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CRISIL Research assigns IPO grade 2/5 to D B Realty Ltd. - page 1 / 3

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January 14, 2010 Mumbai

CRISIL Research assigns IPO grade 2/5 to D B Realty Ltd.

CRISIL has assigned CRISIL IPO Grade "2/5" (pronounced "two on five") to the proposed initial public offer (IPO) of D B Realty Limited (DBRL). This grade indicates that the fundamentals of the IPO are below average relative to the other listed equity securities in India. However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The grade is not a recommendation to buy/sell or hold the graded instrument, or a comment on the graded instrument’s future market price or its suitability for a particular investor.

The grading reflects DBRL’s lack of operating history in real estate development. However, the presence of its experienced promoters, Mr Vinod Goenka and Mr Shahid Balwa, in the real estate development business for more than a decade provides execution track record comfort. The promoters have jointly developed nearly 15.9 million sq ft of residential, commercial and retail real estate projects in and around Mumbai. The grading has considered the highly fragmented nature and severe competition in the real estate industry. However, DBRL’s concentration in and around Mumbai is a key positive. Mumbai real estate market is expected to recover faster compared to other markets.

The grading takes into account corporate guarantees, which total more than the company’s net worth, and that seven out of the 10 subsidiaries have negative net worth. Further, the fact that DBRL has extended unsecured interest-free loans to entities related to the promoters without any agreements in place is an area of concern. Some of these loans have been given to entities that are either loss-making or have negative net worth. The grading also factors in the company’s sizeable development plans over the next few years, for which the managerial team may need to be further strengthened.

DBRL, did not earn revenues in 2006-07 (was incorporated in January 2007), Rs 0.06 billion in 2007-08 and Rs 4.7 billion in 2008-09. The 2008-09 revenue primarily comprised Rs 3.5 billion and Rs 1.1 billion from the sale of TDRs (transferable development rights) and flats, and car parking, respectively.

About the company and the issue DBRL is part of the Dynamix Balwas Group, which also has interests in hospitality, power and telecom. The company was incorporated as a public limited company on January 8, 2007. On May 14, 2007, it was converted into a private limited company and renamed D B Realty Private Ltd. On September 23, 2009, it reverted to a public limited company under the original name, D B Realty Ltd. Promoters, Mr Goenka and Mr Balwa, and their groups currently own 71 per cent of DBRL, which will reduce post the IPO.

The company primarily focuses on real estate development in and around Mumbai. Of the total saleable area of 60.9 million sq ft, 84.1 per cent (51.9 million sq ft) is in and around Mumbai, with the remainder in Pune. The real estate development on 30.6 million sq ft of land will mainly be residential (67 per cent of the total projects), followed by mass housing and cluster developments (29 per cent), and commercial and retail developments (4 per cent). DBRL has 10 ongoing, nine forthcoming and six upcoming projects based on the stage of construction, development and approvals.

DBRL’s board is chaired by non executive independent director Mr Karunchandra A Srivastava, who has over 38 years of experience. Both promoters, Mr Goenka and Mr Balwa, are managing directors. Other board members include Mr Shahzaad Dalal, the nominee director of IL&FS (has over 28 years of experience), Mr Mahesh Gandhi, the nominee director of Trikona Capital (has over 30 years of experience)

January 14, 2010

www.crisil.com

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