1. For part payment towards acquisition of land for some of our proposed residential and commercial projects. 2. To acquire land development rights, related statutory and approval costs for these proposed projects 3. To part finance the development and construction costs over the aforesaid acquired lands
4. To meet expenses of this Issue 5. For General Corporate Purposes
The main object, objects incidental or ancillary to the main object and other object clause of the Memorandum of Association of our Company enables us to undertake the existing activities as well as the activities for which funds are being raised through this Public Issue.
The objects of this Issue also include creating a public trading market for the Equity Shares of our Company by listing them on recognized Stock Exchanges. Our Company believes that the listing of our Equity Shares will provide liquidity to our existing shareholders and enhance our visibility and brand name.
Funds Requirement Sr.
No. Particulars
Amount
(Rs. in million)
1. Part payment towards acquisition of land for some of our proposed projects 615.90
2. Land development rights, related statutory and approval costs for these proposed projects 446.83
3. Part finance Development and Construction costs over these proposed projects 850.00
4. Expenses related to this Issue#
[●]
5. General Corporate Purposes# [●]
Total [●]
#
will be incorporated at the time of filing of Prospectus
The net proceeds of the Issue after deducting all expenses related to the Issue are estimated to be Rs. [●].
The entire requirement of funds as set out above including expenses associated with the Issue will be met through the proceeds of this Issue. In case of any variations in the actual utilization of funds earmarked for the above activities or increased fund deployment for a particular activity, the shortfall, if any, may be met with by surplus funds, if any available in the other areas and/or our Company’s internal accruals and/or the term loans/working capital loans that may be availed from the banks/financial institutions. The balance proceeds of the Issue including any funds raised in addition to the total above mentioned, if any, will be used for general corporate purposes.
The fund requirements and deployment are based on the current internal management estimates of our Company and our current business plan and based on our previous real estate experience and have not been appraised by any bank or financial institution or any other independent agency. These are based on current conditions and are subject to change in light of changes in external circumstances or costs, or in other financial conditions, business or strategy, as discussed further below. We operate in a highly competitive, dynamic market condition, and may have to revise our estimates from time to time on account of new projects, modifications in existing planned developments and the initiatives which we may pursue. We may also reallocate expenditure to newer projects or those with earlier completion dates in the case of delays in our existing projects. Consequently, our fund requirements may also change accordingly. Any such change in our plans may require rescheduling of our expenditure programs, starting projects which are not currently planned, discontinuing projects currently planned and an increase or decrease in the expenditure for a particular project or land acquisition in relation to current plans, at the discretion of the management of our Company.
Means of Finance
The above-mentioned fund requirement will be met entirely from net proceeds of this Issue. In case of shortfall, if any, we may explore other sources of funds including internal accruals arising from our future operations and/or debt.
Sources of Finance Amount
(Rs. in million)
Proceeds of the Issue [••••]
Internal Accruals# [••••]
#
Details of the Objects
We intend to expand the portfolio of projects we undertake thereby diversifying our revenue streams and enhancing the value and position of our brand. We believe that such diversification will allow us to take advantage of new trends and opportunities in the Indian market whilst simultaneously helping us to mitigate the risks of being concentrated in certain segments of the real estate sector.
As part of our business strategy, we have been moving to newer locations which we believe diversifies our project portfolio and offerings with potential upwards. In this process we have obtained access to land reserves including development rights of approximately 49.868 acres for both of our proposed residential and commercial developments in Gurgaon, Haryana through purchase / collaboration agreements. We have proposed 2 residential Group Housing projects over a land admeasuring approximately 20.365 acres and 4 commercial projects, with 3 IT Parks and 1 Commercial Complex, over a land admeasuring approximately 29.503 acres.
We have estimated the total costs of developing these projects which includes land acquisition cost, the costs related to obtaining requisite approvals and such other statutory costs and the cost involved in developing and constructing these projects.
