Investment Guru: Brigade Enterprise

Banking on Bangaluru

Brigade enterpise limited has entered the capital markets with an offer of 166.24 lac shares of Rs. 10 each at a price band of Rs. 351-390 per share. Investment Guru is of the view that realty and infrastructure sector would continue to be in limelight as it makes deeper inroads in the world of stock markets. Brigade enterprise’s business model comprises of a mix of residential, commercial and hospitality properties. The company’s operation and land bank are focused in and around Bangalore. Exposure of the company to a limited geographical area and a lean land reserve of just 44.16 million square feet might put a dent on the margins in future.

However, the bright side of the picture is that the company has sizeable ongoing projects which would keep the scorecard ticking in the medium term. On valuations parameters the stock looks aggresively priced leaving little scope of appreciation for Investors. The issue also has a green-shoe clause which would be used to provide stability to the price of the stock for one month if the market price falls below the issue price. Investors should consider subscribing to the issue purely from listing gains perspective. For long term perspective, there are better players available in the secondary markets with sizeable land bank and better geographical spread.

Issue highlights

BEL is a real estate development company based in Bangalore, primarily focused on the development of residential, commercial and hospitality properties in South India. Company’s residential properties include
integrated lifestyle enclaves and apartment buildings targeted towards middle income and high income customers.

The company has completed a total of 67 properties, comprising of 41 residential properties, 21 commercial properties and five hospitality properties, aggregating to approximately 5.67 million sq. ft. of Saleable Area and approximately 6.74 million sq. ft. of Developable Area.

The company is currently developing 16 properties, including Brigade Gateway and Brigade Metropolis, which are integrated lifestyle enclaves and that comprise of a combined Saleable Area of approximately 10.83 million sq. ft. and a combined Developable Area of approximately 11.89 million sq. ft.

Consolidated total income was Rs. 4,170.20 million for the fiscal year 2007 as compared to Rs.2,032.32 million for the fiscal year 2006 and Rs. 1,605.03 million for the fiscal year 2005, representing year over year increases of 105.19%, 26.62% and 109.38%, respectively.

The consolidated profit after tax was Rs. 714.98 million for the fiscal year 2007 as compared to Rs. 423.06 million for the fiscal year 2006 and Rs. 198.77 million for the fiscal year 2005, representing year over year increases of 69.00%, 112.84% and 85.06%, respectively.