Kalpataru Limited (May Subscribe)

Highlights

Kalpataru Limited, incorporated in 1988, is a prominent real estate developer in MMR with a legacy of 55 years and an integrated real estate development company involved in all key activities associated with real estate development, including identification, acquisition of land, planning, designing, execution, sales, marketing of projects with a total market share of 1.53 pct from FY19 – FY24.

They have an in-house project management and execution team focusing on effective supervision and timely project execution. In FY22, they received “Residential Project – Township (West)” award for Kalpataru Parkcity at the ET Real Estate Awards. They are the 5^th and 7^th largest developer in the MCGM and Thane in terms of units supplied for FY19-9MFY25.

For FY19-9MFY25, MMR was ranked 1^st among the top 7 Indian markets in terms of supply, absorption and average base selling price. For FY19-FY23, MMR and Pune ranked 1^st and 2^nd among top 7 Indian markets in terms of supply, absorption and average base selling price and as of 9MFY25, MMR and Pune continues to be ranked 1^st and 2^nd while in terms of average base selling price, Pune ranked 3^rd.

Their business model includes acquiring freehold, leasehold interests in land, and asset-light development model by entering redevelopment, JDA, JV projects with other landowners. The focus on development of luxury, premium, mid-income residential, commercial, retail projects, integrated townships, lifestyle gated communities, redevelopments.

Out of the total proceeds of Rs. 15,900 mn, Rs. 11,925 mn would be utilised for repayment/ prepayment, in full or in part, of certain outstanding borrowings of which Rs. 3,332 mn and Rs. 8,592 mn is availed by the company and its subsidiaries, and ~Rs. 3,9755 mn would be utilised towards general corporate purposes.

Key Highlights

• The real estate sector along with its ancillary industries, is a significant growth driver of the Indian economy. The real estate market in India has grown at a compounded annual growth rate of approximately 10.83% from US$50 billion in 2008 to US$180 billion in 2020 and is expected to further to reach US$1 trillion by 2030 and touch US$5.8 trillion by 2047. Mumbai is a significant real estate market with diverse micro-markets, including the city, suburbs, extended suburbs, and areas like Thane and Navi Mumbai.
• Their key strategy is to maintain focus on MMR and Pune diversifying them across different micro-markets and price points where commercial and financial viability of MMR not only provides significant market for developments focused on residential sector but also spread across commercial, retail and integrated townships sectors while selectively pursuing opportunities in other high growth cities.
• As of 9MFY25, they have 25 ongoing, 6 forthcoming, 5 planned Projects. Their ongoing/forthcoming projects comprised ~24.83 msf/16.33 msf of DA. Majority of projects and land reserves are in MMR and Pune, 2 ongoing in Hyderabad, Noida, 1 forthcoming in Nagpur, 3 pieces of land in Surat, Nagpur, Udaipur.
• They had 485.38 acres of land in various stages of development, marking 48.97 msf of DA, ongoing, forthcoming, planned projects amounted to 260.48, 101.84, 123.06 acres with DA of 24.83, 16.33, 7.81 msf as of 9MFY25.
• Their integrated township developments and lifestyle gated community projects consist of development, sale/lease, management of residential, commercial, retail developments. As of 9MFY25, they had 5 land reserves for 1,886.10 acres.
• They aim to sell over 80 pct of the saleable area of project during construction phase and focus on selling a sizeable pct within a year from launch as well as prior to receipt of occupation certificate, assisting them in generating CFOs during construction phase, reducing the need for working capital. As of 9MFY25, their net gearing ratio was 86.50 pct. 
• Residential projects as of 9MFY25 were 46.72 msf of DA, comprising 95.41 pct of DA and had 64 residential projects, with 23 ongoing, 5 forth coming projects and 68.31 pct of the DA of the residential projects was in MMR for 33.45 msf.
• The unit sales/ sales volume/sales collections witnessed CAGR of 18 pct/23 pct/31 pct, and revenue and adj. The company exhibited sales CAGR of 37.98 pct during FY22-FY24 from Rs. 10,006 mn to Rs. 19,299 mn and sales for 9MFY25 stood at Rs. 16,247.36 mn. EBITDA improved from Rs. (1,382.65) mn in FY22 to Rs. 473.24 mn in 9MFY25 highlighting operational efficiency and cost control measures.

Key Risk

• KL has witnessed negative cash flows in the past and may continue with the same which might adversely affect their business operations.
• Land may be subject to compulsory acquisition by government and compensation in lieu of that may be inadequate.
• The unsold inventory of projects if not sold in timely manner might negatively affect business operations.
• The changes to the floor space index and transferable development rights in the location of the projects could unfavourably affect the business.

Financial Performance

Peer Comparison

Valuation

Kalpataru Limited is the prominent real estate developer in the MMR and are present across all micro-markets in MMR. They focus on the development of luxury, premium, and mid-income residential, commercial and retail projects, integrated townships, lifestyle gated communities, and redevelopments.At the upper end of the price band of Rs. 414 the issue is priced at a P/B of ~2.33x its FY25 earnings. The valuation seems to be expensive as it has just become profitable. High risk investors may park some funds only for a longer-term perspective.

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