Piramal Enterprises Ltd


(Growth_without Debt) #660

Though i am invested in PEL, i would like to listen view of other well known value investors. After listening of following, it seems that bullishness getting reduced on NBFC due to past rally comparing to other sectors. This could result price stagnation / correction of NBFC/HFC till earning growth align with PE multiples. Mean reversion is playing out!!

Kenneth Andrade, CIO of Old Bridge Capital Management

Samit Vartak of SageOne Investment Advisors:


Ravi Dharamshi, CIO of ValueQuest Investment Advisors :

Disc - Invested at 1800 level. Not applied for right issue.


(Jaclyn) #661

It is too early to jump to conclusions and assign names like this. It is not like mixing some masala and asking for customer opinion in minutes or hours. Even a decent affordable housing project should take 0.5 to 1 year to get the project right (at least at the start) and then it will go into execution mode which includes paper work, actual construction, marketing, sales and finally success. For all the developers getting the cost right, particularly to cut various costs by doing pre-fab, using certain standard constructs and thus driving down the cost from every angle is the most important aspect. The outcomes will be visible 2-3 years from the start.

And do note that not everyone will succeed and get it right, probably few projects down the line they may get it right. So sticking to a good developer who is able to afford the setback and lend him is the game. I think Kushru Jijina has articluated it very well at the Piramal Housing launch con call. So we have to keep that in mind.

Another statistic revealed by Sanjay Gupta was an average housing loan in India runs for 83 months (7 yrs) and a LAP runs for 60 months (5 yrs) and construction finance 28-32 months (3 yrs). By end FY19 (3-4 qtrs from now) and FY20 onward you can see lots of affordable projects being marketed and sold in the market. So for affordable housing the current opportunity lies in construction finance for every lender. Those who calculate the risk involved in each of the project and price it appropriately will be the winners.

In this regard, PEL management has articulated that they have ability to structure the deals such that, bring in equity or debt during the early stages, doing pre-construction financing, switching over to constrution financing and finally tapping the end customers also to get into housing loans or LRD’s. Thus in all stages they partner with the developer and provide value to him including the use of their Brickex platform. That means a project developer gets PEL more as a partner cum lender than as pure lender.

Yes there are unknown risks, but Kushru has pointed out how the NPA’s has gone down over the years while they have continued to expand their financing capabilities. GNPA of 0.4% is an outcome of what the management says.


(Jaclyn) #662

To me the answer appears to be yes. Why don’t you go through attachment in the below post under which there is section called Renunciation which should answer your queries?


(Jaclyn) #663

For a sample, Brigade Enterprises in their concall have said in total they have 20 mill sqft on the pipe line. 12 mill is categorised as affordable and out of which 5.5 mill will be done by FY19 and the remaining later than that. That gives the scale on which the top notch developers are moving into affordable segment.


(Growth_without Debt) #664

@sgjaclyn Why company’s headline focuses on no. of units constructed and to be constructed instead number of unit sold with 100% payment ! Because, for all developers’ this number (unit sold and 100% payment received on handover is not encouraging

I have concern on such construction plan by companies. My view (i may be wrong!) -

(1) Builders are building housing inventories based on funds from construction finance lenders and not based on booking deposit from actual customers (which was the case before RERA!). In this model, Builder need to pay interest on funds/loan and keep building inventories. There is no pricing power as it is just commodities + customer are waiting for more bargain!. So if all companies are building inventories on future demand hope and it does not turn, they are forced to sell at discount.
So let us think - a company manufacturing products based on loan, building inventories, paying advance for raw materials (cement, land, etc), keeping funds under ESCROW account as per RERA, and not pricing power. What you think balance sheet of the company if buyers are not buying their products! If we still to think worst - Think cost of funds increases in future (finance cost goes sky high) and product to be sold at discount !
(2) Regarding affordable housing - the most powerful force against builder/developers are National housing boards and state housing boards. They are selling houses with draw system with reasonably very low price. Execution of housing schemes by housing boards is excellent. I personally have seen in my state that each city has one/more housing scheme by government. the construction quality is also very good as the construction done by L&T. Hence, people prefer first house from such scheme instead affordable housing by developers/builders.
By googling, i found that each state has such excellent schemes by respective state housing boards.


https://mhada.maharashtra.gov.in/?q=affordablehousing
https://www.karnatakahousing.com/Projects/225Scheme/225HousingSchemes.aspx
http://gujarathousingboard.org/activities/ongoing-projects.aspx
http://www.tribuneindia.com/news/chandigarh/community/housing-scheme-for-mig-category-soon/380111.html


(Jaclyn) #665

I did not say companies are building on hope. What I left out in my comment was the market research and understanding what will sell. That part primarily belongs to the developer and there is no escape from that. If they fail in that, then they reap the pain.