The details of the same are given in the following table:
Nature of Project Location Ownership Area
(in Acres)
Land Acquisition
Costs
Approval Costs Development & Construction
Costs
Amount (in Rs. Millions)
Residential
Group Housing Sector - 110 100% 10.215 386.03 156.20 909.82 1,452.05 Group Housing Sector - 113 65% 10.150 10.00 155.22 904.04 1,069.26 Commercial
IT Park Sector - 110A 75% 9.400 8.44 104.43 2,424.87 2,537.74 IT Park Sector - 110A 75% 7.300 6.56 81.09 1,883.15 1,970.80 IT Park Sector - 110A 100% 7.743 292.71 86.03 1,997.41 2,376.15 Commercial Complex Sector - 105 62% 5.060 25.00 230.98 811.03 1,067.01 49.868 728.74 813.95 8,930.32 10,473.01 Total
The land acquisition costs are on the basis of the agreements entered into by us with the respective land owners and are amounting to Rs.728.74 mn. The approval costs include costs for license fees, scrutiny fees, conversion charges, external development charges and infrastructure charges which are based on the estimates obtained from ‘The Firm’, the architect firm. This is estimated to cost Rs.813.95 mn for all of these projects. The development and construction costs are again based on the estimates obtained from ‘The Firm’, which would normally be required for constructing these projects whether residential or commercial with applicable allowable Floor Area Ratio (FAR) and open or service areas not covered in FAR. On the basis of these estimated it translates to an amount of Rs.8,930.32 mn for all of these projects. The aggregate cost of developing these projects, thus, translates to an amount of Rs.10,473.01 mn. The above cost estimates are based on the prevailing applicable rate, cost and conditions which may vary in the future and, thus, it may result to a change in our aggregate cost estimates.
Pursuant to our initial agreements / arrangements, we are in the process of land and other due diligence for each of these aforementioned projects as a result of which the projects may vary accordingly. The status on each of these projects is discussed below:
Residential Projects
1. Group Housing Project – Sector-110, Gurgaon
We are planning for a Group Housing project in Sector-110 of Gurgaon, Haryana. This project is to be developed over an area of approximately 10.22 acres of land. We have entered into an Agreement to purchase with the landowners to the tune of the required land. We are in the process of applying for LoI for the usage of land for our planned Group Housing project.
2. Group Housing Project – Sector-113, Gurgaon
We are planning for a Group Housing project in Sector-113 of Gurgaon, Haryana. This project is to be developed over an area of approximately 10.15 acres of land. We have entered into a collaboration agreement with the landowner of the requisite land through which we would develop this Group Housing Project. As per this collaboration, we have agreed to share the built up area permitted over the land to the tune of 35% with the landowner. We are in the process of applying for LoI for using it for the specified purpose.
Commercial Projects
1. IT Park – Sector-110A, Gurgaon
We are planning for an IT Park project in Sector-110A of Gurgaon, Haryana. This project is to be developed over an area of approximately 9.40 acres of land. We have entered into a collaboration agreement with the landowner of the requisite land through which we would develop this IT Park. As per this collaboration, we have agreed to share the built up area permitted over the land to the tune of 25% with the landowner. We are in the process of applying for LoI for using it for the specified purpose.
2. IT Park – Sector-110A, Gurgaon
We are planning for an IT Park project in Sector-110A of Gurgaon, Haryana. This project is to be developed over an area of approximately 7.30 acres of land. We have entered into a collaboration agreement with the landowner of the requisite land through which we would develop this IT Park. As per this collaboration, we have agreed to share the built up area permitted over the land to the tune of 25% with the landowner. We are in the process of applying for LoI for using it for the specified purpose.
3. IT Park – Sector-110A, Gurgaon
We are planning for an IT Park project in Sector-110A of Gurgaon, Haryana. This project is to be developed over an area of approximately 7.74 acres of land. We have entered into an Agreement to purchase with the landowner of the requisite land through which we would develop this IT Park. We are in the process of applying for LoI for using it for the specified purpose.
