#RealEstate – story of structural reforms. Brand, Balance sheet, Execution and access to low cost funds will drive the value

Last 8-10 years, real estate sector faced multiple challenges with huge inventory build-up, demand slow down, liquidity crunch, drying source of funds..
Sector has given very lackluster performance for these years, but dynamics are now changing with reforms done by the government like GST and RERA. Demonetisation was actually negative for the sector in the short run but for long term, it proved to be a boon.
These structural reforms cleanup the sector with 70% competition gone, market share shifted from unorganized to organized players.

Brand, Balance sheet, Execution and access to low cost funds will drive the value in the sector henceforth.

Customer preference has shifted from
owning under construction flats to near completion or ready possession flats. This shift caused small players without strong balance sheet to go out of market. Demonetisation and GST brought more transparency in the sector. RERA ensured builder complete the project on time
which means focus turned on execution more than just launching the project. That means only the developers with strong balance sheet can launch more projects.

Since last 8 qtrs, number of launches is less than sales. This resulted in dip in unsold inventory and is currently
trading at 2 year low. Secondly interest rates are lowest ever since 2000 which will further boost the demand.

Valuation will now start shifting from asset based (P/B) to earnings based (P/E) as more and more developers signing DM and JDA and starts monetizing land bank…

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More from @jeevanpatwa

Jan 27
Time to switch from FMCG to IT.. My bet is on #INFY

Around year back we discussed that “IT is new FMCG” and market actually recognized this and lot of IT companies trading at 50-60x. I feel one needs to be selective in IT. Not every ER&D is #TataElxsi.
#TataElxsi has its own quality. That’s where I called it CRADS (Contract Research and Development Services).

Cloud, Digital, Blockchain, AR/VR, Robotics, 3D Printing, IoT, AI, ML, Meta…complete transformation of how businesses work and consumers react. Mammoth opportunity
waiting in IT. It’s time to switch FMCG into IT. With flourishing e-com and online marketplace, value of distribution franchise is waning for FMCG. New brands are able to create market share with digital marketing and sales channel. Higher Ad spends, product development cost and
Read 9 tweets
Jan 26
#IBullreal results have no significance at this point. Key points to understand –

Debt reduction – Ibulllreal will be debt free at the time of merger with 650 cr coming from Mr Gehlot and 580 crs from land sale to Elan group. Embassy will have 3000 crs debt out of which 1500 cr
will be reduced through QIP and rest 1500 crs will come from collections next year. So merged entity will be zero debt company in FY23

Sales potential – Launched + planned projects have 18000 cr sales potential with 3400 crs of near completed inventory. Pending cost is 3900 cr
and sold receivables is 4224 crs. That means 9900 crs of cashflow to come in next few years from these projects. In addition, it is holding land bank of 3353 acres and 350 acres (42.5 Mn) for commercial development with potential annual rental of 4300 crs.
Read 4 tweets
Dec 29, 2021
#Lauruslabs Dr Chhava speaks about Care, Innovation and execution...Must watch



- CG is for benefit of ourselves and stakeholders
- Collegues, thier families, come first, shareholders come last in the list
- Mediclaim premium for CEO and chemist is same
- Customers and vendors both treated equally well
- Canteen is free for all, everyone including CEO and contract workers eat same food

- Dilution in early years was high due to the design of the company. It started as R&D company. Before hiring first person in mfg, R&D had 350
people. it lost 100 crs in first 4 yrs
- Tried to do products where we are strong at and not where neighbors are strong at. Believe in our strengh instead of playing at other weakness
- Overlap of R&D and mfg,done lot of process innovations
- same quality product for all region
Read 5 tweets
Nov 29, 2021
#Nifty EPS (Dec’19) = 563. Nifty was trading around 12000 (21x TTM PE) in Feb 20. After corona, it crashed to 7500. Assuming similar PE, market factored in 30%-40% EPS contraction for Dec’20. In reality, EPS contracted only 14% (Dec’20 EPS = 483)

Today if another corona wave
comes, we are much better prepared, lesser uncertainty and India is best placed among all the geographies. Last time, world assumed India would collapse given the size and population, but we did far better..

Nifty earnings have improved significantly in last year and
it gained momentum in last two qtrs where qtr eps is around 200... Dec 21 EPS estimate is 750

Even in worst case, IT, pharma (20% weight) will support earnings.. So Dec 22 EPS cannot be less than 850..

In best case, PE could be 25 & worse case 20.. So Nifty to remain between
Read 4 tweets
Nov 12, 2021
#Lauruslabs

There’s lot of confusion and concers around whats happening in Laurus and I thought of putting my view

There are two main concerns
1.RM costs – this is universal to all pharma companies, but eventually will get sorted
2.ARV sales – this seems the bigger concern.
Because of regimen change (Efavirenz to Dolutegravir) and 30-day to 90-day pack, governments are in process of clearing the inventory which caused sales to go down. This may continue for a quarter more, but Q4 looks good..

Some might feel, funding may divert to Covid.
Global funds are for 5 years, it is a must medicine, so I don’t think, funding can divert or stop

Some are drawing conclusions from Q2 Aurobindo ARV sales. Pls understand LL is last man standing being lowest cost producer. Even if the market shrinks, other players may opt out,
Read 6 tweets
Oct 6, 2021
There is no easy money in stock market

It’s really worrisome to know that many people are coming in the stock market for short term trading after this bull market rally. Came across many young minds who are ignoring their core competency and focusing on trading.
Don’t extrapolate post-corona market returns. This was aberration, abnormal, unusual. Its impossible to earn similar returns every year.

Focus on your core competency and career. Trading will ruin both your career and wealth

Music doesn’t last long. Invest in building your
core competencies like programming skills or engineering skills. That will only help you in long run

I am very bullish on India but trading is not the way to play the India growth story. Only Investing can create serious wealth in long run.
Read 8 tweets

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