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Jul 12, 2012, 08.23 AM IST
CRISIL Research has assigned a CRISIL IER fundamental grade of '2/5' to Nitesh Estates Ltd (Nitesh). The grade indicates that the company's fundamentals are 'Moderate' relative to other listed equity securities in India.
CRISIL Research has assigned a CRISIL IER fundamental grade of '2/5' to Nitesh Estates Ltd (Nitesh). The grade indicates that the company's fundamentals are 'Moderate' relative to other listed equity securities in India. CRISIL Research has assigned a valuation grade of 5/5, indicating that the market price has 'strong upside' from the current levels. Our one-year fair value of the stock is Rs 27 per share. It is currently trading at Rs 14. The grades are not a recommendation to buy, sell or hold the graded instrument, or a comment on the graded instrument's future market price or its suitability for a particular investor.
Nitesh, an upcoming real estate developer in Bengaluru, has built its brand in the residential segment over a short span of time based on quality product offerings. It is expected to benefit from steady growth in the Bengaluru market driven by the progressive IT/ITeS industry and relatively higher affordability compared to other geographies such as national capital region (NCR) and Mumbai metropolitan region (MMR). The company's joint development model with land owners has worked in its favour limited capital outlay, efficient utilisation of funds and access to city-centric projects. The company's ability to attract strategic partners at the company and project levels is also encouraging.
However, Nitesh's limited track record of delivering 1.2 mn sq.ft. of residential space till date vis-à-vis Bengaluru's larger players' 10-15 mn sq.ft. has tempered the grade. Further, Nitesh's foray into the longgestation hospitality and retail segments, though would lead to regular cash flows once operational, is exposed to execution and marketing challenges. Since ~50% of the total capital is currently deployed in retail and hospitality projects, Nitesh's return ratios are expected to remain under pressure as returns in these projects are back-ended. High dependency on the promoter and centralised decision making have also diluted the grade.
Valuation (the current market price has strong upside)
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