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Prestige Estates Sells Assets Worth Rs 7,467 crore to Blackstone Group – Top Indian Market News

Prestige Estates sells assets worth Rs 7,467 crore to Blackstone Group

Prestige Estate Properties Ltd has sold assets worth Rs 7,467 crore to investment firm Blackstone Group as part of the first phase of a Rs 9,160 crore deal. Phase-1 of the transaction included the sale of 12 assets comprising of completed retail, office, and hotel properties. With the completion of this transaction, Prestige Estate’s net debt has reduced to Rs 997.5 crore (compared with Rs 8,464.5 crore as of December 31, 2020). Phase-2 of the transaction is expected to be completed by the end of the next quarter.

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Have adequate spectrum to be competitive in market: Vodafone Idea

P Balaji, Chief Regulatory and Corporate Affairs Officer of Vodafone Idea Ltd (VIL), said the company has an adequate spectrum to meet customers’ requirements and to be competitive in the market. He said that VIL had bid for just as much radiowaves as it needed to boost its services and coverage. This commentary comes after several reports stated that VIL may not have acquired large amounts of spectrum in the recent auctions due to financial constraints. Vodafone Idea’s spectrum holding after the recent auction stands at 1,768.60 MHz.

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Kalyan Jewellers IPO to open on March 16; price band fixed at Rs 86-87

Kalyan Jewellers, on Thursday, announced that it will open its initial public offering (IPO) on March 16. The price band of the IPO has been fixed at Rs 86 to Rs 87 per share. The offer size is Rs 1,175 crore, which comprises a fresh issue aggregating to Rs 800 crore and an offer for sale (OFS) of Rs 375 crore. The company will utilise the funds for meeting working capital requirements and for general corporate purposes. The issue will close on March 18.

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JSW Steel’s crude steel production declines 1% YoY in February

JSW Steel Limited reported that its crude steel production declined by 1% year-on-year (YoY) to 13.06 lakh tonnes in February 2021. The average capacity utilisation was 93% last month. The production of flat-rolled products declined 6% YoY to 9.27 lakh tonnes. The production of long-rolled products increased by 10% YoY to 3.4 lakh tonnes during the same period.

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Infosys BPM extends strategic partnership with Newmont Corp

Infosys BPM announced a five-year extension of its strategic collaboration with the world’s largest gold mining company- Newmont Corporation. The company will standardise and digitise delivery models across Newmont’s mining sites. Infosys BPM will leverage its automation, artificial intelligence (AI), and design thinking capabilities to deliver increased value for Newmont. Infosys BPM is the business process management arm of Infosys Limited.

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SpiceJet to offer RT-PCR test for Rs 500 in Mumbai, Delhi

SpiceJet Limited has launched the country’s cheapest Covid RT-PCR testing facility for the general public at Rs 499 through its subsidiary, SpiceHealth. It will also offer the testing facilities at a special price of Rs 299 (which is one-third of the prevailing market rate) to its passengers. In the first phase, SpiceHealth will make its testing facility available in Mumbai and Delhi.

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NMDC declares interim dividend of Rs 7.76 per share

NMDC Limited’s board has approved an interim dividend of Rs 7.76 per share for the financial year 2020-21. The company has fixed March 23, 2021, as the record date for payment of the interim dividend. State-owned NMDC is India’s largest iron ore miner and produces about 35 metric tonnes (MT) of iron ore from its three iron ore complexes in the country.

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Ramco Systems goes live at Nigeria-based Caverton Helicopters

Ramco Systems Limited announced that it has gone live at Caverton Helicopters with its Aviation M&E MRO Suite V5.8, thereby integrating and digitally transforming its business processes. The installed Aviation Suite helps Caverton Helicopters to track transactions, generate flight contract billing, and execute work packages. Caverton Helicopters is a Nigerian aerospace company that serves the West African offshore oil and gas industry.

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Ares SSG Capital completes acquisition of Altico Capital

Hong Kong-based Ares SSG Funds has completed the acquisition of debt-ridden Altico Capital. This buyout marks the first resolution of a defaulting non-banking finance company (NBFC) outside India’s Insolvency and Bankruptcy Code (IBC). State Bank of India (SBI), Bank of Baroda, Yes Bank, ACRE ARC, and Aditya Birla Finance were the main lenders to Altico Capital that have credit exposure. 

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Firms of Rakesh Jhunjunwala, Samir Arora file for mutual fund licenses

Helios Capital Management and Alchemy Capital Management are among four investment firms that have applied for mutual fund licenses with market regulator SEBI within the past 4 months. Singapore-based Helios Capital is founded by Samir Arora, while Alchemy Capital is co-founded by ace investor Rakesh Jhunjunwala. Bajaj Finserv, Capitalmind (Wisemarkets Analytics), Frontline Capital Services, Unifi Capital, and Zerodha Broking are other firms that have applied for mutual fund licenses.

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USTPO grants patent to Newgen Software for invention of advanced binarization process

The United States Patent and Trademark Office (USTPO) has granted a patent to Newgen Software Technologies Ltd for an invention entitled “Image Processing System and Method”. The patent is for a period of 20 years, which starts from March 2018. The invention is an image processing system that binarizes images, which refers to converting colored and grey images to black and white images. The process of binarization is used to reduce image size and to facilitate document analysis.

