Read this before putting your money on Nitesh Estates -Governance Now

Read this before putting your money on Nitesh Estates

Moneylife, a Mumbai-based magazine on financial affairs, digs out details you must know.

GN Bureau | April 23, 2010

Here we reproduce the moneylife story as it raises substantial issues of financial governance:

Audacious IPO by loss-making Nitesh Estates backed by investment from Times Group
Limited operations, poor track record and bad fundamentals make the stock hugely overvalued

Nitesh Estates Ltd, a Bengaluru-based real-estate firm, hits the market on 23 April 2010. The company was looking to price its shares in the band of Rs120-Rs128 but had to cut it by more than half to
Rs54-Rs56, sensing that investor response would be poor. Indeed, it is quite audacious of Nitesh Estates to even think of coming up with the IPO. For the nine months ended 31 December 2009, the company suffered a loss of Rs1.32 crore. For the financial year ended March 2009, it had a negative cash flow of Rs46.87 crore.

Interestingly, the company has made a pre-IPO placement to Brand Equity Treaties Ltd (BETL), owned by Bennett, Coleman & Company Ltd, owners of the Times Group, at Rs143 per share on 19 February 2010 for 10 lakh shares aggregating to Rs15 crore. This is the main reason one can see large advertisements by the company in various publications of the group. Under such deals—called private treaties—the Times Group takes a stake in an upcoming company in return for low-rate
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