The Hindu Business Line : Fewer floating shares in realty

Mumbai, Nov. 14 It is a case of too much money chasing too few stocks in the realty sector. With promoters holding a sizeable chunk of the stakes, large real estate companies are still under owned and in cases of the promoters’ holding being less, FIIs own majority stake in the non-promoter holding, say analysts.

Emkay Share and Stock Broking firm says that driven by large liquidity in the market and demand for realty stocks, the BSE Realty Index rose by 35.9 per cent in the last two months (as of October) compared with Sensex return of 24 per cent during the corresponding period.

High demand

As of September end, the total shareholding of the promoter and promoter groups in DLF is 88.21 per cent among 32 shareholders (including corporate bodies) and FIIs holding of 7.3 per cent.

In Unitech, 35 promoter/groups hold 74.56 per cent and 153 FIIs hold 6.82 per cent.

For HDIL, 17 promoters hold 61.5 per cent and 29 FIIs 9.34 per cent. In Puravankara Projects, 8 promoters hold 89.96 per cent and 21 FIIs 7.14 per cent. Six promoters of Sobha Developers hold 87 per cent and 53 FIIs 7.41 per cent. In Phoenix Mills, 10 promoters have a 47.92 per cent stake while 59 FIIs hold 42.64 per cent of it.

Mr Naveen Jain, Research Associate at Emkay, said it was a typical demand and supply scenario that impact price.

“Despite the market capitalisation of DLF, about 88 per cent of the stock was locked up. Hence, for whatever little of free float was available a high demand is there,” he said.

Given that the realty sector is still under owned, the expectations are that the sector will continue to attract strong money flows.

Another analysts felt, in a booming market, realty stocks are in demand and since there are few floating stocks around, it is only natural for the price to go up. Mr Jain said a parallel could be drawn with the banking sector, which opened up in the 90s.

market capitalisation

The real estate sector is set to dovetail the growth the banking sector achieved from 2001 to 2007, which had increased 15 times (percentage of BSE 500).

Similarly, the realty sector now accounts for about 5 per cent of the total market capitalisation. Of this 3.5 per cent was contributed by companies that were listed post-April 2006.

Globally, the sector weighs in excess of 3 per cent and range up to 16 per cent (Strait Times Index), he said.

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