Subscribe to Omaxe IPO: Prabhudas Lilladher

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Omaxe, a real estate player, is open for subscription with a public issue of 1.78 crore equity shares 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.

Prabhudas Lilladher report on Omaxe IPO

Company Background

Omaxe is a Delhi based real estate developer with presence in 30 cities and 9 states in India, mainly in North India. Omaxe commenced operations in 1989 as a construction and contracting company. Over the years Omaxe has diversified in real estate development, which currently forms the bulk of the company's business. Omaxe is present in all segments of real estate development - integrated townships, residential, commercial and retail segments.

As on March 2007, Omaxe has completed eight residential projects and two commercial projects covering 5.13 mn sft of developed area. Of this 1.04 mn sft was developed as group housing projects with a total realization of Rs 1076 mn, 3.75 mn sft was developed as townships with a total realization of Rs 3312 mn and 0.34 mn sft was developed as commercial properties with a total realization of Rs 872 mn.

Extensive land bank

Omaxe currently has a land bank of 3255 acres of which 571 acres in on account of joint ventures and collaborations in which Omaxe's economic interest is 74%. Approximately 94% of the land reserves consist of freehold land and the balance consists of lease-hold land.

.... with a 150-mn sft saleable area

Of this total land bank, approximately 3096 acres relate to projects that are currently under development or under various stages of approval for development. This translates to a total saleable area of 150mn sq. ft. The balances 159 acres relate to projects that are currently in various phases of planning. Of the current projects, 38 projects are under development and 14 projects are under various stages of approval for development. Of these 52 current residential and commercial projects, 21 projects are group housing projects, 16 are integrated townships, 14 are commercial complexes and retail malls and one is a hotel property.

While total area under commercial segment is just 4.89 mn sft, this does not include 11.99 mn sft of commercial space that would be developed within the integrated townships.

.... That is focused in Tier 2 and Tier 3 cities

Of the completed projects, a significant portion of these are located in NOIDA and Gurgaon with the upcoming projects spread across Gurgaon, NOIDA, Jaipur, Patiala, Raipur, Agra, Amritsar etc. Thereby diversifying its initial concentration in the NCR region.

Almost 70% of the total land bank that the company plans to develop are located in the Tier 2 and Tier 3 cities. Amongst the key cities targeted, Omaxe is looking at developing 20.8 mn sft of area in Patiala, 14 mn sft in Jaipur, 13.6 mn sft in Raipur, 10.3 mn sft in Indore and 8.9 mn sft in Lucknow.

Strong brand name

While Omaxe's presence as a real estate developer has been relatively more recent, the company has over this period been able to build a strong brand name as a quality contractor. As of March 31, 2007 Omaxe had developed and delivered approximately 5.13 mn sft. of properties, which indicates the company's strong execution capabilities.

Innovation in Development

Omaxe is one of the first few developers to have conceptualized and developed theme retail malls in North India. Some of these theme based projects include, Wedding Malls which are one stop shops for all wedding related arrangements, Home 2 Home which are predominantly home furnishing malls, NRI city in Greater NOIDA, Nile in Gurgaon and Forest in NOIDA.

Outlook & Valuation

In FY07 Omaxe reported revenues of Rs 14.3 bn and a net profit of Rs 2573 mn. This translates to an EPS of Rs 16.7 on an equity capital of Rs 1550 mn. The upper band of Rs 310/share discounts FY07 earnings of Rs 16.7 by 19x. Omaxe has an established brand name in North India with strong execution skills. Moreover it has an extensive land bank as well as impressive geographical spread largely in proximity to the NCR region, we believe that Omaxe is well placed to benefit from the rising demand in the residential, commercial and retail space. We recommend to Subscribe to the issue.