HDIL - The Slum Redevelopment Czar

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Please refer to important disclosures at the end of this report

HDILThe Slum Redevelopment Czar

HDIL is the largest listed Slum Rehabilitation developer in the most resilient Mumbaimarket, which contributes a substantial 71% of our GNAV. Execution of the Rs200bnMumbai International Airport (MIAL) project is progressing well, sustainable TDRprices and successful new launches via the conventional method provides strongvisibility for HDIL. Further, HDIL seeks to de-leverage its Balance Sheet on the backof expected high Revenue inflow from the MIAL project and the recent low-costRs11.5bn fresh NCD issue, which will reduce its gearing to 0.3x in FY2012E fromcurrent levels of 0.5x. At Rs284, the stock is trading at 28% discount to our1-year forward NAV, 8.1x FY2012E EPS and 1.2x FY2012E P/BV. Hence, we Initiatewe Initiatewe Initiatewe Initiatewe InitiateCoverage on the stock, with a Buy recommendation and TCoverage on the stock, with a Buy recommendation and TCoverage on the stock, with a Buy recommendation and TCoverage on the stock, with a Buy recommendation and TCoverage on the stock, with a Buy recommendation and Target Parget Parget Parget Parget Price of Rs356,rice of Rs356,rice of Rs356,rice of Rs356,rice of Rs356,which is at 10% discount to our 1-year forward NAwhich is at 10% discount to our 1-year forward NAwhich is at 10% discount to our 1-year forward NAwhich is at 10% discount to our 1-year forward NAwhich is at 10% discount to our 1-year forward NAVVVVV.....

Execution of Airport project on track:Execution of Airport project on track:Execution of Airport project on track:Execution of Airport project on track:Execution of Airport project on track: First phase of HDIL's MIAL project torehabilitate 20,000 families is on track and likely to get completed by September2010 and generate around 11-13mn sq. ft of TDR. The company will also get2mn sq. ft of FSI for commercial development in the airport vicinity once the 20,000families get rehabilitated. We expect HDIL to sell 5-6mn sq. ft of TDR annually overthe next five years on strong ongoing execution of the MIAL project, which willgenerate further 37mn sq ft of TDR over the next 5-6 years. The MIAL projectcontributes around 30% to our 1-year forward NAV.

Set to gain from strong TDR prices: Set to gain from strong TDR prices: Set to gain from strong TDR prices: Set to gain from strong TDR prices: Set to gain from strong TDR prices: TDR prices in Mumbai have recovered fromRs900/sq. ft in February 2009 to Rs2,700/sq. ft currently. HDIL, being a marketleader and controlling around 70% of the TDR supply in Mumbai, is a key beneficiaryof revival in the TDR market. We have assumed Rs2,000/sq. ft (ie. 26% discountfrom current levels) for its MIAL project. Also, we do not expect a steep fall in theTDR prices as demand in Mumbai's Residential market continues to be resilient.

March 23, 2010

BUYCMP Rs284Target Price Rs356

Stock Info

Sector Real Estate

Market Cap (Rs cr) 9,828

Beta 1.8

52 Week High / Low 411/70

Avg. Daily Volume 46,75,384

Face Value (Rs) 10

BSE Sensex 17,451

Nifty 5,225

Reuters Code HDIL.BO

Bloomberg Code HDIL@IN

Investment Period 12 months

Source:Source:Source:Source:Source: Company, Angel Research, Note: *Assuming conversion of warrants

Key Financials (Consolidated)

Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E

Net SalesNet SalesNet SalesNet SalesNet Sales 1,750 1,750 1,750 1,750 1,750 1,479 1,479 1,479 1,479 1,479 1,775 1,775 1,775 1,775 1,775 3,106 3,106 3,106 3,106 3,106

% chg (26.9) (15.5) 20.0 75.0

Net PNet PNet PNet PNet Profitrofitrofitrofitrofit 786 786 786 786 786 590 590 590 590 590 734 734 734 734 734 1,310 1,310 1,310 1,310 1,310

% chg (44.3) (12.7) 24.4 78.3

FDEPS (Rs)*FDEPS (Rs)*FDEPS (Rs)*FDEPS (Rs)*FDEPS (Rs)* 21.1 21.1 21.1 21.1 21.1 15.9 15.9 15.9 15.9 15.9 19.7 19.7 19.7 19.7 19.7 35.2 35.2 35.2 35.2 35.2

EBITDA Margin (%) 45.7 46.2 49.2 52.3

P/E (x) 13.4 17.9 14.4 8.1

RoE (%) 19.5 10.5 9.9 15.4

RoCE (%) 10.4 7.2 8.3 14.2

P/BV (x) 1.8 1.5 1.3 1.2

EV/Sales (x) 7.9 8.8 7.0 3.9

EV/EBITDA (x) 17.4 19.0 14.3 7.5

PPPPParam Desaiaram Desaiaram Desaiaram Desaiaram Desai+91 22 4040 3800 Ext: 310

Email: [email protected]

Abs. (%) 3m 1yr 3yr

Sensex 1.3 85.2 10.5

HDIL (21.0) 272.5 (34.6)

Shareholding Pattern (%)

Promoters 48.3

MF / Banks / Indian FIs 2.1

FII / NRIs / OCBs 44.0

Indian Public / Others 5.6

March 23, 2010 2

HDIL | Initiating Coverage

HDIL is trading at 28% discount to our 1-year Forward NAV

Valuation

MIAL project valued at Rs178/share

Phase I of the MIAL project is on track and is expected to get completed by September2010. Phase II is expected to start from 1QFY2011E for which the land acquisitionprocess is complete. For the project, we have assumed TDR prices of Rs2,000/sq. ftie. at 26% discount from current the TDR prices. Further, we have assumed FSIfrom the airport site to start generating Revenues from FY2015E onwards, wherein wehave assumed 5% escalation in prices from current levels. As per our sensitivityanalysis to TDR prices, a decline or rise by 5% will impact our MIAL NAV by 4%.ConsequentlyConsequentlyConsequentlyConsequentlyConsequently, we have valued HDIL's MIAL project at Rs6,607cr, we have valued HDIL's MIAL project at Rs6,607cr, we have valued HDIL's MIAL project at Rs6,607cr, we have valued HDIL's MIAL project at Rs6,607cr, we have valued HDIL's MIAL project at Rs6,607cr,,,,,translating into Rs178/share.translating into Rs178/share.translating into Rs178/share.translating into Rs178/share.translating into Rs178/share.

Residential Segment valued at Rs160/share

HDIL has launched Residential projects of 3.3mn sq. ft since March 2009 andsuccessfully sold more than 90% of apartments in three of the four projects launched.These projects have met with success on account of being launched at 10-20%discount to the prevailing market prices. Further, since the company follows the projectcompletion method for its Revenue recognition, substantial portion of the Revenuewill flow in FY2012E as the company achieves threshold for the ongoing projects. Wehave factored in 5% price escalation from FY2011E onwards in construction andcapital value for all its projects. ConsequentlyConsequentlyConsequentlyConsequentlyConsequently, we have valued HDIL's Residential, we have valued HDIL's Residential, we have valued HDIL's Residential, we have valued HDIL's Residential, we have valued HDIL's Residentialprojects at Rs5,938crprojects at Rs5,938crprojects at Rs5,938crprojects at Rs5,938crprojects at Rs5,938cr, translating into Rs160/share., translating into Rs160/share., translating into Rs160/share., translating into Rs160/share., translating into Rs160/share.

Commercial Segment valued at Rs113/share

HDIL recently launched 3mn sq. ft of commercial projects at Andheri and Kurla whereit has already pre-leased 10-15% of office space. We have factored in 5% correctionin rentals and capital values in FY2011E, but 5% increase from FY2012E onwards.Thus, we have valued HDIL's Commercial projects at Rs4199crThus, we have valued HDIL's Commercial projects at Rs4199crThus, we have valued HDIL's Commercial projects at Rs4199crThus, we have valued HDIL's Commercial projects at Rs4199crThus, we have valued HDIL's Commercial projects at Rs4199cr, translating into, translating into, translating into, translating into, translating intoRs113/share.Rs113/share.Rs113/share.Rs113/share.Rs113/share.

Non-MIAL SRS projects valued at Rs109/share

HDIL recently won the slum rehabilitation project at Vile Parle near the Milan Subway,Link Road in Mumbai. This project entails rehabilitation of 2,000 families and thecompany would get FSI of 1.2. The prevailing rates are at Rs13-15,000/ sq. ft. Thecompany expects to launch the project in 2QFY2011E. It also plans to shortly launchPhase I of the Siddharth SRS project in Goregaon of around 1mn sq. ft. We havefactored in 5% price escalation from FY2011E onwards in construction and capitalvalue for all its projects. ConsequentlyConsequentlyConsequentlyConsequentlyConsequently, we have valued HDIL's Non-MIAL Slum, we have valued HDIL's Non-MIAL Slum, we have valued HDIL's Non-MIAL Slum, we have valued HDIL's Non-MIAL Slum, we have valued HDIL's Non-MIAL SlumRehabiliation Scheme (SRS) projects at Rs4,049crRehabiliation Scheme (SRS) projects at Rs4,049crRehabiliation Scheme (SRS) projects at Rs4,049crRehabiliation Scheme (SRS) projects at Rs4,049crRehabiliation Scheme (SRS) projects at Rs4,049cr, translating into Rs109/share., translating into Rs109/share., translating into Rs109/share., translating into Rs109/share., translating into Rs109/share.

