Any idea why institution holding of both FII and DII is falling since last three years?
Posts tagged Value Pickr
EFC – Entrepreneurial Facilitation Centre (25-06-2024)
I have been struggling with 3 points. Please do help…
1. Low capex per seat: As Neeraj Marathe mentions from his experience of co-running a similar business wherein he talks if a co-working business operates at <Rs 6k sq ft, then it’s not viable.
If my math is correct, how is EFC working at Rs 1250 psft (Rs 50k capex per seat with avg of 40 sq ft per seat)? Is this since >75% of their clients are in “managed offices” not co-working (flex) which requires lesser capex than usual?
2. Why REIT right now? What’s the potential upside of venturing into the REIT space - I am specifically trying to work out the math from the EPS accretion point of view. any thoughts…
3. Distraction or Synergy from being full-stack - Getting into interior design + furniture mfg/trading (bringing it around 36% of FY24, while it seems to be revenue accretive (and maybe margin as well for now), can this be a distraction for the overall business which has and will become more cut-throat over time due to lower entry barriers?
Disclosure: no holding (here’s my latest portfolio). closely tracking to see if the evidence so far merits an action.
Eco Recycling Limited (Ecoreco (25-06-2024)
Don’t think Cerebra and Eco are comparable just bec they are in the same industry. Management quality makes a big diff. Cerebra has so many red flags including in their Audit Reports that it is more or less a fraudulent sort of operation. While Eco’s governance standards are no where near top quality, they are far better than Cerebra. Eco has last year received a govt grant for 6cr as also mention by PM in his radio address - this puts additional pressure on Eco management to make sure they don’t do anything unethical as there will be repercussions…
EFC – Entrepreneurial Facilitation Centre (25-06-2024)
Thoughts: My first concerns were it’s a commodity business with little to no differentiation. However, the way EFC is integrating itself in all the essential parts of the value chain is really impressive and help become a sustainable business model that can protect its margins. The cost optimization by Furniture business, the growth potential from the REIT and reduced dependence on landlords and other entities makes it a good bet. The cost of 1250 per sqft is really impressive and I think that can be key to success here.The focus on managed offices reduces the possibility of set liability mismatch as well (although high concentration can be risky)
EFC – Entrepreneurial Facilitation Centre (25-06-2024)
Q4 FY24
Financials
- the rental segment that clocked about 263 crores, which is about 62.2% of the total revenue, whereas the revenue from DNB business stood at 113 crores, which is approximately 27%. The revenue from furniture business stood at about 46 odd crores, which is nearly about 11%.
- Top clients like Quest Corp, we have topclients like Mahindra Finance, we have top client like Bajaj Finance, Tech Mahindra, Eureka Outsourcing which contribute 80% of revenue and 20% from clients which aren’t leased for a long time and are small clients,
Business Info
- DNB: Interior fitting division.
- Closed single largest Contract with Co-Forge for developing 100,000 sq. ft. of commercial space.
- In addition to our core offering of managed office spaces, we have strategically diversified into interior fit out and furniture manufacturing business.
- The idea behind coming up with AIF and REIT is that we need going forward we need to go and control some of the real estate assets which we are actually right now managing and operating. we would like to create this fund structures whereby we would be one of the sponsors to the fund. And bring other contributors other potential unit holders to the fund and together we want
to acquire assets and again we want to use our expertise of which we have acquired over a period of last dozen year to you know manage those properties in a most profitable manner and also offer the same kind of returns to our unit holders under AIF so that which is in the market today, if you see the standard yield that you know kind of generate for a commercial property is between 7
to 8%. But when you convert these properties and run it like a managed office, you know you are likely to earn much better returns and that is what we are trying to aim and trying to create a differentiation in the market that we probably will be the one of the first one to come in the market and run AIF for the investor as an operator and not just as a real estate developer or not
just as an investment fund manager. So that’s the structure that we are trying to implement and this is how we are trying to you know, complement the business that we are doing within our EFC India group
Operational numbers
- Seating capacity from 25,000 to 40,000 for FY24.
- area AUM increased from 1.5mn to 1.9 mn sqft.
- minimum lock-in period with top clients are either three years and five- years contract or some of the special clients with whom we have been you know in contract for more than 6, 7, 8 years
- CapEx cost per seat for us is around ₹50,000.
- In Maharashtra, landlord contracts are 5 years while rest of India is 7-9 years. With long term clients, their contracts are generally 5 years with lock in period of 3-5 years.
- by the time our development work finishes in about next three months’ time, we occupy you know around 80% plus of the capacity
and the balance 20% takes the so around if you look at from the development point of view, generally the gestation period is about four to six months from the time the seats and from the time the center is ready to occupy. - they develop the space at 1250 rupee per sqft which is really cheap and one of the lowest in the industry.
