Fair point! But I still believe that Reliance could eat up their huge business as
It is 7 times bigger than Nesco’s center
Reliance is cash giant, which means infrastructure would not be a problem for them.
Reliance has a brand image which has now become worldwide famous because of Mukesh Ambani climbing the ladder of richest people in the world. So, this could mean (just an assumption) that Reliance would have better odds for attracting customers towards them.
Reliance also plans to open up office spaces there which means another threat for Nesco.
But I agree that having 2 players in the market is very much possible and there is high possibility that both will survive together.
Also, have a look on this article for some related info:
The JIO centre could be used for Reliance’s in-house purposes. If the group headquarters is shifted here, they would use the convention centre only for some token events as it is part of contractual requirements imposed by the Maharashtra government. Ambani must have used the convention centre as a ploy to get hold of the land.
Yes I think this could also happen. The only problem is I am not able to find any material which could confirm this.
We know that the original name of the convention center was Dhirubhai Ambani International Convention & Exhibition Centre (DAICEC), but was changed to Jio World Centre.
And they have also stated that this is going to be the Jio headquarters. But they have also mentioned the Lakme Fashion Week will be hosted here.
So, its going to be a mixture of everything I guess.
Now as Reliance has a TV channel maybe they would provide further offers regarding video shooting their customer’s show at a cheaper price if a customer chose Reliance over NESCO.
(This is all an assumption to just have a healthy discussion)
they have an entire media empire! not just a single channel. investments in media mainly to provide content for their Jio business. there will be organizational synergies, of course.
however NESCO is also revamping its exhibition halls at very high cost so frequent complaints about bird droppings from exhibitors and visitors will stop.
Very interesting discussion so far. One thing, which is open for discussion, is exactly how does the land translate into competitive advantage in context of office space: (BEC context has been debated)
Is the time period from design to completion lower due to faster approvals/ lesser clearances? For instance IT building 4 was commissioned within 3.5 years (Apr 2015 to Dec 2018) with a BUA of 17 lakh square feet. Is this much faster than peers?
Existing land reduces the project cost for NESCO. Is the company able to quote significantly lower rentals than peers and consequently steal customers? If one looks at the property websites, the quoted rent is INR 120-140 per sq ft for IT Building 4, which is comparable to its peers
Then perhaps is the IRR much higher for its projects due to lower costs? For IT building 3, If we isolate incremetal PBT from 2014 onwards till 2019 against a project cost of INR 130 crs, IRR comes to 20-25%. Is this higher than its peers?
In the current COVID scenario, can the company reduce rentals and still earn 20%+ IRR?
The debate wrt WFH is split evenly amongst most analysts. However if one refers to any of the consultant forecasts like JLL, Wakeman and Cushfield, the reports point towards rental pressure in the medium term without any structural change in the long term. These reports need to be taken with a pinch of salt given the agency mindset/ self serving bias of these entities.
In my opinion, the ultimate outcome wrt WFH will only be obvious in hindsight. For now, we need to think in terms of scenarios and probabilities for FY21 and the future.
Bengaluru office market constitutes 33% of A-grade office pace in india.Even in Bengaluru market, vacancy rate has increased from 4.8% to 6.5%.
But this additional 1.7% increase in vacancy rate is not a considerable jump.
2020 1st half rental hike is 6% which is reasonably good.
i think so far there is not much impact and we have to wait and watch for the next 6 months.
But Mumbai is a different real estate story due to its own constraint in land expansion and not much WFH oppurtunities like Bengaluru which is mostly IT driven almost in all office spaces.
IT Building 4 was completed faster has the management implemented learnings from the construction of the earlier building. At the AGM last year, I got to know that the management had to undergo a steep learning process as IT Building 3 was the first big building being constructed.
For IT Building 4, the management got L&T, the contractor, to set up an RCC manufacturing facility in the complex to speed up the construction process.
The building would have been completed at least a year earlier but for restrictions on construction imposed by the Supreme Court in Mumbai.
Sumant Patel has been predicting rentals in the range of Rs 150 to 160 for the properties for the past several years, but rentals have been softer in the Mumbai market as many office complexes have been coming up.
