Nesco Looks Like A Good Place To Move Into

Nesco, with its enviable real estate assets, well-managed cash-flow and competent management, looks like a good place to move into

What do you love, in the time of corona? The question is in-spired from the title of the famous Gabriel Garcia Márquez book, set in a period of cholera epidemic. We are in a similar situation. Much like the book’s protagonist Florentino Ariza, in times of market carnage like the one we are facing due to Covid-19, it is difficult to maintain a sense of equanimity. In the present milieu, many investments offer mouth-watering valuations for good businesses. But, my love for a clean, strong balance sheet and transparent management draws me towards Nesco, which has a history of healthy return ratios combined with an attractive valuation (that could get cheaper).

Originally known as New Standard Engineering Company, Nesco figured out the potential of real estate and a way to commercially exploit it by creating an IT park lease rental business. And in the ’90s, it converted itself into a pure lease rental play. Its 65 acre land in Goregaon, Mumbai, has excellent connectivity — it is in close proximity to both the airports, and is right on the Western Express Highway. As an offshoot, the company also started a hospitality business and continues to run a legacy engineering business.

Additionally, Nesco has embarked on an expansion plan that, in the short run, will add significant IT park space, to increase leasable area. To take advantage of the Mumbai Development Plan for 2034, Nesco plans to create a holistic growth programme including, potentially a hotel. The entire exercise is expected to be financed internally without equity dilution or debt and, interestingly, in some instances, even from customer advances. This makes for a formidable investment case. Now, let us dive into each of its diversifications.