Unitech Ltd- CMP 1.3- Will it rise from the Ashes?

May 13, 2019

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Unitech Ltd- Will it rise from the ashes?logo-demo

       Established in 1971 by a group of technocrats, Unitech Limited is one of India’s leading Real Estate player. It started business as a consultancy firm for soil and foundation engineering and has grown to have the most diversified product mix in real estate comprising of world-class commercial complexes, IT/ITes parks, SEZs, integrated residential developments, schools, hotels, malls, golf courses and amusement parks.

For more info check, http://www.unitechgroup.com

Numbers- The Latest

Market cap: 340 Cr        CMP on 13th  May 2019: Rs 1.30          FV: 2            BV: 29.36 Apx.

Annual Revenue: 1730 Cr FY17              Loss – 403 Cr  FY17

Unitech -Rise and Fall Story

Very good and informative video created by youtube channel FinnovationZ.com this clears many angles of the story.

 

Interesting Info

  • The company had acquired nearly 14000 acres of land until 2011, Debt is around 6000Cr value of land and unsold inventory is looking more than the debt and dues to home-buyers, company is available at just 340 Cr Market-cap.
  • Supreme court ordered last year April to arrest the promoter brother’s and for the last 1 year, they are in jail. This is for failing to deliver flats and villas, cheating, and siphoning out funds.
  • They will get bail only when they deposit 750 Crore, and they have nearly deposited crores.
  • Last month share price Touched Nearly 1Rs.
  • The Supreme court has control over Unitech’s cashflows and projects to refund the homebuyer’s money. Without the Supreme court’s permission, not a single parcel of land can be sold.
  • Though no 2 Cases in the stock market are exactly the same, there are many parallels between Satyam and Unitech. In the case of Satyam, it was employees which needed to be saved, in the case of Unitech its homebuyers who need to be saved.
  • Manish Lakhi has Bought 1.69 Crore Shares @ 7.22 in July 2017, Dilipkumar Lakhi has Bought 5.78 Crore Shares @8.58 in July 2017 and  1.41 Cr Shares at 7.94 in Aug 2017, together with it’s close to 8% of the company. Are these related to promoters?
  • As per the Latest verdict by the supreme court, it has asked govt to takeover Unitech’s projects and delivers homes to home buyers. This can be game-changer for Unitech stock which is beaten down to such levels as if the company is dead.

Some interesting articles on the Unitech collapse.

https://www.proptiger.com/guide/post/how-the-unitech-empire-crumbled-like-a-highrise-of-cards

https://www.business-standard.com/article/companies/unitech-the-decline-of-realty-major-117120900053_1.html

https://economictimes.indiatimes.com/markets/stocks/news/unitech-huge-land-bank-is-a-positive-for-realty-company/articleshow/12063558.cms?from=mdr

https://www.rediff.com/money/report/how-a-realty-mogul-lost-its-throne/20171213.htm

https://www.livemint.com/Home-Page/8jqVoUSir1FChqETSEaszI/Cashstrapped-realtors-look-to-offload-assets.html

 

links that give a wonderful insight into what the Supreme court is doing with Unitech.

Apart from the fact that I find all this very very interesting from a stock opportunity perspective; It is really heartening to see that law is working in India, for a change 🙂

 

Will the Company Survive?

While buying share after a 99% Fall, The ultimate question to be answered was will the company survive? Else Stock will go to Zero / Delist. Below is the list of unsold inventory and under-construction projects which gave me a sense that this company can survive. Unsold Inventories can also be checked at property dealing website proptiger.com @ https://www.proptiger.com/unitech-100027

Real estate Projects

Undercon

Commercial Projects

commercial

 

Supreme Court Hints at Unitech Takeover by Govt

Supreme Court has asked govt to take over Unitech’s projects and complete stuck projects and give home buyers their homes.

My Take 

During 2012-2013 Marksans Pharma too was trading near 1.5 Rs, the company appeared like it’s dead, however, the company was able to survive and it even made good profits in the coming years, thus stock price Rose to 110 Plus in next few years in 2015-2016. Staggering 100 bagger returns to its investors.

Unitech too is appearing like it’s completely dead, However, if one can find out if the company can survive and invest a small portion of his basket, it can be highly rewarding. Looking at various scenarios of land assets more than current debt. Unsold Inventories and rental income from existing commercial projects, Supreme court’s intervention and hold over Unitech’s cashflows, Unitech looks to me as a Survivor candidate. With the Supreme court hinting govt at govt take over, it has concreted the beliefs of its survival.  However, the turnaround of Unitech will take time maybe 3-5 years or even more. Having said that, Unitech is not for the weak-hearted. It may have various scenarios that we may not think of.

Unitech for me is once in a decade opportunity! Only time will tell, how much money we have made here.

Unitech is a potential Multibagger!!!!!!

Important Note: Potential multi-baggers are those stocks that have the potential to give 100 – 500% profits. Obviously, such returns take time. Probably 3 – 4 years or more. Short-term volatility is the reality of the stock market and that will always happen. Short-term movements(upside and downside) are impossible to predict. Only invest funds that you will not need for the next 3 – 4 years. As long as you buy a stock for the right reason and are convinced about the future prospects of the company, there is no need to worry if the share price goes down and stays down for a period of time after you buy; provided you have followed the cardinal stock market mantra BUY LOW.

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The author of the blog Mr.Suyog Dhavan is a Full-time Investor / Value Trader and Value investing/Trading Mentor. His style of Investing is inspired by Mohnish Pabrai, Peter Lynch, and Porinju Veliath. He is the founder of Strategic Alpha Wealth, A Premier stock market mentorship firm with a mission to touch the lives of 1Lakh people through its mentorship program.

1 Comment

  1. rohit garg

    Yes Mate, u r very right about Unitech and all what u mentioned here makes sense; especially unsold inventory which would bring in revenue once buying start purchase cycle.

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