Retail Segment has been valued at Rs35/share

Retail Segment comprises of 9% of HDIL's total saleable area. We have factored in 5%correction in rentals and capital values in FY2011E, but 5% increase FY2012Eonwards. ConsequentlyConsequentlyConsequentlyConsequentlyConsequently, we have valued HDIL's Retail project at Rs1,298cr, we have valued HDIL's Retail project at Rs1,298cr, we have valued HDIL's Retail project at Rs1,298cr, we have valued HDIL's Retail project at Rs1,298cr, we have valued HDIL's Retail project at Rs1,298cr,,,,,translating into Rs35/share.translating into Rs35/share.translating into Rs35/share.translating into Rs35/share.translating into Rs35/share.

March 23, 2010 3


Assumptions

We have assigned 15% Cost of Equity and 10% Capitalisation rate.

We have assumed Tax rate of 20% from FY2011E onwards owing to increase in MAT.

We have assumed conversion of Warrants issued to promoters at Rs240/share.

1-yr F1-yr F1-yr F1-yr F1-yr Forward NAorward NAorward NAorward NAorward NAVVVVV (Rs/share)(Rs/share)(Rs/share)(Rs/share)(Rs/share)

MIAL (Airport FSI & TDR) 178

Residential 160

Commercial 113

Other SRS Projects 109

Retail 35

Gross NAGross NAGross NAGross NAGross NAVVVVV 594594594594594

Less

Net Debt (86)

Unpaid land cost & Customer advances (31)

Tax (87)

NANANANANAV/shareV/shareV/shareV/shareV/share 395395395395395

TTTTTarget Parget Parget Parget Parget Price at 10% discount to NArice at 10% discount to NArice at 10% discount to NArice at 10% discount to NArice at 10% discount to NAVVVVV 356 356 356 356 356

Exhibit 1: Valuation Summary

Source: Angel Research

71.0

20.8

4.4 3.40.4

Mumbai MMR excluding Mumbai Kochi Hyderabad Pune

Exhibit 2: Location-wise Break-down of GNAV


Mumbai contributes71% of GNAV

March 23, 2010 4


PPPPParticularsarticularsarticularsarticularsarticulars FY11EFY11EFY11EFY11EFY11E FY12EFY12EFY12EFY12EFY12E FY13EFY13EFY13EFY13EFY13E FY14EFY14EFY14EFY14EFY14E FY15EFY15EFY15EFY15EFY15E FY16EFY16EFY16EFY16EFY16E FY17EFY17EFY17EFY17EFY17E FY18EFY18EFY18EFY18EFY18E FY19EFY19EFY19EFY19EFY19E

Saleable area (mn sq ft)Saleable area (mn sq ft)Saleable area (mn sq ft)Saleable area (mn sq ft)Saleable area (mn sq ft)

Residential 1.1 1.8 2.4 3.2 3.3 3.6 4.1 4.6 4.9

Commercial 0.2 0.3 0.6 1.1 1.3 1.3 1.4 1.9 1.9

Retail 0.1 0.2 0.3 0.6 1.3 1.5 1.2 1.1 1.0

Airport PAirport PAirport PAirport PAirport Projectrojectrojectrojectroject

TDR 5.7 5.7 6.1 6.1 6.3 6.5

FSI 1.1 0.8 1.1 1.7 2.0

FSI from other SRS projects 0.4 0.4 0.9 0.6 0.4 0.4 0.4 0.2

LLLLLeasable area (mn sq ft)easable area (mn sq ft)easable area (mn sq ft)easable area (mn sq ft)easable area (mn sq ft)

Commercial 0.5 3.0 3.7 3.7 3.7 5.2 5.4

Retail 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02

Realisation (Rs /sq ft)Realisation (Rs /sq ft)Realisation (Rs /sq ft)Realisation (Rs /sq ft)Realisation (Rs /sq ft)

Residential 6,690 6,141 5,648 5,706 5,201 4,589 4,677 4,458 4,163

Commercial 2,073 2,176 2,923 3,173 3,486 3,968 4,166 4,375 4,594

Retail 7,164 7,082 6,546 4,695 4,354 4,370 4,233 3,645 3,989

Airport PAirport PAirport PAirport PAirport Projectrojectrojectrojectroject

TDR 2,000 2,000 2,000 2,000 2,000 2,000

FSI 12,763 13,401 14,071 14,775 15,513

FSI from other SRS projects 7,107 12,281 16,878 17,798

LLLLLease rentals (Rs/sq ft/m)ease rentals (Rs/sq ft/m)ease rentals (Rs/sq ft/m)ease rentals (Rs/sq ft/m)ease rentals (Rs/sq ft/m)

Commercial 105 97 101 106 112 114 120

Retail 57 60 63 66 69 73 76 80 84

Exhibit 3: HDIL Sales & Realisation Assumptions


PPPPProjectrojectrojectrojectroject LLLLLocationocationocationocationocation SegmentSegmentSegmentSegmentSegment PPPPPrice (Rs/ sq ft)rice (Rs/ sq ft)rice (Rs/ sq ft)rice (Rs/ sq ft)rice (Rs/ sq ft)

Metropolis Andheri Residential 8,200

Kukatpally Hyderabad Residential 3,000

Dongre Virar Residential 2,000

Ektanagar Kandivali Residential 5,000

Milan Subway Vile Parle FSI 13,000

Bandra (E) SRS Scheme BKC FSI 15,000

Siddarth Nagar Goregaon Res 6,000

Kalamsarry Kochi Commercial 3,200

Kukatpally Hyderabad Retail 5,500

Bombay Oxygen Mulund Retail 6,000

MIAL TDR SRA 2,000

MIAL FSI Santacruz Commercial 10,000

Exhibit 4: Pricing Assumptions


Exhibit 5: Sensitivity analysis to our 1-year forward NAVCost of Equity (%)Cost of Equity (%)Cost of Equity (%)Cost of Equity (%)Cost of Equity (%)

13 13 13 13 13 14 14 14 14 14 15 15 15 15 15 16 16 16 16 16 17 17 17 17 17

1,300 410 383 357 337 314

1,650 429 402 376 352 330

2,000 449 421 395395395395395 371 348

2,350 468 440 414 389 366

2,700 488 459 433 408 384

TDR

PTD

R P

TDR

PTD

R P

TDR

P ric

esri

ces

rice

sri

ces

rice

s

(Rs/

sq f

t)(R

s/sq

ft)

(Rs/

sq f

t)(R

s/sq

ft)

(Rs/

sq f

t)


March 23, 2010 5


Investment Argument

High-Margin Slum Re-development projects

Slum re-development (SRA) does not involve upfront investment in land compared tothe conventional real estate projects. The cost per sq. ft in the slum re-developmentprojects is around Rs3,000/sq. ft v/s Rs5,000-6,000/sq. ft (including land cost) onfreehold land due to the high property prices in Mumbai. Slum re-development alsohas high entry barriers, as it requires expertise and experience as it entails dealingwith the government agencies and slum dwellers regularly until project completion.

In Mumbai, more than 54% of the population lives in slums clusters situated incertain pockets of the city. A slum population of 7.5 million could translate into1.5mn families with average household size of five. This could translate into SRApotential of 644mn sq. ft and Revenue potential of Rs2,000bn for the re-developers.

SRA requirement would be of aroundSRA requirement would be of aroundSRA requirement would be of aroundSRA requirement would be of aroundSRA requirement would be of around644mn sq ft, which translates into644mn sq ft, which translates into644mn sq ft, which translates into644mn sq ft, which translates into644mn sq ft, which translates intoRevenue potential of Rs2,000bn for theRevenue potential of Rs2,000bn for theRevenue potential of Rs2,000bn for theRevenue potential of Rs2,000bn for theRevenue potential of Rs2,000bn for theReReReReRe-----developersdevelopersdevelopersdevelopersdevelopers

Strong presence in Mumbai Metropolitan Region (MMR)

Mumbai's Real Estate market has been quite resilient being the last one to decline inthe recent meltdown and the first to show signs of recovery on improving sentiment.Property prices in Mumbai have been rising on the back of reviving financial marketsand overall improvement in the economic environment. We believe that the newproject launches, both high-end and mid-range, would register an increase in prices.Against this backdrop, HDIL, being the largest listed developer in the attractive Mumbaimarket, with expertise and experience in re-development projects, will be a keybeneficiary. Mumbai and the MMR (excluding Mumbai) contribute 39% and 49%respectively, of HDIL's overall saleable area (194.4mn sq. ft).

