Unusual build-up in Akruti City stock leaves market guessing
The Economic Times, March 18, 2009, Page 17
Mumbai-Based Realty Co Hits 52-Week High; Overtakes Unitech, Indiabulls Real Estate
Rajesh Unnikrishnan & Supriya Verma Mishra, MUMBAI
MUMBAI-BASED real estate firm Akruti City on Tuesday overtook Unitech and Indiabulls Real Estate to become the second-most valuable property firm in terms of market capitalisation. But the spectacular rise in Akruti’s share price over the past few months has raised quite a few eyebrows. The stock has been consistently outperforming the real estate sector as well as major equity indices during a period marked by sliding real estate prices and a slowing economy.
On Tuesday, the stock surged 12.3% to close at Rs 1,577.80, after touching a 52-week high of Rs 1,610 intra-day. The stock has risen 56% over the past one month alone, compared with a less than 2% rise on the BSE Real estate index, and a 2% fall in the BSE Sensex. Brokers are unsure if the run-up in Akruti’s stock price has to do with the company’s fundamentals, or the low non-promoter holding.
On Tuesday, nearly 70-lakh shares were traded on both exchanges combined, which is slightly more than the non-promoter holding in the stock. And despite such heavy volumes, less than 4% of the trades resulted in delivery. Of the company’s equity base of 6.67 crore shares, promoters own 90%, around 6% is held by corporate bodies, and the rest by the public.
As far as earnings go, the company has reported an earnings per share of Rs 58 for the first nine months of the current financial year, surpassing the EPS of Rs 44.87 for the whole of last year. But the company’s net profit for the third quarter (October-December) fell sharply, weighed down by heavy interest costs. Construction activity has seen a significant slowdown over the past 6-8 months, and many projects have stalled due to lack of funds. Most of Akruti’s projects are in Mumbai, where the fall in prices has been gradual compared to other parts of the country. Yet, it seems unlikely that Akruti would have been immune to the problems in the sector. Industry watchers say the sector in general is likely to fare poorly in the current quarter too, after a dismal performance in the preceding quarter.
“Many companies had booked revenues in their residential properties in advance, expecting timely completion of the projects and good demand,” says an industry person. “A lot of those revenues could be unwound in this quarter,” he adds. Also, brokers point out that the stock is not exactly cheap. On a trailing basis, Akruti is trading at a price to book value(P/BV) of over 13 times. In comparison, market leader DLF is trading at a P/BV of little over 2 times, while Indiabulls Real estate is quoting at a P/BV of less than 1. IL&FS Reality Fund has picked up 15% stake in Infrastructure Ventures India, an SPV floated by Akruti City, for Rs 200 crore. Akruti’s land bank for residential projects (6 million sq ft) in Mumbai has been primarily acquired through the slum rehabilitation route
On Wednesday, Fed officials are expected to signal that they will continue to keep a key interest rate at a record low near 0% for as long as necessary and use other unorthodox means to jump-start the economy.
The Fed has the leeway to focus on the weak economy because inflation pressures are expected to remain low in the face of widespread layoffs that are depressing wage demands.
The Economic Times, March 18, 2009, Page 17
Mumbai-Based Realty Co Hits 52-Week High; Overtakes Unitech, Indiabulls Real Estate
Rajesh Unnikrishnan & Supriya Verma Mishra, MUMBAI
MUMBAI-BASED real estate firm Akruti City on Tuesday overtook Unitech and Indiabulls Real Estate to become the second-most valuable property firm in terms of market capitalisation. But the spectacular rise in Akruti’s share price over the past few months has raised quite a few eyebrows. The stock has been consistently outperforming the real estate sector as well as major equity indices during a period marked by sliding real estate prices and a slowing economy.
On Tuesday, the stock surged 12.3% to close at Rs 1,577.80, after touching a 52-week high of Rs 1,610 intra-day. The stock has risen 56% over the past one month alone, compared with a less than 2% rise on the BSE Real estate index, and a 2% fall in the BSE Sensex. Brokers are unsure if the run-up in Akruti’s stock price has to do with the company’s fundamentals, or the low non-promoter holding.
On Tuesday, nearly 70-lakh shares were traded on both exchanges combined, which is slightly more than the non-promoter holding in the stock. And despite such heavy volumes, less than 4% of the trades resulted in delivery. Of the company’s equity base of 6.67 crore shares, promoters own 90%, around 6% is held by corporate bodies, and the rest by the public.
As far as earnings go, the company has reported an earnings per share of Rs 58 for the first nine months of the current financial year, surpassing the EPS of Rs 44.87 for the whole of last year. But the company’s net profit for the third quarter (October-December) fell sharply, weighed down by heavy interest costs. Construction activity has seen a significant slowdown over the past 6-8 months, and many projects have stalled due to lack of funds. Most of Akruti’s projects are in Mumbai, where the fall in prices has been gradual compared to other parts of the country. Yet, it seems unlikely that Akruti would have been immune to the problems in the sector. Industry watchers say the sector in general is likely to fare poorly in the current quarter too, after a dismal performance in the preceding quarter.
“Many companies had booked revenues in their residential properties in advance, expecting timely completion of the projects and good demand,” says an industry person. “A lot of those revenues could be unwound in this quarter,” he adds. Also, brokers point out that the stock is not exactly cheap. On a trailing basis, Akruti is trading at a price to book value(P/BV) of over 13 times. In comparison, market leader DLF is trading at a P/BV of little over 2 times, while Indiabulls Real estate is quoting at a P/BV of less than 1. IL&FS Reality Fund has picked up 15% stake in Infrastructure Ventures India, an SPV floated by Akruti City, for Rs 200 crore. Akruti’s land bank for residential projects (6 million sq ft) in Mumbai has been primarily acquired through the slum rehabilitation route
On Wednesday, Fed officials are expected to signal that they will continue to keep a key interest rate at a record low near 0% for as long as necessary and use other unorthodox means to jump-start the economy.
The Fed has the leeway to focus on the weak economy because inflation pressures are expected to remain low in the face of widespread layoffs that are depressing wage demands.
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