We came to know about this company sometime in July 2017 when Mr. Pankaj Bajaj was elected as a President of CREDAI NCR chapter. He is a well know personality in the real estate industry. Eldeco Housing and Industries Ltd. (EHIL) is listed on the Bombay Stock Exchange since 1985. In 1996, Pankaj Bajaj, son of O P Bajaj, joins as a promoter director on the board of EHIL. His background includes a B Com. (Hons.) with distinction from Shri Ram College of Commerce (1993), Delhi, an MBA from IIM Ahmedabad (1995) and a short stint as a management consultant advising MNCs on their entry strategy in India.
Pankaj Bajaj forms a new company, Eldeco Infrastructure and Properties Ltd. (EIPL). EIPL’s focus is to undertake large projects in the NCR of Delhi and other states of North India. EIPL expands rapidly in the NCR of Delhi with a number of successful residential projects especially in the Noida and Greater Noida region. EHIL continues its leadership position in Lucknow and Kanpur.
What made me go deep into this company is the sudden jump in it’s stock price from 800 levels to 2000 plus in a matter of just 60 days. After scanning thru the announcement what I found is only a mystery to me which may turn out as huge wealth creator or may trap many aspiring investors….
#1. Reverse merger taking place to make listed entity a bigger player – Apart from the two main companies, a listed one – EHIL and privately held – EIPL, there are ‘N’ number of companies floated from project to project basis and it looks like some of these privately held companies are getting merged with the listed entities like M/s Halwasiya Agro Industries Ltd and M/s MAK Sales Private Limited got merged with listed entity. In our opinion, company is in the process of consolidation and may combine some or all the unlisted entities to create a big real estate company. They are also shifting their registered office from state of Haryana to Uttar Pradesh where they have major projects.
#2. RERA & Demo Effect positive for the company – After RERA doing business will not be easy, one need to have funds in place before launching a projects and many more guidelines. This will bring transparency in business execution, hence some of the small players working effectively will become bigger names in days to come. Also Demo effect & focus on affordable housing will create organised demand for these small organised players.
#3. After all who is buying in big chunks – Looking at the announcement, one PMS account called “Guardian Advisors Pvt. Ltd” has started buying shares of this company in big way and currently holding 17% of the company. They don’t disclose the names of PAC on behalf they are buying the shares, recent buying took place around weighted average of Rs 1500 per share. It’s is shocking to know that this PMS which is having just 100 Cr AUM has invested approx 70 Cr in this company alone. How can a PMS manager taking such a risk of investing 70 Cr out of 100 Cr in just 1 company, do they have some insider info or are the PAC (person acting on concert) belongs to promoter group. In our opinion, later may be true because present promoter holding is just 55% and adding 17% more will make the promoter holding to 72% kind of levels which is close to threshold of 75% set by SEBI. After all, such a high risk bet can be taken only by the informed circle, it’s matter of time we all will come to know the names of PAC.
#4. Eldeco City Limited – As per the board meeting on 27th Oct 2017, Eldeco City Limited was merged with listed entity. Now, again we have board meeting scheduled on 24th Nov 2017 to announce & approve the audited Q2 results and who knows some more announcement might come. Not to forget that, PMS account has almost done their buying or probably buy another 2-3% more. We may expect some good result or some announcement on 24th Nov 2017 meeting.
#5. Calculation mis-match, how come? – Interesting thing to know is since last 2 months, the total turnover on the BSE exchange for this stock is hardly 20 Cr. Looking at Sept 2017 shareholding pattern, Guardian Advisors Pvt Ltd- Core Value A/C holds just 2.10% and the announcement made on 16th Nov 2017, they are holding 17.126%, it means they have bought 15% of equity in last 2 months period only. Total share outstanding for company is 19.66 Lacs as on Sept 2017, hence 15% of this is 2.94 Lacs shares they bought during last 2 months period. Even if we consider average price of Rs 1500 per share in last 2 months, they might have spent Rs 44 Cr to buy 15% stake but in last 2 months total turnover was around Rs 20 Cr.
Are we missing something? In fact we are missing many things because this looks like a mystery for us, who is buying, why they are buying and what’s the plan….nothing is clear at this moment and it may not be clear till the stock reaches where it is suppose to be. This is not a stock advice to buy or sell, please consult your advisor!
Disclosure : Small exposure from lower levels.
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