Source: Census Data 2001

Exhibit 7: Slum population high in Mumbai

54.1

32.5

18.9 18.7 17.213.5

10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Mum

bai

Kolk

ata

Chennai

Delh

i

Hyd

era

bad

Ahm

edabad

Bangalo

re

(%)

PPPPPartciluarsartciluarsartciluarsartciluarsartciluars FFFFFigigigigig RemarksRemarksRemarksRemarksRemarks

Total slum population in Mumbai (mn) ~7.5

Total hutments (mn) 1.5 Assuming five person per hutment

Redevlopment Industry size (mn sq ft) 644 (1.5mn*269sq ft*1.2 loading*1.33 FSI)

Investment potential (Rs bn ) 772 Assuming construction cost of Rs1200/ sq

ft for rehab

Revenue potential (Rs bn ) 2,000 Assuming 50% sold through TDR and FSI

Exhibit 6: SRA - Rs2,000bn Revenue Potential for Redevlopers


March 23, 2010 6


MIAL Project provides strong visibility

HDIL was awarded the MIAL Slum Rehabilitation Project in October 2007 as part ofthe Mumbai Airport expansion and modernisation plan. Under the MIAL project,HDIL is required to rehabilitate 82,500 families spread over 276 acres of land in thevicinity of the Mumbai airport. The project has been granted FSI of 4 on account ofbeing in the high density zone. Consequently, HDIL requires around 160 acres ofland to rehab the 82,500 families over the next 5-6 years, while it currently hasaround 110 acres of land largely in the Eastern suburbs, which would suffice Phase I,II requirements. Pertinently, Phase I is nearing completion and Phase II is expected tostart in 1QFY2011E. On completion, the MIAL project would be one of the largestslum rehabilitation to be executed this far in India.

The MIAL project is expected to generate land and construction TDR of around 44mnsq. ft. Post the relocation of slum inhabitants from the encroached 276 acres, MIALwill utilise 158 acres for airport modernisation and expansion. HDIL is to have therights to redevelop 55% (65 acres), while the remaining 45% (53 acres) would beavailable to MIAL's partner, GVK. This will generate FSI rights of 10mn sq. ftfor HDIL.

The MIAL project is expected toThe MIAL project is expected toThe MIAL project is expected toThe MIAL project is expected toThe MIAL project is expected togenerate land and construction TDR ofgenerate land and construction TDR ofgenerate land and construction TDR ofgenerate land and construction TDR ofgenerate land and construction TDR ofaround 44mn sq. ft and further FSIaround 44mn sq. ft and further FSIaround 44mn sq. ft and further FSIaround 44mn sq. ft and further FSIaround 44mn sq. ft and further FSIrights of 10mn sq. ft for commercialrights of 10mn sq. ft for commercialrights of 10mn sq. ft for commercialrights of 10mn sq. ft for commercialrights of 10mn sq. ft for commercialdevelopment at the airport site for HDILdevelopment at the airport site for HDILdevelopment at the airport site for HDILdevelopment at the airport site for HDILdevelopment at the airport site for HDIL

Source: Company, Angel Research

Exhibit 8: Land reserves concentrated in MMR (mn sq. ft / % to Saleable area)

73.3 /38%

98.0 /50%

7.4 /4%15.0 /8%

0.8 /0%

Mumbai MMR (excluding Mumbai) Hyderabad Kochi Pune

HDIL, the market leader in slum rehabilitation, is well-poised to cash in on the

immense opportunity in the SRS Segment. It stands a good chance to win large SRA

projects like Dharavi where rehab families could be of similar size to MIAL. It may be

noted here that the company has executed around 10mn sq. ft of SRS projects in the

last 15 years, and is more competitive than other developers in the fray.

HDILHDILHDILHDILHDIL, being the market leader in slum, being the market leader in slum, being the market leader in slum, being the market leader in slum, being the market leader in slum

rehabilitation, stands a good chancerehabilitation, stands a good chancerehabilitation, stands a good chancerehabilitation, stands a good chancerehabilitation, stands a good chance

to win large SRA projects like Dharavito win large SRA projects like Dharavito win large SRA projects like Dharavito win large SRA projects like Dharavito win large SRA projects like Dharavi

Exhibit 9: HDIL’s Saleable interest from MIAL projectPPPPParticularsarticularsarticularsarticularsarticulars SaleableSaleableSaleableSaleableSaleable Phase IPhase IPhase IPhase IPhase I Phase IIPhase IIPhase IIPhase IIPhase II Phase IIIPhase IIIPhase IIIPhase IIIPhase III RemarksRemarksRemarksRemarksRemarks

(mn sq. ft)(mn sq. ft)(mn sq. ft)(mn sq. ft)(mn sq. ft) AreaAreaAreaAreaArea

Land TDR 8.9 2.6 2.7 3.6 ((82,500 (families)*269 sq ft *1.2 (Laoding)) /4)

Construction TDR 35.4 10.3 10.7 14.4 82,500 (families)*269 sq ft *1.2 (loading)*1.33 (FSI)

FSI at Airport site* 9.9 9.9 65 acres*2.5 (FSI)*1.4 (Loading)

TTTTTotalotalotalotalotal 54.254.254.254.254.2 12.9 13.4 27.9

Source: Company, Angel Research, Note: * We have assumed FSI to be sold once relocation of entire 82,500 families is completed

March 23, 2010 7


Phase I completion on track

Phase I of the MIAL project is on track and likely to get completed by September 2010and generate around 11-13mn sq. ft of TDR. HDIL will also get 2mn sq. ft of FSI forcommercial development in the airport vicinity once rehabilitation of18,000-20,000 families is completed. Phase I, spread over 53 acres (located at Kurla,off LBS Marg), is 1.5km away from BKC and 5-7 minutes from the closest railwaystation (Vidyavihar). The property was bought from IL&FS for Rs1,900cr. Out of the 53acres, 38 acres would be utilised to rehabilitate 18,000 families, while the balancewould go for commercial development. Construction work at the site commenced inJune 2008 and the pace of construction work is impressive. HDIL has already generated7mn sq. ft of TDR from Phase I. Another 2,000 families will be rehabilitated in Kurla(E) and Bhandup for which work has been started. HDIL intends to start Phase II byApril 2010 for which land has already been acquired in the Eastern suburbs. Thisprovides strong Revenue visibility with steady Cash flows from sale of TDR.

The pace of construction work forThe pace of construction work forThe pace of construction work forThe pace of construction work forThe pace of construction work forPhase I is impressive. HDIL has alreadyPhase I is impressive. HDIL has alreadyPhase I is impressive. HDIL has alreadyPhase I is impressive. HDIL has alreadyPhase I is impressive. HDIL has alreadygenerated 7mn sq. ft of TDR out of thegenerated 7mn sq. ft of TDR out of thegenerated 7mn sq. ft of TDR out of thegenerated 7mn sq. ft of TDR out of thegenerated 7mn sq. ft of TDR out of thetotal of 11-13mn sq. ft that wouldtotal of 11-13mn sq. ft that wouldtotal of 11-13mn sq. ft that wouldtotal of 11-13mn sq. ft that wouldtotal of 11-13mn sq. ft that wouldaccrue from Phase 1accrue from Phase 1accrue from Phase 1accrue from Phase 1accrue from Phase 1

Exhibit 10: 28 Buildings with G+11 Structures to rehab 18,000 families by September 2010



Exhibit 11: 3,000 labourers, 100 Engineers working on site Exhibit 12: 270 sq. ft provided to each rehab family


March 23, 2010 8


To gain from strong TDR prices

TDR prices in Mumbai have recovered from the bottom of Rs900/sq. ft in February2009 to Rs2,700/sq. ft currently. However, it is still lower by 40% from the peak ofRs4,200/sq. ft. Mumbai has been a more resilient market, as prices have risen by20-30% compared to the 10-15% increase in prices in the other metros. We expectdemand for the Residential Segment in Mumbai to remain stable owing to employmentstability and increasing disposable income levels. Hence, we believe that the newlaunches will continue to gain momentum going ahead and fuel demand for TDRand positively impact the TDR prices.

Project valued at Rs178/share

The MIAL project cost, including land cost for rehabilitation, will be around Rs6,300cr.In our opinion, HDIL could generate enough cash to complete the project by sellingTDR and FSI at the site. While current TDR prices are quoting at Rs2,700/sq. ft, wehave assumed Rs2,000/sq. ft for the project, which we expect HDIL will sell by FY2016E.Further, we expect HDIL to start generating Revenues from sale of FSI at its airport sitefrom FY2015E onwards. We have assumed around 6mn sq. ft of TDR sale annuallyfrom the MIAL project upto FY2016E. Our sensitivity analysis indicates that a 5%decline in TDR prices leads to 4% fall in NAV from MIAL. Consequently, we havevalued MIAL project at Rs178/share or 30% of GNAV.


