Prozone Intu Properties Ltd

Unique biz model, build residential and commercial property, sell them and use that money to build retail space (malls/multiplex) lease that space and earn lease rent year after year

Good land bank, all are single land parcels, which can be well developed as per project requirement, few land parcels are as big as 46 acres, which are not easy to get these days cheap

Out of 18 million sq ft, only 1.2 million sq ft developed till date, leaving huge earning visibility over next few years

Entire land bank is fully paid, hence no overhang of huge debt, only working capital required, which can be financed partly by lease income received from aurangabad mall

Tier 2 tier 3 growth story, prices in tier 2 and tier 3 cities have remained somewhat stable in last few years, land rates have increased considerably for few locations such as nagpur and indore

Quick selling of residential properties as company first develop infrastructure and amenities before opening of bookings

Being less leveraged, company prices its projects agressively and close booking quickly as compared to competitors

Appointment of renowned contractors such as shaporji palonji and L&T makes sure their projects are not held up and completed before time.

Company has manageable debt / working capital requirement ( debt free at net level considering cash and investments)

Land prices have rose post acquisition of various land parcels by the company hence no need for investment in new land parcel

Intu properties (uk) as a partner/stake holder brings much credibility to the company

Market cap of 275 odd cr looks cheap considering all above points

ProzoneIntu_Concall.pdf (99 KB)

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Amit,

How about Indian promoters, Chaturvedi brothers. Salil Chaturvedi was earlier charged under narcotics case. Another group company, Provogue is not doing good (despite being an early mover in the retail space).

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Yes Megha,

Thats the biggest overhang, which i believe is priced in. One bright side is investment of Intu UK.

I am not good with number crunching, but technically there seems to be good supply between 21/23 levels, which seems to me like some investor wants to take exit. Which is seen in delivery percentage of both bse and nse of last 3 months, which indicates average delivery close to 75% of total volume.

When the supply is slowly absorbed, stock will reach higher territory for sure. In last 5 quarters SBI Magnum mutual fund has increased its holding by stagerring 21 times in this stock.

http://www.moneycontrol.com/mf/user_scheme/mfholddetail_sec.php?sc_did=PCS03#PCS03

Disc : I m holding this stock from 18, added few near 24 level.

Stock is up from 21 levels to cmp of 26.5 with huge volumes and with good delivery % in both bse and nse, looks like selling seems to be over.

Cheers…

Akhil chaturvedi sold 29lac shares in June 2014

I would be happy if chaturvedis reduce their stake.

I am looking at long term potential of the company.

They are yet to develop over 17 million sq ft total in next 5/6 years. Out of which 25% will be retail space (malls/multiplex) close to 4.2 million sq ft

Imagine the profit and cash flow the company will generate, even if company is able to get profit of rs 500 min per sq ft (most conservative estimate). on construction and sale of residential and commercial projects, and lease rental of rs 50 per sq ft per month on retail project

Real estate investment trusts (Reits), notified last year, have so far found few takers due to taxation-related issues. To address this, theCentral Board of Direct Taxes(CBDT) wants this market instrument to be made exempt fromMinimum Alternate Tax(MAT).

aThe idea behind granting a apass-througha status to Reits was not to levy MAT on those. It is a technical issue we are working to resolve,a said a source.

Reits are a security instrument that sell on bourses like a stock and invests in real estate a properties or mortgages.

Under the current rules, the tax department has deferred capital gains tax on transfer of shares. But MAT, which a transferor has to pay at 18.5 per cent to 20 per cent, is proving a deal-breaker, given the substantial immediate cash outflow involved. Foreign investors swapping shares for Reit units, though, do not have to pay MAT.

That implies Reits or Infrastructure Investment Trusts (InvITs), in their current form, attract MAT immediately a at about 20 per cent a and capital gains tax that is deferred to the point of sale of units.

Tax experts say the provision to do with MAT on Reits will come as good news to real estate companies waiting to launch these instruments.

Sriram Govind, senior member (international tax practice), Nishith Desai Associates, said, aThe issue is that the capital gains, which are exempt under the Income-Tax Act for the sponsor on transfer of special-purpose vehicle units to Reits, will substantially increase book profits as against the actual tax payable. Therefore, for sponsors, MAT could apply at 18.5 per cent of total book profits and then deferred capital gains tax later at an appreciated value on sale of Reit units which is likely to be a larger tax burden. A MAT exemption, if given to sponsors, will be a blessing for developers that are looking to transfer properties to Reits.

Industry participants say a MAT exemption is in line with the governmentas intent. aThe intent might have been for tax neutrality during the transfer of assets from the sponsor to a Reit. A MAT exemption will be in line with that,a said Gautam Mehra, executive director, PricewaterhouseCoopers.

The Securities and Exchange Board of India (Sebi) had cleared the Reit regulations in August last year, after the governmentas announcement that the tax instrument would be given a pass-through status. After notifying the norms, Sebi had raised the tax-related issues with the government and is currently in a dialogue with the finance ministry to address those.

Rakesh jhunjhunwala holds 2% stake in this.
I understand this company has huge land bank and can generate good FCF over the next few years however would like to know what changed in 2015.

Here is a research report from 2012

http://rakesh-jhunjhunwala.in/14-top-quality-stocks-for-2013/

They are mentioning the same positives and expected it to play out over the next 3 years,however it did not happen.

Came across this link in moneylife…anonymous suggestions to buy prozone…

http://www.moneylife.in/article/stock-tips-continue-despite-new-sebi-rules/40090.html

Stock has almost doubled from where the discussion was initiated, i m bullish for long term, especially some sops expected in upcoming budget for housing sector and some incentive for brick & mortar retail segment so that online retailers does not have undue advantage.

Will book profit slowly above 50 level.

Amit

Pranab, your so called “detailed report” is word to word lifted from below blog :-

Amit

After the recent fall and a good technical pattern

I feel this stock is ready for a move for all the other reasons mentioned by VP members and also for the fact that the invincibles of D-Street both RJ and RK Damani have vested their faith in this unique business model. Lets see if all these things come together or not

I would stay cautious of RE co in tier 2 or tier 3 cities, as black component is more than 50% or sometimes 70 to 80% of the cost of the property. I know this as i have many relatives invested into market like Vadodara and Anand.

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Promoters have been reducing stake in the company as well as jhunjhunwala have reduced exposure. Contradictory to the the rosy picture craved out in the latest presentation. Which is the firm via which damani is holding ?