4. Commercial Complex – Sector-105, Gurgaon
We are planning for a Commercial Complex in Sector-105 of Gurgaon, Haryana. This project is to be developed over an area of approximately 5.06 acres of land. We have entered into a collaboration agreement with the landowner of the requisite land through which we would develop this Commercial Complex. As per this collaboration, we have agreed to share the built up area permitted over the land to the tune of 38% with the landowner. We are in the process of applying for LoI for using it for the specified purpose.
Of our total cost requirement of Rs.10,473.01 mn we would require an amount of Rs.1,912.73 mn to be met from the proceeds of this Issue. The detailed break-up of the same is given below:
Project Location Ownership Area
(in Acres)
Land Acquisition
Costs
Approval Costs Development & Construction
Costs
Amount (in Rs. Millions)
Residential
Group Housing Sector - 110 100% 10.215 350.29 87.04 135.80 573.13 Group Housing Sector - 113 65% 10.150 - 86.49 134.94 221.43 Commercial
IT Park Sector - 110A 75% 9.400 - 58.73 191.12 249.84 IT Park Sector - 110A 75% 7.300 - 45.60 148.42 194.02 IT Park Sector - 110A 100% 7.743 265.61 48.38 157.43 471.42 Commercial Complex Sector - 105 62% 5.060 - 120.60 82.28 202.89 49.868 615.90 446.83 850.00 1,912.73 Total
We discuss the details of each of our objects for raising funds through this Issue herebelow: 1. Part payment towards acquisition of land
In respect of our land acquisitions, we are required to pay an advance at the time of executing an agreement to purchase, with the remaining purchase price due upon completion of the acquisition. We have already entered into agreements with the land owners for the proposed land requirement of 49.686 acres. We have made payments to the tune of Rs.112.84 mn against the same till the date of filing this Draft Red Herring Prospectus. The balance of Rs.615.90 mn is to be paid for the acquisition of these lands which is proposed to be met from the proceeds of this Issue. If the above outstanding land payments are paid prior to the receipt of the issue proceeds by short term loans, the issue proceeds would be utilized to pay those loans.
2. Land development rights, related statutory and approval costs
We have estimated an amount of Rs.813.95 mn towards our land development rights, related statutory and approval costs relating to our proposed projects. These costs include costs for license fees, scrutiny fees, conversion charges, external development charges and infrastructure charges. Out of these cost estimates the amount required to be met through the proceeds of this issue include 50% of these costs which is to be paid upfront and for the underlying cash
margins required for furnishing the Bank Guarantees. Bank Guarantees are to be furnished for the balance 25% of the both external and internal development charges. The cash margins required for furnishing these Bank Guarantees would be 25% of the total Bank Guarantee amount. Internal development charges are estimated to be Rs.124.67 mn which is calculated by estimating the cost of Rs.2.5 mn for each acre of land to be developed.
The details of these costs are elaborated below:
Particulars Amount
(in Rs. Millions)
Approval Costs 813.95
50% to be paid upfront (A) 406.97
External Development Charges 513.07
Internal Development Charges 124.67
Total Development Charges 637.74
Bank Guarantee Amount (for 25% of the total development charges) 159.44
Cash Margins @25% of the Bank Guarantee Amount (B) 39.86
Total Approval Costs to be met from Proceeds (A) + (B) 446.83
3. Part financing Development and Construction Costs
We have estimated an amount of Rs 8,930.32 mn for all of our proposed projects in Gurgaon. We assume that each of our projects would be developed over a period of 3 years and we further assume to require the total development costs and construction costs for 1.5 month to incur before we launch our projects. Thus, out of our total development and construction costs, we estimate to incur Rs.850.00 mn to be met through the proceeds of this Issue. The balance amount of Rs.8080.32 mn is expected to be met from the advance to be received from customers and / or cash flow from operations.
4. Issue Expenses
The Issue related expenses include, among others, Issue management fees underwriting and selling commission, distribution expenses, legal fees, printing and stationery costs, advertisement expenses, registrar and depository fees and listing fees payable to the Stock Exchanges, etc.
