Had looked at the stock when it was around Rs. 130, and now re-visiting again at Rs. 60. Few observations which I have made:
- Majority of the investment rationale weaved around 3 themes: Net Surplus, Change in management and planned commercial space of Embassy (43.2 mn sq. ft.)
- Net Surplus: I am getting a feeling that this number was just a humbug. In merger presentation (pg 6), the Net surplus figure was thrown at Rs. 12,079 cr (launched + planned) and now when you look at Q3 presentation the number is Rs. 6,146 cr which is a reduction of 5,933 cr. Not everything was realized as debt has come off by only Rs. 2000 cr. So, was the number overstated back then? Correct me here if I am wrong.
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There are no details on the net surplus of Embassy group which was reported at Rs. 6,513 cr. in the merger presentation, while one is sure that debt of Rs. 4,300 cr is coming on IB Real’s books. Ent Surplus is agaisn realizable over 4-5 years, so in PV terms it might be lower than today’s value of debt.
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Further, there are no updates on the planned commercial projects of Embassy Group (~41 mn sq ft) which as per their merger presentation (pg 5) was supposed to bring annual rent of Rs. 4,241 cr. Since then interest rates have gone up by 200-250 bps, and add to the delay in construction, so even this value would have taken a hit.
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So there are a lot of moving pieces with no clear answer from the management which makes you question one of the key investment rationale post merger- that change in management would improve corporate governance.
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Another observation: Back in 2021 IB Real had become a consensus trade, and it could be seen that retail shareholding jumped from 55% to 74%, which is a clear sign that stock was in a classic distribution phase. Moreover, every single shareholders holding more than 1% have sold off (except Embassy of course). Now this cannot be merely a coincidence.
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