Thank you for your kind comments: I am a learner :just like fellow VP boarders, and I have greatly benefited and continue to benefit from the quality discussions on the forum as well as pointers from seniors.
I refer to your Query linked to the Managements integrity first. The real estate sector transactions are such that there is possibly need for “creative accounting”. Most developers balance sheets if forensically analysed will throw up red flags. The integrity call that I took is that the promoters have a very good record of treatment of minority shareholders.
The first question is should we look at Real estate sector currently? Is the sector on the verge of a turnaround? My gut feel is yes.
There have been a number of large ticket lease / rental deals, sale / purchase of large parcel of rental yield properties. Commercial uptick is usually followed in 2 to 3 years by uptick in residential demand.
IBREL is a significant rental yield player with some stretch on debt.
IPIT: the Real Estate Trust of IBREL (IBREL holds 47.5% of it) has 3.3 mn. sq. feet with occupancy rate of 88% and rental yield of Rs. 160 psf. (Book value of investment 3250 crores)
The company has 30 mn. sq. feet under various stages of development. Realisable value of the same would be to the tune of 20,000 crores.
Considering expenses (incl. interest) and estimated cash outflows, as well as additionally assuming construction and operational cost of about 3200 Rs. per sf. against receivables, we see that current market cap of Rs. 3,000 crores is not at all representative of the true value of the company.
To get these ballpark numbers, and ensure that I was not making flawed calculations, I got detailed assistance from multiple acquaintances who are currently at senior level and well entrenched with big ticket names in the real estate sector.
Monetising London Property (Purchased for 155 mn. GBP last year, however a prime locality property in the most resilient real estate market in the world, and should have no problem liquidating the same. In fact property prices in London have appreciated over the past year)
Sales at Panvel Project
Slow sales at Indiabulls Blu (Worli, Mumbai)
the bet that I am taking is that the management will execute and deliver, and minority shareholders will be rewarded too.
I trust this update helps.
Have a good weekend and best regards!