Exhibit 14: TDR prices still 40% lower than Peak

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Jan-

08

Feb

-08

Mar-

08

Apr-

08

May-

08

Jun-0

8

Jul-

08

Aug-

08

Sep-0

8

Oct

-08

Nov-

08

Dec

-08

Jan-

09

Feb

-09

Mar-

09

Apr-

09

May-

09

Jun-0

9

Jul-

09

Aug-

09

Sep-0

9

Oct

-09

Nov-

09

Dec

-09

Jan-

10

Feb

-10

Mar-

10

(Rs/

.sq

ft)

WWWWWe have assumed Rs2,000/sq. ft ase have assumed Rs2,000/sq. ft ase have assumed Rs2,000/sq. ft ase have assumed Rs2,000/sq. ft ase have assumed Rs2,000/sq. ft asagainst the prevailing Rs2,700/sq. ftagainst the prevailing Rs2,700/sq. ftagainst the prevailing Rs2,700/sq. ftagainst the prevailing Rs2,700/sq. ftagainst the prevailing Rs2,700/sq. ftfor the MIAL project, which contributesfor the MIAL project, which contributesfor the MIAL project, which contributesfor the MIAL project, which contributesfor the MIAL project, which contributesaround 30% to our GNAaround 30% to our GNAaround 30% to our GNAaround 30% to our GNAaround 30% to our GNAVVVVV


Exhibit 13: GNAV Break-up of MIAL project (GNAV/ % to MIAL GNAV)

TDR FSI

43 /24.2%

135 /75.8%

March 23, 2010 9


New launches have been rewarding

HDIL has strategically de-leveraged its business model by launching various projectsthrough the conventional route since March 2009 thereby reducing its overdependenceon the TDR market. It has launched 3.3mn sq. ft of Residential and 3.0mn sq. ft ofCommercial, and has managed to successfully sell more than 90% of the apartmentsin three out of its four projects. It has even managed to pre-lease 10-15% of itscommercial launches at Rs100-120/sq. ft at its Andheri and Kurla projects. Thecompany's recent projects have been successful on account of being launched at10-20% discount to the prevailing market prices. Management has indicated that itwould be adopting the same strategy for its forthcoming launches as well. In FY2011E,HDIL plans to launch new projects constituting another 6-7mn sq.ft.

The company's recent new projectsThe company's recent new projectsThe company's recent new projectsThe company's recent new projectsThe company's recent new projectshave been successful on account ofhave been successful on account ofhave been successful on account ofhave been successful on account ofhave been successful on account ofbeing launched at 10-20% discount tobeing launched at 10-20% discount tobeing launched at 10-20% discount tobeing launched at 10-20% discount tobeing launched at 10-20% discount tothe prevailing market prices. Inthe prevailing market prices. Inthe prevailing market prices. Inthe prevailing market prices. Inthe prevailing market prices. InFY2011EFY2011EFY2011EFY2011EFY2011E, HDIL plans to launch new, HDIL plans to launch new, HDIL plans to launch new, HDIL plans to launch new, HDIL plans to launch newprojects constituting another 6-7mnprojects constituting another 6-7mnprojects constituting another 6-7mnprojects constituting another 6-7mnprojects constituting another 6-7mnsq.ftsq.ftsq.ftsq.ftsq.ft

Exhibit 15: Launching projects through conventional routePPPPProjectrojectrojectrojectroject LLLLLocationocationocationocationocation Saleable AreaSaleable AreaSaleable AreaSaleable AreaSaleable Area Sold/ LSold/ LSold/ LSold/ LSold/ Leaseeaseeaseeaseease LLLLLaunching Rateaunching Rateaunching Rateaunching Rateaunching Rate

(mn sq. ft)(mn sq. ft)(mn sq. ft)(mn sq. ft)(mn sq. ft) (Rs/ sq. ft)(Rs/ sq. ft)(Rs/ sq. ft)(Rs/ sq. ft)(Rs/ sq. ft)

ResidentialResidentialResidentialResidentialResidential

Galaxy Kurla (E) 0.4 > 90% 4,251

Premier Kurla (W) 0.9 > 95% 5,251

Metropolis Andheri (W) 0.7 > 95% 7,651

Kilburn 1.3 > 20% 5,751

CommercialCommercialCommercialCommercialCommercial

Premier Kurla (W) 2.0 15% Rs 80/ sq ft

Metropolis Andheri (W) 1.0 10% Rs 120/ sq ft

TTTTTotalotalotalotalotal 6.36.36.36.36.3Source: Company, Angel Research

HDIL controls 70% of TDR supply in Mumbai and is a key player in the revival of theTDR market. We have assumed Rs2,000/sq. ft as against the prevailing Rs2,700/sq.ft for its MIAL project. With our and street's TDR assumption 20-25% below the prevailingprice, there exists further room for appreciation in NAV.


Exhibit 16: Premier Residential project (0.9mn sq ft) Exhibit 17: Premier Phase I Commercial project (2mn sq. ft)


March 23, 2010 10


Vasai- Virar belt in limelight - Monetisation of Rental housingprojects; focus on upcoming SEZs

The 550 acre MMRDA rental township in Virar is likely to commence construction by1QFY2011E as final clearances are awaited. MMRDA has offered FSI of 4 for therental housing schemes comprising FSI of 3 for free sale area to HDIL and FSI of 1 forrental housing. The project aims to provide affordable housing for the low-incomegroups and economically weaker sections, within close proximity to cities, towns andrural areas. HDIL will provide self-contained units of 160 sq. ft. carpet area withstandard features in MMRDA managed apartment buildings.

Besides the rental housing schemes, the company recently launched its first masshousing project in Virar of 1.5mn sq. ft as well where more than 35% has beenpre-sold at Rs2,200/sq. ft.

HDIL also plans to develop a multi-product SEZ in Vasai-Virar of 2,500 acres and amulti-service SEZ in Bhayander of 600 acres. It has already acquired 2,300 acres forthe Vasai-Virar SEZ at an average cost of Rs50/ sq. ft.

De-leveraging Balance Sheet

At end of FY2009, HDIL's Gross Debt increased to Rs4,143cr from Rs376cr in FY2007resulting in Interest outflow of around Rs595cr, ie. 77% of PBT. However, in 2QFY2010HDIL raised Rs1,688cr through a QIP Issue and Rs156cr by issuing 2.6cr warrants topromoters, which will get converted by end FY2011E. The company partially utilisedthese funds to reduce its leverage to Rs3,393cr, translating into gearing of 0.4x inFY2010. In FY2011E, HDIL requires to repay Rs200cr of debt and will have interestoutflow of around Rs450cr. We believe that the new launches and monetisation of theMIAL project will generate enough cash flows, which will help further reduce debt.HDIL has also raised Rs1,150cr from fresh NCD issue, following an improved CAREA+ rating. This will enable HDIL to repay its short-term debt and reduce overall costof borrowing by 50-100bp to 12%. Consequently, we expect Net Debt to decline fromcurrent levels of 0.5x to 0.3x in FY2012E.


Exhibit 18: Steady Cash flow from New launches and MIAL to reduce Debt

0.5

0.8

0.9

0.50.3

0.3

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

FY07 FY08 FY09 FY10E FY11E FY12E

Net Debt (LHS) Net D:E (RHS)

(Rs

cr)

(x)

MMRDMMRDMMRDMMRDMMRDA has offered FSI of 4 for theA has offered FSI of 4 for theA has offered FSI of 4 for theA has offered FSI of 4 for theA has offered FSI of 4 for therental housing schemes in Virarrental housing schemes in Virarrental housing schemes in Virarrental housing schemes in Virarrental housing schemes in Virarcomprising FSI of 3 for free salecomprising FSI of 3 for free salecomprising FSI of 3 for free salecomprising FSI of 3 for free salecomprising FSI of 3 for free salearea to HDIL and FSI of 1 for rentalarea to HDIL and FSI of 1 for rentalarea to HDIL and FSI of 1 for rentalarea to HDIL and FSI of 1 for rentalarea to HDIL and FSI of 1 for rentalhousinghousinghousinghousinghousing

The successful new launches andThe successful new launches andThe successful new launches andThe successful new launches andThe successful new launches andmonetisation of the MIAL project willmonetisation of the MIAL project willmonetisation of the MIAL project willmonetisation of the MIAL project willmonetisation of the MIAL project willgenerate enough cash flows which willgenerate enough cash flows which willgenerate enough cash flows which willgenerate enough cash flows which willgenerate enough cash flows which willreduce Net Debt from current levelsreduce Net Debt from current levelsreduce Net Debt from current levelsreduce Net Debt from current levelsreduce Net Debt from current levelsof 0.5x to 0.3x in FY2012Eof 0.5x to 0.3x in FY2012Eof 0.5x to 0.3x in FY2012Eof 0.5x to 0.3x in FY2012Eof 0.5x to 0.3x in FY2012E

March 23, 2010 11


Concerns

Fall in TDR prices

Around 22% of HDIL's saleable area comes from TDR market ie. from MIAL project.TDR prices have gone up from its low of Rs900 sq. ft in Feb 2009 to Rs2,700/ sq. ftcurrently. This has boosted HDIL's cash flow and help to deleverage its balance sheet.TDR prices are dependant on regulatory changes and new launches. We are quitepositive on continue flow of new launches in Mumbai property market given strongdemand, stability in employment outlook and higher disposable income. Howeverthere is possibility of increasing FSI in suburbs from 1x to 1.33x which will impact TDRvolumes and thereby prices negatively. However, we have assumed Rs2,000/ sq ft(25% lower from current level) for its MIAL project while calculating our 1 yr forwardNAV which gives enough margin of safety.

