Indian Real Estate company – Vipul

Vipul is a mid-cap stock in the Indian real estate industry, and the company’s stock is trading at attractive pricing and much lower valuation than 2-3 years back because most real estate companies are emerging from difficult times on 2008-2009. While Mumbai real estate companies like Orbit Corp and Peninsula Land are delivering strong QoQ numbers, other real estate companies in India like Vipul (Delhi based) are lagging behind in terms of demand strength. But demand will return strongly across metros and lareg cities, in a year or so when the Indian economy returns to full steam. That scenario makes Delhi based real estate companies like Vipul a good buy today. The market cap is about Rs 275 cr for land and building assets of over 1400 cr.

Vipul has its operations primarily in Gurgaon (Delhi suburb/border). Over the last few years this company has expanded to other cities also. They are currently executing projections in Ludhiana, Bhuvneshwar, Kolkata, Faridabad and Hyderabad besides Gurgaon.

Vipul has a land bank of more than 1,000 acres. This land bank is situated at Gurgaon where they have about 425 acres of land, in Hyderabad they have 400 acres, in Ludhiana 130 acres, and about 95 acres in Faridabad. Besides they have small pockets of land at other places also.

The company in 2007 had given 15% stake to Wachovia at about Rs 1,300 per share which when adjusted for the stock split translates into price of about Rs 260 per share as against that the stock is available at Rs 61 (Jan 22, 2010) and its been consolidating in the Rs 55-65 range.

In a recent deal in Gurgaon, DLF bought about 350 acres in Gurgaon from Haryana State Industrial Development Corporation (HSIDC) for Rs 1,750 crore. This deal is significant in two ways. (a) it talks about valuation of the land bank in Gurgaon and (b) it talks about the change in the attitude of real estate developers. They were earlier risk averse and  shying away from buying any fresh land bank. Now real estate developers have started buying land bank at places where they see good sales potential.

Vipul owns about 425 acres of land in Gurgaon. This land is close to Sohna Road in Gurgaon and this land also has good sales potential and with Commonwealth Games coming up. The new toll road Delhi-Gurgaon has also come up nicely. All these factors augur well for companies like Vipul and with 425 acres in Gurgaon where the sales potential maybe high and land banks at other places also at marketcap of about Rs 370 crore, the stock looks attractive with a Price/Book of just 1.07 (ie, its available at book value), and hence a good buy at current price for value investors.

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