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A Lion’s eye on the Bulls and Bears

“In India, companies may fall sick, but promoters rarely do!”

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November 8, 2008

Akruti’s P R on a continuous Overkill Drive to Influence Buy Reports from Analysts

On August 27,2008 I had posted a blog on Akruti warning of High Incremental  Debts at reportedly high Interest rates…the Price then was Rs 840 and the Market Cap was Rs 5600 crs against a networth of under Rs 800 crs and Debt of Rs 626 crs as on March 31,2008…Debt that had since climbed close to Rs 1000 crs and reportedly sales were being booked on even Properties pledged for these loans

Share Price has dropped to Rs 650 and Market Cap is down,but still very High, at Rs 4300 crs

So it was with some amusement that I received an email yesterday from an outfit called Research Reality recommending Akruti…The email interestingly bore links to download three seperate Buy Reports from three different Broking Houses…two reports were dated Dec 2007 and Feb 2008 when the Share Price of Akruti was Rs 1000 to Rs 1200 while one was of October 2008 when the share price was Rs 700…all three project a price of Rs 1400 +….The current price is Rs 650

The latest Report feels more like Company Propoganda…perhaps sponsored by the company itself and planted on potential Investors ! ?…Nothing New really…It’s happens regularly in India and even all round the world 

Risk Factors stated are very muted and don’t raise the issue of High Current Debt and it’s Cost and the impact on earnings growth of the Project Delays,Depressed Liquidity and Falling House Price and Demand Scenarios unfolding

Also there is no mention of the nature and current value of land,building and shares pledged or placed as collateral with Lenders

The Broking House loves the scale of the 44 projects and  the 118 million saleable sq feet that Akruti is involved in currently constructing over the next 7-8 years.Their CAGR EPS projections from FY 2007-2010 are over 100%…with a huge burst in FY 2010  

The Reality is that the Realty Sector is simply unlikely to revive in the next year or two…in fact a Big Builder tells me the Real Estate prices even in Mumbai,that were holding till now, will now fall sharply as Diwali Demand was the last Straw that Buiders were grasping onto…and Demand Surge did not happen.

A recent Press Report spoke of SRA Schemes simply being abandoned as the cost to the Builder comes to Rs 4000/sq ft ,considering also the cost of providing  atleast 300 sq ft each to the slum dwellers…even after the additional FSI that is granted, the fall in Selling Price/Sq Ft has evaporated all the obscene profits that were visualised on the projects read more

Conflicting Technical Take predicts a bull run of 42% to a Nifty of 4250 inside six months

Ooof !…Yes,I’m not a Technical Guy…but just received another Tech Report from a leading listed Broker,who just laid off 70 people on Thursday….It’s a conflicting and bullish view

It predicts that the Nifty will surge 42% to 4250 within Four to Six Months from now….that would mean a Sensex Level that goes past 14000 again in the first half of 2009

Such Conflicting Views at either end of the Opinion and Prediction Spectrum are the Challenges one confronts often in Equities….That’s the Beauty of Equities…there is always a Buyer and a Seller at a point….as Warren Buffett would say “Who says Market’s are Efficient !?”….and that’s the reason he finds Value at times…such as like this  

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