Nesco

Elnet is trading at 5 PE because it does not pay dividend and cash = Equity . Also Elnet is owned by state govt too and hence growth is only 3% due to poor management team. Elnet does not even own that land but leased one. Elnet have no land bank and existing space is fully occupied. Hence no growth but only 3% inflation dependent rental growth which is also mismanaged whereas NESCO has grown at 10% last decade and will continue for another 10 yr.

Instead of considering the likes of HCL Tech and Wipro, if one consider entire IT sector, then historic PE is 20 as Infy, TCS, LTI trades at 23 on avg. Also, they are renting not only to these big companies but many other unlisted companies and foreign companies whose growth or valuation is higher. Anyway, i dont have this point of view to equate IT sector’s growth to NESCO. When IT was growing at 100% YoY between 1995-2000, no renting space was growing at that rate. If IT sector degrow and another new economy sector like renewable energy sector starts growing at abnormal rates, then the space will be rented to them and IT parks will be renamed as Renewable park. Thats why this business is much more stable but with nominal growth than any specific sector.

Nominal growth and higher RoE can be acheived if cash is taken out of the book. Dividend is what matters going forward.