NESCO is a 83 year old completely debt free company. NESCO is engaged in the Business of Licencing premises in IT park buildings and providing related services, Licencing premises for exhibitions and providing services to the organisers, manufacturing of machines and capital equipment, Hospitality and catering services.

Nesco

Current Market price on the date of publishing this report-: 634 Rs

From being one of India’s few renowned engineering companies to becoming a diversified conglomerate, NESCO has taken a series of adventurous, bold and creative steps in past decades.

Introduction

Incorporated in 1946, Nesco is a diversified Company engaged in four business segments. These business include Nesco IT park where it provides space to some of the world’s leading companies, Bombay Exhibition Centre is the largest Exhibition Centre in the private sector, Nesco’s Foods division which on the days of exhibitions prepares and serves over 20,000 meals per day and Nesco’s Indabrator division which is a leading manufacturer of surface preparation equipment with facilities in Gujarat.

The Company is engaged in licensing premises in IT park building and providing related services, licensing premises in its exhibition and convention incubation centre and providing related services to the clients, manufacturing of machines and capital equipment and hospitality and catering services.

Businesses

Real Estate

With its premium IT Park, Nesco Realty set a new standard. The Park is a self-contained complex that spans several million square feet. It houses the world’s top international corporations, including HSBC, KPMG, PWC, MSCI, BlackRock, and others. In the home sector, the division is currently aiming to provide maximum value, comfort, elegance, and style.

The Indian Green Building Council has awarded Tower 4 a Platinum certification for Core & Shell under the LEED India grading system. Hall 3 has an Incubation Center as well as a Child Care Center for the children of Nesco Center employees.

During the year ended march 2022, revenue from IT Park increased by 7.35% to ₹ 26,415.15 lakhs (previous year ₹ 24,606.29 lakhs). 80% of Tower 03 and 92% of Tower 04 are occupied by our clients.

Nesco had hired JLL’s landlord representative team to handle sales and marketing for Nesco IT Park Tower 04. JLL has a strong Tenant Representative and Landlord Representative practise, as well as a technological platform and a worldwide client network.

Tower 4

IT4 is a dynamic, multi-purpose structure that is a cutting-edge IT complex for major organisations. The complex redefines intelligent design norms with a total construction area of approximately 1.7 million sq. ft. and multi-level parking. It strictly complies to high ecological and energy-use criteria. Nesco Realty’s ergonomic sensibilities enable IT4 stand out as a workplace focused on hospitality and employee comfort.

Sectorial view and Future outlook

The Mumbai Suburban region is home to several multinational corporations, banks, and global shared services. Existing tenants in this site will likely choose to grow or migrate to adjacent IT Parks, creating a big opportunity. Having said that, the micro-market lacks supply in the ‘A’ category. Landlords that have supplies at the proper moment will have a distinct advantage.

Occupiers may enhance their emphasis on environmental, social, and corporate governance as major considerations when selecting a building to occupy. Adoption of green buildings is expected to function as a driver for occupant choice. Long-term prospects include technological upgrading spaces and increased lease portfolio flexibility.

The only danger to Nesco IT Park’s operations comes from neighbouring office space suppliers and more established Business Parks. Additionally Companies have encountered work-from-home situations and have been under pressure to enhance their profitability following the Covid era. As a result, in order to save money, companies are considering downsizing their rooms or moving to cheaper locations. This is also one of the concern which puts pressure on the Nesco to renegotiate the rent increase due this year.

Bombay Exhibition Centre

Nesco’s entry into the event industry has been met with enthusiasm. Nesco Events has built one-of-a-kind assets that have swiftly become huge successes. This is a great start for the company and strengthens the Group’s ability to provide quality entertainment to a growing audience of keen fans.

From the 1st of November 2021 to the 31st of March 2022, the Centre hosted twelve guest exhibits arranged by established clients. Other exhibitions were unable to take place due to the shutdown and accompanying limitations imposed from 1 April 2021 to 31 October 2021 in order to contain the 3rd wave of Pandemic. There are currently 21 exhibitions scheduled for the fiscal year 2022-23.

The BEC, which was founded in 1991, represents Belief and Opportunity. The Center has helped the world come together in Mumbai with a single goal by bringing millions of ideas to reality.

• Hall 1 – The biggest BEC hall is 19,143 square metres in size, making it the largest in the private sector in Mumbai. The hall has a standard clearance height of 6.75m and 7 gates to provide guests and exhibitors convenient access and movement.
• Hall 2 has an area of 7378 square metres. Convenience is prioritised here, as an extra 2,600 sqm serves as a bay area that can be transformed into a café or food court. This facility has 5 gates to provide caterers and organisers convenient access for set up.
• Hall 3 is the second biggest hall at the BEC. It is an astounding 11,799 square metres and has a clearance height of 6.75 metres. The three gates provide a smooth flow of traffic for attendees, organisers, and exhibitors.
• Hall 4 The highest point of Mumbai’s tallest hall is 14 metres. Hall 4 is Mumbai’s largest pillar-less hall, with unbroken broad views for staging any public event. It has a total size of 10,800 sqm.
• Hall 5 is well-known as a performance and event facility. At 4,664 square metres, it can accommodate audiences of up to 5,000 people. The clear height is 6.88m, and the two gates provide distinct, orderly entry and departure places.
• The Grande This adaptable room is ideal for formal occasions such as AGMs, weddings, business gatherings, and celebrations. The Grande, with a gross area of 2,108 Sqm, may be customised into smaller sizes according on your needs.

Income from the Exhibition Centre for the year was ₹ 1,618.33 lakhs compared to ₹ 595.11 lakhs in the previous year, there was an increase in revenue by 171.94%.

