- Land hold is just another capex, how they utilise this efficiently to get returns is what matters, not appreciation of land value. Hence importance of ROCE.
- Value of land is unlocked only when they are sold, that means they are shutting down those retail locations! or when company is being liquidated. So for this kind of industry valuation wont improve due to land holdings from investors perspective.
- For retail industry land helps due to the following
a. One time cost, variable cost go down, no rentals or rental escalations (was major reason for Big
Bazar to shut shop).
b. Benefit of depreciation
c. Protection against market downturn as they can liquidate assets and raise money - Land holding however improves valuation for real estate companies, only if they are able get returns regularly by developing and selling.
| Subscribe To Our Free Newsletter |
