DLF's success boosts realty cos' confidence

The success of the DLF initial public offer might give more confidence to realty companies.

"This is just the beginning. Realty companies will raise a minimum of Rs 100,000 crore from the primary market in the next five years," said Prithvi Haldea of PrimeDatabase, a firm specialising in primary markets.

Haldea said the share of realty stocks in the total market capitalisation in India is insignificant at less than 2 per cent. In mature markets like the US and Europe, realty companies make up 10 per cent to 15 per cent of the total market cap.

"Real estate is still immature in India as reflected in the capital markets. It will become better represented at the bourses as it starts maturing," he said. 
 

REALTY STOCKS
Company	Prev close	Close on June 18	% Change
Ansal Properties & Infrastructure	273.00	258.00	-5.49
Peninsula Land	497.15	470.40	-5.38
Anant Raj Industries	1066.80	1015.00	-4.86
Unitech Ltd	525.15	506.25	-3.60
Parsvnath Developers	329.70	321.40	-2.52
Mahindra Gesco Developers	547.30	536.50	-1.97
Sobha Developers	847.20	833.35	-1.63

"If real estate sector performs well overall, that is in price movement and profitability, then many realty firms will finalise plans to raise money from the capital markets in the third quarter of this year," said Arvind Parakh, chief executive officer, Omaxe Ltd.

Incidentally, Omaxe recently got the nod from the market regulator for its public issue, which is expected to be out this July.

Delhi-based Vatika which had been planning to get listed next year, has got a confidence boost from the DLF IPO. "The DLF IPO will encourage other companies to get listed. It just proves that there is no lull as far as real estate is concerned ," said Gaurav Bhalla, executive director, Vatika.

Some listed companies may also look at raising more money from follow-on issues. "We have no plans as of now of raising more capital from the stock market. But the success of the DLF IPO will certainly be a factor in our current decision making ," said Kunal Banerji, president-marketing, Ansal Properties & Infrastructure.

The last six months have seen a correction in realty stocks, with companies seeing their market cap being eroded by over 25 per cent till April.

"The earlier hype and overvaluation of realty companies is a closed chapter today. Given today's GDP growth, the property market's growth is inevitable. This will be reflected with more companies getting listed," said Jigar Shah, director, KR Choksy.

Kamlesh Gandhi, head-investment banking, Religare is more cautious: "A lot will depend on the listing price of DLF and how sustainable the stock is. So do not expect a similar response from institutional investors for all realty stocks," he said.

The warning always needs to be kept in mind as today's stock postion of the companies shows, but the general trend towards realty entering stock markets is definitely positive.