This was given to Free flag subscribers on friday....

BUY PODDAR DEVELOPERS Script code 523628.

Target Rs 3000. in 2 years.

Few reasons can be as follows:

(i) Very high quality of earnings: The aggregate pre-tax ROE of the portfolio is 37% a year;

(ii) Exceptionally strong balance sheet quality: Of the 11 businesses, 8 have no net debt and the most leveraged business has interest cover of more than 3x;

(iii) Highly Scalable Businesses.

Poddar Developers qualifies on all counts. It is a very profitable business with very low debt. Also, it is a micro-cap with a market capitalisation of only Rs. 875 crore. So, you can imagine the extent of scalability that it has. The management, headed by Rohit Poddar, is very dynamic and clear-headed about the future path for the company.

To understand Poddar Developers’ business model, we have to look at four resources:

(i) Article in Forbes India which analyzes the prospects of the company and calls it “the next big realty thing given a 24.7 million unit shortage”. Rohit Poddar, the CEO, is quoted as saying “My business, in the years to come, won’t be judged as a realty business. It will be like any consumer business with a steady growth in top line and profits. The next year’s numbers will always be better than the previous”.

(ii) Feature on CNBC TV18 which explains the economics of low cost housing projects;

(iii) Advertorial which provides details of the mega township project in Badlapur;

(iv) Investors’ presentation dated May 2015 which sets out the “key strengths and differentiators” of Poddar Housing and provides details of the “Strong project pipeline providing near term cash flow visibility”.