Barclays is moving out to Pune and JP Morgan IT (not in NESCO) is also shifting to Banglore / Hydrabad. Another investment banking IT company ruled out Western Mumbai property due to too high prices. IT companies are finding mindspace Airoli as next affordable destination.Is anyone aware of managment recent commentry on IT park leasing market?
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Good results led by Excellent performance from BEC.
Disc - Invested and forming 8% of Portfolio
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indeed!.. the result on first glance stands a testimony to the resilience of management. just when you think there are fault lines emerging (BEC traffic issues etc or closure of building no. 1) they come back with even better result.
every segment has performed better, BEC being a highlight and so is capital goods. Even the income from investments has performed well (despite diminishing cash balance on a/c of investment in the completion of new building no. 4)
PS: albeit the NP% is slightly reduced, though sales are better
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Any idea when the Metro station likely to be commissioned?
Disc: invested
the metro line should become operational in the end of 2020. Two more years to go!
the management seems to have provided some info to this brokerage:
construction of IT building 5 AND an exhibition hall will begin next year. They will be spending Rs 130 cr on the new exhibition hall. Wonder why so much.
the new IT building will have some 20 lakh sq ft lease able area while IT building 4 will have about 12 lakhs. I believe it may have increased to 15 lakh or so if the height of the building was raised by one floor or thereabouts. I am not sure on this though.
They have begun renting out IT building 4 already. Construction is complete and the interiors were on during the AGM. While passing by the highway one can see that the glass cladding on the entire structure is almost complete.
one must not set much store by the target price by the brokerages.
disclosure: holding in core portfolio
shiv kumar
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In addition to above points, some insider buying seen last week:
Disclosure: Holding almost 15% of portfolio
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Any idea who is the tenant? My company has a office right next door at Nirlon and it is largely empty. How is the rental demand in Goregaon area?
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Nescoâs new building is yet to receive Occupation certificate. but rental agreements are being signed. tenants will move in after OC is received and rentals will be booked from then on.
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I believe the latest report from NB (pasted below) will help all of us get a sense on the current state of affairs with the company.
Source: Nirmal Bang Institutional reports (FYI, this report is publicly available hence it is being shared by me)
Commercial Office Space Addition To Drive Growth
We hosted a real estate conference recently where we discussed with Mr. Dipesh
Singhania, chief financial officer of NESCO regarding the companyâs strategy going
forward. Following are the key takeaways from the meet: 1) Agreement signed for two
units out of 39 in case of IT Building IV. 2) Letter of Intent (LoI) received for 17 units and
they are under the negotiation stage. 3) Possibility of a delay in receiving occupation
certificate for IT Building IV from December 2018 scheduled earlier to January 2019. 4)
BECâs (Bombay Exhibition Centre) growth expected to be ~4-5% in FY20, despite
shutdown for refurbishment. 5) Plan to start IT Building V and the leasable area could
range between ~1.2mn sqft -~2mn sqft. 6) Threat from upcoming Reliance Convention
Centre at Bandra-Kurla Complex or BKC partially impacting BEC segmentâs revenues.
7) Phase-1 of expansion remains on track with the planned addition of a 450-room hotel
and 1mn sqft of BEC space.
Agreement signed for two units of IT Building IV: NESCO has been able to draw an
insurance company to lease two units out of total 39 units of IT Building IV. The fit-outs are
expected to start by February 2019 and should take around six to eight months. NESCO is
expected to generate revenues from the units by 3QFY20. The lease rentals of specific clients
have not been disclosed, but on an average IT Building 4 could draw lease rentals ranging
from Rs118 sqft/month to Rs120 sqft/month.
Strong demand for quality office space helps IT Building IV to receive LoI for 17 units:
NESCO has been making efforts to lease its new IT Building 4 admeasuring ~1.2mn sqft of
leasable space. Apart from closing a deal on two units with an insurance company, it has also
received LoIs for an additional 17 units. The LoIs received for these 17 units are under the
negotiation stage and their finalisation is expected soon.
Possibility of delay in getting occupation certificate or OC for IT Building IV: The
building was expected to receive OC by December 2018. However, the management stated
that there is possibility of one- month delay in receiving OC for this building.
BEC revenues expected to grow 4%-5% in FY20: The management plans to add another
0.2-0.3mn sqft of temporary BEC space which shall be operational by 3QFY20. The addition
will help in balancing the loss of revenues from planned refurbishment of halls developed prior
to FY17 and also aid in achieving 4%-5% revenue growth in FY20.
Plan to construct IT building V and leasable area could range between ~1.2mn sqft to -
~2mn sqft: The management is having discussions on constructing IT building V which shall
have a leasable space of ~1.2mn sqft to ~2mn sqft. The capital expenditure could be
~Rs10,000mn, but could vary depending upon the area (mn sqft) planned for construction.
Threat from upcoming Reliance Convention Centre could partially impact BEC
segmentâs revenues: The upcoming Reliance Convention Centre could have an impact of
20%-25% on BEC revenues. However, the quantum of impact would be dependent on the
lease rate (sqft/month) charged by the convention centre.
Phase-1 of expansion remains on track: The planned addition of a hotel with 450 rooms
and 1mn sqft of BEC space remains on track. The management still needs to take a decision
on whether the hotel would be managed by the company or given to a hotel management
entity for conducting operations.
