29 January 2008

BSE Sensex: 18092

INDIA RESEARCH

Rs899
Adani Enterprises Ltd. (AEL) OUTPERFORMER

RESULT NOTE Mkt Cap: Rs222bn, US$5.6bn

Analyst: Shirish Rane (91-22-6638 3313; shirish@idfcsski.com)

Bhoomika Nair (91-22-6638 3337; bhoomika@idfcsski.com)
Salil Desai (91-22-6638 3373; salil@idfcsski.com)
Result: 3QFY08
Comment: In line with estimates
Last report: 3 October 2007 (Price Rs648; Recommendation: Outperformer)

Key valuation metrics (Consolidated)

Year to March (Rs mn) Sales yoy chg (%) Net Profit EPS (Rs) yoy chg (%) PER (x)
2007 169,491 - 1,733 7.0 - 128.5
2008E* 168,473 (0.6) 3,827 15.5 121.4 58.1
2009E* 217,146 28.9 6,896 28.0 80.6 32.1
20010E* 291,655 34.3 20,571 83.4 197.9 10.8
* Not comparable with FY07 since Sales and PAT are computed on Economic Interest basis

AEL reported Q3FY08 revenues at Rs53.4bn (+24.2% yoy), driven by higher traded volumes in the agri division.
EBITDA jumped by 42.1% yoy to Rs1.6bn, on the back of the strong growth in revenues and higher volumes of
agri-products, leading to a 40bps yoy improvement in EBITDA margins. Net interest decreased sharply by 60.5%
to Rs255mn due to higher interest income charged on advances to subsidiaries, while depreciation increased by
77.5% yoy to Rs141mn due to capex on a floating crane barge at the company’s Belikeri port and completion of
the company’s corporate office building at Gurgaon. Consequently, post-minorities adjusted PAT jumped 184.2%
yoy to Rs995mn and after including Rs208.4mn of income from stake sale in a subsidiary, reported PAT increased
by 243.9% to Rs1.21bn. AEL is currently in advanced stages of implementing 4,000MW of power plants and plans
to add another 5,900MW of power plants over the next 3-4 years. The company is also scaling up its real estate
business from ~45mn sq. ft. currently to over 100mn sq. ft. We believe the company’s aggressive plans in power
and real estate and strong growth in its core trading business are expected to drive a 128% CAGR in earnings
over FY07-10E and create significant value for shareholders. We maintain our Outperformer rating on the stock.

KEY HIGHLIGHTS
• AEL’s consolidated revenues for Q3FY08 increased by 24.2% on a yoy basis to Rs53.4bn, driven by higher volumes
of traded goods in the agri division.
• EBITDA for the quarter increased by 42.1% yoy to Rs1.6bn, on the back of the strong growth in revenues and
higher volumes of agri-products. In line with the growth in revenues, EBITDA margin also improved from 2.6% in
Q3FY07 to 3% in Q3FY08.
• Net interest costs decreased sharply by 60.5% yoy to Rs255mn during the quarter, due to income of Rs300mn
from interest charged on advances given to subsidiary companies. Gross interest during the quarter was Rs555mn,
on the back of term loans on books of approximately Rs10bn.

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• Depreciation in Q3FY08 jumped sharply by 77.5% yoy to Rs141mn, mainly due to capex of Rs1.2bn incurred
during 9MFY08 on acquisition of a floating crane barge at the company’s Belikeri port and completion of the
company’s new corporate office at Gurgaon.
• Consequently, AEL’s PAT (post-minorities) for Q3FY08 jumped sharply by 184.2% yoy to Rs995mn. During the
quarter AEL sold its 49% stake in Adani Retail Ltd. to Reliance Retail, for a net gain of Rs208.4mn. Adjusting for
this non-recurring gain, AEL’s reported PAT increased by 243.9% yoy to Rs1.2bn during the quarter.

AEL expanding power generation capacity to 9,900MW

AEL, through its 91% subsidiary Adani Power Ltd. (APL), is currently implementing two thermal power plants – a
2,640MW plant at Mundra, Gujarat, and a 1,980MW power plant at Tirora, Maharashtra. The Mundra plant will
utilize imported coal from the company’s captive mines in Indonesia as fuel. The project is progressing as per schedule
and the first unit of 660MW is expected to be commissioned in time, by March 2009. The Gondia plant is proposed to
be based on domestic coal to be mined by AEL from a captive coal block (reserves of ~170m tons) allocated to it.

