It now looks like NESCO won’t be able to hold any exhibitions at BEC till Metro work is complete which the article in ToI says could be 2019. This 30-40% of annual revenues will be lost.
Does any of know the revenue recognition policy at NESCO. Probably those who have already booked the event will have to be refunded and already booked revenues will need to reversed to an extent?
What is the chance of organisers suing NESCO for lost business?
Disc: no holdings.
Todays TOI article on Nesco
Have dropped a mail. Let’s wait and see. Will keep you posted
Some more thoughts on the business:
What will be the reputation Impact this kind of event will have on BEC? Will organisers be wary of holding events here in future?
Metro right at the doorstep is a big plus increasing visibility, accessibility, property value and footfall as well with no investment/expense for NESCO.
Building 4 revenues should start flowing in from Fy20 beginning with full occupancy expected by
end CY19.
Given that this Building is almost twice in size of Building 3, which is clocking revenues of ~100 crores pa, we should expect a conservative revenue inflow of 150-175 crores which will more than make up for BEC revenue, should it not become operational even by end 2019 (worst case scenario imo as such a drastic step is unimaginable to sustain for long; traffic is a gross reality in India and there are better ways to cope with it than to shut down businesses!).
The additional triggers of hospitality business growing fast and upcoming announcement of a new project (BEC halls or B5) provide comfort as well.
Imho, these kinds of one off events are good buying opportunities for value investors.
Disc: took long position today. will add depending on how the story unfolds.
Not only will the company lose out on BEC revenues, this will also have a cascading effect on the hospitality business. If there are no exhibitions, the hospitality business would take a major hit too.
The management had suggested ~Rs.40 crores of revenue from the business this fiscal. That’d be more than 10% of the overall revenues in FY19. So in essence, we are effectively looking at a 50% hit on the top line, which will impact the bottom line by close to a similar degree too.
Not to mention, loss of revenues will lead to the company generating lesser free cash flows and thus pushing all the future plans ahead by a couple of years. The blanket ban if it happens, is going to put the company back by a few years at least (as the EPS is going to go back to levels it was a few years ago - as the net profits will shrink).
I have written to the CS to find out more details on what kind of insurance has the business taken out to handle such averse situations - be it a natural calamity, terrorist attack or a regulatory situation like this.
All I’m trying to understand is, if there is loss of revenue (if any at all) due to the restrictions put by the BMC, is the company insured in anyway - fully or partially to mitigate the loss of revenue due to this situation?
I’ll let you folks now as and when (if at all) I hear back from the management / CS. Cheers.
Guys, does anybody know if NESCO concall transcripts are available anywhere??
They don’t do con-calls. They also do very few interviews - maybe once or twice in a year. Only way to track the company is through broker / analyst reports and by going to their AGM.
All right thanks! My first impulse is to look for concalls always. Anyways, will check out other resources!
@vivek_mashrani, @T11 @jirohit : thanks for developing and sharing the NESCO model in excel ! Super helpful…
The AGM notes put up on Value Pickr paints a good enough picture of the company.
shiv kumar
Folks - I had some work there today and here’s my assessment - > The service line where Nesco entrance is didn’t have any issues while going or coming back. However, while returning, the entire stretch going from town towards borivali was jampacked (around 8 pm) but the service road was still ok.
In terms of the construction work, the progress since my last visit was quite visible and I reckon the civil work could finish in next 6 - 9 months (if continues at same pace)
Disc - Invested from lower levels … looking to add
There might be a caveat though:
Yay! 
Although now the smart move on the part of NESCO would be to assign some people to work constantly with the traffic police & metro workers on event days to sort out traffic.
Specifically, collect evidence that they’re helping with whatever they can. So that later if such an arbitrary blanket order is passed again, NESCO has it’s side of the case ready!
Nesco has clarified to SEs about the spurt in volume and also about no stricture on the holding of exhibitions .
Most large malls & commercial complexes in Mumbai assist the traffic flow by providing the “Traffic Wardens” - fairly standard practice, am assuming Nesco would be doing this for last 3-4 years already. Does not build any case against the blanket ban, in my opinion.
One other alternative could be, to have the vehicle parking area 15-20 minutes (spread it into 2-3 different places) away from the exhibition center and have shuttle buses (probably a tie up with Uber/Ola) every 15 minutes between parking and the exhibition center. If this could help in reducing even 150-200 vehicles per day coming into the center, it might turn out to be good. This method is pretty common at the US airports.
Not good news for NESCO which will lead to further delays for Metro Construction activities
Construction work on metro is on full swing. I think these works were approved earlier.