Furniture and DNB
- the furniture business has a potential of 300-400 crores and will positively impact the ebitda margins. the current PAT margins of 14.76% should remain at round 15-20%
- On the DNB division, I have already signed contracts of 132 crores, which includes contracts from Coforge, TCS and then many other organizations like, YesssWorks, Bosch, Saga University and such contracts are already there, signed for 132 crores and they’re about 60 odd crores or contracts under documentations and negotiation while we speak. this 130 revenue will get recognized together fully in H1.
- For the furniture business: I think our ability to achieve a reasonable capacity of more than 60 to 80% is pretty much possible during the first year itself.
Outlook
- Incorporated Ek Design Industries Limited as a subsidiary for Furniture Manufacturing Venture.
- Incorporation of EFC REIT Private Limited as a step-down subsidiary for REIT.
- Incorporation of EFC Investment Manager Private Limited as WOS for AIF.
- Incorporation of EFC AIF LLP for AIF.
- the seat under development means will be ready in a month or so. the capacity under development is proper capex and can take time.
- If I am right, billed capacity of 33829 at a operational seating of 41139 means gives a capacity utilization of 92.5%
- Capacity under development is double.
- Increase seat capacity to 92000 in FY26
- the furniture production will start from second quarter. and their Managed offices business itself will be an anchor client and hence will consume most of it themselves so they dont need to go to market to find a lot of client and this the requirement of these furniture’s are also quite voluminous when it comes to the managed-office players in our industry.
- At least around 50% of what we really are setting to target this financial year
- By FY25, we should be closing at around our target is to close around 65,000 plus seats that we like to achieve by then. So just to give you a bit of trajectory, I mean as we speak already, by September we’ll be touching around 50,000 to 55,000 seats which are already contracted in thebsense that you know they are already in the development or you know beginning to get into development. So, by September we’ll be touching between 50 to 55 and by March certainly would be crossing 65,000 seats.
- as long as the market is really positive on the real estate side and also the demand from the GCC clients
and also the domestic client is on an upstream, we truly believe that we should be at least if not
more be able to kind of achieve .75 times of growth every year in the total number of seats that
we will be keep adding to. - out of the 50,000 per capex, 30,000 goes towards furnitures and fixtures.
Risks
- top client contribute 50% of revenue
Industry
- The major share of commercial supply witnessed in Indiahas been in Tier 1 cities, i.e., Bengaluru, Delhi, Gurgaon, Noida, Mumbai, Hyderabad, Chennai, Pune, and Kolkata.
- Bengaluru has emerged as the largest market for flexibleworkspaces in India with a total of approximately 32%
followed by the Delhi NCR market comprising a total of roughly 20% and 29% Hyderabad and Pune each with 13%vand 14% respectively of the total stock. - India Commercial Office stock is standard 832 million square feet as of December 31st 2023, in the top nine cities, grade A and grade B,
bifurcation 85% to 15%. Flex office space occupy occupancy about 1,000,000 seats spread over 65,000,000 square feet across major cities in India - In 2023, co-working space accounted for about 20% of the total office space absorption in major Indian cities, reflecting a strong and growing demand.
- total Office leasing space market is more than 800 million square feet of stock available in the top nine cities. Out of that, the Flex office market you know has been continuously growing. You know earlier they used to occupy not more than 5%, 7% kind of share and today, you know, it is already kind of occupying 25%.
