Recommendation from Real Estate Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.

ANANT RAJ : ON A FIRM FOOTING

HERE IS WHY
✓ Leading position as an infrastructure developer
✓ Widespread portfolio of residential and commercial projects
✓ Aims to be debt-free by end of calendar year 2024

The infrastructure sector acts as a catalyst for India’s economic growth as it drives the growth of allied sectors like townships, housing, built-up infrastructure and construction development projects. According to a report by Colliers and the Confederation of Real Estate Developers’ Associations of India (CREDAI), the real estate sector is projected to be a USD 10 trillion market by 2047, while its share in India’s gross domestic product (GDP) is estimated to increase to 14-20 per cent during this period. Currently, the sector’s share in GDP stands at around 7.3 per cent.

Anant Raj Limited, with over five decades of experience, is our choice scrip this time. The company has grown to become one of the largest real estate developers in the Delhi-NCR region, with an extensive portfolio that spans almost all the verticals of real estate and beyond. The strength of Anant Raj lies in its steadfast policy of not selling any of its commercial properties, a practice it continues to uphold. Today, the company boasts almost 5 million sq. feet of leasable space, much of which is operational across some of the prime locations in Delhi and NCR.

In Q2FY24, on a consolidated basis, the revenue of the company rose by 54.34 per cent YoY to ₹512.85 crore compared to ₹332.28 crore from the previous year’s same quarter. On a sequential basis, its revenue increased by 8.69 per cent. For Q2FY24, the PBIDT excluding other income increased significantly by 41.25 per cent and stands at ₹112.80 crore from ₹79.86 crore in the previous year’s same quarter.

It has sequentially increased by 9.57 per cent. The net profit increased by 77.80 per cent and stood at ₹104.44 crore compared to ₹58.74 crore in the previous year’s same quarter, while sequentially it increased by 16.64 per cent from ₹89.54 crore. Anant Raj is also present in the technology sector with data centres, digital infrastructure and digital cloud solutions, providing secure, scalable digital infrastructure and managed IT services for businesses. Currently operating with 6 megawatts of IT load at the Manesar facility, it plans to expand to 28 megawatts by FY25 end and scale up to 307 MW IT load data centre within the next 4 – 4.5 years.

The company continues to significantly reduce its debt and expects to be net debt-free by the end of the calendar year 2024. Its net debt ending Q2FY25 stood at ₹96 crore versus ₹220 crore in Q1FY25. It has announced a fundraising programme of ₹2,000 crore, primarily focused on the data centre business. Currently, the company’s residential portfolio mix for ongoing and upcoming projects stands at 9.07 million sq. feet while its commercial portfolio stands at 1.85 million sq. feet.

Anant Raj holds approximately 100 acres fully paid freehold land in Delhi and NCR for future residential, warehousing and hospitality projects. The company’s share is currently trading at a PE of 82.8 times as against the industry PE of 35.3 times while its three-year median PE stands at 42.4 times and one-year median PE stands at 55.7 times. This higher valuation is supported by better financials. Its three-year sales growth stands at 81.1 per cent while profit growth stands at 213 per cent in the same duration, Considering the company's business and its leading position, we recommend BUY.