One can expect this to be sluggish for the next several years as offices enforce WFH. While I expect IT companies to embrace WFH, financial service business will do this slowly due to the sensitive nature of their businesses.
I have a feeling that We Work, which has rented a lot of space in IT Building 4, may renegotiate rentals.
While several leveraged players in the construction space are likely to suffer in the coming years, NESCO with its lean balance sheet can weather the storm very well.
The company is cutting corners but I will keep on following up … Let see what unfolds.
Company has a land. They keep doing construction/add-on on this land and hoard cash/reserves to do this which is nothing but retained earning of every shareholders.
Why NESCO promoters don’t answer of massive salary hike they took for themselves of almost 12+ cr in this year (110%) when earning is due to take a big hit and every long term shoulder who believes in business are readying themselves to take pain knowing that there are headwinds for the business in short/medium term until this pandemic is sorted out.
What they would be doing extra in these times for prizing themselves with massive RECURRING cash which belongs to every shareholders.
Have the promoters funded themselves with shareholder money to increase their own personal stake by buying shares from market.
Whatever this is something which management has to speak up and i am in regular followup with the company with no logical answer so far.
Nesco is a valuable asset. The only issue is professionalisation of the management. They hired a CEO who quit just within 3 years. Also I hear from my acquaintance there that the attrition is pretty high at all levels. They should pay good salaries with ESOPs to retain talent. Good management can make this wonderful asset even better.
With all the speculation about work from home, NESCO IT park division has delivered stable numbers (on margins and revenues). I guess BEC business will be a washout for lFY21.
Pretty good nos considering the pandemic and risk of loosing tenants or delay in rentals given WFH shift. Shows the quality of tenants…many might be MNCs and as management said, they don’t seem to have lost rentals.
AGM notes and point not covered in chairman speech/management presentation
IT park 2 is around 75-76% leased. mgmt expecting to lease fully by march-21.
capex of 1500 cr to be done from internal accruals and company has 2 plans- 4 yr capex/5 yr capex for the same
expected income from BMC for covid center is minuscule and management has not raised the invoice with bmc yet. negligible amount, so immaterial.
no of covid cases going down, so biggest BEC hall already released back to NESCO, expecting 1 more hall to be released soon. pending 2 hall to be released depending upon covid situation.
10-20 cr income from BEC in FY21 in case any exhibition happen in Q4 fy21. but highly unsure as depends upon situation
IT park2 and hotel may take 5 year to construct. Singapore based consultant used and current at stage of plans to be submitted to MCGM. BEC new hall to take 10 months as pre fabricated material being used.
nesco foods trying to get business without exhibitions by supplying outside ( didnt not proper details on this )
asked management if they would consider selling off indabrator business and investing capital in realty business but they seemed to be focused on continuing with this biz considering nesco history and origin with this business.
asked mgmt about steep hike in compensation as well but question was left out/missed without reply.
also asked about impact of WFH on NESCO or commercial real estate business but this question was also missed.
management also mentioned that they would not discount the rental to lease out IT park4 in response to one query.
my two bits: there seems to be little change on the company’s projections over the years. Just shows that they are quite focused on doing things over the long/medium term.
For the past two years, they have been saying that IT Tower 2 will be developed in two phases. Now it is almost confirmed. There will be an IT Building and a hotel. If necessary they may use their cash and investments to carry out the development simultaneously.
They have been saying this since IT Building 3 was under construction some years ago. Slow and Steady is the name of their game!
I feel they may speed up if some special concession comes from the government.
The proposed hotel is a four-star development with 300 keys and the management expects 70 per cent occupancy. At the last AGM they said the hotel will be run by NESCO management itself with the rooms rented out to those participating in exhibitions, etc.
Like in the past years, there will be a bump up in top and bottomline when IT Building 4 is fully rented out in the current financial year. The new exhibition hall will give a small increase next year.
Then till Tower 2 is developed there will be some slow growth unless NESCO’s own exhibition and events business throws up a surprise.
An aside here: The 2008 terror attacks threw company’s revenues and profits in disarray as NESCO was entirely dependent on the exhibition business then. They are better prepared during the Covid pandemic because of the IT Building business.
I feel probability of surprises on the upside is higher than in the other direction.
