Domestic MDF market size is pegged at 2500Cr currently & is expected to grow at 15% CAGR over the next 3 years (organised players to grow even faster).

The industry further has potential to capture incremental opportunity of 4500-5000Cr low-end plywood market. https://t.co/Cre3xVUNqu

@VishalBhargava5 The issue is that builders offering smaller carpet area per room. In some cases, it’s even difficult to fit king size bed.

A THREAD on how most real estate folks structure deals with outside investors.

Most people utilize the "preferred equity" structure when they raise money from outside investors. They "syndicate" deals.

Here's the basics:

The person (or team of people) putting the deal together is the "sponsor". Also called general parter. Referred to on twitter as the GP.

They find the property, do all the work, hire the management company and take fees. They often co-sign debt and always secure the financing.

The investor is generally passive, doing no work and putting in cash. This is the "limited partner". Referred to on twitter as the LP.

They don't co-sign debt. They simply read reports and ask the sponsors questions and cash checks every month (if the deal is going well).

There are two equity classes.

"Preferred equity" belongs to the LPs. Cash talks, so this is a higher class of shares. They are first in the "capital stack" behind the debt (bank loan).

"Common equity" belongs to the sponsor. They are generally last in the capital stack.

Sponsors generally co-invest. That means they hold both equity classes. A 10% co-invest is standard.

That means the GP has skin in the game. His 10% co-invest makes him both an LP and a GP.

The real estate market in India expanded at a CAGR of ~10% from $50bn to $120bn between 2008-17.

It's estimated to expand at a CAGR of 17.7% to $1tn by 2030. It will added $820bn in 10 years from $180bn in 2020.

Will throw a number of opportunities along the way.

Some points for Canfin Homes bulls to ponder upon:

1. It has been on the block twice in the last 5 years. Why didn't anyone buy?

2. If it gets sold, would the liabilities side stability remain?

3. Is it granular enough or only limited to Tier 2 cities unlike Aavas which is in

Tier 3 and Tier 4 and is able to print abnormal ROAs.

4. NIMs are okay-ish for a HFC. ROA is good at 2%+

5. ROE is 19%, because it is leveraged almost 9x.

My view remains- it isn't granular enough to escape competition from Banks like SBI and ICICI etc. Thus we see a lower

growth rate. Why not HDFC ltd over this in that scenario if you are settling for a lower growth rate and also taking the risk of competition and company being sold. Its likely to be a compounder and not a fast grower. Adjust expectations accordingly.

Disc: not invested in both^

@mahek108 @pd_log @nid_rockz @SwarnashishC @AnishA_Moonka @mmvRavindra Agreed !!

Oberoi will always remain a leader n mrkts also values it in the same way.