The traditional office as we know it, is not going anywhere. While WFH has gained acceptance, it is already started showing its ugly face in terms of employee fatigue, lack of employee engagement etc. A recent Microsoft study showed that while bosses are happy with the remote work setup, average employees are not so much, primarily due to stress.
Also, one key reason for productivity gain while working from home is, employees have nothing else to do during Covid times and bosses know that. Once people start going to movies, malls, visit friends, relatives, WFH will not remain as productive as it is currently.

Will we be back to where we were before Covid ? No, There will be more flexibility for people to chose where do they work from. But at least some days of the week people will report to office.

Another point to note is, while the pandemic was raging, Indian IT industry hired record number of people.

Disclosure : Hold Nesco and some REIT


That’s right. Hybrid model would be the future. At the same time I am expecting lot of innovation in terms of Virtual realty and lot of tools that will help employee engagement while working from home as well as lot of productivity measurement tools will emerge.

Ofcourse, premium properties will still be in demand, but overall if say there is 40% WFH scenario (many companies outside India have started going this way), overall demand of commercial real estate will go down as companies will reduce space requirement by rotation etc.

Even if properties like NESCO may have full occupancy, how the pricing power remains and % increase they can command needs to be seen.


Hello All - For the benefit of those who want to understand the basics of NESCO’s business, I have written below long post :

What do you do if you have a ~70 acre parcel of land in the heart of Mumbai where land is scarce and expensive? Sumant Patel, promoter of NESCO Ltd., decided to start an exhibition business by building the Bombay Exhibition Centre (BEC) in 1991 on that parcel of land.

As India opened its gates to globalisation, companies rushed in to exhibit their products at BEC’s trade fairs and exhibition events. The business took off.

Today, from the steady, recurring cash flows of the BEC, NESCO has :

  • built IT parks - 2 buildings are currently operational & generating ~₹20 crores in rent per month from MNCs & banks

  • built a hospitality business - NESCO Foods - to cater to office goers, &
  • planning to build another 2.9m sq ft of leasable area which will have 2.6m office space and 0.3m 300 room 4-star hotel for a capex of ₹2,000 crores

NESCO’s moat :

Traditionally, real estate players need to :

  • invest a lot upfront in acquiring a piece of land
  • then spend years & (mostly) borrow money building it
  • then wait for their payday till the entire building is sold or leased out

However, since NESCO has captive land purchased decades back, it doesn’t need to pay exorbitant sums to acquire it at today’s prices - and it has steady cash flows from the BEC & IT Parks with which it builds additional buildings on the land - so it doesn’t need to borrow to build. And NESCO is able to lease out soon after building because demand for office space in Mumbai is evergreen.

NESCO’s cash generating engine is growing at a steady rate of ~15% with an RoE of 19-20% and no debt on the Balance Sheet - which is unique for a commercial real estate player.

Revenue break up

Margins Profile

RoE break up

Risks :

However, there are some obvious risks which might derail NESCO’s growth plans :

  • COVID-19 has made physical contact almost prohibitory - NESCO’s businesses - both IT parks & Exhibition - earn when people come together in big groups.
  • IT companies are planning to allow people to work from home at least some of the time - this will reduce demand for premium office space & might also eliminate it completely over a long period.
  • Additional threat from co-working spaces like WeWork (although the flip side to this is that even co-working companies need office space - NESCO itself leased out roughly 10% of leasable area to WeWork)
  • Reliance Jio Convention Centre which might compete with BEC exhibition business
  • NESCO enters into low RoE businesses like Hotels

Management :

I like managements which are conservative & are cautious of excessive leverage - this is what Mr. Sumant Patel has said about the upcoming capex program

The cash flows of about ₹2,000-2,200 crore will be staggered over a period of 5-7 years. As a policy, we will not be going in for any external debt and all our outflows will be funded by our internal accruals in its entirety.

Management salaries has been an area of concern : in FY20, Patels’ total take home from NESCO jumped almost 4x!

