Peninsula Land - Sell All...

Peninsula Land-Continued Land Acquisitions Are Destroying a viable business model

Peninsula Land has acquired land in past 6-9 months both in and outside 

 

Mumbai . It acquired two land parcels in South Mumbai (Napensea 

 Road: for Rs 1.1bn, Carmichael Rd: for Rs 1.4bn) and one each at 

Lonavala (Rs 0.3bn), Alibagh and Hyderabad. The delay in launch 

of Goa and Nashik Projects may delay the launch of the above 

 projects which will affect cash flows thereby increasing debt levels.

Key risks

Selling PBP (phase-II) completely without delays in the price range 

of Rs. 15-16K psf or leasing the same at a rate of Rs140+ psf. 

An unviable model?

Sell Peninsula Land on account of the following: (i) We see competition for PENL in selling/leasing the phase-II of Peninsula Business Park (0.6msf) as there is a stiff competition from Alok infra(Phase I, Sold by PENL to Alok Infra)leading to delay in cash inflow (ii) Delays seen in cash flow as it has been more than a year since the company has not launched any projects (iii) PENL has acquired land for residential projects (outright purchase /JV/JDA), both in and out side Mumbai. 

These acquisitions have increased the debt levels and could be a concern as near term cash flow visibility seems bleak.

Peninsula Business Park (PBP) – a key revenue contributor PBP’s phase-I was sold to Alok Infra and it has recognised approx Rs.10 bn on % completion method. As per management, PENL has started marketing the second tower of PBP for outright sale/lease. However, we believe Lower Parel area is likely to see over supply and infrastructure bottlenecks. 

On this basis we feel that PENL may face difficulty in leasing/selling PBP at its predetermined price. Moreover it is facing competition from Alok Infra Phase –I PBP which was sold by PENL to Alok Infra. 

New launches yet to be announced As per management, PENL was supposed to launch Goa (1msf) and Nashik (2.2msf) projects, but we still haven’t seen any official launches though construction work has commenced. The delay in launches may cloud near term cash flow visibility.