But what I was pointing out was rather than follow what they did until now, the affordable housing scheme has boxed the developer to cut costs and come up with a product which will give them tax exemption. That is what driving the innovation to eliminate the cost from every angle and eventually make a profit for themselves. That is where standard practices, pre-fab, industrial scale manufacturing all come into the picture. It is not that these developers have found a social cause and because of it they are venturing into it. Ultimately the opening of a big market which is driving them towards this.

Recently I even saw a news articles which talked about completely pre-built house, that is factory made, but probably for individual use but not for a developer. But we will see several failures along the way.


#666

I have been looking at the Pune and Ahmedabad RE market since the last few years. Pune RE has crashed thanks to the effects of the IT industry slowdown in Pune coupled with over ambitious developers. Apartments which used to cost 80 lacs are selling for 65 lacs today. I guess (havent looked) that affordable housing would have suffered the same fate in Pune. Kolte Patil is a premium builder and based out of Pune. They are up 5 times in the last 1 year. I have seen their projects and did not find either the location or the scheme worth investing as much as they demanded. But they are still making great money - even in the dull Pune market.

Ahmedabad and most of Gujarat by extension went through a long time correction and is still in the middle of one. Loads of GHB schemes have been launched. In spite of this, the building of apartments by private builders continues unabated. Ahmedabad city limits have increased by another 10 kms during this period of so called time based correction. Another data point is Gruh - which derives large parts of its revenues from Gujarat and Western India is going as strongly as any other HFC in the market.

My point is that RE is extremely localised, specific to one project, scheme or area. While you can sell a scheme for 20k psf in one area of Mumbai, the moment you cross the road less than 80 mts away you will find another selling for 40k psf. Both HFCs and RE developers are making money at the same time when some RE developers are going bust.

The only way to find a convincing loophole in what PEL is doing, is to find the exact schemes that they are financing. Or else, you trust the capital allocation capabilities of AP and let it rest.


(Amit) #667

I am in similar dilemma. I am eligible for x shares and I am looking to apply for 2x shares…I will submit the cheque for 2x shares * 2380. How would I get refund in case I only receive my eligible quota of x shares.

Please advise.

PS : Pardon me if I am asking rights question here as I do not look to start a new thread for one question. Also since the right issue is related to Piramal I feel it is appropriate to ask the query in this thread.


(Shiv Kumar) #668

if you have received the form, there is a column to fill in your bank
account details where the refund will be sent. if you are applying via
ASBA, there is no question of refund since amount will be blocked and only
the sum for the shares allotted will be deducted from your account

shiv kumar


(Sunday) #669

On what date would we be able to know, how many shares have been allotted and when would we see the allotted shares in our demat account.


(Shiv Kumar) #670

date of allotment - on or about March 8
date of credit - on or about March 14
date of listing - on or about March 16


(Mahendra243) #671

https://economictimes.indiatimes.com/industry/indl-goods/svs/cement/dalmia-bharat-consortium-emerges-as-highest-bidder-for-binani-cement/articleshow/63097182.cms?utm_source=APPusers&utm_medium=twittershare&utm_campaign=socialsharebutton

A consortium of Dalmia Bharat and Bain Piramal Resurgence Fund emerged the top bidder for Binani Cement

Read more at:
//economictimes.indiatimes.com/articleshow/63097182.cms?utm_source=APPusers&utm_medium=twittershare&utm_campaign=socialsharebutton&utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst


(Mahendra243) #672

when the rights issue happen will the price correct to rights price…?
do we know only by 8th march if we are allotted the rights share?
pls advise


(Growth_without Debt) #673

2017 Buffet letter -

Is it applicable to Piramal group? However, looking at past performance it seems not applicable but “Future performance does not guarantee repeat of past performance!”


(Shiv Kumar) #674

even Buffett does acquisitions! In fact he is waiting with a 100 bn dollars
to buy something good at a bargain.


(Marathondreams) #675

Piramal has solid history of many successful acquisitions value accretive to its shareholders over 30 years. For me, it’s good enough :wink:


(Mridul) #677

At times in the complexity of things one often tends to miss the most basic thing, which here is that this is a conglomerate with finance being one of its major verticals. Now look at all NBFCs, look at their cash flows. You will know what is happening here.

This is the best managed group in the country by far!


(Pod85) #678

It seems that you have zero clue on how an NBFCs cash flows from lending operations are structured. Suggest you read 4-5 AR’s of Pvt banks and NBFCs and then read Piramals AR.


(Kumar Saurabh) #679

Friend, a wrong direction with all effort will lead no where.Please spend sometime on understanding businesses of interest and valuation interpretation/methodologies. A good read of whole thread and various threads on financial sector valuations might help. Not commenting on whether piramal is overvalued/undervalued because the base of argument itself is misplaced. Also, not commenting on real estate as next bubble as such discussions without solid data points do not lead to any logical conclusion


(Growth_without Debt) #680

Is mean reversal playing out ?
What are possible reasons for continuous price correction ?

Disc: Invested at 1800 level. Not applied for right issue