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Real estate: It’s still a good story
Posted by Srini Uppala | November 26, 2007 | 278 views
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Loading ...If the street was disappointed with the September quarter numbers of real estate companies, it was willing to forgive and move on. No developer really turned in spectacular results but you wouldn’t guess that from the manner in which share prices have rallied.
Unitech’s consolidated profit numbers, for instance were way below expectations at Rs 401 crore (Rs 4.01 billion), thanks to a delay in some of its projects and the resulting lower revenues. But at the end of October, the stock was trading at levels of Rs 383, up about 50 per cent since August.
DLF saw a sequential fall in operating margins to 69.7 per cent and if the net profit was higher by 33 per cent, it was only because of a lower tax rate and a smaller outflow on interest. But the stock was firm at Rs 950 levels post the results though it has since corrected to Rs 825 levels.
The signals from the industry are somewhat mixed; the developers, as also some industry watchers, say the story is far from over. Even if there is over-supply in some pockets, the long-term demand, they claim, is intact.
However, a recent report by Deutsche Bank cautions that IT companies - which drive three-fourths of the demand for commercial space - will be compelled to prune costs and therefore prefer to operate from smaller towns rather than Bangalore or Hyderabad.
The Bangalore-based Sobha Developers’ [Get Quote] though is convinced that Bangalore will remain a preferred city. Says Says P Kanodia, CFO, Sobha, “Our plans have not changed and even now 75 per cent of our projects are in Bangalore.”
Sobha’s top line stayed flat in the September quarter, but according to Kanodia it’s only because no project has seen a 25 per cent completion.
“We haven’t been able to recognise revenues for several projects but we will make up for it in the next couple of quarters,” claims the CFO.
Even the Delhi-based Parsvnath Developers [Get Quote], which sprung a nasty surprise on analysts when it disclosed that receivables had piled up to over Rs 1000 crore (Rs 10 billion), claims there is nothing to worry about.
Says Chairman Pradeep Jain, “The bookings are strong but the buyers are paying in instalments and the receivables will come down after we receive a few more payments.” Incidentally, the rise in receivables at Rs 400 crore (Rs 4 billion) is the same as the turnover of Rs 400 crore in the quarter, though the management has said it will clarify the numbers.
SOURCES:
Business Standard
Topics: Real Estate |
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