Dear Readers,

I am sure you all might be well aware of Pragati Maidan. If not, no issues. Check out the venue of Auto Expo 2012 and you will get to know about Pragati Maidan.

Just to share a few details, Pragati Maidan is a venue for large exhibitions and conventions in New Delhi, and with 774,720 sq. ft. of exhibition space, it is presently Delhi’s largest exhibition centre. It is owned and managed by Indian Trade Promotion Organisation (ITPO), the premier trade promotion agency of the Ministry of Commerce and Industry, Govt. of India.

Pragati Maidan hosts over 70 national and international exhibitions annually, with the largest being the India International Trade Fair which attracts over 10,000 exhibitors and over 30,00,000 visitors.It also houses five permanent exhibitions which include the Nehru Pavalion, Atomic Energy and Defense Pavilion. Some of the events held in Pragati Maidan are the India International Trade Fair, World Book Fair and the Auto Expo.

The global trade exhibition business is a multibillion dollar market in which India presently has just a 0.7% stake while China has 13%. However, one cannot deny the fact that India is fast emerging as a preferred destination and its share in the trade exhibition business is growing faster than appear.

Now, how can one gain from the burgeoing share of India in the global trade exhibition business. Pragati Maidan, obviously doesn’t serve the purpose.

Well, luckily we have a listed company by the name of NESCO Ltd which owns an exhibition centre, Bombay Convention and Exhibition Centre (BCEC) in the financial capital of the coutry, Mumbai.


Today, BCEC is the only place in Mumbai where large scale exhibitions can be held. The next biggest competitor Nehru Center has only 25,000 square feet of space, whereas BCEC has 450,000 square feet, second only to Pragati Maidan.

More importantly the Global exhibition companies find the current state of infrastructure adequate. Thus, NESCO is planning to increase its exhibition space from 450,000 square feet to 1 million square feet. Besides owning a large space (a pre-requisite for holding an international standard trade exhibition), the company enjoys locational advantages as its located on a national highway and is just a 10-15 minutes drive from Mumbai Airport. Moreover a Railway station has been proposed which would be located right behind the NESCO complex. All these add to the competitive advantage of the company.

For FY 11, BCEC income was Rs 65.62 crore compared to Rs 54.04 crore in FY 10, an increase of 21%. Over 105 conventions and exhibitions were held at BCEC.

IT Park and Realty

This was about BCEC, however NESCO is sitting on a land parcel of 70 acres i.e. approx. 30 lakh sq. ft of space. and the management is utilizing every bit of it efficiently. Besides BCEC, NESCO has another important division i.e. IT Park and Realty, consisting of three IT buildings. IT 1 and IT 2 have a combined total space of 300,000 square feet, leased out to major IT companies. The construction of IT 3 building completed recently and the company has already started with the marketing of the same. The space under IT 3 is 6,60,000 sq. ft. The company had leased out 1,50,000 sq feet by Nov’11 and they expected to complete the MoUs for the all the remaining space before end of Dec’11.

So for FY 13, the revenue from IT Park division can more than double to Rs 130 crore from Rs 51.61 crore in FY 11. Also the company has already finalized the Design for IT building 4 and the construction work is expected to start any time soon. The CAPEX for the same should be around Rs 200 crore, as per the management guidance.

Growth drivers & Valuations

Though NESCO has recorded a phenomenal growth during the last 5 years, we believe there’s enough visibility for the next 3-4 years, largely because they still have much un-utilized space:

  1. Construction and leasing out of IT building 4
  2. Simultaneous expansion of BCEC from 450,000 sq. ft. to 1,000,000 sq. ft.
  3. Year on Year increase in rents of IT Buildings and rates charged for hosting exhibitions

Normally for such a company one would expect a debt-laden balance sheet, like any other real estate company. However NESCO is a debt-free company with extraordinary operating profit margins of 75% and net profit margins of 50%. Besides being debt free, company is holding liquid investments and cash balances worth Rs 170 crore. The business model of a company ensures adequate liquidity and cheap source of funding as the licensees and exhibition companies pay it in advance for the booking of the space.

So, we are getting 3 IT buildings with approx. 1,000,000 sq. ft. space (avg. value of Rs 13,000 per sq. ft., considering the location), an exhibition centre with a space of 450,000 sq. ft., 70 acres of land (worth Rs 2,500 crore +) and liquid investments worth Rs 170 crore for just Rs 800 crore (Read: the current market cap of the company).

The good thing about this company is that it is generating great cash flows that enables it to carry out construction and expansion of both the IT Buildings and BCEC, without resorting to debt, as they still have about 40-50% space unutilized.

Ekansh Mittal

[[email protected]]