot for mall/retail section
and 702,000 square foot for IT park. The project includes shopping
mall, multiplex, office tower, dining and convention area. Adjacent to
the Hill Ridge IT park, a 250 room 5 star hotel project is underway. It is
expected to be commissioned in about 2 years from now.

At Gachibowli itself, a residential project known as Hill Ridge Springs is

coming up. About 48,500 square foot of area is still to be sold. There
will be 2,3,4 bed room apartments, duplex apartments, penthouses,
clubhouse, floating gardens, gymnasium, tennis court etc. within the
housing complex. Hill Ridge Villas, a 5 bedroom independent Villas
project is planned nearby. About 50,000 square foot area is available
for sale. Another residential project with total built up area of about
295,000 square foot will come up at Gachibowli.
The following table shows the details of projects at Bangalore:

Location Type Built up

area
Jigani Residential 411,600
Prime lake, Begur Res./Comm 2,704,000
.
Green vista, Residential 618,475
Whitefield
Apartment, Residential 195,000
Whitefiled
Kudlu, Hosur Road Residential 467,200

The following table shows the details of projects at Chennai:

Location Type Built up

area
Prime Pacific, Residential/ 23,391,720
Sriperumbudur Commercia
l
Prime Celestial, Residential/ 20,447,600
Vayalur Commercia
l
Prime Auburn, Minjur Residential 3,781,500

The following table shows the details of projects at other locations:

Location Type Built up

area
Visakhapatnam Residential 4705,350
Paiet, Pune Residential 1,000,000
Dengaragaon, Pune Residential 1,742,400
Bhajgaon, Pune Residential 2,944,000
Sector 121, Noida Residential 1,076,368
 Sector 119, Noida Residential 780,682
Sector 118, Noida Residential 2,874,960
Sector 144, Noida Commercia 2,000,000
(SEZ) l

It may be noted that IVR Prime has more residential projects than
commercial projects. From the above tables, it can be seen that
Chennai has more developable area (47 million square foot) that
accounts to nearly 70% of the toal.

The proceeds of the IPO will be used to complete projects, repay loans
and make payments for development rights.
Financial performance in the past 3 years:

Item 2005 2006 2007

Income 21.85 136.43 147.83
Expenditure 20.63 122.82 110.26
Profit before tax 1.23 13.52 30.85
Profit after tax 0.71 11.70 20.68

All figures mentioned are in Rs. Crores.

The EPS for the year 2007 is 4.60.

IPO details:

Start Date: July 23, 2007

End Date: July 26, 2007
Issue Size: 14,150,000 equity shares
Face value: Rs.10
Price band: Rs.510 to Rs.600
Market lot: 10 shares
Minimum quantity: 10 shares
Retail investor limit: Rs.100,000

Application forms can be downloaded from this link.

Red Herring Prospectus is available from this link.

Following table illustrates the bid status at 1655 IST on July 23, 2007.

Total Issue Size 14150000

Total Bids Received 10150
Total Bids Received at Cut-off 9020
Price
No. of times issue is subscribed 0.00

Conclusion:

The company is promoted by well known IVRCL group with an excellent

track record in infrastructure and construction projects. IVR Prime has
strong support from the parent company for technical expertise. IVRCL
itself has a strong order book, and hence additional manpower will be
needed for IVR Prime.
The P/E ratio at the lower and upper price bands work out to 111 and
130 respectively. For the construction sector highest P/E is 173, lowest
is 2.4 and composite is 32. Hence the IPO may be considered slightly
overpriced.

It may be interesting to note that, except the Gachibowli project in

Hyderabad, IVR Prime has not executed any other project. The
remaining are only in planning or miniscule stage. Moreover, the vast
developable area is around Chennai where real estate prices have
already gone up recently.

The company owns only 14% of its projected 2,478 acres. It has only
development rights for about 58% of land. 21% of the land is in
agreement stage. 70% of the land payment is still pending for the
company. Considering these factors, it is difficult to visualize
reasonable earnings in the near term.

The IVR Prime IPO may not get a good investor response unlike DLF
(which has been reasonably well received in secondary market), HDIL
or Omaxe.

Sundaramurthy Vadivelu

LABELS: IPO, INDIA STOCK MARKET, IVRCL, IVR PRIME URBAN

DEVELOPERS

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