Nitesh Estates Ltd

Nitesh Estates, founded by Nitesh Shetty in 2004, is into property development in South India, predominantly in Bangalore. Nitesh Estates was listed in 2010 and had a listing market cap of 500crs.
Nitesh Shetty, a dynamic and self made enterprenuer, is in his 40s and quite a visionary in his field. He started hoarding business and convinced one of the land owners to develop their property and thus began his career in property development. The company has many marquee projects to its credit like the Ritz Carlton in Bangalore, Nitesh Hub Mall in Pune, and many grade A office buildings in the CBD of Bangalore. There are only a handful of Grade A property developers in Bangalore and Nitesh is one of them. His usp being his designs and fancy facades, truly redefining bangalore’s skyline. Nitesh Shetty has got KPF (one of the most prestigious architects of New York) to design the Nitesh Park Avenue project in Bangalore. This just shows that he is extremely passionate and smart about his development.

But not so smart with his finances, as the company is finding it extremely difficult to survive, given its current situation with its mounting debt (around 900 cr). So much that the company has not reported profits for the past 3 years and its reserves in the balance sheet is also eroded.

The company has completed 19 million sft and currently has over 11 million sft under development (both residential and commercial combined). The company also owns a stake in the Ritz Carlton hotel in Bangalore (around 26%) and the Nitesh Hub Mall in Pune (this Mall is recently sold in order to reduce their debt).

Now the trigger. There was a news article in Jan 2018 that Chinese real estate firm Fosun is looking to pick up 50% stake in Nitesh Estates for 800 cr! While the valuation might be slightly steep, this is very possible considering anyone who wants to take controlling stake in a marquee company and dive deep into Bangalore’s real estate. As stated, there are only a hand few Grade A developers in Bangalore and getting a controlling stake in any other firm is not possible. This might be the reason for Fosun.

What if the deal does not take place? Well that’s a huge risk and definitely a possibility. But Nitesh Shetty has increased stake in the company this quarter. Is this an indication? Since he is privy to inside information!

Disc: Invested

IIRC, within a few weeks of ET “breaking” the news of a possible deal with Fosun, there were news articles regarding the Chinese government instructing its companies not to go for overseas investment especially in ‘hot’ sectors like real estate. Instructions from the CCP are taken very seriously by the Chinese companies! :slight_smile:

All news in various sites have been sourced from a single source.

However, even after news regarding CCP displeasure was out, Nitesh Estates posted a screenshot of the ET article (regarding their deal with Fosun) on their website. Not sure what to make out of it!

The ET article had claimed valuations to be 800 crores, quite a distance from its market cap. Lucky to have positive news coverage at this time to boost valuations. They had similar positive coverage even during their IPO.

In social media, there are a large number of customers dissatisfied with Nitesh Estates due to lack of progress in their projects. Maybe if Nitesh Estates manages to sell enough of their assets or stake itself, they could clear their debts and then manage to complete projects.

Disclaimer: Bought Nitesh Estates on reading the ET news on Fosun. Started researching after buying it :stuck_out_tongue: and then decided to sell it with a significant loss!

1 Like

Thanks for your insights. Yes, this is a very risky counter.
But CCP guidelines were out in August 2017, and MOU of Fosun was made in Jan 2018. CCP guidelines were only reported later by TOI.
IMHO, i dont think the deal with Fosun is off, but one can only speculate about the outcome as of now.

As with the social media comments, customers are restless as there have been significant delays, again because of their debt situation. I dont recall seeing any comments on bad quality etc…its wrt to non-completion, a cash trapped situation which is now in a must do or die…Hopefully they will do and not die.

Nitesh Shetty has previously got marquee investors like Ocziff, Goldman Sachs, Citi group etc, albeit now they have now parked their funds in Nitesh specific projects. So he definitely has the potential to reach out for help.

Given the risk in this counter, its more about a bet on whether the promoter can come out of this situation stronger or not.

Disc: biased view as I’m invested.

1 Like