Target: ₹988

CMP: ₹905.90

Oberoi Realty (OBER) has issued a clarification to stock exchanges on 24th Nov’22 w.r.t to its proposed 50 per cent area buyout in its completed super-luxury 360 West, Worli project for a consideration of up to ₹4,000 crore. While investors have been concerned over a possible rise in the company’s debt levels owing to this proposed transaction, the company has sought to allay these concerns and guides that this will be a cash neutral transaction for the company.

With OBER proposing to pay up to ₹70,000/psf on carpet area basis (just over current ready reckoner rates) vs. carpet area selling price of over ₹100,000/psf, it appears that the company may clock some marginal gains.

With OBER continuing to retain control over the entire sales of the project (including partner’s inventory) and company’s guidance of this proposed transaction being cash neutral, investor concerns over the company’s debt levels rising may be allayed.

We retain our Add rating with an unchanged TP of ₹988/share.

Key risks are a decline in demand for residential properties and weakness in office leasing.