Pudumjee Pulp (CMP - Rs 18.2/share, Rs Mkt Cap Rs 75cr)
Pudumjee Pulp which was earlier into Paper manufacturing, Real Estate and Power/Investments, is now a pure Real Estate play (with small wind power capacity) post demerger scheme effective from 1 Feb 2016. With transfer of Paper division, new entity will be almost debt free.
Rationale for Demerger (As stated in demerger document)
- Shifting operations from Pune (land belongs to Pudumjee Pulp) to Mahad. This will free land (measuring 29acres) for real estate development. (As per page 52-53 of demerger document, Pune land measuring 29acres and Fort office will belong to Pudumjee Pulp)
- Respective segments namely paper and real estate can better focus on their activities post demerger.
Pudumjee Pulp carries out real estate activity in JV with G-Corp (60:40). JV started booking numbers from FY12 onwards.
Pudumjee Pulpâs Real Estate Financials
Pudumjee Pulpâs Financials
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As we can see Real Estate contributed significantly to companyâs numbers before demerger. Paper business consumed large capital, while had very little to show in terms of numbers.
Time Line in terms of Real Estate Development
Annual Report FY10
The Real Estate business being carried out by the Company in Partnership involving construction and sale of over 650 mid size luxurious flats aggregating about 9,30,000 sq.ft. in 3 phases at Thergaon, Pune is in progress. This project has received a good response as from its first phase which has just launched, 115 out of 176 apartments have already been booked. All 3 phases of this project are expected to be completed during the next 5 years.
Annual Report FY11
The Real Estate project of the Company at Pune in Partnership viz ; Pudumjee:G-Corp Developersâ having aggregate saleable area of 9.3 lac sq.fts. comprised in about 650 mid sized luxurious flats to be constructed in 3 phases is progressing satisfactorily. The possession of 188 flats is expected to be handed over in the current year when the revenue is expected to be recognized by the firm and consequently by the Company.
The Real Estate project for construction of about 650 mid sized luxurious flats in Pune in Partnership is satisfactorily progressing. Encouraged by the success of the project the Company has initiated another Real Estate project at its surplus land having about 2.5 lacs sq.ft. of saleable area. (This shows company has land bank beyond what is known in public domain)
Annual Report FY12
Your Directors are happy to inform that the accompanying accounts of the Company includes a profit of ` 691 lacs being its share from the Partnership firm âPudumjee G:Corp Developersâ from Real Estate activity, consequent upon completion of first building having 94 mid-sized luxurious flats. Another two buildings having about 188 flats are expected to be completed in the current year when revenue from which is expected to be recognized by the firm and consequently by the Company. The remaining four buildings are expected to be completed progressively.
The Real Estate project for construction of about 650 mid sized luxurious flats in Pune in Partnership is satisfactorily progressing. The possession of flats to the customers, in its first building has been handed over by the firm in March, 2012. Possession of flats in the next two buildings is expected to be handed over in the current year.
Annual Report FY13
The Company received a tax free profit of `16.60 crores being its share from the Partnership Firm carrying the Real Estate activity at Pune consequent upon this yearsâ completion of 188 mid-sized luxurious flats comprising two buildings. The project is progressing satisfactorily and so far out of 658 flats which are to be completed in a phased manner, 282 flats have been fully constructed.
Annual Report FY14
The Real Estate Business of the firm in which the Company is a Partner, has been satisfactorily progressing despite the business in the industry facing some recessionary pressure elsewhere. The accounts include Companyâs share of profit of ` 1143 lacs in respect of a building completed during the year and stock of few flats sold by the firm as against a profit of Rs1660 lacs in the last year in respect of two buildings then completed.
The Company has commenced development of land for constructing residential / commercial complex having saleable area of about 1,50,000 sq.ft for which purpose the land has been treated as stock-in-trade at a fair market value of ` 1441 lacs, by crediting the difference over cost, to Capital Reserve of the Company.
The Company so far has been carrying on the Real Estate business through a Partnership firm where this year a building of 94 mid-sized luxury flats has been completed, taking the total of such buildings to 4. The Company has now commenced a project named âGreenvilleâ on a land of about 9000 Sq.Mtr where residential / commercial complex would be constructed. The Companyâs accounts include a tax free profit of ` 11.43 Crores being its share from the Partnership firm in respect of the aforesaid building completed and stocks of few flats sold by the firm.
Annual Report FY15
The demerger process when complete will enable the Company to focus on Real Estate business.
The Real Estate Business of the firm in which the Company is a Partner is satisfactorily progressing. One more building of 94 flats has been completed and the accounts include Companyâs share of profit of ` 13.53 crores in this respect. One more residential building for construction has been taken up during the year and despite recessionary pressure elsewhere the firm has been able to book all but few flats.
The construction of residential cum commercial complex taken up by the Company on its own, is awaiting certain statutory clearances.
The Companyâs Real Estate business through a Partnership firm has been successfully operating, having completed its 5th building comprising of 94 flats in the âGREENSâ complex. The 6th building has been started as an ambitious project of 16 stories comprising of 124 flats adding to the tall status of this complex.
The âGreenvilleâ project comprising of residential cum commercial complex taken up by the Company on its land of about 9000 Sq. Mtr. is awaiting statutory clearances.
Summary of timeline
Company started Real Estate development with of 650 flats (comprising of 6 buildings) in JV with G-Corp in Thergoan, Pune having total area of 9.3 lac sqft. This project was to be developed in 3 phases.
FY12 â Completed 94 flats (Building 1). Possession handed in March 2012.
FY13- 188 flats completed and handed over (taking total to 282 flats till date). Total 3 buildings done.
FY14 â Another 94 flats completed in fourth building (taking total to 376 flats). Total 4 buildings done.
FY15 â One more 94 flats completed in 5th building (taking total to 470 out of 650). Company has commenced work on 6th Building having 124 flats (16 stories)
*9M FY16âŠFY16 nos of flats are from FY15ARâŠPAT will be much higher once numbers are recognized for 124 flats.
Investment Risks
- Pre-Demerger, Pudumjee pulp had large ICDs to Pudumjee Industries which has been increasing since FY12. With streamlining of paper business, continued increase in ICDs will be negative.
Investment Rationale
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Companyâs cumulative profit of Greens project (total 6 buildings) is Rs 53.3cr (partly includes 6th buildingâŠwhich will be complete by FY17)
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Another project GreenVille with saleable area of 2.5lac sqft (land 9000 sqmt) is awaiting regulatory clearance.
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Asset light model wherein property is developed in JV. Pudumjee provides land.
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As per the demerger document, company will be shifting paper plant from Thergoan (Pune) to Mahad (Raigadh) and use factory land to develop real estate. Pudumjee Pulp owns 29 acres land. Assuming FSI of 2, this provides developable area of 2.5mn sqft. This provides enough raw material to company which can be developed over many years. As per note 25.11.a (notes to account) in AR FY15, land measuring 96111.84 sqft (costing Rs 0.14lac) used in relation to operation of factory, has been revalued and converted to stock in trade on 25.10.2013 at an amount of Rs 1441.67 lacs. The same is being used for development of real estate development. This gives approximately land value of Rs 1500/sqft. Considering Company has around 1.26mn sqft land (29 acres * 43560), land value is around 190cr.
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With market cap of Rs 75cr, risk reward is favorable given asset light model, large available (known land bank) and PAT run rate of Rs 11-13cr.
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