Two realtors who have seen maximum sell off has been Mumbai based players, Indiabulls Real Estate (IBREL), which has major investments from Steel baron Lakshmi Niwas Mittal and Pujit Aggarwal promoted Orbit Corporation.
At the end of March, 2011 FIIs held a 53.73 per cent stake in IBREL, which has fallen to 45.33 per cent in the September quarter of this financial year, a drop of 8.4 per cent. The heavy selling by institutional investors has battered the stock too .
The stock hit its new low since listing at Rs 60, down 5.06 per cent at the end of the day on the Bombay Stock Exchange (BSE).
FIIs have also shown the door to other realtors like D B Realty, Housing Development and Infrastructure Ltd (HDIL), Sunteck Realty and Bangalore-based Nitesh Estates.
The real estate sector has been grappling with interest rate hikes, slowdown in sales and an increase in debt burden of developers. Even though sales have dried up developers are not ready to cut prices and they are borrowing at a higher cost.
An analyst with a foreign brokerage who did not wish to be identified says, “Indiabulls Real Estate has failed to generate any cash flow earnings and most of its net asset value lies with its power venture where it will take time before any concrete results can be seen. The company has bought land parcels from National Textile Corporation (NTC) at very high prices where they are not able to capitalise. Even in its existing projects cash flow is a concern, and the sales slowdown in Mumbai is a negative sentiment.”
IBREL isn't the only case. Following the footsteps are fund managers who had bought stake in Orbit Corporation promoted by Pujit Agarwal.
Pujit Agarwal, managing director, of the luxury realty company said, “The realty market has been hit badly, FIIs have sold our shares but as I understand in the last two weeks FIIs have started re-investing. Our stocks have fallen down considerably but sales are slowly picking up now.”
The company's FII holding has fallen from 11.97 per cent in the March quarter to 6.73 per cent in the June quarter and stands at 2.26 per cent at the end of the September quarter, a fall of 9.71 per cent. Orbit's stock hit its 52-week low at Rs 26.05 per share at intraday, finally closing at Rs 26.40 down 1.12 per cent.
R Sridhar, group director, DB Realty, said, “I think the problem with the Indian market is that the FIIs are under a lot of pressure and they are trying to cut their exposure. But the shares at these prices are quite attractive and real estate is a long term story.”
DB Realty's promoters who are embroiled in the telecom 2G- scam, has seen a drop in FII holding from 5.46 per cent in March, 2011 to 4.54 per cent in September, 2011, a drop of 0.92 per cent.
Kamal Khetan, Managing Director of Sunteck Realty, indicated that institutional investors own close to 14 per cent stake.
The FII holding in the company has fallen from 6 per cent to 4.44 per cent, a drop of 1.56 per cent in the last six months.
The FII holding in Nitesh Estates has fallen to 21 per cent in the September quarter as compared to 23.07 per cent by March-end, a drop of 2.07 per cent.
An analyst from a domestic brokerage said, “Some funds had started selling IBREL shares in the open market, which has pulled the stock price to its new lows and we expect this to continue for sometime. Also the stock price of all the realty stocks have fallen to the same levels as it had hit when market was trading at 8000 points and at present we are trading at 16,065 points, if markets falter any further the funds will continue their heavy selling. This time around not only the Mumbai based players but Delhi based players will also bear the brunt.”
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