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
Akruti has a strong presence in the SRA Segment.
Strong Suspicion that even current price of Rs 650 won’t hold for long…A Broker strongly suggested to me at a “Diwali Do” that if I want to really earn big money I should short Akruti in Derivatives…Fall,actually a Crash in Share Price, was imminent despite nearly 90% of the shareholding with the Promoters and their attempt to support the Price…to probably protect pledged/collateral value on Loans
Therefore with so much market opinion and sentiment against Akruti,such strong Buy Reports being repeatedly send are bound to be viewed as P R overkill by Akruti…it will backfire on them…Hope they realise it…More Important….Potential Investors and Financiers are unlikely to be continued to be influenced by such reports
I hope and Pray better sense prevails at Akruti and it let’s the Market decide it’s share price independently without attempting to influence it,if it has been doing so….otherwise it has all the makings of another Lok Housing in the making perhaps !?