The total estimated Issue expenses are approximately Rs. [●] million which is [●] % of the Issue size. Sr. No. Description Estimated expense* (in Rs. Million) % of Total Expenses* % of Total Issue Size*
1 Fees for the BRLM [●] [●] [●]
2 Fees for the Registrar to the Issue [●] [●] [●]
3 Regulatory fees
(including fee payable to SEBI, Stock Exchanges, etc.)
[●] [●] [●]
4 Fees payable to the Legal Advisors [●] [●] [●]
5 Fees payable to the Auditors [●] [●] [●]
6 Advertisement Expenses
(including fee payable to advertising agencies)
[●] [●] [●]
7 IPO Grading Expenses [●] [●] [●]
8 Miscellaneous Expenses [●] [●] [●]
Total [●] [●] [●]
*Will be incorporated on finalization of the Issue Price and prior to filing Prospectus with RoC.
Pursuant to Clause 2.5A of the SEBI (DIP) Guidelines our Company needs to obtain grading for this IPO from at least one credit rating agency. In this regard we have appointed [●]. The total expenses for IPO Grading are estimated to be Rs. [●] million, which is [●] % of the Issue size.
5. General Corporate Purposes
Our Company, in accordance with the policies set up by our Board, will have flexibility in applying the remaining net proceeds of this Issue, for general corporate purposes, including but not limited to acquisition of lands / rights in lands or development rights, construction of projects, expenditure of capital nature, strategic initiatives and acquisitions, brand building exercises and the strengthening of our marketing capabilities, subject to compliance with the necessary provisions of the Companies Act.
Our management, in response to the competitive and dynamic nature of the industry, will have the discretion to revise its business plan from time to time and consequently our funding requirements and deployment of funds may also change. This may also include rescheduling the proposed utilization of net proceeds and increasing or decreasing expenditure for a particular object vis -à-vis the utilization of net proceeds. In case of a shortfall in the net proceeds of the Issue, our management may explore a range of options, including utilizing our internal accruals or seeking debt from future lenders. Our management expects that such alternate arrangements would be available to fund any such shortfall. Our management, in accordance with the policies of our Board, will have flexibility in utilizing the proceeds earmarked for general corporate purposes.
At least 75% of the residual funds after utilizing issue proceeds have been tied up. Estimated Schedule of Deployment of Funds
As estimated by our management, the entire proceeds received from this Issue would be utilized as per the following deployment schedule: Q-II (Jul-Sep) 2008 Q-III (Oct-Dec) 2008 Q-IV (Jan-Mar) 2009 Land Acquisition Costs
Approval Costs Development & Construction
Costs Residential
Group Housing Sector - 110 573.13 350.29 87.04 135.80 Group Housing Sector - 113 221.43 - 86.49 134.94 Commercial
IT Park Sector - 110A 249.84 - 58.73 191.12
IT Park Sector - 110A 194.02 - 45.60 148.42
IT Park Sector - 110A 471.42 265.61 48.38 157.43
Commercial Complex Sector - 105 202.89 - 120.60 82.28 1,912.73
615.90 446.83 850.00 Total
Project Location Amount
(in Rs. Millions)
Funds Deployed
Our statutory auditors M/s M. Mohan & Co., Chartered Accountants have vide their certificate dated April 24, 2008 certified that our Company have spent Rs.121.99 million till March 25, 2008 towards the object of the issue, the details of which are as follows:
Particulars Location Amount
(in Rs. Millions) Land Acquisition Costs
Residential
Group Housing Sector - 110 35.74
Group Housing Sector - 113 10.00
Commercial
IT Park Sector - 110A 8.44
IT Park Sector - 110A 6.56
IT Park Sector - 110A 27.10
Commercial Complex Sector - 105 25.00
112.84 9.15 121.99 Grand Total Total Issue Related Expenses
Sources for financing of Funds already deployed