Guess this: how much can a developer develop residential and commercial space within a span of five years? Two million, four million or five million sq ft? What if we to tell you that one developer has brought more than eight million sq ft under development within a short span of just five years, would you believe it? Believe you will, if the developer is Bengaluru-based Nitesh Estates. As if eight million sq ft of development in five years is not enough, the company has set itself a much higher target. “In the next 3-4 years, we’re going to build 15-20 million sq ft, out of which 80 per cent would be residential projects,” informs Nitesh Shetty, the 32-year-old founder and Managing Director of Nitesh Estates.
High Quality Standards
Nitesh Estates has series of firsts to its credit. It was the first to win India’s largest corporate housing project by ITC in the face of stiff competition by well-established developers. Then again, it has the distinction of bringing the first Ritz-Carlton Hotel to India. Also, it was one among the first few developers to attract foreign direct investment in real estate when Och Ziff Capital Management Group, one of the world’s largest PE funds, picked up 25 per cent stake in the company and Citigroup’s property arm Citi Property Investors invested in the Ritz-Carlton Hotel. HDFC AMC too has picked up a stake in Nitesh Estates.
So what makes Nitesh Estates such a ‘hot property’ for foreign and domestic institutional investors? The premium living, working, lifestyle and leisure space it has developed over the years bears ample testimony to the company’s highest quality standards in property development. “We created benchmarks of our quality, execution and our profile through these projects,” says Shetty.
Benchmark Projects
A look at the ongoing and completed projects of Nitesh Estates will be enough to prove the company company’s credentials in property developments. Nitesh Buckingham Gate was the ultra-premium project developed by the company for the elites of Bengaluru’s high society. Sold by invitation only, Buckingham Gate boasts of ultimate in luxury living. Similarly, projects such as Nitesh Wimbledon Park, Nitesh Mayfair, and other projects are designed for the crème de la crème of Bengaluru’s society. Other residential projects such as Nitesh Forest Hills and Nitesh Central Park have been designed to meet highest standards in property development.
Nitesh has developed one of India’s largest Rs 100 crore corporate housing projects Nitesh Garden Enclave for the management personnel of the ITC Group. It has also developed premium office space such as Nitesh Timesquare and Nitesh Broadway and is planning to develop yet another half million sq ft world class A-grade office complex Nitesh Madison Square. That apart, the 7.5 lakh sq ft Nitesh Mall with lifestyle retail outlets, will be the largest mall located in Indiranagar in the Central Business District of Bengaluru. This project is being designed by globally renowned architectural firm Callison of Seattle. Another mall, Nitesh Lexington Avenue, will be built on Brigade Road, the heart of Bengaluru’s shopping district.
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Then, of course, there is the Ritz-Carlton Hotel, marking Nitesh’s foray into the hospitality sector. The 281-room 5-star hotel in Bengalurue will be equipped with a helipad, yet another first in India, and will be thrown open to guests by April 2011. Nitesh proposes to build the second Ritz-Carlton in Chennai.[INSERT_1]
Financial Performance
Nitesh’s financial performance has been as impressive as its projects. Its income from operations almost quadrupled from Rs 22.36 crore in 2006 to Rs 86.89 crore in 2009. For the current fiscal, the company has already notched up an income of Rs 45.85 crore for six months ended September 30, 2009. The bottomline too has seen impressive jump from Rs 1.37 crore in 2006 to Rs 2.76 crore in 2009. For the first half of FY10, the company has seen quantum jump and has recorded net profit of Rs 6.08 crore. The company’s current equity capital stands at Rs 69.78 crore.
As on March 31, 2009, its EPS works out a low Rs 0.41 on FV of Rs 10, but its RONW stood at 5.3 per cent, which is comparable with some its peers.
Professional Management
The second reason for Nitesh’s success is the strongly professional management led by the company’s founder Chairman & Managing Director Nitesh Shetty. The presence of corporate stalwarts such as Subir Raha, G. N. Bajpai, James Brent, Ashok Aram, Darius Udwadia, among others, on the Board of Nitesh Estates reflects in ample measure the company’s strong commitment to corporate governance. Explaining the rationale behind taking these stalwarts on board, Shetty says, “Real estate being a little grey area in people’s perception, we felt one of the things to do which others haven’t done is to try and corporatise this business. So we asked these very senior people to sit on our Board to project ourselves as a next generation real estate company.”
That apart, the company is professionally managed and performance-oriented. Explaining the performance-driven culture of the company, Ashwini Kumar, Chief Operating Officer, Nitesh Estates, says, "Everyone sees his own performance linked up with the business goals and success of the company. And as the company succeeds, Nitesh is very happy to share the rewards with the employees. This is a company which has lot of entrepreneurial fire in its belly."
Going Places, Literally!
Now, Nitesh is set to go places with its mixed use projects such as Nitesh City in Chennai and Nitesh Wimbledon Gardens in Kochi. It is also planning to launch a project in Goa. Nitesh City will be a one million sq ft development including a luxury hotel and 100 residences associated with the hotel. Nitesh Wimbledon Gardens in Kochi will be one of South India’s largest urban mixed use development covering two million square feet of homes, retail, office and service apartments. The expansion into Chennai and Kochi opens up vast business opportunities for Nitesh. Of course, the company’s geographical diversification into other cities in South India also derisks the company’s business as well as it would no longer be solely dependent on the Bengaluru market. But even after this geographical diversification, the company would still be predominantly dependent on Bengaluru. Hence any downturn in the real estate prices in Bengalru would adversely affect the fortunes of Nitesh.
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The Recipe for Success
So what is the recipe for Nitesh’s astounding success? The first is the joint development model and the other is partnership with big names. “Two things separate us from the rest. One is the joint development model, which has allowed us to grow fast because we don’t have to buy land. We work with landowners, arrange finance through institutions and build a brand. The second is we focus on partnerships, whether it is partnership with ITC, Ritz-Carlton or the three large PE funds. That’s what has helped us grow in the last five years,” explains Shetty. Explaining the rationale and the advantages of the joint development model, Executive Director L. S. Vaidyanathan says, “Joint development model gives larger opportunity with limited capital and enables us to share risks and rewards with the developers. Going forward, joint development model is going to be the real strength of this company”.
The flip side of the joint development model is that the company has to find landowners who would be willing to enter into such an arrangement. Secondly, since the company does not own land, it cannot develop the land as and when it wants to and will have to depend on the landowner for developing it when the latter wants it to.
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Powering Future Growth
The company plans to raise about Rs 500 crore (incl. greenshoe option) from the market to fund its ongoing projects and future growth. It is executing the Ritz-Carlton in Bengaluru and developing a million sq ft of retail space in Chennai. “Majority of the IPO amount is going to get deployed towards for Ritz-Carlton project in Bengaluru and retail development. About Rs 86 crore debt is sitting on the balance sheet which we would like to repay and make the company debt-free,” informs Vaidyanathan.
As for future, Nitesh already has its hands full with some of the most prestigious projects. Also, the residential, office and retail property market is looking good due to the economic recovery, and with the IPO funds in its kitty, Nitesh would be well-poised to take advantage of the upturn in the real estate market.