Realty stocks go below IPO price

'Likely to face further pressure in the short-term'


S. Shanker

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Mumbai, June 9 Realty stocks on the bourses took a battering on Monday with many trading far below their issue price.

The realty index touched a 52-week low, corrected 7.38 per cent at 5,752.22. On January 8, the index was 13,848.09 and a month back, on May 9, it was 7,891.10.

The Delhi-based DLF Ltd stock closed at Rs 481.55, 7.39 per cent lower than its previous close of Rs 519.95. The DLF issue was priced at Rs 525. Sobha Developers stock suffered a 6.8 per cent drop, closing at Rs 409.85. The issue price was Rs 640.

Puravankara Projects traded at Rs 210 at close, down 5.43 per cent. The IPO price was Rs 400.

At close Omaxe stock traded at Rs 174.05, down 3.68 per cent, far below its issue price of Rs 310.

Among the major losers of the day was Unitech Ltd, which was down 9.3 per cent over the previous close at Rs 184.80.

Housing Development and Infrastructure Ltd was at Rs 573.65, 8.81 per cent lower than its previous close. Phoenix Mills slid 8.27 per cent to Rs 276.85. On Friday, the stock closed at Rs 301.80.

Ansal Infrastructure was down 8.10 per cent from its previous close of Rs 113.60 at Rs 104.40.

"It's a cascading effect," said Mr Sameer Panke, Researcher, Dolat Capital Markets. The fall is a logical conclusion to the unnatural run up the stocks had over the last one year. The net asset values of the high beta realty stocks were unreasonable as also the assumptions of their performance.

Mr Suman Memami, Research Analyst, Religare Securities, said the realty market was expected to face further pressure in the short-term.

PE players were in a wait and watch mode and the NAV of the realty stocks would shrink because of the slowdown in execution, fall in realisations and rising cost. Moreover, uncertainty in the Indian stock market was further driving stocks to all-time lows, he said.

Major factors

Some of the major factors dragging the realty stocks down were slackening demand in both the residential and commercial segments and a downward trend in realisations across markets.

Mr Memami said there was also a pile up of inventory with builders and developers and liquidity crunch was forcing them to postpone new launches. In addition, the cost of under-construction projects was rising.