INDIA BUSINESS WORLD - March 16th - March 31st - 2008
SOROS BUYS 2.5% IN INDIABULLS REALTY ARM
The signs of a softening in property prices are unmistakable but veteran global investor George Soros does not seem to be worried as the real estate-savvy billionaire businessman has picked up a 2.5% stake in Indiabulls Real Estate (IRE) in a deal worth Rs 276 crore. The investment has come at the time when many of Soros’ US-based counterparts have been on a selling spree amid concerns over acute financial crisis in the world’s largest economy.
The deal was struck at Rs 455.8 on the day when the shares closed 4.2% down at Rs 449.4. Post-acquisition, there would be no dilution in promoters’ stake in the company as the transaction involved an exchange of stakes between Quantum and another leading US-based fund Morgan Stanley. When contacted, IRE director Gagan Banga said, “We do not comment on stock market transactions.”
After scaling dizzy heights in the bull run, real estate and construction stocks have taken a pounding since January. Analysts say there are fears that the stock market turmoil may take its toll on realty prices and also on the prospects of the industry. The company’s valuation, according to analysts, appears to have come down to reasonable level as its price/earnings ratio (P/E) plunged from as high as 1,150 times to 24 times currently.
George Soros has invested in quite a few Indian companies, mostly from real estate and infrastructure industry. Unitech, GMR Infrastructure, Anant Raj Industries and Shree Precoated Steels are some companies in which the investor had bought stakes in the past. Quantum Fund is also believed to have recently picked up some stake in Future Capital Holdings.
Market sources say select funds have been adopting contrarian investment strategy by accumulating beaten down shares in sizeable lots. These are mostly long term investments driven by optimism that the market may bottom out soon and valuations will start looking up. The near term market will also be influenced by the trend in Q4-FY08 results, which is expected to be positive given encouraging advance tax figures rolled out by corporates, say market sources.
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