Vijay Shanthi Builders Ltd

BSE Code: 523724

CMP: Rs.18.87

Book Value: Rs.42.69

EPS: Rs.3.62

P/E: 4.94

Industry P/E: 17.63

Market Cap: Rs.46.80 Cr

Dividend Yield: 4.48%

Target: Rs.32-38

Time: 2-4 months.

Medium Term Target: Rs.47-54

Introduction: Vijay Shanthi Builders Limited was started in 1977 as a partnership firm in the name of Shri Shanthi Constructions by Late Mr. V. C. Jain. In its aspiration of creating a “home for all”, Vijay Shanthi went public in January 1992 with an IPO of Rs.65.5 million and is listed on the Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and Madras Stock Exchange (MSE).
Vijay Shanthi Builders Limited is engaged in Property Development mainly of Promotion of residential spaces in and around Chennai. VSBL is known for its excellence in quality of Homes with a delivery of clear title, on time and without cost escalations, along with necessary completion certificates from the regulatory authorities. VSBL gives guarantee for its homes, is transparent in its area calculation and provides maximum plinth area. VSBL is included in the panel of approved builders of south Indian bank, Kotak. HDFC, LIC Home Finance, ICICI Bank, IDBI Bank, SBI and other such reputed institutions. Vijay Shanthi Builders Ltd is also known to offer luxury apartments at affordable prices to discerning citizens. The Company currently has several projects under implementation and continues to explore newer opportunities. To rewind, a couple of years back; it merged High End Homes Private Limited into itself. Pursuant to this, the Company issued one equity share of Rs.10 each fully paid up, for every three equity shares held by the Shareholders in High End Homes Private Limited.

The Company used to run a mineral water plant in the name of Vijay Shanthi. However, considering miniscule contribution (0.83%) of this segment to its top line, the Board of Directors had proposed to exit the Company from mineral water business from the FY11-12. As the assets deployed by the Company to this segment are very less, this decision would not involve any substantial sale / dilution in the value of assets of the Company.  It was in 2003 when Vijay Shanthi Builders started engaging in premium segment. It is probably the first company in this space in Chennai, to make a foray into this segment  and to come up with the concept of lifestyle premium homes, complete with theme, concept planning and high end amenities. Its elite homes boasted personalized lifts, mammoth open spaces, the finest gyms, spas and more. It has also ventured into villa housing concepts. Vijay Shanthi has been an Award Winning Company. It has been awarded by CREDAI and CRISIL in the years 2008 and 2009 respectively. Vijay Shanthi Builders Ltd has touched the lives of over 10000 happy families and has created some of the most finely crafted and contemporary homes in South India, covering a built up area of over to 50 lakhs square feet. It has already completed about 275 projects and is still counting. 

Shareholding Pattern: The promoters hold 66.89% while the general public holds 33.11%. Thus the company has the controlling stake which helps in taking fast decisions.

Financials: For FY12, the company came out with flat net profit even in a high interest rate regime. The total income of the company for FY12, came out to be Rs.210.78 Cr as against Rs.136.40 Cr in the same period previous year. The PBDT of the company is Rs.14.50 Cr in FY12 as against Rs.12.60 Cr in FY11. The net profit of the company came out to be flat at Rs.9.47 Cr as against Rs.9.50 Cr in the same period previous year. The EPS of the company remained flat at Rs.3.62 in FY12 as against Rs.3.63 in the same period previous year. The fall in net profit in FY12 is basically due to higher depreciation, tax component, and interest outgo. Meanwhile, the reserves of the company increased to Rs.83.17 Cr in FY12 as against Rs.76.14 Cr in the same period previous year. The book value of the shares also improved to Rs.42.69 from earlier, Rs.39.07.

Triggers:

(i) The demand for Housing continues to increase as ever, though the increase in lending rates by the Banks affected the off-take of home loans to a large extent, during the last few months. However, now with the RBI going in for the CRR cut, followed by an interest cut, we can look forwards for a softer interest rate regime in the coming days. The company is confident that with completion of various residential projects in the coming months, both its top and bottomlines, are set to witness a substantial increase.

(ii) Following are the on-going projects of Vijay Shanthi Builders Limited, which are expected to be revenue accretive in the coming days:

Project Name                                        Location

Lotus Pond                                                               Thaiyur

Infiniti                                                                     Mevalurkuppam

Park Avenue (Phase I)                                              Kandigai

Boulevord                                                                 Kandigai

Silent Valley                                                            Tambaram

Mystiq                                                                     Purasawalkam

The Art                                                                   Nunganbakkam

(iii) Vijay Shanthi Builders Limited has a land holding of 5507795 sq. ft (approx.) which is valued at Rs.1878 crores (approx). This shows the real potential of the company, in terms of value creation for the shareholders.

(iv) The futures projects are the following:

Project	Name of the Location	Total Saleable Area
Serene	Perungudi	48000 sq. ft.
Aurum	Besant Nagar	85000 sq. ft.
Whistling Woods	NH4-Bangalore Highway	700000 sq. ft.
Calm Springs	Ratnamangalam Vandalur–             Kelambakkam	1500000 sq. ft.
Eternal Springs	Ambattur	500000 sq. ft.

(v) The Company’s projects are currently located in Chennai, Tamil Nadu only. Since Chennai has a lot of scope and potential, the Company plans to exploit all the opportunities provided by the city to the fullest. In the future the company might think of moving to other locations. (vi) The Company is in the process of completing and handing over around 800 apartments constituting more than 8 lacs Sq.ft. of constructed space during the first quarter of the Finance year 2012—13 (FY13) and further expect to complete and handover nearly 7 lacs Sq. Ft. constructed space during the subsequent quarter. This trigger alone can take the scrip to over Rs.50 price band. (vii) The Company is consistently paying dividend to its shareholders, since the last 7 years.  Vijay Shanthi Builders Ltd informed that the Board of Directors of the Company at its meeting held on May 30, 2012, inter alia, has recommended the dividend of Re. 0.80 per equity Share for the financial year 2011-2012, (Face Value of equity share is Rs. 10). Due to the Company’s superb performance it has been ranked among the TOP 400 SMALL CAP CORPORATES OF INDIA in Dalal Street Journal's widely circulated and read "SMALLCAP 400, 2011".  Vijay Shanthi builders are the leaders of the High end segment projects and have been conferred  with the prestigious “ACCOLADES OF EXCELLENCE” – India’s Best Residential Project  award for their Unique project  “PATIO” from CNBC & CRISIL. A rare Honour reserved for a select few in the real estate industry. It’s the first and only home in Chennai to have been bestowed with this special privilege.

Conclusion: The scrip is looking good on the charts and is about to give a breakout above Rs.18.20, which is expected to cross easily as the momentum is very strong.  Considering all the factors mentioned above, investors can go in for the scrip, at the CMP of Rs.18.87, for a price target of Rs.32-38, in the next 2-4 months time frame. Moreover, a decent P/E rating of 10 can also take the scrip to around Rs.37-38 in the coming days. The worst is over for the sector, as the rate cut by the RBI is imminent in the next policy meet as the inflation is expected to come down. 

Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on the recommendation or after reading the report.

The call made herein is for informational purposes and is not a recommendation to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness is not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrip mentioned in this column. Investors should take their own decisions while buying and  selling the shares/securities