In addition to the above two projects, AEL is proposing to set up 5,280MW of thermal power plants in India over the
next 3-4 years. These projects include expansion of the Mundra plant by 1,980MW and new power plants at Dahej
(1,980MW) and Rajasthan (1,320MW). The Mundra and Dahej plants are proposed to be based on imported fuel, for
which AEL is exploring acquisition of coal mines in Indonesia and South Africa. The Rajasthan power plant is to be
based on domestic coal, from a coal mine allocated to the Rajasthan Rajya Vidyut Utpadan Nigam Ltd. (RRVUNL).
With these projects, AEL’s total power generating capacity is expected to increase to 9,900MW by end-FY12. We
believe AEL’s control over fuel supply, effective mix of PPA-based fixed tariff and merchant sales and its execution skills
will create significant value for the company’s shareholders over the medium to long term.

Over 100mn sq. ft. of real estate projects planned

AEL is currently implementing three real estate projects:

• Shantigram Township at Ahmedabad – an integrated township with a mix of residential, commercial and retail
development and a total saleable area of 41.5mn sq. ft.
• Commercial and office space development at Bandra-Kurla Complex, Mumbai, with a total saleable area of ~2.2mn
sq. ft.
• Commercial and residential development over Khatau Mills land at Kandivali and Byculla in Mumbai, with a total
saleable area of ~2mn sq. ft.

In addition to the above, AEL has undertaken three more real estate development projects, with a saleable area of
~59mn sq. ft.
• Integrated township at Mundra, with development of ~50mn sq. ft.
• Mixed residential and retail development at Kochi of a total saleable area of ~3.2mn sq. ft.
• 5.6mn sq. ft. of residential, commercial, retail and hotel development at Surat, Gujarat.

With these projects, AEL’s total planned real estate development will be in excess of 100mn sq. ft., making it one of the
leading real estate developers in the country. The company’s focus on land acquisition at competitive rates, focus on
large sized projects and diversified presence across segments and geographies are expected to be extremely value accretive
for the company going forward.

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 IDFC - SSKI INDIA

Maintain Outperformer
We are not changing our FY08 and FY09 earnings estimates for AEL. AEL is in the process of transforming itself from a
trading company into an entirely integrated business across its segments such as power, real estate and agri business.
Accordingly, AEL is at an advanced stage of execution of 4,000MW power plants, which have low cost of generation
resulting in higher returns and another 5,900MW of power plants in advanced stages of planning. Moreover, AEL has
leveraged upon the group’s strong execution capabilities by entering the real estate development business in lucrative
locations (~100msf across various segments). We believe AEL can further enhance shareholder value by adding value
accretive projects in power and real estate businesses over the medium term. We maintain our Outperformer rating on
the stock.

Consolidated quarterly results

3Q07 4Q07 FY07 1Q08 2Q08 3Q08
Net Sales 42,966 66,119 169,491 32,715 43,823 53,362

Total Expenditure 41,843 64,704 164,788 31,555 42,718 51,767

EBITDA 1,123 1,415 4,702 1,161 1,106 1,595

Other Income 26 8 42 30 69 24
Depreciation 80 57 163 68 89 141
Interest 646 548 2,286 321 489 255

PBT 423 818 2,295 801 598 1,223

Current tax 67 179 387 85 88 224

Fringe Benefit Tax 0 3 16 3 3 (7)
Deferred Tax 6.3 114 114 21 28 5
Tax Rate (%) 17.2 36.2 22.5 13.6 19.9 18.2

PAT 350 523 1,778 691 479 1,000

Extra-ordinary items 2 2 (5) (4) (3) 217

352 524 1,774 687 476 1,217
Share of Associates 0 - (34) - - -
Minorities 0 - (6) (3) (50) (5)