Technocraft industries (25-06-2024)
Technocraft Industries -
Q4 and FY 24 concall and results updates -
Company’s Business segments, FY 24 revenues, EBIT margins -
Drum Closures - 543 vs 534 cr YoY, operated @ 34 vs 30 pc EBIT margins YoY
Scaffolding and Formwork - 1032 vs 889 cr YoY, operated at 18 vs 26 pc EBIT margins YoY. This is likely to reverse in FY 25
Manufacturing of Cotton Yarn, Fabric and Garments - 491 vs 534 cr YoY, operated at (-)4 pc vs (-) 7 pc EBIT margins YoY
Engineering and Design Services - 198 vs 135 cr YoY, operated at 19 vs 20 pc EBIT margins YoY
Company’s new Aluminium extrusion and fabrication plant at Aurangabad with a capacity of 17,500 MT and 6 lakh Sq Mar has gone live in Mar 24. As this facility ramps up, results from this plant should be visible in FY 25 ( in Q4 - basically, full effects will be visible in FY 26 ). Total capex required here should be around 280-300 cr. This should result in incremental revenues of 400-500 cr for the company ( most likely in FY 26 - after the full ramp up )
Seeing strong demand uptick in the Scaffolding and Formwork business from US, Middle East and Indian Mkts in Q1. Company is ramping up capacity to meet the increased demand. Expecting further acceleration in Indian demand after the election uncertainty is over
Sustainable EBITDA margins in Scaffolding are around 20 pc and 15 pc for Formwork
Company has shifted most of their Textiles business from Mumbai to Aurangabad. Aurangabad is a low cost destination wrt doing business. Plus there is a global recovery ( post COVID led overstocking ) in the Textiles business. Company feels that a turnaround in their textiles business should only be around the corner
Most of company’s Scaffolding exports are targeted at US ( 90 pc of exports ) vs only 10 pc of exports to Europe. Company lacks a key certification that’s required to sell in Europe. If that certification comes through in next 3-4 months, company can ramp up their European business as well. If this happens, the EU business can be as big as their US business
Also expecting descent growth to continue in the engineering and design business
Company has not even started tapping the export demand for Aluminium formwork from geographies like - Africa, LATAM. Will venture out there once the new Aurangabad facility comes fully on stream
Guiding for a topline growth of > 20 pc for FY 25 and FY 26. Also guiding for an EBITDA margin of 19-20 pc for FY 25
Other players are also putting up Aluminium formwork capacities in India. However, the demand is outpacing the supply. Also, Technocraft is one of the few companies that are also backward integrating into Aluminium Extrusions. This should give them a competitive advantage
Company has also entered into plastic drum closure business. Margins here are similar to steel drum closures. Also, the application areas of steel and plastic drum closures are completely different
**Company has developed a special device used to cool down the seeker head of Air-Air, Surface - Air missiles (cools it down below (-) 150 degrees within seconds). Company is the sole Indian Producer for this device. Supplies should start shortly.**Although wrt company’s size, this may ( at present ) not be a big revenue driver
Disc: holding, biased, not SEBI registered
Ranvir’s Portfolio (25-06-2024)
Technocraft Industries -
Q4 and FY 24 concall and results updates -
Company’s Business segments, FY 24 revenues, EBIT margins -
Drum Closures - 543 vs 534 cr YoY, operated @ 34 vs 30 pc EBIT margins YoY
Scaffolding and Formwork - 1032 vs 889 cr YoY, operated at 18 vs 26 pc EBIT margins YoY. This is likely to reverse in FY 25
Manufacturing of Cotton Yarn, Fabric and Garments - 491 vs 534 cr YoY, operated at (-)4 pc vs (-) 7 pc EBIT margins YoY
Engineering and Design Services - 198 vs 135 cr YoY, operated at 19 vs 20 pc EBIT margins YoY
Company’s new Aluminium extrusion and fabrication plant at Aurangabad with a capacity of 17,500 MT and 6 lakh Sq Mar has gone live in Mar 24. As this facility ramps up, results from this plant should be visible in FY 25 ( in Q4 - basically, full effects will be visible in FY 26 ). Total capex required here should be around 280-300 cr. This should result in incremental revenues of 400-500 cr for the company ( most likely in FY 26 - after the full ramp up )
Seeing strong demand uptick in the Scaffolding and Formwork business from US, Middle East and Indian Mkts in Q1. Company is ramping up capacity to meet the increased demand. Expecting further acceleration in Indian demand after the election uncertainty is over
Sustainable EBITDA margins in Scaffolding are around 20 pc and 15 pc for Formwork
Company has shifted most of their Textiles business from Mumbai to Aurangabad. Aurangabad is a low cost destination wrt doing business. Plus there is a global recovery ( post COVID led overstocking ) in the Textiles business. Company feels that a turnaround in their textiles business should only be around the corner
Most of company’s Scaffolding exports are targeted at US ( 90 pc of exports ) vs only 10 pc of exports to Europe. Company lacks a key certification that’s required to sell in Europe. If that certification comes through in next 3-4 months, company can ramp up their European business as well. If this happens, the EU business can be as big as their US business
Also expecting descent growth to continue in the engineering and design business
Company has not even started tapping the export demand for Aluminium formwork from geographies like - Africa, LATAM. Will venture out there once the new Aurangabad facility comes fully on stream
Guiding for a topline growth of > 20 pc for FY 25 and FY 26. Also guiding for an EBITDA margin of 19-20 pc for FY 25
Other players are also putting up Aluminium formwork capacities in India. However, the demand is outpacing the supply. Also, Technocraft is one of the few companies that are also backward integrating into Aluminium Extrusions. This should give them a competitive advantage
Company has also entered into plastic drum closure business. Margins here are similar to steel drum closures. Also, the application areas of steel and plastic drum closures are completely different
Company has developed a special device used to cool down the seeker head of Air-Air, Surface - Air missiles (cools it down below (-) 150 degrees within seconds). Company is the sole Indian Producer for this device. Supplies should start shortly. Although wrt company’s size, this may ( at present ) not be a big revenue driver
Disc: holding, biased, not SEBI registered