Business Analysis 13: Equinox India Developments Ltd (Formerly Indiabulls Real Estate)
If you are on the lookout to bet on this particular industry, I would suggest you to study some stocks. I'll discuss one such stock in this content which is Equinox India Development
Real estate industry is one of the major contributors to the Indian economy. After pandemic, the industry saw huge boom especially in the mid to luxury market.
Most of the stocks which didn't do well just before pandemic have done well over the past 3 years. Yet, Indian real estate industry has a long runway going forward.
If you are on the lookout to bet on this particular industry, I would suggest you to study some stocks. I'll discuss one such stock in this content which is Equinox India Development, formerly known as Indiabulls Real Estate. Hope this is now familiar to you.
They are a leading real estate player catering to high value & high volume products across mid-income, premium and luxury price categories with a presence in 8 cities. Majority of their strength comes from Mumbai, Delhi, Bengaluru, Chennai and Gujarat.
The company has a huge land bank of 3232 acres that could fuel the next phase of growth. There are several launches scheduled in FY26.
Since the new management came, the business took off. They have taken several steps to turnaround the company. They have -
1. Changed the brand name from Indiabulls to Equinox India.
2. Changed from promoter based company to professionally managed one.
3. Raised money to fix their balance sheet and fund growth.
4. Launched several new projects and completing existing projects.
Although inventory is still a concern, hope new launches and selling existing ones will reduce it going forward. One of the most significant achievements is that they have achieved break even in Q2FY25 with positive EBITDA and PAT.
Numbers are looking better in Q3 also. Average cost of borrowing is almost more or less stable, around 13%. Despite being a turnaround candidate, debt to equity of the company is just 0.1x as of Q2FY25. Also they have a huge land bank. That's their plus point.
Sales have picked up, EBITDA and PAT are positive, balance sheet is in better shape, positive outlook for the overall industry. So, why is the stock falling?
Apart from valuation, there are still some issues that need to be kept in mind.
1. The company had been facing opposition for the merger between Embassy group and Equinox India for sometime from individual investors. However, NCLATs approval resolved the issue.
2. There are pending issues and litigations like siphoning off funds by the previous management, provisioning for London receivables, Nashik SEZ development projects and others.
3. Impairment assessment of inventory is a significant risk as there's an uncertainty of the carrying value of the inventory.
However, the company is working towards resolving such issues.
So, the business is trading at a current market cap - 8078 cr and current market price - ₹126.40.
As they are going through a turnaround phase, we can't compare with its peers. They have just achieved break even point in Q2FY25. On revenue multiple basis, they are trading around 8x multiple. Seems quite high. However, the pace at which they are growing it seems that the company deserves such valuation.
One more point is other prominent investors and funds' buying price. The company raised 3908 cr through preferential allotment of equity and warrants at a price of ₹111.50 per share to Embassy group, Blackstone Real Estate Fund, Baillie Gifford & Co and other prominent investors and funds such as Utpal Sheth, Capri Global, Maybank, Quant, Poonawala Finance, Micro Lab respectively. That gives a support level for new investors. Considering good asset base, reserves, low debt status, proper execution, and bright prospects for the real estate industry give investors confidence that the stock has potential to do better in the future.
Thanks for reading
Take care
Rabi
Disclaimer: I'm not SEBI registered. This content is for educational purposes only. Do your own diligence.
Very nice detailed write-up