Indiabulls Real Estate Triggers Best Rally In Realty Stocks In Seven Years
The S&P BSE Realty Index gained as much as 9.1 percent, the most since November 2009
Shares of Indiabulls Real Estate Ltd. jumped 42.5 percent, the most in a decade, after the company’s board said it is considering separation of its residential and, commercial and leasing businesses in a move that may help it unlock value.
The company is looking to segregate its commercial and leasing businesses, either as a standalone entity or a special-purpose vehicle – and will call it Indiabulls Commercial Assets Ltd. (ICAL). To that end, the company is exploring two options. Under the first option, ICAL will be placed as a separate holding company under Indiabulls Real Estate to hold its assets and investments. It may also explore the possibility of bringing in a strategic investor, the company said in a filing.
The other option will be to reorganise its existing businesses through a demerger and eventually list its commercial and leasing business, the company said.
“The market is expecting value discovery for Indiabulls Real Estate through this move as was evident from the stock rallying by over 30 percent during the day,” Abhishek Lodhiya, senior equity research analyst at Angel Broking said in an email to BloombergQuint.
The stock rose 79.3 percent in the past month, compared with a 3.4 percent increase for the company’s Bloomberg peers and the 20.7 percent gain in the S&P BSE Realty Index.
The company trades at 21.1 times its earnings in trailing 12 months and 18 times its estimates for the coming year. That compares with its Bloomberg peers, which are priced at an average of 47.5 times trailing per-share earnings.
A Trigger For Real Estate Stocks?
The S&P BSE Realty Index gained as much as 9.1 percent, the most in over seven years, led by index heavyweights DLF Ltd. and HDIL, besides the top performer Indiabulls Real Estate.
Analysts say other property developers are likely to follow suit and separate their commercial and residential assets. Market sentiment is improving as companies are looking to de-merge their commercial assets to unlock value, Adhidev Chattopadhyay, analyst with brokerage Emkay Global Financial Services, told BloombergQuint over the phone.