REPORT ON REALITY STOCK

TIMES NEWS NETWORK[ SATURDAY, JUNE 02, 2007 12:14:30 AM]


MUMBAI: The fate of several realty stocks may depend on the fortunes of DLF. If the DLF offering succeeds, other realty firms too will see a smooth sail; if the issue falters, they will have to redo their arithmetic. Till now the going has been good. Shares of property companies have been on an upmove ever since the Securities and Exchange Board of India (Sebi) cleared the industry giant's mega initial public offering (IPO). The recovery has happened despite concerns over cooling property prices, which had soared to unprecedented levels amid the real estate boom. "The realty story does not appear very compelling as property prices in metros like Mumbai have already fallen by 15-20%. The current rally, however, will help set the mood for the DLF issue," said an analyst with a leading retail brokerage house. All eyes are on the DLF issue, which is likely to hit the market on June 11. Merchant bankers feel the sustainability of real estate rally and the fate of the forthcoming IPOs will depend on how investors treat the DLF offer. Stocks led by Unitech and Peninsula Land have outperformed the market after Sebi approved DLF's Rs 9,000-crore plus offer on May 7. Though the uptrend in share prices has provided a breather to investors, brokers tracking the sector are not fully convinced about the 'rally'. Peninsula Land led the pack with a rise of 37%, followed by Unitech, which shot up 34%. Lok Housing and Constructions gained 12% while Indiabulls Real Estate advanced 10%. Sobha Developers and Parsvnath Developers rose 7% and 4.5%, respectively, between May 7 and June 1, 2007, on the BSE. Though companies like Unitech and Sobha Developers announced good Q4FY07 numbers, investors remain concerned over the fact that industry prospects are vulnerable to fluctuations in property prices and oversupply situation, say analysts. Unitech's net profit has shot up 13 times at Rs 984 crore while Sobha Developers posted a 82% rise to Rs 162 crore in FY07. A few more realty companies are soon expected to go to the public to raise Rs 4,000-5,000 crore. The list includes Omax (size Rs 1,500 crore), HDIL (Rs 2,500 crore) and IVR Prime (Rs 500 crore), among notable examples. Analysts, however, are divided on the prospects of the Indian real estate sector. According to ICICI Securities, oversupply concerns are overdone though sporadic drop in prices in overheated markets cannot be ruled out. The real estate sector has all the trappings of a winner, said the leading domestic broking house in its report. Citigroup, however, appears to be sceptical about the prospects of property developers. "India's real estate market is in pain," said the leading FII in its report. "The consensus view is almost unanimous that property prices are set to fall. It's pretty tough for the country's property developers," said Citigroup.