Karda Constructions Ltd. – Mgmt interaction

Real estate is a difficult industry to be in. If the fragmented nature of the industry (dozens of unorganised, local small developers) wasn’t sufficiently challenging, demonitisation and the subsequent slowdown in the economy proved even more challenging. And then the RERA blow (welcomed by consumers though) broke the back of many a developer. Even before the community could reconcile with all of these, they have to now stare at the business vacuum caused by the pandemic! Phew

Given the job losses, pay cuts, business slowdown etc etc that we continue to witness, high ticket investments like real estate probably ranks much lower in consumers’ preference list. And understandably so. When the income stream is uncertain, why would anyone be in a hurry to commit towards any such long term investment.

That said, the sector is here to stay is my personal belief. And as the economic activity limps towards normalcy, there will be pent up demand that developers will have to satiate. The sales vacuum caused by the pandemic could possibly help the sector consolidate by weeding out the, already-weak and unreliable, developer. Unforeseen demand, driven by the WFH concept (now touted to be the new normal) could add to this pent up demand. And, those following good business practices (on-time delivery, good quality projects etc) and supported by strong balance sheets will have the opportunity to capitalise on this.

Regional plays like Sobha, Oberoi, Prestige etc could be some of the beneficiaries. But these are known and well researched names. While scouting further names, I landed up on a company called Karda Constructions, a Nashik based real estate developer. After updating myself with publicly available data, I managed to interact with the management.

Attached herewith is my note:

They seemed to have built a decent franchise in Nashik, performed reasonably well so far and have proactively changed their business model (to asset light) all of which imply their ability to capitalise on opportunities thrown open once the CoVID situation normalises. However, a sharp run up in the stock price make the valuations look demanding.

Cheers!!!

Sudhir

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