With Bombay Exhibition Centre’s ongoing growth, there is now a diverse option for any trade show. The BEC is already India’s largest private-sector exposition site, presenting exhibitions for the majority of India’s and the world’s largest and most reputable organisers.

Sectorial view and Future outlook

The exhibition industry sector facilitates trade/business transactions of over Rs 3,00,000 crore yearly, encouraging and supporting the expansion of a wide range of enterprises while also providing a massive job opportunity for about 1,20,000 individuals. Typically, 745 events are held each year, with an average event size of 9.8 thousand gross square metres.

Bombay Exhibitions owns 73% of the exhibition space in the Western and Northern regions – Western (38%), Northern (35%), Southern (24%), Central (2%), and Eastern (1%), with a primary focus on B2B events.

Nesco Events

Utsav Rangilo Re Gujarat nay, the 9-day Navaratri celebration was not held during the fiscal years 2020-21 and 2021-22 owing to the continuing epidemic. Rangilo Renow, on the other hand, will be organised on a major scale in the fiscal year 2022-23. Ticket sales and event sponsorship provide huge financial opportunities.

Due to the ongoing epidemic, the Paddy Fields – Folk & Fusion music event was also cancelled for the fiscal years 2020-21 and 2021-22. Paddy Fields also assists us in generating leads and sales from third-party B2C events such as Filmfare Marathi, Enchanted Valley Carnival music festival, DID Little Champs, Awards Night, COBEX, and others.

Nesco Food

Nesco Foods caters to social, commercial, and luxury events at all levels. It is one of Mumbai’s most popular hospitality providers, well-known for their diverse capabilities and variety of cuisines. The section runs the city’s largest non-flight kitchen.

Nesco Foods offers a complete solution for Meetings, Incentives, Conferences, and Exhibitions (MICE). This is the obvious choice for MICE in Mumbai because to its large-scale supply of space, banqueting alternatives, and tailor-made luxury. Nesco Foods is the ideal partner for conventions, conferences, AGMs, town halls, seminars, and workshops because to its world-class facility and concierge services.

Income for the year from the foods division decreased from the last year by 12.65% to ₹1,135.27 lakhs as compared to ₹1,299.61 lakhs during the previous year.

The ROOT

The Root is a cutting-edge core kitchen that serves as the nerve centre of the whole Foods business. The facility can prepare approximately 50,000 servings every day from a variety of cuisines. The Root’s renowned and skilled chefs can cook any meal to perfection while honouring both the cuisine and the consumer.

Engineering

Indabrator is an excellent engineering service provider. The company believes in a one-stop shop for all surface preparation requirements. Machines, replacements, and abrasives are all included. With its own foundry and state-of-the-art production plant, Indabrator’s leadership is distinguished by its entire immersion across the value chain.

Company caters to following products under this segment

• Short blasting machines
• Air Pollution control systems
• Painting Systems
• Abrasives
• Spares
• Operations and Maintenance Solutions
• Annual Maintenance contracts

During the year under review, income from Indabrator increased by 75.22% to ₹4,571.12 lakhs as compared to ₹ 2,608.76 lakhs during the previous year.

Financials

For the year ended March 2022

• Company achieved a consolidated turnover of Rs 337 crs up 16% as compared to previous year consolidated turnover of Rs 291 crs
• Consolidated profit before tax was at Rs 227 crs up 5% as compared to Rs 216 crs in the financial year 2020-21.
• Consolidated earnings per share amounted to ₹ 26.85 (previous year ₹ 24.48).
• Income from investments and other income was ₹4,501.34 lakhs (previous year ₹6,459.95 lakhs), decreased by 30.32%. On further analysis of cash flow statement it was found that company had purchased fixed assets worth approx 150 crs in FY 22.
• Company had paid 21 crs in dividends which was around 3 Rs per share.
• Company had no debt as on 31 March 2022.
• Company’s liquid resources (fixed maturity plans, mutual funds, cash and bank balances) increased by 4.46 % to ₹ 85,578.99 lakhs from ₹ 81,923.11 lakhs.

Q2FY23

• Net Sales stood at Rs 142.87 crore in September 2022 up 76.92% from Rs. 80.76 crore in September 2021.
• Quarterly Net Profit stood at Rs. 81.90 crore in September 2022 up 86.19% from Rs. 43.99 crore in September 2021.
• EBITDA stood at Rs. 116.62 crore in September 2022 up 94.14% from Rs. 60.07 crore in September 2021.
• NESCO EPS has increased to Rs. 11.62 in September 2022 from Rs. 6.24 in September 2021.

Going Forward

As part of its future aspirations, the business has planned a capex plan of around 2400 crore to construct a 2.6 msf sq leasable area commercial tower, a 350 key 4-star hotel, and to refurbish and enlarge the BEC.

The order book is strong for the next few quarters, and the pre-covid run rate of show business is anticipated to be ahead. On the extension front, the business proposes to demolish one of the factory sheds and extend it for BEC (hall 6 with 450 car spaces in the basement for a capex of about 125-130 crore, completion in 10 months with net leasable area addition of 1.5 lakh sq feet). However, this new capacity is projected to generate income beginning in fiscal year 25.

Note-: Nesco was previously suggested on 15th Nov 2020 when the stock was trading at 510 Rs and since then it has delivered around 30% returns.( Excluding dividends)

Conclusion

Nesco is a debt-free company with large cash and equivalents as well as investments on the balance sheet. The company’s management is quite cautious, opting for slow and planned vertical development supported mostly from internal accruals and specialised successful business models such as foods/own events, etc. Although 2.5 years of income were lost due to covid, we expect the exhibition industry to fully rebound to pre-covid levels beginning in H2FY23. The IT Park company will benefit as well, since occupancies have risen and are likely to grow more in the coming quarters. Thus based on this we strongly feel Nesco is worth exploring for long term.