Deven Choksey of KR Choksey Securities gives his perspective on Lanco Infratech and Parsvnath Developers.
According to him, Parsvnath Developers offers a good amount of opportunity. Moreover, he feels that there is a good amount of appetite for such issues because in the realty space, the institutional buyers and the overseas buyers are equally interested. Hence, he feels that it should find good response from investors.
As regards to Lanco Infratech, Choksey feels that given the kind of issue and the kind of a complexity, it is largely for those investors who are institutional investors and who have an appetite to stay in the infrastructure space for a longer period of time.
Excertps from CNBC-TV18's exclusive interview with Deven Choksey:
How do you think the price band for Parsvnath Developers is valued?
I think if one is looking at comparative valuation with Unitech, what we find is that sales to market cap ratio of Unitech is probably 30 times and this company is being marketed at less than 5 times. So if one looks at it from this angle, then this particular company should be revalued.
Secondly, the land bank of about 102 million square feet is equally impressive because as it unfolds into projects and realizing into revenue and profits, in the coming years, it will significantly contribute to topline and bottomline of the company.
So, to a great extent, the issue offers a good amount of opportunity. Moreover, there is a good amount of appetite for such issues because in the realty space, the institutional buyers and the overseas buyers are also equally interested. This company is a relatively known company as far as the operations are concerned. Probably that would find good amount of interest in the market. So all put together, it should find good response from investors
Have you done any preliminary work on where exactly their land banks are and what kind of reasonable market value would you ascribe to that?
We haven't gone into the nitty-gritty part of the land bank valuation. But it is spread across various states unlike other issues like Lanco where they are predominantly focussed in Hyderabad. So to a great extent, that should be better.
They also have commercial and residential properties coming up. So that should give them a better valuation. As far as the balancing is concerned, it looks quite promising.
It has a non-metro focus as well. So on a strict comparison, which listed entity would you compare it against?
There could be some amount of comparision with Unitech and at some point of time, in future, with DLF.
At Rs 250-300, would put a subscribe on Parsvnath Developers?
Yes, I think the retail investor should go towards the higher band of the price and probably ask for subscription. They should get better subscription prospects in this particular range.
Lanco is a little bit more of a complex business; it has got many elements, which ones of those elements do you like?
I think you are very right, there are two aspects, one is the holding company aspect, the holding company holds investment in various power projects, which are either commissioned or are in the process of being commissioned.
They are putting up further capacities and taking over some of the stakes. If you look at the holding company structure and the investment in the power project and then look at the revenue coming into the books of the company, maybe I
But as we have seen, in such a scenario, where in the companies will unfold their projects, at some point of time and maybe unlock the valuation, the shareholders who have been holding company would get a little bit more benefited in the second stage.
In my viewpoint, given the kind of issue and the kind of a complexity, this particular IPO is largely for those investors who are institutional investors and who have an appetite to stay in the infrastructure space for a longer period of time.
The other business model of this company, which they are entering into, is in the realty space. They will be coming out with around 19.5 million sq ft of land, which is either owned or given the development rights. I think they should develop those lands over a period of time. So to that extent, I think the valuation would be seen over a period of time from that area.
The only issue, which I probably wanted to find out more from the management of the company is that they have a larger part of the development belonging to the company's own development efforts.
To a great extent, I think it should be seen whether the timely delivery will happen. I think it will be in Hyderabad and Andhra Pradesh with the IT park as well as the residential complex that they are developing in the realty space.
So, I think it is dependent on one particular geography of the country. Otherwise, I think as I have said that the investors who are having a long-term horizon for this kind of business, should be coming into this company.
So how would you value the land bank and the sort of orderbook they have in the construction part of their business?
About Rs 1600 crore worth of orderbook is seen. And out of that, Rs 1200 crore belongs to the group activities in this space. Land bank valuation would be slightly tricky at this point of time to get into.
But as far as the cost part of the valuation is concerned, if you are looking at the diluted equity of Rs 220 crore, it comes to somewhere around Rs 35 per share. We will have to actually see the market valuation part of the land and maybe the property when they develop it, I think we will have to see it further but Rs 35 per share is largely the cost part of the valuation.
So what is the bottomline, subscribe on Parsvanath and stay away from Lanco?
For retail investors, yes, I think one should subscribe to Parsvanath possibly stay away from Lanco. For institutional investors, who have infrastructure as their focus and want to stay invested for 4-5 years, then one should equally subscribe to Lanco.
Maybe I think at every opportunity you get, you may get further to buy from this stock as well in the market post listing.
How are you finding the market now? Do you think it is going up even from here?
In my viewpoint, I do not doubt that the market will have an upside, maybe 13,400-13,500 at this point of time is reasonably placed. Cairns Energy issue will slightly re-rate some of the oil companies particularly ONGC and it has started the process since last week.
I think that ONGC and Reliance will be the drivers in my view, also Bharti and certain other cement companies. I see that at this point of time, the market will move in the 12,925 and 13,400 band and maybe consolidate before it makes a bigger move thereafter.
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