Bhartiya International's (Bhartiya's) Q2FY14 standalone (fashion business) revenues exceeded but earnings were below CRISIL Research's expectations due to lower margin. The real estate development business through its associate company (40 percent share) Bhartiya Urban Infrastructure & Land Development Company Pvt. Ltd (BUILDCO) has reported bookings of 2.4 mn sq ft as of Q2FY14 (90 percent of the launched area). Construction of the residential project is also progressing well. The management is still evaluating different options for the PE investor's exit; this is a key monitorable. We maintain the fundamental grade of 3/5.
Factoring in lower-than-expected margins in the accessories and textile businesses, we have lowered margin estimates for FY14 and FY15. Accordingly, earnings estimates are lowered. We continue to use the sum-of-the-parts (SOTP) method to value Bhartiya but have retained fair value of Rs 285 per share as more than 70 percent of the valuation is derived from the real estate business, which is unchanged.
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