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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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.

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.


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

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…

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.


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


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 ?

Their other income represents Interest & Dividend Income on Investments etc
This is fairly high for this quarter, can’t find the reason for same.
Can anyone pls confirm if this is a one-off or may recour?

Once again other income is high and this time EBITDA has dropped. Dec 2022 quarter had a jump in expenses. Below is a shot from the Notes to financial statements in their annual report 2022 (link - | pdf page 128 of 221)

Here the other income includes

  • Profit on sale of current investments
  • Notional gain on value of current investments measured at FVTPL

I am not very clear on whether the other income is recurring but they have chosen to categorize it as other income and by that metric I presume that it will not be recurring. Also they have been able to sell some units in Nagpur and Coimbatore in the last couple quarters so I believe that is one aspect for the jump in other income.

I am not from an accounting background so I don’t know how to feel about the ‘Notional gain on FVTPL’ part here. It is not comforting as an investor but I suppose in a real estate business such as this, it is necessary to report.

Just a few points that I wish to note in this discussion

  • Intu UK went bankrupt in 2020 thereby entering administration in the UK and KPMG took over to administer their properties. They have been selling off the UK malls to other real estate management businesses to recover money for their debtors as far as I know.
  • Previously mentioned Chaturvedi family group trusts and some other assortment of trusts and companies are classified as the Indian promoters with 26.7% holding in the company down from 30.4% holding pre-covid.
  • The investor presentation/ website etc. still uses the Intu UK logo / branding but I am not clear on the holding structure.
  • Intu India sold off some portion of their shares in Prozone Intu so now they have dropped from holding 3.5% in Dec 2021 to 2.5% as of Sep 2022.
  • Nailsfield limited holds 28.8% of the company. It is registered in Mauritius and was and probably still is a subsidiary of Intu Properties PLC (Source - )
    PDF uploaded here in case the source goes down
    F0B942C8_72F6_461B_A4F6_CCDDCA3718B2_182812.pdf (164.9 KB)
    As an aside, this is probably why the business is using Intu branding and in case KPMG continues administering the business, they may sell off the holdings to recover the locked value.
  • Nailsfield Limited also held a stake in Provogue before that was delisted, (I presume due to the business failing) and as mentioned here the Chaturvedi family had a role in that business too.
  • What I find interesting is that Nailsfield also had a holding in Pantaloons at one point (see - It might have been an Intu PLC strategy to get into retail businesses and have positions but not everything has gone all that well for them, as it appears.

Disclosure here before continuing - The stock is an older holding in family PF, position size is small relative to PF. Considering increasing the position. No transactions in the last 30 days. Reason for holding and adding is that the business model is differentiated and current land bank plus unsold property etc. that is in their inventories gives them a book value above 30 Rs. while stock has been trading below that level (not without reason, as seen above). As for this consideration of inventories, it is prudent to read an audit note from the same AR 2022 (pdf page 153 of 221)

The previous page about revenue recognition is also worth going through before taking any investment decisions.

Below I am listing some points from the latest Investor Presentation (Q3FY23 IP - )

  • Two malls built - One in Aurangabad, which is 78% leased out and the other one in Coimbatore is 92% leased out so 80% - 85% of the leasing revenue is now being reflected in the income statements. I am assuming that any post-covid impact is minimal at this point. They are reporting increasing footfall.

  • Aurangabad Prozone Trade Center (PTC) is a commercial office space that is a part of the Aurangabad mall as far as I know. I couldn’t find details on the utilization of this office space. On the website it looks as if they are trying to lease it out.

  • Nagpur mall is under construction so that would be the next leg of leasing income growth. Debt has surged but there are reserves so it can be considered ‘net zero debt’ on paper.

  • 170 / 540 residential units have been sold in Coimbatore as per latest IP so 69% of the space is yet to be sold. Construction is ongoing here, there are progress photos in the presentation.

  • 272 / 336 residential units launched in Nagpur have bee sold so about 20% of the built space is to be sold out.

  • Collection of cash is not 100% for the sold residential units in both cases. This is normal with Real Estate projects of this nature and cash flow should reflect in the coming quarters. They seem to have enough expenses lined up for the cash anyway so debt may not go down soon.

  • 43.5 acres residential with 5 acres commercial included is to be built in Indore. Many approvals have been received.

Overall, I feel that this is a risky pick. The presentation mentions that Jhunjhunwala holds some 2+%, Radhakishan Damani holds 0.9% etc. I usually am not a fan of these types of ‘selling the investment’ type of slides but many companies are doing it. There is a slim margin of safety here in my mind and further falls in price could increase that MoS. That said, it could all come crashing down but considering that they at least managed to hold on through the covid period I feel that they are at least resilient and the possible growth makes me think that this is worth a small allocation.

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