Housing Development & Infrastructure Equity Research

Date of Research – 18 January 2016

Price – Rs. 68.85

About the Company

Housing Development & Infrastructure Limited (“HDIL” or the “Company”) has established itself as one of India’s premier real estate development companies, with significant operations in the Mumbai Metropolitan Region (“MMR“).

HDIL had a land reserve of 226.41 million square feet as on 31st December 2012. HDIL has about three decades of experience in the real estate & infrastructure domain having developed over 100 million sq. ft. area of commercial, residential and retail space.

The Company has been a major player in Mumbai real estate market with 90% land reserves in MMR and IS a market leader in Residential and Slum Rehabilitation (SRA) projects.

HDIL is currently executing the largest SRA project for rehabilitation of approx. 85,000 slum dwellers under expansion and modernization of Chhatrapati Shivaji International Airport, Mumbai. ApproxImately 33,000 housing units are currently under construction for this project.

Key Financial Figures

Consolidated(Rs. Cr)
ParticularsFY 2013FY 2014FY 2015FY 2016FY 2017
Total Income from Operations1,025.24872.261,022.471,169.46 723.77 
Expenses(247.69)(21.28)216.56384.32 110.86  
Earnings Before Other Income, Interest, Tax and Depreciation (Operating Profit)1,272.93893.54805.91785.14 612.91  
Depreciation84.5478.5715.325.76 7.50  
Finance Costs692.31707.29553.44512.28 428.24  
Other income39.9981.3860.6523.01 34.51  
Exceptional items441.98– – 
PBT94.09189.06297.80290.11 211.68  
Tax20.5211.3779.1624.07 56.80  
PAT (before Minority Interest and share of Associates)73.57177.69218.64266.04 154.88  
Profit/ (loss) attributable to Minority Interest(0.05)0.12(0.02)(0.10) (0.11)
Share of profit / (loss) of Associates0.29– – 
Consolidated Profit / (Loss) for the year73.33177.57218.66266.14 154.99  

Profitability Analysis

Consolidated(%)
ParticularsFY 2013FY 2014FY 2015FY 2016FY 2017
Operating Profit Margin Ratio124.16102.4478.8267.14 84.68 
Net Profit Margin Ratio7.1820.3721.3822.75 21.40 

Operating profit margin is a measurement of the proportion of a company’s revenue that is left over after paying for production costs such as raw materials, salaries and administrative costs. Net profit margin is arrived at by deducting non operating expenses such as depreciation, finance costs and taxes out of operating profit and shows what is left for the shareholders as a percentage of net sales. Together these ratios help in understanding the cost and profit structure of the firm and analysing business inefficiencies.

Key Balance Sheet Figures

Sources of Funds / Liabilities(Rs. Cr)
ParticularsFY 2012FY 2013FY 2014FY 2015FY 2016 
Share Capital419.00419.00419.00419.00419.00 
Money received against warrants– 
Share application money pending allotment2.50– 
Reserves & Surplus9,890.679,963.7110,140.0510,385.6810,728.75 
Net worth (shareholders funds)10,312.1710,382.7110,559.0510,804.6811,147.75 
Minority Interest4.617.267.387.367.27 
Long term borrowings1,373.133,138.831,127.121,061.67902.05 
Current liabilities5,555.283,659.665,173.095,723.985,571.07 
Other long term liabilities and provisions2.18127.181.371.672.27 
Deferred Tax Liabilities14.1418.9318.9418.46 
Total Liabilities17,261.5117,315.6416,886.9517,618.3017,648.88 

 

Application of Funds / Assets(Rs. Cr)
ParticularsFY 2012FY 2013FY 2014FY 2015FY 2016 
Fixed Assets235.81291.33228.64120.03137.28 
Noncurrent Investments52.0577.4450.07159.65129.63 
Current assets16,789.4013,046.4116,515.3417,265.7917,299.69 
Long term advances and other noncurrent assets37.903,891.9885.7372.8382.27 
Deferred Tax Assets0.08– 
Goodwill on consolidation (net)146.297.15– 
Total assets17,261.5117,315.6416,886.9417,618.3017,648.88 

Efficiency Analysis

 
ParticularsFY 2012FY 2013FY 2014FY 2015FY 2016 
ROCE12.889.447.646.796.51 
ROE / RONW7.857.991.682.022.39 

Return on Capital Employed (ROCE) measures a company’s profitability from its overall operations by calculating the return generated on the total capital invested in the business (i.e. equity + debt). Return on Equity (ROE) or Return on Net Worth (RONW) measures the amount of profit which the company generates on money invested by the equity shareholders. In short, ROE draws attention to the return generated by the shareholders on their investment in the business. Together these ratios can be used in comparing the profitability of the company with other companies in the same industry.

Valuation Analysis

Consolidated
ParticularsFY 2013FY 2014FY 2015FY 2016FY 2017
Total Income from Operations (Rs. Cr.)1,025.24872.261,022.471,169.46 723.77 
Growth (%)(48.90 %)(14.92 %)17.22 %14.38 % (38.11 %) 
PAT (Rs. Cr.)73.33177.69218.64266.04 154.88  
Growth (%)(90.94 %)141.53 %23.05 %21.68 % (41.78 %) 
Earnings Per Share – Basic (Rs. )1.754.215.208.19 4.16 
Earning Per Share – Diluted (Rs. )1.754.215.208.19 4.16 
Price to Earnings40.1421.7620.718.91 20.53 

Dividend History

The Company has not declared any dividends over the last 5 financial years.

Liquidity and Credit Analysis

Current Ratio

Higher current ratio implies healthier short term liquidity comfort level. A current ratio below 1 indicates that the company may not be able to meet its obligations in the short run. However, it is not always a matter of worry if this ratio temporarily falls below 1 as many times companies squeeze out short term cash sources to achieve a capital intensive plan with a longer term outlook. HDIL’s average current ratio over the last 5 financial years has been 0.30 times which indicates that the Company is comfortably placed to pay for its short term obligations.

Long Term Debt to Equity Ratio

Companies operating with high debt to equity on their balance sheets are vulnerable to economic cycles. In times of slowdown in economy, companies with high levels of debt find it increasingly difficult to service the interest on their borrowings as profit margins decline. We believe that long term debt to equity ratio higher than 0.6 – 0.8 could affect the business of a company and its results of operations.

HDIL’s average long term debt to equity ratio over the last 5 financial years has been 4.73 times which indicates that the Company operates with considerate level of debt and is not placed well to withstand economic slowdowns.

Interest Coverage ratio

Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e. finance charges) on its outstanding debt. Higher interest coverage ratio indicates that the company can easily meet the interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise doubts about the company’s ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the company is just not generating enough to service its debt obligations.

HDIL’s average interest coverage ratio over the last 5 financial years has been 11.52 times which indicates that the Company can meet its debt obligations without any difficulty.

Ownership pattern

In its latest stock exchange filing dated 31 March 2017, HDIL reported a promoter holding of 36.49 %. Large promoter holding indicates conviction and sincerity of the promoters. We believe that a greater than 35 % promoter holding offers safety to the retail investors.

At the same time, institutional holding in the Company stood at 45.11% (FII+DII). Large institutional holding indicates the confidence of seasoned investors. At the same time, it can also lead to high volatility in the stock price as institutions buy and sell larger stakes than retail participants.

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.