Over-dependence on MMR

Mumbai property prices have gone up by 20-30% from its low. With MMR accountingfor 87% of HDIL's saleable area, any decline in demand or prices could impact ourNAV.

Delay in execution

We have assumed construction of all its residential launches done in FY2010 to becompleted by FY2012E. As the company follows project completion method to bookrevenues we expect substantial jump in Revenues in FY2012E. Any delay in executionwill impact our estimates and in turn our NAV.

Long gestation SRS projects

Around 31% of HDIL's its saleable area comes from long gestation SRS projectdevelopment, which involves getting consensus from slum dwellers, governmentapprovals, clearing slum encroachments, and rehabilitation. Any delay in aboveprocesses could increase project costs and delay in sales from project FSI, creating acash trap.

March 23, 2010 12


Financial Outlook

Strong Revenue visibility

HDIL is expected to report de-growth of 21.4% on compounded basis overFY2008-10E on account of lower TDR prices and minimal launches in FY2009.However, since March 2009 the company has launched 3.3mn sq. ft of Residentialprojects and more than 90% of the apartments have been sold out from three out ofthe four projects. As HDIL recognises Revenues on project completion method insteadof percentage completion method, most of the Revenues from the new launches willflow in FY2012E. Moreover, ongoing execution of the airport project will generateTDR of 6mn sq. ft annually which also provides strong Revenue visibility. We haveassumed TDR price of Rs2,000/sq. ft for the project ie. at 25% discount to currentprices. Hence, we expect HDIL's Revenues to increase by 20% yoy in FY2011E toRs1,775cr and 75.0% yoy in FY2012E to Rs3,106cr driven by sale of the TDR generatedfrom the MIAL project and ramp up in completion of its Residential projects.Consequently, we expect Revenues to record CAGR of 44.9% over FY2010-12E.


Exhibit 19: Revenue Trend

Operating Margins to increase

The EBIDTA Margins had declined by 1,900bp over FY2008-10E owing to lower TDRprices, which fell from Rs4,200/sq. ft to Rs900/sq. ft during the mentioned period.However, TDR prices are on recovery path since February 2009. Further, the companylaunched new projects - 3.3mn sq. ft of Residential and 3mn sq. ft of Commercial - inFY2010. Consequently, we expect Margins to increase from 46.4% in FY2010E to52.5% in FY2012E mainly due to completion of the Revenue recognition threshold ofthe company's ongoing projects and sustainable TDR prices.

179.2

97.2

(26.9)(15.5)

20.0

75.0

(50)

0

50

100

150

200

-

500

1,000

1,500

2,000

2,500

3,000

3,500


Revenue (LHS) yoy growth (RHS)

(Rs

cr)

(x)

WWWWWe expect HDIL's Revenues to increasee expect HDIL's Revenues to increasee expect HDIL's Revenues to increasee expect HDIL's Revenues to increasee expect HDIL's Revenues to increaseby 20.0% yoy in FY2011E to Rs1,775crby 20.0% yoy in FY2011E to Rs1,775crby 20.0% yoy in FY2011E to Rs1,775crby 20.0% yoy in FY2011E to Rs1,775crby 20.0% yoy in FY2011E to Rs1,775crand 75.0% yoy in FY2012E toand 75.0% yoy in FY2012E toand 75.0% yoy in FY2012E toand 75.0% yoy in FY2012E toand 75.0% yoy in FY2012E toRs3,106cr driven by sale of the TDRRs3,106cr driven by sale of the TDRRs3,106cr driven by sale of the TDRRs3,106cr driven by sale of the TDRRs3,106cr driven by sale of the TDRgenerated from the MIAL project andgenerated from the MIAL project andgenerated from the MIAL project andgenerated from the MIAL project andgenerated from the MIAL project andramp up in completion of itsramp up in completion of itsramp up in completion of itsramp up in completion of itsramp up in completion of itsResidential projectsResidential projectsResidential projectsResidential projectsResidential projects

WWWWWe expect EBIDTe expect EBIDTe expect EBIDTe expect EBIDTe expect EBIDTA Margins to increaseA Margins to increaseA Margins to increaseA Margins to increaseA Margins to increasefrom 46.4% in FY2010E to 52.5% infrom 46.4% in FY2010E to 52.5% infrom 46.4% in FY2010E to 52.5% infrom 46.4% in FY2010E to 52.5% infrom 46.4% in FY2010E to 52.5% inFY2012EFY2012EFY2012EFY2012EFY2012E

March 23, 2010 13



Exhibit 20: Improving EBIDTA Margins

51.1

65.5

45.7 46.249.2

52.3

0

10

20

30

40

50

60

70


(%)

Low gearing to boost Earnings

The land purchases for MIAL project resulted in high gearing of 94% (Rs4,143cr) inFY2009, with Interest outflow of Rs620cr. However, in FY2010, HDIL raised Rs1,854crthrough a QIP Issue and Warrants to promoters, which helped reduce its leverage toRs3,393cr and translating into gearing of 0.4x for the year. The company also raisedRs1,150cr through a NCD issue, following an improved CARE A+ rating. This willenable HDIL to repay short-term debt and reduce overall cost of borrowing by50-100bp to 12%. On the other hand, the company's Tax rate is likely to increase to20% owing to hike in MAT rate. Thus, we expect HDIL's PAT to post CAGR of 48.9%over FY2010-12E.


Exhibit 21: Earnings Trend

367.2

156.8

-44.2-24.9

24.4

78.3

-100

-50

0

50

100

150

200

250

300

350

400

-

200

400

600

800

1,000

1,200

1,400

1,600


PAT (LHS) yoy growth (RHS)

(Rs

cr)

(%)

WWWWWe expect HDIL's Pe expect HDIL's Pe expect HDIL's Pe expect HDIL's Pe expect HDIL's PAAAAAT to post CAT to post CAT to post CAT to post CAT to post CAGR ofGR ofGR ofGR ofGR of48.9% over FY2010-12E48.9% over FY2010-12E48.9% over FY2010-12E48.9% over FY2010-12E48.9% over FY2010-12E

March 23, 2010 14


Industry Outlook

The Real Estate Sector in India is currently on a gradual improvement curve. Accordingto Cushman and Wakefield, the demand forecast for pan-India commercial officespace is 196mn sq. ft, while Retail space demand stands at 43mn sq. ft for 2009-13.Demand for Hospitality and Residential Segments is estimated at over 690,000 roomnights and 7.5mn units respectively, over the mentioned period. We expect demandfrom Commercial and Retail Segments to pick up in 2HFY2011E owing to renewedinterest from the Corporates thereby catching up with the Residential Segment.

New projects are also getting launched with the liquidity position of the developersimproving on the back of QIPs and proposed public issue offers (IPOs). Over the lastsix months, listed companies have raised US $3.5bn through QIPs and issuance ofWarrants. Further US $2.4bn is expected to be raised from the proposed IPOs hittingthe markets towards end 2010. The Sector has also been supported by the governmentpolicies that allow housing loans to individuals carrying a risk weightage of 50% tobe increased from Rs20lakh to Rs3lakh along with allowing re-scheduling of bankdebt without it being classified as NPL.

Exhibit 23: Forthcoming IPOs in 2010CompanyCompanyCompanyCompanyCompany (US $mn) (US $mn) (US $mn) (US $mn) (US $mn)

Ambience 200

Emaar MGF 750

Lodha Developers 500

Nitesh Estates 100

Oberoi Constructions 150

Sahara Prime City 700

TTTTTotalotalotalotalotal 2,4002,4002,4002,4002,400Source: Company, Angel Research


Exhibit 22: QIP Proceeds ease Liquidity crunchCompanyCompanyCompanyCompanyCompany (US $mn) (US $mn) (US $mn) (US $mn) (US $mn)

Ackruti City 65

DLF 830

HDIL 363

IBREL 570

Orbit Corp 30

Parsvnath 36

Sobha Developers 115

Unitech 950

TTTTTotalotalotalotalotal 2,9592,9592,9592,9592,959

March 23, 2010 15


Mumbai Property

Residential Segment to continue to witness stability in demand

The Mumbai property prices have increased 20-30% from the lows, though still10-15% lower from their highs. Resurgence in demand and positive economic growthoutlook has resulted in appreciation of capital values across most micro markets,both high-end and mid-range. The Mid-segment projects in the suburbs have witnessedhigher increase in demand than the upscale South Mumbai market owing to increasingaffordability. Thus, the overall Mumbai market is expected to witness increase in newproject launches in the mid-range particularly over the next six months.

Economic stability coupled with rising disposable income levels are expected tostimulate demand and result in some appreciation in the capital values in certainpockets in Mumbai in the short to medium term. However, further hike in Interestrates could dent the demand.

