Aditya Birla Real Estate faces minor setback on Worli land ruling; strong growth outlook intact: Antique

The brokerage has retained its buy rating with a reduced target price of Rs 3,448 (from Rs 3,804).

Antique Stock Broking remains structurally positive on the medium-to-long-term growth prospects of Aditya Birla Real Estate Ltd (ABREL) but notes a minor setback following the Supreme Court ruling on a 10-acre plot in Worli. The brokerage has retained its buy rating with a reduced target price of Rs 3,448 (from Rs 3,804).

The workers' colony land parcel, adjacent to ABREL’s 30-acre freehold land, was under litigation with the Brihanmumbai Municipal Corporation (BMC). Leased to ABREL in 1927 for worker housing, the land was to be transferred to ABREL after the lease expired in 28 years. However, the transfer never occurred, and litigation ensued. While the High Court previously ruled in ABREL’s favor, the Supreme Court reversed the decision on January 7, 2025, directing ABREL to hand over 6.31 acres to BMC. The remaining 3.69 acres are freehold and will remain with ABREL.

Antique estimates a 10% impact on net asset value (NAV) and has revised its EV/EBITDA multiple for FY27E to 11.75x from 13x. The entire 10-acre parcel had a saleable area of 1.5 million sq. ft. with an estimated gross development value (GDV) of Rs 8,400 crore, assuming a carpet rate of Rs 90,000 per sq. ft. After accounting for a 45% EBITDA margin and discounting over five years, the after-tax NAV for the entire land stands at Rs 2,230 crore. With 64% of the land (6.31 acres) being handed over, the NAV impact is Rs 1,430 crore. Despite this, Antique maintains its FY25/26/27 sales booking estimates at Rs 6,800 crore, Rs 9,400 crore, and Rs 11,800 crore, respectively.

ABREL remains Antique’s top pick, followed by Oberoi Realty and Prestige Estates. The company has been aggressive in business development (BD), completing projects with a GDV of over Rs 16,000 crore last year. In FY25 YTD, ABREL completed five acquisitions with a GDV of Rs 23,500 crore (excluding NOIDA), four of which were outright purchases.

With ongoing and upcoming projects totaling over Rs 76,000 crore in GDV (excluding an additional Rs 14,000 crore expected from NOIDA), ABREL is well-positioned for future growth. Since its first project launch, ABREL has sold Rs 10,700 crore worth of projects as of 2QFY25, leaving a strong inventory pipeline for FY26/27. Antique expects ABREL to continue its BD momentum, targeting deals with a GDV of Rs 6,000-10,000 crore in the near term, in line with its FY25 guidance of Rs 15,000-20,000 crore.

In Q4FY25, ABREL plans to launch projects worth Rs 8,300 crore in GDV, including Sector 31, Gurugram (Rs 2,500 crore), Trimaya Phase 3, Bengaluru (Rs 700 crore), Navya final phase, Gurugram (Rs 1,500 crore), Wellesley Road, Pune Phase 1 (Rs 700 crore), and the Sarjapur project, Bengaluru (Rs 2,900 crore). While ABREL needs to achieve over Rs 5,000 crore in sales bookings in 4QFY25 to exceed its FY25 guidance, Antique remains optimistic due to a robust launch pipeline and healthy market absorption rates.

Antique highlights ABREL’s strong cash flow visibility, supported by completed and ongoing projects. These projects are expected to generate a surplus cash flow of approximately Rs 6,500 crore, with Rs 4,060 crore from unsold inventory. This reinforces the brokerage's confidence in ABREL’s ability to meet and potentially surpass its FY25 targets.