Bangalore: Crisil Research on Wednesday said Nitesh Estates Ltd’s fundamentals are only moderate compared with other publicly traded firms, but also that the realty firm’s market price could rise sharply.
Crisil assigned the Bangalore-based firm a 2 on 5 fundamental grade rating.
Nitesh Estates’ limited delivery of 1.2 million sq.ft. of residential space compared with the 10-15 million sq.ft. of space delivered by larger firms in Bangalore tempered the grade, Crisil said in a note. The firm was set up in 2001 by Nitesh Shetty and went public in 2010.
The researcher also said Nitish’s entry into the long-gestation hospitality and retail segments has exposed it to execution and marketing challenges, though these are likely to give it regular cash flows once operational.
Since about half of Nitesh’s capital is deployed in retail and hospitality projects, its returns are expected to be under pressure, Crisil said.
High dependency on the promoter and centralised decision-making also diluted the grade, Crisil said.
More positively, Crisil said Nitesh has built its brand in the residential segment in a short period based on good product offerings and is expected to benefit from steady growth in the Bangalore market driven by the information technology and outsourcing industries and the relatively higher affordability of buyers in the city.
The company’s joint development model with land owners has also worked in its favour owing to limited capital outlay, efficient utilisation of funds and access to city-centric projects, Crisil said.
Crisil assigned a valuation grade of 5 on 5 for Nitesh Estates, indicating that the firm’s market price has a strong potential to increase from its current level.
Nitesh’s shares were trading down 0.42% at Rs14.20 on the Bombay Stock Exchange at 2.16 pm on Wednesday, while Crisil’s one-year fair value of the stock is Rs27 a share. The Sensex was at 17,499.72 points, down 0.67%.