Thank you so much @yeshas7, @Azhar_12 , @Kailasa_Tiwari for your continuous tracking and in-depth analysis of the stock. This thread has not just presented an actionable investment advice, but has also shown how intelligent investors think through and track a real special situations/‘value’ investment over time. This is like gold for a newbie like me, and I feel this has the potential to become a genuine case study in the coming years!
Anyways, here are my two cents on the stock:
Industry-beating ROCE comes from 2 places - either from actual competitive advantage over peers such that one is both, vertically integrated and has pricing power, thereby earning high returns despite asset-intensive business position, or from outsourcing processes in supply chain to others, thereby remaining asset light, but trading this off with increased volatility due to counterparty risk. The 1st is an indication of business quality while the 2nd is just a company’s policy.
Raymond Realty seems to be in the middle; it has land + pricing power in Thane, making this part of its 16% ROCE being of the good kind; but this is unsustainable (land will run out). However, its JDA business is of the 2nd kind — no control on land and related regulations, company is subject to complications faced not just by itself but by another party (the JDA partner) and so on, despite generating a higher ROCE. The company plans to expand using the JDA route, not the vertically integrated asset-heavy route like Lodha. This increases the company’s future execution risk while maintaining an illusion of safety until the Thane land runs out. But till it does —
Business: JDA led asset-light premium real estate development in Thane and Mumbai (Bandra - BKC). Thane land is owned, Mumbai land is JDA.
Thane land was a Raymond mill; This land is recorded at book value (₹4 lakh) in the balance sheet. Raymond Realty may be a special situation investment opportunity: hidden value in balance sheet item (huge discrepancy between asset’s market and book value), price dip due to technical selling, promoter buying.
WACC:
Cost of Equity = 6.95% + 1.55*(7%) = 17.8%; Cost of Debt = 9.6%*(1-25%) = 7.2%
WACC = 17.8%*85%+7.2%*15% = 16.2% (current, unreasonable)
Assuming longterm cost of debt ~9%, debt/equity mix ~0.66, WACC = 17.8%*0.5+6.75%*0.5 = 12.3% long-term WACC
Cost of debt is ~1.5x of Lodha Group’s - execution is the question
Raymond Thane TenX (aspirational) project selling at ~₹26000/sqft. Assuming this rate for entire 11.4mn sqft, current value of land is ~₹29640 crore. They are assuming it to be worth ~₹25000 crore, so management clearly is conservative. Of this, ₹8200 crore already sold, so remaining is ₹16800 crore. Also, price is at a premium vis-a-vis locality.
Recently (Mar 2026), 18.6 acre was sold for ₹497 crore in Majiwada (less premium area than Viviana) for residential/mixed development purposes. Per acre price is ~₹26.7 crore, thus, land value conservatively is 45 acre (remaining) * ₹27 crore = ₹1215 crore. In 2019, Raymond sold 20 acres of Thane land at ₹700 crore; the remaining 45 acre would thus be worth ~₹1575 crore in and of itself at 2019 price.
Thus, we are buying the remaining business at: ₹(2950-1215+350) crore = ₹2085 crore (conservative)
Or ₹(2950-1575+350) crore = ₹1725 crore (base) purely based on liquidation of remaining land.
My approach: let us ignore the revenue/yearly new bookings etc; while they are extremely important to track execution, they are less relevant for a cashflow analysis. Let us focus on cash flow potential from all projects.
Rough calculation: ₹43000 crore development potential, 20% blended EBITDA margin = ₹8600 crore EBITDA. Interest = 9% of ₹3000 crore max debt (to maintain 1:1 D/E management guidance for long-term, again conservative) = ₹270 * 7 = ₹1,890.00 crore. Free cash flow from these projects alone = ~₹5033 crore (net of tax @25%). I am calling this cash ‘free’ since we are purely focusing on existing projects, i.e. we are ‘pausing’ operations after the current projects are executed for valuation’s sake.
Longrun WACC is 12.3% (calculated).
Let’s assume all projects completed within 7yr (management guided), money received in next 2 years, i.e. all money received by 9 years. To maintain margin of safety and avoiding the prediction of annual collections from current projects (because it is impossible), let us discount the ~₹5033 crore as if they were lumpsum received after the 9 years.
Again, not accounting for any price appreciation (even the management didn’t in their estimation of ₹43000 crore GDV — so not only is there no double counting, there is ‘no’ counting of price appreciation, again adding to margin of safety), discounted value of future FCF generated from current projects alone, is ₹1772 crore.
| Years’ Completion+Receipt | Base (12.3% WACC) | Bear (16% WACC) | Column 4 |
|---|---|---|---|
| 7 | 2234 | 1781 | |
| 9 | 1772 | Unlikely (<land liquidation value) | |
| 11 | Unlikely (<land liquidation value) | Unlikely (<land liquidation value) | |
Levers that may make this an underestimate:
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Faster completion, sale of inventory will significantly reduce discounting factor, increase FCF
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Proven execution track record can reduce cost of debt (Lodha has ~6% at similar credit rating), this can reduce WACC and thus, discounting factor
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Price appreciation (BIG)
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The fact that the management hasn’t sold the land at ₹12-1500 crore; the premium it earns for execution of not just the Thane land, but also all the JDAs can’t be just ~₹300-600 crore (of course discounted at ~12%, but still)
-
Greater proportion (lumpier) inflows in earlier years, say 1st to 4th year, vis-a-vis 5th to 9th
Levers that may make this an overestimate:
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Execution and collection may take time, that will increase the discounting factor and reduce FCF
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Since it is mainly targeting retail residential market, any news of poor build quality will make it not just lose its pricing premium but also make sales harder (what is good is that it will always have the cushion of liquidation of Thane land)
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Is blended EBITDA margin profile overall, actually 20%? We don’t know, we are relying on the management for this number. If it isn’t, i.e. if margins are inherently lower, or say if competition enters the JDA market, then Raymond will have to rely on its branding to generate the margin; or else the margin gap will eat up the FCF
I personally feel the underestimation levers are more likely, but I won’t make any inference based on my (perhaps biased?) gut feeling. Anyways, what this exercise tells us is that the option value of the business, excluding the projects in the current pipeline, is ₹(2950-1772) crore = ₹1178 crore.
My Question: Why sale of real estate on land? Why not development of asset that provides future stream of cash like how Phoenix did?
