The business looks interesting to me but the problem I have with this business:
Let’s try and break down the unit economics of the business:
We invest 100 crore in cranes today and get delivery.
At 20% avg yield, we have a topline of 20cr. EBITDA Margins of 60% means EBITDA of 12cr. For simplicity, lets ignore other income, interest as they are not relevant here.
Assuming a 25% tax rate, we end up with approx 9cr of PAT.
If a business invests 100cr and earns 9cr, is it really a great business? Also, this excludes the REAL depreciation. Even if we assume a actual life of 40 years, implying dep of 2.5% per annum, this will give us an effective PAT of 6.5cr.
So it is not a bad business, but does it deserve high valuations? Wind EPC is one business to see how they can execute.
Note: These are all rough calculations, let me know if there are any errors here
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