I was looking for some value buys recently and found this to be a good value buy. However, once I started discussing BLAL with my friends (who are also investing enthusiasts like me), it was clear that it was undervalued however there were 2 risks that stood out.
- It can take years and years for the land sale to happen. One example that comes to mind is GOCL. I know about this since it is a Hyderabad based business. It took 10 years for them to monetize its lands. Though it can be argued that they were waiting for more appreciation as Kukatpally (where the lands were located) did become a major developed hub in the city and fetched a good sum in 2022.
- The official price of sale is going to be extremely lesser than fair market price. In the case of GOCL, they sold it for 10 Crores per acre whereas in Kukatpally, the going rate is way higher (an acre of commercial land will cost to 50-80 crores). So the benefit which will be passed to the shareholders is also going to be much lesser than market rate basis.
Disclaimer – I took a small entry position today but going to wait and watch before adding more. This is not a Buy/Sell recommendation and I am a newbie investor.
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