Commercial Segment - Rentals to stabilise

The supply in Mumbai increased marginally from 9.5mn sq. ft in CY2008 to 10.6mnsq. ft in CY2009 owing to subdued demand, delays in execution and liquidity crunchfaced by the developers. Total absorption in 2009 (5.4mn sq. ft.) was approximately37% down compared to 2008. Consequently, vacancy rates were recorded in therange of 11-13% and rentals declined by 20-30% in CY2009. However, going ahead,we expect rental to bottom out owing to renewed interest from Corporates resultingfrom the ongoing recovery in the economy.

Source: Cushman & Wakefield

Exhibit 25: Supply outpaced absorption in CY2009

2003

0

1

2

3

4

5

6

7

8

9

10

2004 2005 2006 2007 2008 1Q09 2Q09 3Q09 4Q09

(mn sq ft)

Supply Absorption

The Mumbai Residential market isThe Mumbai Residential market isThe Mumbai Residential market isThe Mumbai Residential market isThe Mumbai Residential market isexpected to witness an increase in newexpected to witness an increase in newexpected to witness an increase in newexpected to witness an increase in newexpected to witness an increase in newproject launches in mid-rangeproject launches in mid-rangeproject launches in mid-rangeproject launches in mid-rangeproject launches in mid-rangeparticularly over the next six monthsparticularly over the next six monthsparticularly over the next six monthsparticularly over the next six monthsparticularly over the next six months

WWWWWe expect Office rentals to bottom oute expect Office rentals to bottom oute expect Office rentals to bottom oute expect Office rentals to bottom oute expect Office rentals to bottom outowing to renewed interest fromowing to renewed interest fromowing to renewed interest fromowing to renewed interest fromowing to renewed interest fromCorporates resulting from the ongoingCorporates resulting from the ongoingCorporates resulting from the ongoingCorporates resulting from the ongoingCorporates resulting from the ongoingrecovery in the economyrecovery in the economyrecovery in the economyrecovery in the economyrecovery in the economy

Source: Cushman & Wakefield

Achievable P Achievable P Achievable P Achievable P Achievable Pricericericericerice ChangeChangeChangeChangeChange

LLLLLocationocationocationocationocation (INR/Month) (INR/Month) (INR/Month) (INR/Month) (INR/Month) (% yoy)(% yoy)(% yoy)(% yoy)(% yoy)

High EndHigh EndHigh EndHigh EndHigh End Mid SegmentMid SegmentMid SegmentMid SegmentMid Segment High EndHigh EndHigh EndHigh EndHigh End Mid SegmentMid SegmentMid SegmentMid SegmentMid Segment

South 42,500-58,000 28,000-37,000 3 7

South Central 42,000-66,000 35,000-45,000 (4) 4

Central 34,000-55,000 15,000-26,000 6 0

North 22,000-30,000 16,000-24,000 (4) 21

Far North 10,000-16,500 8,500-11,500 20 25

North East 10,000-16,000 6,400-8,500 (15) 10

Exhibit 24: Capital values across Mumbai

March 23, 2010 16


Company Background

HDIL is part of the Wadhawan Group, which has been involved in real estatedevelopment in the MMR since the last three decades. Prior to listing in July 2007, theWadhawan Group had developed around 73.2mn sq. ft of Saleable area, whichincluded 13.7mn sq. ft of Residential, 15.3mn sq. ft of Commercial, 0.7mn sq. ft ofRetail, 35.6mn sq. ft of land development and 7.9mn sq. ft of Saleable area underthe SRS. The company has constructed approximately 5.5mn sq. ft of rehabilitationhousing units under SRS.

HDIL is the largest listed player in MMR with 87% of its land reserves. As of December30, 2009, HDIL's total land reserves comprised approximately 194.4mn sq. ft. ofSaleable area.

Major in Slum Rehabilitation

HDIL is an established developer in slum rehabilitation, which primarily involvesconstructing residential buildings for the slum dwellers and clearing public and privateland for development of residential, commercial, retail and infrastructure purposes.Under SRS, rehabilitation flats are built free of cost for the slum dwellers and in returnthe developer is granted by the relevant authority rights to develop certain saleablearea equal to or greater than the surface area of rehabilitation housing built for theslum dwellers. It may be noted here that by executing projects under SRS, the companygains access to prime Mumbai land at a reasonable cost. Pertinently, HDIL has baggedthe prestigious MIAL, which involves rehabilitation of 85,000 families.


Exhibit 26: Break-up of Land Reserves (mn sq. ft / % to total saleable area)

91.0 /47%

27.3 /14%

17.3 /9%

58.7 /30%

Residential Commercial Retail SRS


Exhibit 27: Leader in SRS

SRS

Non-SRS

Low costof land

High costof land

LongGestation

ShortGestation

High entrybarriers

Low entrybarriers

HDIL is the largest listed player in theHDIL is the largest listed player in theHDIL is the largest listed player in theHDIL is the largest listed player in theHDIL is the largest listed player in theMMR with 87% land reserves. As ofMMR with 87% land reserves. As ofMMR with 87% land reserves. As ofMMR with 87% land reserves. As ofMMR with 87% land reserves. As ofDecember 30, 2009, HDIL's total landDecember 30, 2009, HDIL's total landDecember 30, 2009, HDIL's total landDecember 30, 2009, HDIL's total landDecember 30, 2009, HDIL's total landreserves comprised approximatelyreserves comprised approximatelyreserves comprised approximatelyreserves comprised approximatelyreserves comprised approximately194.4mn sq. ft. of Saleable area194.4mn sq. ft. of Saleable area194.4mn sq. ft. of Saleable area194.4mn sq. ft. of Saleable area194.4mn sq. ft. of Saleable area

Under SRSUnder SRSUnder SRSUnder SRSUnder SRS, HDIL gains access to prime, HDIL gains access to prime, HDIL gains access to prime, HDIL gains access to prime, HDIL gains access to primeMumbai land at a reasonable costMumbai land at a reasonable costMumbai land at a reasonable costMumbai land at a reasonable costMumbai land at a reasonable cost

March 23, 2010 17


Annexure I

Slum Rehabilitation Scheme

The Slum Redevelopment Authority (SRA) is the nodal agency, which identifies slumpockets for redevelopment. SRS projects with low slum density can avail FSI up to3.0x, while high density projects can avail FSI of 4.0x (only for select large projectslike the airport SRS and proposed Dharavi redevelopment).

Developers can execute SRS schemes only on getting consent from at least 70% of theslum owners. Moreover, only those slum dwellers are eligible to avail of the schemewhose names appear in the voters' list as on 01.01.1995 along with being the actualoccupant of the hut. A slum dweller has to also figure in Annexure II, which lists theslum dwellers entitled to benefit from the SRS. Annexure II also mentions themeasurement of the land. During the course of the construction work, the developersbear the rent for the transit tenements, while other expenses incurred towards water,electricity and telephone charges is borne by the slum dwellers themselves. Duringthe slum rehabilitation period, the developer can construct and sell free sale areaavailable to him as part of the SRS scheme with a cap of 90%. The balance can besold only after completion of the project.

Source: SRA

Exhibit 28: SRA flow chart

March 23, 2010 18


Profit & Loss Statement (Consolidated) Rs crore

Y/E MarchY/E MarchY/E MarchY/E MarchY/E March FY2007 FY2007 FY2007 FY2007 FY2007 FY2008 FY2008 FY2008 FY2008 FY2008 FY2009 FY2009 FY2009 FY2009 FY2009 FY2010E FY2010E FY2010E FY2010E FY2010E FY2011E FY2011E FY2011E FY2011E FY2011E FY2012E FY2012E FY2012E FY2012E FY2012E

Gross salesGross salesGross salesGross salesGross sales 1,214 1,214 1,214 1,214 1,214 2,395 2,395 2,395 2,395 2,395 1,750 1,750 1,750 1,750 1,750 1,479 1,479 1,479 1,479 1,479 1,775 1,775 1,775 1,775 1,775 3,106 3,106 3,106 3,106 3,106

Less: Excise duty - - - - - -

Net SalesNet SalesNet SalesNet SalesNet Sales 1,214 1,214 1,214 1,214 1,214 2,395 2,395 2,395 2,395 2,395 1,750 1,750 1,750 1,750 1,750 1,479 1,479 1,479 1,479 1,479 1,775 1,775 1,775 1,775 1,775 3,106 3,106 3,106 3,106 3,106

Other operating income - - - - - -

TTTTTotal operating incomeotal operating incomeotal operating incomeotal operating incomeotal operating income 1,214 1,214 1,214 1,214 1,214 2,395 2,395 2,395 2,395 2,395 1,750 1,750 1,750 1,750 1,750 1,479 1,479 1,479 1,479 1,479 1,775 1,775 1,775 1,775 1,775 3,106 3,106 3,106 3,106 3,106

% chg 179.2 97.2 (26.9) (15.5) 20.0 75.0

Total Expenditure (593) (825) (950) (795) (901) (1,481)

Cost of cosntruction (513) (633) (299) (286) (488) (1,056)

Other operating expenditure (51) (136) (537) (420) (299) (274)

Personnel (8) (12) (22) (27) (34) (45)

Administartive exps (22) (44) (92) (63) (80) (105)

