Subscribe in NewsGator Online

Add to Technorati Favorites!

Follow by Email


Most Popular Links

Monday, November 29, 2010

Real Estate Companies Reconsider Capital Raising Plans

With real estate and financial services stocks battered on Dalal Street, several companies have been forced to review their capital-raising plans. At least one public sector bank, which was working on sale of shares to institutional investors, has put its plans on hold till sentiment improves.
But the worst hit would be real estate players, several of whom had lined up initial public offers (IPOs). The list included Emaar MGF, which had deferred its issue earlier, Embassy Projects and Lavasa Corp that has also received a showcause notice from the environment ministry. Raheja Universal, BPTP, Ambience, Lodha Developers and Kumar Universal were also planning share sales.
“The current controversy has adversely affected investor sentiment for certain sectors and until things settle down, investors are likely to be cautious,” said Pratik Gupta, head of equities at Deutsche Bank. JP Morgan India investment banking head Rohit Chatterjee said in the short term, investors are likely to stay away from finance and realty stocks. Drugmaker Claris Lifesciences, which was in the market to raise Rs 300 crore, had to lower the price band to Rs 228-235 from the earlier Rs 278-293 in view of the choppy markets. Poor response also forced the company to extend the issue closing date, originally scheduled to end on Friday, to December 2.
Investor worry was in evidence on Friday with the BSE Sensex closing 184 points down at 19,136, led by a 4.68% decline in real estate stocks. This is the lowest closing level in 11 weeks. During the day, the Sensex dropped below the 19,000-mark as investors were worried about the future of the sector and tightening of lending to realty companies.
The fall was led by Unitech, which is also under the lens in the 2G telecom scam, declining by 4.8%, while DLF, the country’s largest real estate developer, recouped most of the losses and closed 1.7% down. Shares of Hindustan Construction, the promoter of Lavasa, crashed 19%.
In the afternoon, financial services secretary R Gopalan tried to play down the fears saying there was no directive to cut down lending. During the week, the Sensex declined by 2.3% with the loan probe by CBI affecting sentiment since Wednesday. Among the financial services companies under the CBI scanner, LIC Housing Finance closed 12% lower at Rs 931.15, while Central Bank dropped 10% to close at Rs 188.40. Investment bankers said the overall India story remained intact but appetite for real estate and banking stocks had taken a hit. This was apparent in the widening of spreads on credit default swaps for Indian stocks seeing the biggest jump since June. An increase in the spreads indicates that global investors are worried about the prospects of Indian stocks.
“Overseas institutional investors are very worried. There main fear is about the possibility of more murkiness in the real estate sector,” a senior executive at a leading foreign bank said. Bankers said the inability of developers to tap the stock market could affect them severely as banks are expected to tighten flow of loans to the sector. Even before the scandal broke out, RBI had tightened norms for lending to the sector fearing that a bubble was building up. “There may be some cash flow problems for some of the companies in the short term given that IPOs are tough and banks are tightening lending norms,” said a banker.

View my complete Profile

Contact Us

Real Estate
Verification No.:*
contact form faq
Year 2009
May 2009

pril 2009

March 2009

February 2009 Year 2008
Page copy protected against web site content infringement by Copyscape