Cash Flow :

CFO/PAT ratio is almost 1 : 1 which indicates all earnings are in cash - a favourable feature of NESCO. Also, NESCO’s business doesn’t need net working capital investments which is another plus.

However, NESCO doesn’t generate a lot of free cash - which is a pitfall of avoiding debt. NESCO’s Operating cash flow gets spent on new buildings & very little is available for dividends or buybacks. For eg. out of cumulative ₹803 crores in Operating cash in last 5 years, free cash was ~₹284 crores. Dividend Payout ratio is only 9-10% & Dividend yield at today’s prices is 0.5% which is meagre. The ability to not take out cash from the business is a drawback for potential minority investors.

Almost₹670 crores of cash (as of FY20) is invested in short & long term MFs/debt funds presumably because mgt doesn’t want to borrow to meet future capex needs.

References :

  1. Urge you to read this piece by Professor Sanjay Bakshi which beautifully explains NESCO’s moat like characteristics :
  2. NESCO last 5 years Annual reports
  3. The Hindu article on Capex program : Nesco to invest ₹325 cr. to expand expo centre - The Hindu

I would love to have your feedback/comments on the above post here


Krishna S. Patel appointed as Chairman and MD


Chairman’s speech from the AGM on Aug 11th.
aabda380-2bc1-4d7b-99d2-5da02e9cee4f.pdf (928.5 KB)

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AR 2021 notes

  • 80% of Tower 03 and 75% of Tower 04 are occupied
  • Company’s liquid resources (fixed maturity plans, mutual funds, cash and bank balances) increased by 19.48% to 819.23 cr. from 685.67 cr.
  • There was a decrease in the managerial remuneration for the year by 31.64% and increase in compensation of other employees by ~10%
  • Expansion plans
    o Nesco IT Park is expecting to complete the designing & finalization of plans for the new Tower 02 which will be located in place of legacy IT building 02 and the adjoining areas. The designs are made by Singapore Based Architects – Aedas and the total development size will be about 4.6 million sq. ft. that includes office space, hotel, car parking and other amenities. Estimated cost is 1800 cr. with outflow spread over 5-years
    o IT Park Division is planning to complete the F&B and Retail areas in Tower 04 which include new Restaurants, Food Court, Gym, Convenience Store, Salon and a Coffee Shop. The expected cost is approximately 50 cr.
  • Indabrator division, the abrasive plant manufacturing capacity of 2000 MT/annum has been ramped-up to 6000 MT/annum and expected to generate revenue of approximately 25 cr. on full capacity basis
  • Number of shareholders: 39’865, price (low): 380, price (high): 639

Here are the detailed business metrics since FY13.

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Total Revenues 162.74 181.42 223.07 297.08 357.20 358.00 392.60 474.28 355.70
IT Park 27.86 47.83 90.67 124.40 141.91 145.40 137.00 214.17 246.06
Exhibition centre 90.52 94.89 85.86 111.83 132.77 129.70 156.00 158.60 5.95
Hospitality services 5.60 20.40 34.10 35.68 13.00
Indabrator 25.08 18.39 17.91 27.93 33.89 26.40 32.50 23.27 26.09
Investments 19.28 20.31 28.62 32.90 42.98 36.10 33.00 42.55 64.60
KMP remuneration (cr.) 3.60 3.75 5.11 6.06 7.06 7.58 8.02 21.49 13.54
Audit fees (lakhs) 7.85 9.55 11.01 11.50 15.60 19.85 21.69 21.68 21.76
Employees 121.00 135.00 166.00 131.00 159.00 155.00 130.00

Disclosure: Invested (position size here)



The reduction in Managerial remuneration should be taken with a pinch of salt. Mr. & Mrs. Patel were paid 7.06 crore in 2019 which increased to 20.16 crore in 2020 (in a pandemic year) and is now reduced to 13.27 crores. So, In essence, they have almost doubled their remuneration in two years while the Investors are having lower EPS than 2019.

In fact, The reduction in remuneration has happened in 2021 because the Net profit of the company has gone down by 30% (ring a bell?). Since they can’t pay themselves 20 crores when Net profit is 170 crores only (10% limit), they had to reduce the remuneration. I would not be suprised if it goes up this year once the Net profit is up again.