EBITDEBITDEBITDEBITDEBITDAAAAA 621 621 621 621 621 1,570 1,570 1,570 1,570 1,570 800 800 800 800 800 684 684 684 684 684 873 873 873 873 873 1,626 1,626 1,626 1,626 1,626

% chg 362.8 152.8 (49.0) (14.5) 27.7 86.1

(% of Net Sales) 51.1 65.5 45.7 46.2 49.2 52.3

Depreciation& Amortisation (1) (1) (3) (4) (11) (24)

EBITEBITEBITEBITEBIT 620 620 620 620 620 1,568 1,568 1,568 1,568 1,568 798 798 798 798 798 680 680 680 680 680 862 862 862 862 862 1,602 1,602 1,602 1,602 1,602

% chg 364.4 152.9 (49.1) (14.8) 26.8 85.8

(% of Net Sales) 51.1 65.5 45.6 46.0 48.6 51.6

Interest & other Charges (5) (4) (58) (71) (57) (55)

Other Income 10 38 32 102 113 90

(% of PBT) 2 2 4 14 12 6

Recurring PBTRecurring PBTRecurring PBTRecurring PBTRecurring PBT 625 625 625 625 625 1,602 1,602 1,602 1,602 1,602 771 771 771 771 771 711 711 711 711 711 918 918 918 918 918 1,637 1,637 1,637 1,637 1,637

% chg 156.3 (51.8) (7.8) 29.0 78.3

Extraordinary Expense/(Inc.) - - - - - -

PBT (reported)PBT (reported)PBT (reported)PBT (reported)PBT (reported) 625 625 625 625 625 1,602 1,602 1,602 1,602 1,602 771 771 771 771 771 711 711 711 711 711 918 918 918 918 918 1,637 1,637 1,637 1,637 1,637

Tax (77) (192) (94) (121) (184) (327)

(% of PBT) 12.3 12.0 12.2 17.0 20.0 20.0

PPPPPAAAAAT (reported)T (reported)T (reported)T (reported)T (reported) 548 548 548 548 548 1,410 1,410 1,410 1,410 1,410 677 677 677 677 677 590 590 590 590 590 734 734 734 734 734 1,310 1,310 1,310 1,310 1,310

Add: Share of earnings of associate - - - - - -

Less: Minority interest (MI) 0 (0) (1) - - -

Prior period items & others - (0) 109 - - -

PPPPPAAAAAT after MI (reported)T after MI (reported)T after MI (reported)T after MI (reported)T after MI (reported) 548 548 548 548 548 1,410 1,410 1,410 1,410 1,410 786 786 786 786 786 590 590 590 590 590 734 734 734 734 734 1,310 1,310 1,310 1,310 1,310

ADJADJADJADJADJ. P. P. P. P. PAAAAATTTTT 548 548 548 548 548 1,410 1,410 1,410 1,410 1,410 677 677 677 677 677 590 590 590 590 590 734 734 734 734 734 1,310 1,310 1,310 1,310 1,310

% chg 367.2 157.3 (52.0) (12.8) 24.4 78.3

(% of Net Sales) 45.1 58.9 38.7 39.9 41.4 42.2

Basic EPS (Rs)Basic EPS (Rs)Basic EPS (Rs)Basic EPS (Rs)Basic EPS (Rs) 25.6 25.6 25.6 25.6 25.6 65.8 65.8 65.8 65.8 65.8 28.5 28.5 28.5 28.5 28.5 17.1 17.1 17.1 17.1 17.1 19.7 19.7 19.7 19.7 19.7 35.2 35.2 35.2 35.2 35.2

FFFFFully Diluted EPS (Rs)ully Diluted EPS (Rs)ully Diluted EPS (Rs)ully Diluted EPS (Rs)ully Diluted EPS (Rs) 14.7 14.7 14.7 14.7 14.7 37.9 37.9 37.9 37.9 37.9 21.1 21.1 21.1 21.1 21.1 15.9 15.9 15.9 15.9 15.9 19.7 19.7 19.7 19.7 19.7 35.2 35.2 35.2 35.2 35.2

% chg 367.2 157.3 (44.2) (24.9) 24.4 78.3

Source: Company, Angel Research; Note: *Assuming conversion of warrants

March 23, 2010 19


Balance Sheet (Consolidated) Rs crore


SOURCES OF FUNDSSOURCES OF FUNDSSOURCES OF FUNDSSOURCES OF FUNDSSOURCES OF FUNDS

Equity Share Capital 180 214 275 346 372 372

Preference Capital - - - - - -

Reserves& Surplus 554 3,427 4,146 6,526 7,524 8,748

Shareholders FShareholders FShareholders FShareholders FShareholders Fundsundsundsundsunds 734 734 734 734 734 3,642 3,642 3,642 3,642 3,642 4,422 4,422 4,422 4,422 4,422 6,871 6,871 6,871 6,871 6,871 7,895 7,895 7,895 7,895 7,895 9,120 9,120 9,120 9,120 9,120

Minority Interest - 0 0 0 0 0

Total Loans 376 3,113 4,143 3,343 2,743 2,743

Deferred Tax Liability 1 2 2 2 2 2

TTTTTotal Liabilitiesotal Liabilitiesotal Liabilitiesotal Liabilitiesotal Liabilities 1,111 1,111 1,111 1,111 1,111 6,756 6,756 6,756 6,756 6,756 8,568 8,568 8,568 8,568 8,568 10,217 10,217 10,217 10,217 10,217 10,641 10,641 10,641 10,641 10,641 11,866 11,866 11,866 11,866 11,866

APPLICAAPPLICAAPPLICAAPPLICAAPPLICATION OF FUNDSTION OF FUNDSTION OF FUNDSTION OF FUNDSTION OF FUNDS

Gross Block 27 58 65 115 374 656

Less: Acc. Depreciation 2 3 6 10 21 45

Net Block 25 54 60 105 353 612

Capital Work-in-Progress 0 5 15 45 45 45

Goodwill 2 9 48 48 48 48

InvestmentsInvestmentsInvestmentsInvestmentsInvestments 158 158 158 158 158 191 191 191 191 191 249 249 249 249 249 503 503 503 503 503 503 503 503 503 503 503 503 503 503 503

Current Assets 1,782 7,241 8,865 10,452 11,290 12,446

Cash 6 351 75 198 125 343

Loans & Advances 141 1,311 1,710 2,394 2,753 3,166

Other 1,636 5,580 7,080 7,860 8,413 8,937

Current liabilities 859 748 669 936 1,598 1,788

Net Current AssetsNet Current AssetsNet Current AssetsNet Current AssetsNet Current Assets 923 923 923 923 923 6,493 6,493 6,493 6,493 6,493 8,196 8,196 8,196 8,196 8,196 9,515 9,515 9,515 9,515 9,515 9,692 9,692 9,692 9,692 9,692 10,658 10,658 10,658 10,658 10,658

Mis. Exp. not written off 2 2 (0) - - -

TTTTTotal Assetsotal Assetsotal Assetsotal Assetsotal Assets 1,111 1,111 1,111 1,111 1,111 6,756 6,756 6,756 6,756 6,756 8,568 8,568 8,568 8,568 8,568 10,217 10,217 10,217 10,217 10,217 10,641 10,641 10,641 10,641 10,641 11,866 11,866 11,866 11,866 11,866

March 23, 2010 20


Cash Flow Statement (Consolidated) Rs crore


Profit before tax 625 1,602 771 711 918 1,637

Depreciation & others (2) (46) 15 75 68 79

Change in Working Capital (754) (5,345) (1,823) (1,276) (256) (747)

Less: Other income 10 38 32 102 113 90

Direct taxes paid (20) (164) (63) (121) (184) (327)

Cash Flow from OperationsCash Flow from OperationsCash Flow from OperationsCash Flow from OperationsCash Flow from Operations (161) (161) (161) (161) (161) (3,991) (3,991) (3,991) (3,991) (3,991) (1,132) (1,132) (1,132) (1,132) (1,132) (713) (713) (713) (713) (713) 434 434 434 434 434 551 551 551 551 551

Inc./ (Dec.) in Fixed Assets (62) (45) (62) (80) (259) (283)

Inc./ (Dec.) in Investments - (23) (57) (254) - -

Other income 10 38 32 102 113 90

Cash Flow from InvestingCash Flow from InvestingCash Flow from InvestingCash Flow from InvestingCash Flow from Investing (51) (51) (51) (51) (51) (30) (30) (30) (30) (30) (88) (88) (88) (88) (88) (232) (232) (232) (232) (232) (146) (146) (146) (146) (146) (193) (193) (193) (193) (193)

Issue of Equity (1) 1,712 - 1,938 374 -

Inc./(Dec.) in loans 179 2,737 1,031 (800) (600) -

Dividend Paid (Incl. Tax) - (49) (75) - (79) (85)

Others (4) (35) (11) (71) (57) (55)

Cash Flow from FCash Flow from FCash Flow from FCash Flow from FCash Flow from Financinginancinginancinginancinginancing 174 174 174 174 174 4,365 4,365 4,365 4,365 4,365 944 944 944 944 944 1,067 1,067 1,067 1,067 1,067 (361) (361) (361) (361) (361) (140) (140) (140) (140) (140)

