The real estate segment has taken off sharply in the post-Covid period, and especially over the past couple of years. The return-to-office mandates of companies looking at hybrid working styles and the demand for larger living spaces have seen commercial and residential realty thriving.

While housing and office space demand are robust in metros, there is considerable action even in other larger cities. Gujarat, as a State with strong infrastructure presence in cities such as Ahmedabad and Gandhinagar, has seen a strong uptick in realty demand in recent years.

In this regard, Ganesh Housing Corporation, a mid-sized builder and developer of commercial and residential properties is a reasonably sound play on the prospects of these markets. It is a company with ₹8,665-crore market capitalisation.

At ₹1,039, the stock trades at 19 times its per share earnings for FY24 and 16 times its likely per share earnings for FY25. This is among the lowest valuation multiples commanded by any real estate company with even mid-sized operations. For example, Suraj Estates, which is much smaller than Ganesh Housing, commands 30-plus times FY24 earnings. The BSE Realty trades at a PE of nearly 76 times. And players of varying sizes and styles of operation trade from 30-200 times (or higher) on their FY24 earnings.

A track record of strong execution of projects, a healthy pipeline of commercial and residential properties, focus on annuity revenues and a debt-free balance sheet are positives for Ganesh Housing.

Investors with a 2-3-year perspective can buy the shares of the company at the current price.

Between FY22 and FY24, the company’s revenues grew at a compounded annual rate of 52.8 per cent to ₹899 crore in FY24, while net profits rose at 155.5 per cent to ₹460.7 crore. It enjoys an EBITDA margin of 70.1 per cent in FY24.

Specialised operational segments

Ganesh Housing is a premium Ahmedabad-focused developer of commercial and residential properties. The company has completed 17 residential and four commercial projects over the years, spread over 22.5 million square feet.

It currently has three ongoing projects, two of which are residential and one is commercial. About 2.5 million square feet would be built by March 2027.

The company’s Million Minds project includes construction of both residential and commercial properties. Ganesh Housing’s Million Minds (IT SEZ – Residential) spans eight phases running up to the next 10 years, in a prime location behind Nirma University, with each space having 0.6 to 0.9 million square feet of saleable area and ₹380-540 crore per phase in revenues.

Then there is the Million Minds (IT SEZ – Commercial), which is spread over seven spaces (to be completed by H2FY33) of 1.3 million square feet each, also in the SG Highway prime location. The first phase commenced operations in H1FY24. Ganesh Housing has a strategic partnership with Tishman Speyer for Million Minds commercial project, given the experience it has in developed markets, having worked with reputed clients such as Meta, Amazon, LinkedIn and even top Indian companies.

The project is quite lucrative as each phase would generate about ₹72 crore in lease income every year.

This construction is going to be funded from internal accruals, without taking any external debt.

In other finished projects, Malabar County 3 and Malabar Exotica are both 100 per cent completed and 100 per cent booked. Possession has generally been on time or ahead of schedule.

One Thaltej, a commercial project with 1.8 million square feet construction and ₹2,114 crore revenue potential, will commence from the second half of this fiscal and go on till H2FY28.

Smile City 1 and Smile City 2 are township projects planned in Godhavi, Ahmedabad. The latter could generate as much as ₹4,550 crore in revenues by H1FY31.

In all, over the next several years, there is a robust pipeline of projects lined up with 31.1 million square feet to be constructed, thus generating a sale value of more than ₹16,000 crore.

Ahmedabad itself is a robust real estate market, especially after the emergence of the GIFT City rolled out by the Central government. Inventory overhang has reduced from 25 months in FY21, to just 15 months in FY23, and per square feet rates have risen steadily, according to Knight Frank and PropEquity.

Healthy financials

From a difficult period in the aftermath of the Covid-19 pandemic, the past three fiscals have been robust for the company. From a debt-equity ratio of 0.79 in FY20, Ganesh Housing aggressively paid down its loans and became debt-free in FY23 and continued to be so in FY24 as well.

The company’s return on equity has more than tripled in the last two years to 29.7 per cent in FY24. Return on capital employed is higher at 39.6 per cent as of FY24. It also has a cash surplus of ₹230.6 crore at the end of the previous fiscal.