Disc: Invested
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I would like to point out that WeWork and CoWrks (RMZ group) are very different from other coworking spaces in India (Awfis; 91 Spring Boards etc.) and should not be painted with the same brush.
WeWork India (JV between WeWork & Embassy Group) has been expanding heavily and have taken space in a lot of premium tech parks as well. Do read about Powered by We and WeWork counts IBM; FB; Citi bank and the likes as part of its global clientele. They are not just leasing out space to start ups and freelancers, in fact a major chunk of their growth is being driven by big ticket enterprises. Softbank has poured in over 7 billion valuing the company at $ 42 Billion. It is not just for small ticket, hippy crowd social co-working space. It is a behemoth now!
Having said that, WeWork and the likes would be a complimentary business to IT Parks rather than a disruptor. IT Park gives out worm shells to WeWork who then customizes it as per client requirements, takes care of day to day facility operations and leases out to companies. Everyone is happy at the end.
Unfortunately, Embassy is not a listed entity.
https://www.bisnow.com/national/news/office/in-2018-wework-is-coming-to-manage-your-office-83356
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If they are getting into residential realty, it comes as an absolute surprise. Over the 5.5 years Iâve been invested in the company Iâve not heard them once speak about residential real estate.
None of their released plans, AGMs or analyst meetings have ever mentioned this.
I really hope they stick to what theyâve been planning as Iâve quite started to trust the managment over the years (as theyâve done the right things mostly) and have treated minority shareholders well too.
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unlikely they are are going to develop residential properties in the NESCO complex. As the slide says the company is looking to leverage the NESCO brand-name in other metros. At the last AGM also a question was asked about the companyâs plans once the existing land bank gets exhausted. Management said developing real estate elsewhere remains an option. IMHO this is some loud thinking on part of the management.
panic selling on the basis of a single slide is not recommended.
disclosure: holding
shiv kumar
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Not selling, not panicking either 
Nesco is my 2nd largest holding and it remains a core part of my portfolio.
Iâd prefer the managment sticking to what their plans are thatâs all. I believe any distraction is only going to be detrimental for all stakeholders (including the promoters). So far theyâve done quite well and I hope they continue with their good work.
Of course once the current land bank is exhausted itâll make a whole lot of sense for them to use all the cash their existing buildings and businesses throw out out for creating more real estate. Sure, the economics of the business wouldnât remain the same (as the land wouldnât be this cheap), however it will ensure business continuity.
Disc: Invested and increasing exposure.
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at the rate in which the Goregaon property is being developed it will be at least a decade if not more before it is completely built up. Also there is the land in Gujarat where the Indabrator facility is located. So far management has been insisting that the land parcel is not contiguous and its development would not be as profitable as the Mumbai property. But Google Maps shows that the facility at Anand is located near a major road in an area which is developing into a major residential location.
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Donât understand how WeWork is anything more than a company leasing out office space. Regardless of the marketing tactics and the tendency of SoftBank to keep putting a higher price tag on WeWork, I donât think its show will go on for long. Recently I was reading about how WeWorkâs CEO himself purchased assets on loan and then unloaded the property on WeWork at premium lease prices. Thus heâs clearly enriching himself! SoftBank too was prevented by its investors to purchase a majority stake in WeWork at crazy valuations.
At least NESCO mgmt is not engaged in such unethical practices!
That said, this move into residential development has got me curious & Iâd like to see the strategy to reevaluate my thesis for investment.
âFake it till you make itâ is the strategy adopted by almost all the tech Unicronâs like Uber, AirBnB, Yelp to tackle the chicken and egg problem or to stimulate the early demand. The idea is to bootstrap one side of marketplace inorganically to attract the other side.
Some Indian promoters are far too unethical than this, not saying Nesco promoters are unethical.
I would have agreed that embracing conflict of interest as a solution to the chicken and egg problem if WeWork CEO had done it at the inception stage of the start up. When itâs done at a valuation of $20B, itâs not really âbootstrappingâ but milking gullible investorâs money.
. . . this is first thing that came to my mind i.e. you are never sure of what management is thinking. . they will talk about Hotel (and then also argue if managing itself is great or should be outsourced), and then suddenly they will come up with residential (may come up, as its only us who are speculating looking at the website; though they fleetingly did mention in the AGM)
. . . my take on management that they are risk averse (no debt), still prudent (in managing cash in debt investments and investing in newer assets), manage business very very closely (inch by inch they keep creating opportunities within the land holding), are not afraid to innovate and anticipate where market is heading (shifting from exhibition to IT buildings few years ago, or their current thinking of new future plans on remodeling entirely the Goregaon land), are not scared (of reliance), manage crisis well (traffic issues), keep evolving (started F&B business), not scared to re-orient (soon realized their own properties e.g. paddy fields have not much to offer OR that they hired new age managements staff for future growth), are nimble footed (steadily evaluating and will get into new market e.g. resi. etc)
. . .but in the end they are a family run business with, thankfully a reasonable regards for the investors, but donât feel obliged to keep you pre informed. . . their methods are like an unsaid rule: DONT ASK US WHAT WE DO, HOW WE DO, OR WHEN WE DO; JUST TRUST US AND WE WILL TAKE CARE OF YOU
. . . honest, hard working, but like to keep and arms length distance
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