Firstly some disclosures the idea of evaluating moats through floats was inspired from this amazing post from Professor Sanjay Bakshi
Secondly the candidate chosen to be evaluated is borrowed from Amit Arora ‘s blog – Poddar Developers Ltd
Now lets begin, Poddar developers ltd is a small Mumbai based real estate developer interestingly the Group is focusing on the value housing segments in Mumbai, within the MMRDA region.
Value housing or Affordable housing as it commonly called has huge demand in India. Poddar developers have a significant presence in Mumbai suburban region through multiple projects, you can access details here
So much so for our candidate now lets quickly define FLOAT – It is other people’s money which company holds temporarily. Durable FLOAT is something which becomes a cost less revolving fund for the company. The common sources for FLOAT are
– Trade payables (Look for companies who buys at Credit but sell in Cash )
– Customer Advances
– Deferred taxes (Companies having advantageous tax situation – unlikely to be durable)
Durable FLOATS create higher ROE and ROCE for the companies, reason – they are using other people’s temporary money to run their operations
How to calculate FLOAT for … Read the rest