Andhra stocks rally to cheer bifurcation
Feb 19 2014 , Mumbai/ Hyderabad
Hyderabad realtors bullish, foresee sales pickup
Even real estate players rejoiced the decision, saying the move will lead to a pickup in sales in six months to one year.
Out of the 300 companies listed on BSE and NSE from Andhra Pradesh, most stocks from the cement, realty, infrastructure, construction and engineering sectors gained.
The gainers included Gayatri Projects (1.71 per cent), Prajay Engineers (5.07 per cent), Andhra Cement (3.05 per cent), Prism Cement (0.43 per cent), Anjani Portland Cement (1.99 per cent), Sanghi Industries (1.32 per cent) and Deccan Cements (4.98 per cent).
Other stocks from Andhra Pradesh that gained included International Paper (earlier Andhra Pradesh Paper Mills, 6.45 per cent), transport-logistics major TCI Industries (5 per cent), Sujana Towers (4.95 per cent), KSK Energy Ventures (3.49 per cent), VST Industries (0.81 per cent).
Stocks from the IT and pharma sectors, whose sales and profits are more aligned to national sales and exports, saw only modest price movements in Wednesday’s trade.
The top 10 listed companies from Andhra Pradesh in terms of net sales and profits saw modest price movement: Dr Reddy’s Laboratories (1.02 per cent), Divi’s Laboratories (0.48 per cent), Aurobindo Pharma (0.27 per cent), Amara Raja Batteries(1.40 per cent), Coromandel International (0.59 per cent), CMC (1.15 per cent), Infotech Enterprises (0.70 per cent), Kaveri Seed Company (-0.01 per cent), Andhra Bank (-0.18 per cent) and Natco Pharma (0.01 per cent).
Head of research at ICICI Securities Pankaj Pandey cautioned, “It remains to be seen how the ground situation pans out. So far there is no clear timeline; it is yet to be known whether employees will be given an option to shift to their choice location when the division takes place.”
Real estate players in Hyderabad expect a pickup in sales in six months to one year. They are hopeful of a price increase up to 25 per cent. Also, there could be an increased interest from the investor community, including NBFCs.
In case of the residual state of Andhra Pradesh, the demand will start picking up once its future capital is announced and would grow with new projects that would be announced along the way.
“Many of us have been selling at thin margins due to the increase in input costs coupled with slow offtake,” said B Jagannath Rao, managing director of Lotus Properties, which is now doing a premium residential project in one acre to have 35 units near Banjara Hills.
According to Rao, Hyderabad has been seeing choppy markets for six to eight years now, earlier due to recession and later due to political reasons that included agitations for and against Telangana.
Annual sales of residential units in and around Hyderabad average about 15,000 units a yearly and prices range from Rs 2,000 per sqft upwards in the city periphery to Rs 9,000 per sqft in prime locations depending on builders, specifications and size of a project.
Some segments in Visakhapatnam and Krishna districts are already matching prices the current capital city of Hyderabad, according to C Shekar Reddy, national president of Credai.
According to him, prices in Hyderabad are low compared with other cities with comparable infrastructure in place. Growth in places other than Hyderabad would be defined by various development plans that will be announced by the new government, he said.
“It is not right to say that there would be no buyer after Telangana is carved out. It is not right to say the market will collapse,” he said, adding that about 50 per cent of the buyers now came from other states.
The project inventory that would be available in three months to one year in Hyderabad is low. Projects in various stages might take three to five years to complete, he said, adding that the city is expanding and is not just focused on the west side, where many of the IT hubs are located.
“With the political stalemate finally coming to an end, the real estate sector in the region can aspire to enter the next phase of development,” said Sanjay Dutt, executive managing director for South Asia at Cushman & Wakefield.
“Critically, investors including NBFCs are expected to show greater interest in entering and committing to the market, ensuring long-term growth,” Dutt said.
“The real estate sector had been driven largely by end-users for the past couple of years but may now start to see renewed activity from the investment community,” Dutt said.
According to Jaiveer Reddy, managing director of Ashoka Developers and Builders: “There will be competition between the two governments to attract investments. This will be good for the real estate segment.”
In the words of M Narsaiah, managing director of Shantha Sriram Constructions, several big ticket projects across residential and commercial segments have been facing delays as the developers were adopting a wait and watch game. “This will boost the confidence of the industry players to up their investments,” said Narsaiah.