Stocks of nine real-estate and construction firms, listed between April 2006 and now, are trading at stiff discounts to their listing prices. For two stocks, the discount to their listing price is as high as more than 40%. Six of the nine stocks are even trading below their offer
prices.
Analysts with brokerages say forthcoming public issues of construction firms, too, will face a similar fate, with the capital-market regulator tightening the disclosure norms for such companies.
Market regulator Securities and Exchange Board of India (Sebi) chairman M. Damodaran said on Thursday that real-estate and construction firms that plan to enter the market must disclose their land-bank details with ownership pattern or purchase agreements. The firms have also been directed to project the valuation of their land-bank based on its present value, without taking into account any future appreciation.
Worst-hit is Parsvnath Developers Ltd. Its stock closed at Rs275.35, on Friday, a stiff 47.68% discount to its listing price of Rs526.30. It was listed on 30 November 2006 at a massive premium to its issue price of Rs300.
Tantia Constructions Ltd, too, traded on Friday at a substantial discount to its issue price. It closed at Rs124.65, a 43.34% discount to its listing price of Rs220. It made its debut on 28 April 2006, at an over 400% premium to its issue of price of Rs50. Four other stocks, including those of Akruti Nirman and Patel Engineering, are trading at over 20% discount to their listing prices.
The company which suffered the least is Unity Infraprojects Ltd. On Friday, it closed at Rs456.25, a 3.26% discount to its listing price of Rs471.70. It was listed on 12 June 2006 at a much higher issue priceof Rs675.
D.S. Kulkarni Developers Ltd and Sobha Developers Ltd are now trading at a discount of less than 20% to their issue prices. However, they are still at a premium to their offer prices. For instance, Sobha Developers Ltd on Friday closed at Rs777.05 against an issue price of Rs640. D.S. Kulkarni Developers closed at Rs280.75, marginally higher than its issue price of Rs275.
Meanwhile, Indiabulls Real Estate Ltd made its debut on the Bombay Stock Exchange on Friday . The company was formed following the de-merger of the real-estate business of Indiabulls Financial Services. It opened at Rs380.05, touched a high of Rs414.80 and closed at Rs325.65, the stock’s lowest level during the day.
“I would not say that the days of construction stocks are over. Only those firms that are fundamentally strong and not riding on projected valuation of their land banks will do well on the bourses. Others may find it tough,” says an analyst with a brokerage, run by a private Indian bank, on condition of anonymity.