Consolidated Reported PAT 352 524 1,733 685 426 1,212

Consolidated Recurring PAT 350 523 1,738 689 429 995

OPM (%) 2.6 2.1 2.8 3.5 2.5 3.0

NPM (%) 0.8 0.8 1.0 2.1 1.0 1.9

Shares (mn) 246.5 246.5 246.5 246.5 246.5 246.5

EPS 1.4 2.1 7.0 2.8 1.7 4.0
PER 158.3 106.1 127.6 80.5 129.2 55.7

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 IDFC - SSKI INDIA
Analyst Sector/Industry/Coverage E-mail Tel. +91-22-6638 3300
Pathik Gandotra Head of Research; Banking, Strategy pathik@idfcsski.com 91-22-6638 3304
Shirish Rane Cement, Construction, Power, Real Estate shirish@idfcsski.com 91-22-6638 3313
Nikhil Vora FMCG, Media, Retailing, Mid Caps nikhilvora@idfcsski.com 91-22-6638 3308
Ramnath S Automobiles, Auto ancillaries ramnaths@idfcsski.com 91-22-6638 3380
Nitin Agarwal Pharmaceuticals nitinagarwal@idfcsski.com 91-22-6638 3395
Ganesh Duvvuri IT Services, Telecom ganesh@idfcsski.com 91-22-6638 3358
Varatharajan S Oil & Gas varatharajan@idfcsski.com 91-22-6638 3240
Chirag Shah Textiles, Metals chirag@idfcsski.com 91-22-6638 3306
Bhoomika Nair Construction, Power, Logistics, Engineering bhoomika@idfcsski.com 91-22-6638 3337
Avishek Datta Oil & Gas, Engineering avishek@idfcsski.com 91-22-6638 3217
Bhushan Gajaria FMCG, Retailing, Media, Mid Caps bhushangajaria@idfcsski.com 91-22-6638 3367
Shreyash Devalkar IT Services, Telecom shreyash@idfcsski.com 91-22-6638 3311
Nilesh Parikh, CFA Banking nilesh@idfcsski.com 91-22-6638 3325
Ashish Shah Automobiles, Auto Ancillaries ashishshah@idfcsski.com 91-22-6638 3371
Salil Desai Cement, Infrastructure salil@idfcsski.com 91-22-6638 3373
Rahul Narayan FMCG, Retailing, Media, Mid Caps rahulnarayan@idfcsski.com 91-22-6638 3238
Ritesh Shah Textiles, Metals riteshshah@idfcsski.com 91-22-6638 3376
Aashiesh Agarwaal, CFA Real Estate aashiesh@idfcsski.com 91-22-6638 3231
Neha Agrawal Banking neha@idfcsski.com 91-22-6638 3237
Swati Nangalia Mid Caps swati@idfcsski.com 91-22-6638 3260
Dharmendra Sahu Database Manager dharmendra@idfcsski.com 91-22-6638 3382
Dharmesh Bhatt Technical Analyst dharmesh@idfcsski.com 91-22-6638 3392

Equity Sales/Dealing Designation E-mail Tel. +91-22-6638 3300

Naishadh Paleja MD, CEO naishadh@idfcsski.com 91-22-6638 3211
Paresh Shah MD, Dealing paresh@idfcsski.com 91-22-6638 3341
Vishal Purohit MD, Sales vishal@idfcsski.com 91-22-6638 3212
Nikhil Gholani MD, Sales nikhil@idfcsski.com 91-22-6638 3363
Sanjay Panicker Director, Sales sanjay@idfcsski.com 91-22-6638 3368
V Navin Roy Director, Sales navin@idfcsski.com 91-22-6638 3370
Rohan Soares SVP, Sales rohan@idfcsski.com 91-22-6638 3310
Suchit Sehgal AVP, Sales suchit@idfcsski.com 91-22-6638 3247
Pawan Sharma Director, Derivatives pawansharma@idfcsski.com 91-22-6638 3213
Dipesh Shah SVP,-Derivatives dipeshshah@idfcsski.com 91-22-6638 3245
Manohar Wadhwa VP, Derivatives manohar@idfcsski.com 91-22-6638 3232

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Explanation of Ratings:
1. Outperformer: More than 10% to Index
2. Neutral: Within 0-10% to Index
3. Underperformer: Less than 10% to Index
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