Alchemist Realty - Hidden Gem Story

No. of Equity shares – 7,41,01,000;
Face Value - Rs. 2.00
Market Cap – Rs. 140.79 Crore
EPS - 0.15
Book Value – Rs. 17
52 Week High – Rs. 104
52 Week Low – Rs. 11
Bonus – 1:1 Feb-08
Promoter Holding – 42.30%
More than 1% holding – 54.17 13 entities
No. of shareholders – 506
Reserves – Rs. 10 Cr
Total Debt/Equity - 3

Alchemist Realty Ltd is a subsidiary of Rs 7,000-crore Alchemist group based out of Chandigarh , has interests in real estate, food processing, healthcare, pharma and aviation.

Recently, CLSA (Mauritius) has bought 700,000 shares at Rs 18.70 a share and Sunil Talwar sold 675,315 shares at Rs 18.70 a share of Alchemist Realty.

On July 04, 2008, board has approved the allotment of 38,00,000 Equity Preferential Convertible Warrants to the Promoter M/s. KDS Corporation Pvt Ltd at a premium of Rs. 115 for the face value of Rs. 2, consequent upon receipt of 10% upfront amount in advance.

Future Prospects:
The company claims to have land bank of 10,600 Acres. It has plans to invest over Rs 5,000 crore in the next 7-10 years for its development. The company plans to develop integrated townships, resorts, chain of hospitals, hotels and restaurants and health spa on its land bank.

They are planning to spend Rs 1,000 crore for setting up a chain of hospitals and intend to set up at least 20 hospitals in the country. Also they are looking at inorganic expansion, besides the Greenfield project. In Punjab alone, the group is planning to have 2-3 hospitals in near future. The company also plans to set up research centre and educational institutes.
Currently the company has one hospital in Panchkula (Haryana). Further, it has appointed Dr P Venugopal, former director, All India Institute of Medical Sciences (AIIMS), New Delhi, as chairman-medical division of Alchemist Group.

Company plans to open 20 restaurants in two years in northern states under the brand “Red Cap’. Excluding land and lease amount, company has earmarked an investment of about Rs 15 Crores for setting up the outlets. The eating joints would operate under franchisees as well as stand-alone basis. The size of the outlets would vary from 3,200 sq ft to 6,500 sq ft. The group will open 100 restaurants under these brands in Indian cities and overseas markets like Geneva, Dubai, Los Angeles, New York and Chicago. As a part of its debut in food & beverage (F&B) retail, company is also setting up 1,000 quick service restaurants (QSRs)-Republic of Chicken (ROC)-across the country at an investment of Rs 800 crore. The group claims to be a quality supplier of safe poultry products and wants to carry the same marketing plank for ROC launch.

The Company plans to develop over 1,000 high-end housing units by 2010 and would also construct luxury villas on 9 acres of land in Shimla and an IT park at Chandigarh.

Concerns:
Economic slowdown could reduce the pace of implementation of plans. All these plans are highly capital intensive so one should watch out how the company raises funds, if major portion comes through debt, then the company will have to bear high interest cost. The deliverability of projects is also crucial, in that, whether the projects will be transferred to this single company.

However, Indian economy is showing signs of bottoming out, and the major event, Commonwealth Games is held in India in 2010 due to which the industry will be will be benefited & could be re-rated. This could prove advantageous for the company.

For FY08-09, Sales has grown to Rs. 102 Cr (Rs. 83 Cr) but net profit has declined to Rs. 1.02 Cr (Rs. 4.54 Cr).

So, if company is able to deliver its projects in time and as per planning, from the current price of Rs. 19 or so, we can see great upside in the longer term.