675 cr is the lease rental revenues, Opex is 75 cr (half of total standalone opex as per FY17 results), hence EBITDA is 600 cr for just lease rental, EBIT is 45 cr - hence depreciation is EBITDA - EBIT = ~550 cr.
You are right, I did some very simplistic calculation, yours is a better approximation, this means that the calculated yield will go down even further. So if total gross block is 7825 cr and ~90% is lease rental, the company is earning just 600 cr net lease rental which I think is not even 9% but 8%, even lesser.
Yes, in no official release or presentation that I know of, it is mentioned that management guidance is 400-500 cr gross CapEx. You should ask this question to @SecretInvestor since he claims this to be the management guidance. My problem is how come a business whose CapEx requirement is ~1200 cr this year can change overnight to a CapEx requirement of just 400-500 cr. You may even ask this question @shaggyjo who has written a blog on this company.
Please refer to my first post on this : This is exactly my worry, two of the assets (FRL and FLR) have been transferred to promoter group at 1/3rd and 2/3rd of current value within the last 6 months. Whether this is coincidence or something else is open to speculation. But certainly raises red flags in my mind.
Just got one more piece of detail, got to know from CARE, the credit rating agency of FEL that both FEL and FRL have actually provided full corporate cross guarantees to debt in both the companies. This changes everything one knows about the bonds trading above par because in no way FRL milking FEL by giving it an abysmally low yield of just 8% on the investment made in leaseholds on its behalf is going to affect the bond-holders of FEL. Bondholdersā money is safe and if FEL is not able to provide the same then FRL would be liable and will provide the same. So the unfair related party arrangement between the two companies - which is definitely against the interests of FEL shareholders, given present audited numbers, is not against the interests of FEL bond-holders as they are safeguarded by FRL cash flows and assets.
@8sarveshg I am still waiting for hard numbers from you as I have asked in my previous post. You seems to have all the data points expect the approx picture of how FELās balance sheet and P&L statement is going to look after 2 years.
Thatās a terrific insight. CARE Ratings in their April 17 report for rating Commercial Papers do say that they have considered combined financials for FEL and FRL for assessment. CARE CP Rating rationale. Brickwork rated them on some of their recent NCDs.
Perfectly summarized why FEL is still a value buy. One point you missed is that Biyani has guided at least 1500Cr EBITDA in FY18 for FEL. General Insurance stake sell is pretty close, Life Insurance stake sell is 18-24 months away.
There is another way to look at FEL. All debt are almost matched by investments, so can safely be ignored in rough calculation. That will give a EV=Mcap, and divide by 1500Cr EBITDA of FY18, it seems a value buy even at cmp.
You should read my earlier posts on this topic. I had predicted the probable capex requirement of this business last year. Ofcourse it has increased further this year. Plus one canāt and shouldnāt trust this management is all I can say as far as their guidance goes. I am not saying invest or not in this stock but atleast donāt depend on management guidance for creating your hypothesis on this stock.
Yes Iāve read your comment. I wanted @SecretInvestor to comment now that more data is available. Iām not privy to the information that was shared at the Analyst meet in May 2016. Iām also not certain on how much of the Rs. 720cr in capex is for maintenance and how much for growth. Rent income has increased by 18% yoy so it can be argued that the excess capex was to increase leasing income. Their margins have also improved for the 9 month period.
Frankly, I donāt have enough information right now to know whether the model makes sense or not. It really comes down to whether maintenance capex is significantly less than the D&A.
Further, as @DevKolhi pointed out - promoters did step up to purchase shares in September when the shares were trading close to todays print.
Dont think that FEL would be benefitted in any way as the deal being talked with is FRL and not FEL. FEL continues to be business with extremely poor economics and with no guidance or promise on how capital allocation with take place in the future. Cash generated in FEL, if any, is at the whims and fancies of Mr B with random businesses with no assurity of long term success being put together. Best to stay away in my opinion.
@rahpar, pls refer to my previous posts - FEL was always a very poor business and I have written in details about the same.
When good quality stuff is available in cheap, why should one consider a business with FEL always marred with uncertainties.
I hope you are also aware about the liquidity and debt challenges at the future group. While some of it can be resolved through deals, no-one knows whether or not it will materialise.