Inc./(Dec.) in Cash (39) 344 (275) 123 (74) 219

Opening Cash balancesOpening Cash balancesOpening Cash balancesOpening Cash balancesOpening Cash balances 44 44 44 44 44 6 6 6 6 6 351 351 351 351 351 75 75 75 75 75 198 198 198 198 198 125 125 125 125 125

Closing Cash balancesClosing Cash balancesClosing Cash balancesClosing Cash balancesClosing Cash balances 5 5 5 5 5 350 350 350 350 350 75 75 75 75 75 198 198 198 198 198 125 125 125 125 125 343 343 343 343 343

March 23, 2010 21


Key Ratios


VVVVValuation Ratio (x)aluation Ratio (x)aluation Ratio (x)aluation Ratio (x)aluation Ratio (x)

P/E (on FDEPS) 19.3 7.5 13.4 17.9 14.4 8.1

P/CEPS 19.3 7.5 15.6 17.8 14.2 7.9

P/BV 8.3 1.7 1.8 1.5 1.3 1.2

Dividend yield (%) 0.2 1.7 - 0.7 0.7 0.7

EV/Sales 8.4 5.3 7.9 8.8 7.0 3.9

EV/EBITDA 16.4 8.0 17.4 19.0 14.3 7.5

EV / Total Assets 5.2 1.7 1.5 1.2 1.0 0.9

PPPPPer Share Data (Rs)er Share Data (Rs)er Share Data (Rs)er Share Data (Rs)er Share Data (Rs)

EPS (Basic) 25.6 65.8 28.5 17.1 19.7 35.2

EPS (fully diluted) 14.7 37.9 18.2 15.9 19.7 35.2

Cash EPS 14.8 38.0 18.3 16.0 20.1 35.9

DPS 0.5 5.0 - 2.0 2.0 2.0

Book Value 34.3 169.9 160.5 184.8 212.3 245.3

Du PDu PDu PDu PDu Pont Analysisont Analysisont Analysisont Analysisont Analysis

EBIT margin (%) 51.1 65.5 45.6 46.0 48.6 51.6

Tax retention ratio (x) 0.9 0.9 0.9 0.8 0.8 0.8

Asset turnover (x) 1.9 0.6 0.2 0.2 0.2 0.3

RoIC (Post-tax) (%) 85.9 36.8 9.4 6.1 6.7 11.6

Cost of Debt (Post Tax) (%) 10.5 11.0 12.3 10.8 9.6 9.6

Leverage (x) 0.3 0.8 0.9 0.7 0.4 0.3

Operating RoE (%) 109.3 57.3 6.8 3.0 5.5 12.3

Returns (%)Returns (%)Returns (%)Returns (%)Returns (%)

RoCE (Pre-tax) 83.0 39.9 10.4 7.2 8.3 14.2

Angel RoIC (Pre-tax) 98.0 41.8 10.7 7.3 8.4 14.5

RoE 59.5 64.5 16.8 10.5 9.9 15.4

TTTTTurnover ratios (x)urnover ratios (x)urnover ratios (x)urnover ratios (x)urnover ratios (x)

Asset Turnover (Gross Block) 74 57 28 16 7 6

Inventory / Sales (days) 271 522 1,297 1,796 1,616 973

Receivables (days) 59 28 23 47 58 47

Payables (days) 180 104 128 184 240 187

Wkg capital cycle (ex-cash) (days) 178 538 1,487 2,152 1,942 1,168

Solvency ratios (x)Solvency ratios (x)Solvency ratios (x)Solvency ratios (x)Solvency ratios (x)

Net debt to equity (x) 0.5 0.8 0.9 0.5 0.3 0.3

Net debt to EBITDA (x) 0.6 1.9 15.4 11.9 4.6 1.8

Interest Coverage (x) 10.1 10.2 0.4 0.5 1.6 4.0

HDIL

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Opinion expressed is our current opinion as of the date appearing on this material only. While we endeavor to update on a reasonable basisthe information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. Prospectiveinvestors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressedherein.

The information in this document has been printed on the basis of publicly available information, internal data and other reliable sourcesbelieved to be true and are for general guidance only. While every effort is made to ensure the accuracy and completeness of informationcontained, the company takes no guarantee and assumes no liability for any errors or omissions of the information. No one can use theinformation as the basis for any claim, demand or cause of action.

Recipients of this material should rely on their own investigations and take their own professional advice. Each recipient of this documentshould make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companiesreferred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risksof such an investment. Price and value of the investments referred to in this material may go up or down. Past performance is not a guidefor future performance. Certain transactions - futures, options and other derivatives as well as non-investment grade securities - involvesubstantial risks and are not suitable for all investors. Reports based on technical analysis centers on studying charts of a stock's pricemovement and trading volume, as opposed to focusing on a company's fundamentals and as such, may not match with a report on acompany's fundamentals.

We do not undertake to advise you as to any change of our views expressed in this document. While we would endeavor to update theinformation herein on a reasonable basis, Angel Securities, its subsidiaries and associated companies, their directors and employees areunder no obligation to update or keep the information current. Also there may be regulatory, compliance, or other reasons that mayprevent Angel Securities and affiliates from doing so. Prospective investors and others are cautioned that any forward-looking statementsare not predictions and may be subject to change without notice. Angel Securities Limited and affiliates, including the analyst who hasissued this report, may, on the date of this report, and from time to time, have long or short positions in, and buy or sell the securities of thecompanies mentioned herein or engage in any other transaction involving such securities and earn brokerage or compensation or act asadvisor or have other potential conflict of interest with respect to company/ies mentioned herein or inconsistent with any recommendationand related information and opinions.

Angel Securities Limited and affiliates may seek to provide or have engaged in providing corporate finance, investment banking or otheradvisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past.

Note: Please refer important `Stock Holding Disclosure' report on Angel web-site (Research Section).

Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

Ratings (Returns) :

Disclosure of Interest StatementDisclosure of Interest StatementDisclosure of Interest StatementDisclosure of Interest StatementDisclosure of Interest Statement HDILHDILHDILHDILHDIL

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Note:Note:Note:Note:Note: We have not considered any Exposure below Rs 5 lakh for Angel, its Group companies and Directors.

HDIL

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Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946Angel Capital & Debt Market Ltd: INB 231279838 / NSE FNO: INF 231279838 / NSE Member code -12798 Angel Commodities Broking (P) Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302

Research Team

Fundamental:

Sarabjit Kour Nangra VP-Research, Pharmaceutical [email protected]

Vaibhav Agrawal VP-Research, Banking [email protected]

Vaishali Jajoo Automobile [email protected]

Shailesh Kanani Infrastructure, Real Estate [email protected]

Anand Shah FMCG , Media [email protected]

Deepak Pareek Oil & Gas [email protected]

Puneet Bambha Capital Goods, Engineering [email protected]

Sushant Dalmia Pharmaceutical [email protected]

Rupesh Sankhe Cement, Power [email protected]

Param Desai Real Estate, Logistics, Shipping [email protected]

Sageraj Bariya Fertiliser, Mid-cap [email protected]

Viraj Nadkarni Retail, Hotels, Mid-cap [email protected]

Paresh Jain Metals & Mining [email protected]

Amit Rane Banking [email protected]

Rahul Jain IT [email protected]

Jai Sharda Mid-cap [email protected]

Sharan Lillaney Mid-cap [email protected]

Amit Vora Research Associate (Oil & Gas) [email protected]

V Srinivasan Research Associate (Cement, Power) [email protected]

Aniruddha Mate Research Associate (Infra, Real Estate) [email protected]

Shreya Gaunekar Research Associate (Automobile) [email protected]

Mihir Salot Research Associate (Logistics, Shipping) [email protected]

Chitrangda Kapur Research Associate (FMCG, Media) [email protected]

Vibha Salvi Research Associate (IT, Telecom) [email protected]

Pooja Jain Research Associate (Metals & Mining) [email protected]

Technicals:

Shardul Kulkarni Sr. Technical Analyst [email protected]

Mileen Vasudeo Technical Analyst [email protected]

Derivatives:

Siddarth Bhamre Head - Derivatives [email protected]

Jaya Agarwal Jr. Derivative Analyst [email protected]

Institutional Sales Team:

Mayuresh Joshi VP - Institutional Sales [email protected]

Abhimanyu Sofat AVP - Institutional Sales [email protected]

Nitesh Jalan Sr. Manager [email protected]

Pranav Modi Sr. Manager [email protected]

Sandeep Jangir Sr. Manager [email protected]

Ganesh Iyer Sr. Manager [email protected]

Jay Harsora Sr. Dealer [email protected]

Meenakshi Chavan Dealer [email protected]

Gaurang Tisani Dealer [email protected]

Production Team:

Bharathi Shetty Research Editor [email protected]

Dharmil Adhyaru Assistant Research Editor [email protected]

Bharat Patil Production [email protected]

Dilip Patel Production [email protected]

HDIL - The Slum Redevelopment Czar

Economy & Finance

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