While I will not call it a red signal on corporate governance, it’s definitely very close to that.




Disc- Invested (not heavily), tracking closely for Corporate governance


Any idea if NESCO is planning to venture in Pune as well or they are already in any of the parks in Pune ?

There has been increase of 22 crores YOY in other income which is mainly interest income
But increase in investments during the same period is 53 crores. Investments are maily in non convertible debentures.
Why is the interest income so high YOY Or am I missing something?

Investing in NESCO vs REIT : -

Was trying to assess moat of NESCO in context of its attractiveness vis-a-vis REITs. I found that REITs have certain advantages over n : -

  1. Distribution of dividend : - REITs are bound by regulations to pay out 90% rental income as dividends whereas NESCO has to conserve cash to keep on funding further construction on its land. Hence the dividend payout is low & bound to remain low.

  2. Diversification : - REITs have advantage of geographically diversified properties vs. NESCO which is concentrated in Mumbai only which increases single location event risk for it.

  3. Capital Appreciation : - This probly follows from (2) above. More geographically spread properties means more chances of capital appreciation & subsequent rise in NAV of units. Whereas in NESCO’s case the price appreciation is only dependent on earnings’ growth - rental income + Exhibition income - which is nyways going to be subdued for sometime.

The whole point of bringing this up is that isn’t NESCO’s wide MOAT is not as wide now as it was earlier with listing of REITs & thr attractiveness as investments. So, isn’t nesco’s multiple at the risk of getting de-rated or not further re-rated going ahead. Of course, if the mgmt decides to take certain actions thngs can change.

Would love to hear long time n investors thoughts on this. Wat makes you buy/hold this stock vs. an REIT?

Disclosure :- No investment as of now. Was invested earlier.


I would like to add 1 point here as Q.

why “Nesco” not moving into other cities? They can venture in Navi Mumbai, Pune, Nagpur.

One would always want to expand, provided if they think the success could be repeated.

I think the reason could be both a qualitative and quantitative one.

I don’t know about the management, do they have hold on Mumbai area/market only? To move to other cities and build real estate and do business, can they do it on their own or do they have to do a JV with someone else like Ashiana does? Who would want to lose control, when they can expand and grow where they are?

The profits will also be less if they don’t know about the nuances in other cities you mentioned. There have to be similar events happening and similar environment existing for Nesco to venture into those cities and become profitable. The fixed assets jumped from 213 crores to 776 crores in FY 20. They have done capex. So they don’t want to go to other cities, check the thread.

And I guess, your question may have been asked before, to the management, and they may have already replied. Check concalls or transcripts. Or they may have mentioned about this in their ARs.

Not invested.

The main reason is cost of land. The Mumbai land was owned by company frm many yrs back, thus cost of land is very less compared to developing same piece of land parcel today.

In any other city, they vl be on par with others as far as acquiring land & developing it is concerned. In fact, REITs vl anyways beat them in that game with thr comparitively massive scale. Question is, is that the business that they want to be in. Thn probly a solution is something sort of to hive-off land asset in a separate co. & then leverage that. Bt I blv development is not thr core competency it seems.

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right but to stay in game ans be competitive, they need to think beyond REITs and Jio center else this company would be a bad trap for investors.

It looks like the Government officials do not want to let go of this prized asset. I can understand that government needed land to quarantine/ cure people during height of the pandemic but to keep 4 lakh sq. ft with you in middle of BKC area without paying a penny for just vaccinating people (I would be surprised if Covid care centre has any patients in it right now)? Can’t they do it at a regular Civil hospital?


Is government not paying for using the centre?

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“With deep regret, the company informs that Shri. Sumant Jethabhai Patel — Executive Director and Chief Mentor of the Company, left for heavenly abode on 17 November 2021.”

This is a big blow. I remember seeing him on CNBC/BloombergQ since many years. Always spoke with confidence. Om Shanti.


KPMG leased Office space in NESCO IT Park.


Jio World Center. . . Opening Soon!


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