The stock of Housing Development and Infrastructure Ltd crashed 14.33 per cent from its previous day’s close on the BSE to end the day at Rs 96.25 on partial stake sale by the promoter, Sarang Rakesh Wadhwan, to fund land acquisition.

Over 1.67 crore shares changed hands on the BSE, against its two-week average of 47.40 lakh shares.

On Tuesday, Vice-Chairman and Managing Director Wadhwan sold 36.79 lakh shares at an average price of Rs 113.97, according to NSE bulk deal data. The buyer’s name was not disclosed. Today, Citigroup sold 49.39 lakh shares at an average price of Rs 100.6. It was not immediately clear on whose behalf the sale was carried out.

“We are aiming at debt reduction. This move was primarily to fund the land acquisition we had entered into about a year back,” Wadhwan explained to a TV news channel on Wednesday. No details were shared about the land purchase but the company expects this acquisition to add substantial value. HDIL’s debt currently stands at Rs 4,000 crore but the company is confident of reducing it significantly in quarters ahead, he said.

However, market analysts tracking the stock remained sceptical. According to a senior real estate analyst, the sharp fall in the stock could be an early warning sign of default.

“It is quite unusual to see the promoter selling stake to fund land acquisition as it implies the company is not able to fund it otherwise and it could be viewed as a last resort. This move also indicates that the company’s debt repayments could get tighter from here on and could be seen as an early sign of default. We maintain a sell call on the stock unless there is a positive trigger by way of better realisations from the company’s sale of land parcels, which could help reduce its debt position,” he added.

Calls to Wadhwan for his comments remained unanswered.

(This article was published on January 23, 2013)
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