Not sure if wanting to operate the hotel all by themselves is a good idea. I am wondering as to why they would want to take up that risk - wouldn’t long term predictive lease income be a better way of handling the hotel premises?
Thanks Anil, what I’m unclear about is are they using 45 acres of land only for BEC or for everything? If only 45 acres of land is available for construction, what is the remaining 20 acres being used for? Roads, parking, empty areas etc. This is what I’m unclear about. Sorry should have been more specific about my query.
Thanks mate. My thoughts on your queries.
They haven’t shared these details. What is clear at the moment is IT Bldng # 1 will be demolished and phase 1 NBEC will come up there and the existing exhibitions halls will stay. Only once phase 1 is over, will we know.
I’m not clear on the exact revenues or PAT coming from the building, my guess is it’ll be 10-12 crores. This will be partly mitigated by increased kitchen revenues, yearly increases in leasing rates of both BEC and IT Bldng # 3 and more exhibitions/functions. By 2019-20 it will cease to matter as IT bldng # 4 should contribute to the topline and it will make up for everything. Yes, the building won’t be leased out again.
Sorry mate, I’m not aware.
As per mgmt earlier NBEC costs were estimates. These are more accurate. For IT Bldng # 4 they have paid for additional FSI. I believe everything will be through internal accruals. Not once did they mention anything on raising debt for expansion.
Don’t have an idea about this. Sorry.
Realistic expectation should be expecting revenue from IT bldng # 4 to come in during 2019 and 2020. Though they always kept saying that revenues shouldn’t be impacted during all the development they are to carry out.
Trying to get a higher share of wallet from existing captive customers by constructing a hotel is a great thought. I have been to a couple of exhibitions where they had tens of thousands of visitors coming in for the exhibitions, I’m sure for such big exhibitions they will see good demand for their hotel. Also all the talk of BEC being far from the airport, traffic on western express highway etc. get thrown out of the window. As a visitor to the exhibition you stay there for a couple of days, attend the exhibition there, eat there and then go home. Makes sense to me!
I concur with you that they maybe better off letting professionals run this hotel rather than running it themselves. But we will have to wait and see how it pans out.
Thanks Aman. Your notes are fantastic! I happened to find on BSE site the Nesco team has uploaded the chairman’s speech and most of what you have written is corroborated there. 2017 Chairman’s speech.pdf (190.9 KB)
Excited to get a road map from the Management for the very first time!
As we know that Nesco has enjoyed superb OPM of 70% but going forth how is GST going to impact it’s OPM. Will Nesco be able to pass it on to customers as it used to do. Considering the IT scenario not looking good, will it have an impact on IT rentals ? Need guidance from members on this group.
Impact of GST on rentals
“Credit/set-off of input GST is available to a developer, if the sale is executed prior to obtaining the completion certificate or prior to first occupancy. However, this credit is not allowed if the developer chooses to rent out the property. Hence, we might see a spike in commercial rentals,” explains Amit Sarkar, partner and head – indirect taxes, BDO India.
Recent investor presentation by the company.
I am unable to get through to the company secretary @ [email protected]
The email bounced back stating "Unknown To address"
Does anybody have contact info for their investor relations dept?
Please guide. I have been going through older AR of this company.
When I look at FY-12 AR FY-12 revenue from operation is 128.5 Cr;
When I look at FY-13 AR FY-12 revenue from operation is 127.98 Cr;
Are such discrepancies a common occurrence ? or is it something we need to take very seriously ?
Same observations in FY-16 & FY-17. Details are mentioned below. Don’t know why this keeps happening.
Any suggestions, comments guidance are appreciated.
When i look at FY-17 AR FY-16 total current assets are = 161.2128 Cr.
When i look at FY-16 AR FY-16 total current assets are = 450.0527 Cr.
Thanks for scrutinising the annual reports and pointing out the discrepancy. The difference is coming from recognising some debt funds as non-current investments instead of current investments. You can look at the sections corresponding to non-current and current investments in the annual reports to verify the same.
Still that leaves about 5% difference in total assets, the latter report showing higher amount for the previous year. At first glance there does not seem to be any malicious intent behind the change, since it does not boost the profits or growth in any manner.
But I am fairly inexperienced at this stuff myself, so take my view with a bucket full of salt!
Regarding your current assets questions
FY16 annual report uses India GAAP accounting. FY17 uses IND AS. Accounting methodology has changed for all non banking companies in India. That is why you see these differences.
Regarding your revenue from operations questions
A lot companies tend to restate previous year’s numbers while they report current year. Unless this causes huge changes you should ignore small differences. Else you will wasting precious time worrying about something that does not affect the investment thesis
Current status of IT building 4. To get a sense of construction progress please see post 256 from April.
IT building-1 being demolished, It building-4 not yet ready.
Phase-1 construction of NBEC will be built at site of IT building-1.
Revenue is going to go down as IT building 4 is not ready & IT building-1 is not being used.
More ever the CAPX cycle is going to start with construction of Phase-1. Management has clarified that there will be no debt for phase-1, however further phases no clear indication.
This is the classic case start of U curve that starts with CAPEX cycle. Expected time frame for Phase - 1 itself is 10 years. A close watch on execution & management commentary required.
so construction of exterior could be completed in the next six months. And by next Diwali it would be ready for occupation. By March 2019 quarter it will start generating revenues. This could happen earlier also if management gets tenants for the lower floors in which case fit-outs would also happen simultaneously with the construction of upper floors.
Management had indicated this at the 2016 AGM which I attended.
disclosure: holding in core portfolio.
Can someone pls share the details only for the NESCO IT Park in terms of:
- What is the total area that can be leased out (includes buildings not yet constructed?)
- What is the current available space that is being leased out for rentals and how much of space is actually being rented out?
- What are the commercial rates at which rentals are being generated in this area?
- How long are the contracts signed during lease agreements and what are the vacancy rates?
Thanks and Regards
Sounds a little optimistic to me. Here are some of my notes I gathered from past annual reports
Building 3 construction started in FY09-10, completed in FY11-12 and fully occupied in FY 15-16. This was when IT sector was booming. Now IT sector is having hiring freeze, headcount is going down at many large IT companies and general corporate renting also appears to be subdued. Against this backdrop I think it will take lot longer than just 2 years for IT building 4 (which is lot bigger than building 3) to start generating revenue let alone fully occupied. It will eventually complete and get fully occupied but it could take a lot longer than what investors are anticipating.
Quite possible about the revenue generation part. Even if the management
signs up a couple of big clients in the initial months it would change the
game. But I expect completion on schedule.
Few days back I was reading a report on commercial real estate demand overpowering supply and hence good days for at least commercial real estate coming back as new supply was constrained off late due to demand. Not sure specifically about Mumbai but will check. Just want to know if your view on NESCO new capex ramp up is inclusive of this information or in case you see the data , you would like to revisit your assumption /interpretation ? I would try to search the report , JLL or done real estate advisory cake up with 2-3 months back