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Market News Top 10 News

Adani Ports to Develop West Container Terminal at Colombo Port – Top Indian Market News

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Adani Ports to develop West Container Terminal at Colombo Port

Adani Ports and Special Economic Zone Ltd (APSEZ) will develop the West Container Terminal (WCT) at Colombo Port. The Sri Lankan cabinet, on Tuesday, approved the plan through a tripartite understanding with India and Japan. WCT will have a 1,400-metre quay wall, terminal area of about 64 hectares, and an annual capacity of 2.6 million TEUs (twenty-foot equivalent unit).

In other news, APSEZ announced that it had handled cargo volume of 21.12 million metric tonnes (MMT) in February 2021, which is an 8% year-on-year (YoY) growth.

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Bharti Airtel acquires spectrum worth Rs 18,699 crore in auction

Bharti Airtel has acquired 355.45 megahertz (MHz) spectrum across sub gigahertz (GHz), mid-band, and 2,300 MHz bands for Rs 18,699 crores in the latest spectrum auction. This will help improve the company’s deep indoor and in-building coverage in every urban town. The spectrum will also help improve its coverage in villages. Bharti Airtel said the acquired spectrum would help them provide services to an additional 9 crore customers in India.

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Prestige Estates signs agreement with Blackstone to sell 12 assets in Phase-1 of Rs 9,160 crore deal

Prestige Estate Projects has signed definitive agreements with global investment firm Blackstone to sell 12 completed assets in the first phase of a Rs 9,160-crore deal. In November 2020, Prestige Estates had signed a term sheet to sell a large portfolio of completed and under-construction properties to Blackstone for an enterprise value of Rs 9,160 crore. This includes completed offices, retail properties, and hotel properties. The company will use the funds for future expansion activities and repayment of debt. 

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Vodafone Idea buys spectrum in 5 telecom circles

Vodafone Idea Ltd (Vi) has acquired spectrum in India’s five telecom circles in the latest auction for 4G wireless services. However, the company did not disclose the quantity of spectrum bought or the financial details of the transaction. Vi said it expects that a large quantum of spectrum will be made available for 5G services at fair prices to enable operators to roll out the technology rapidly.

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Jindal Steel to acquire bankrupt Reliance Naval & Engineering: Report

As per a report from BloombergQuint, Jindal Steel & Power Ltd (JSPL) and two other groups were the latest to express interest in bidding for Reliance Naval & Engineering Ltd. “For Jindal Steel, Reliance Naval can be a captive client for the company’s shipbuilding plates”, said JSPL managing director Vidya Rattan Sharma. The reports further state that Dubai-based shipping firm GMS and Kotak Special Situations Fund were among the others that registered to bid for Reliance Naval.

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Engineers India secures consultancy project worth Rs 600 crore

Engineers India Limited (EIL) has received a consultancy project from Indian Oil Corporation Ltd (IOCL). EIL has been awarded the project for execution of ‘Consultancy for Overall Project Management’ and EPCM (Engineering, Procurement, Construction, Management) services for capacity expansion of IOCL’s Panipat Refinery from 15 million metric tonnes per annum (MMTPA) to 25 MMTPA. The total order value is around Rs 600 crore.

Cipla receives USFDA approval for Sumatriptan Nasal Spray

Cipla Limited has received final approval from the US Food and Drug Administration (USFDA) for Sumatriptan Nasal Spray. The drug is indicated for the treatment of migraine attacks. According to IQVIA (IMS Health) data, the generic version of Sumatriptan Nasal Spray had US sales of approximately $53.3 million (~Rs 390 crore) for the 12-months ending December 2020. 

In other news, Cipla said its Gulf subsidiary has expanded its partnership with Alvotech for the marketing and distribution of four biosimilar medicines in Australia and New Zealand.  

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Govt to divest 10% stake in Ircon International

The Government of India announced that it will sell up to 4.70 crore equity shares of public sector construction firm Ircon International. This represents 10% of the issued and paid-up share capital of the company. The floor price for the offer for sale (OFS) has been fixed at Rs 88 per share. The OFS will open tomorrow (March 3, 2021) for retail investors.

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Bajaj Healthcare gets approval from Maharastra PCB to restart Tarapur unit

Bajaj Healthcare Ltd has received approval from Maharashtra Pollution Control Board (MPCB) to resume operations at its Tarapur unit in Maharashtra. The MPCB had issued a notice to the company in January 2021, directing the closure of operations at the Tarapur unit for alleged violation of the provisions of the Water (Prevention and Control of Pollution) Act 1974 and Air (Prevention and Control Pollution) Act 1981.

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Subex joins O-RAN Alliance for open radio access networks

Subex Limited announced that it has become a member of the O-RAN Alliance to support the development and standardisation of Open Radio Access Networks (RAN). [RAN is the part of a telecommunications system that connects individual devices to other parts of a network through radio connections] With its expertise in advanced network analytics based on machine learning, Subex would help drive innovation in the RAN domain. 

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Gayatri Highways acquires 51% stake in Balaji Highways Holding

Gayatri Highways Limited, on Tuesday, said it has successfully completed the acquisition of 51% equity share capital of Balaji Highways Holding Private Limited. Hyderabad-based Balaji Highways is engaged in the business of undertaking infrastructure projects such as the construction of state and national highways.

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Editorial

The Real Estate Boom in India. Who Will Benefit?

The real estate sector is one of the largest contributors to India’s economy. It is a highly competitive industry that constantly faces massive hurdles. Amidst the Covid-19 pandemic, real estate developers were forced to halt construction activities. They saw a considerable decline in sales volumes. The rental income from malls and office complexes saw a fall. All external conditions led these companies to incur losses. 

Fortunately, with the removal of lockdowns, things are finally looking positive for the sector. Certain realty firms are now witnessing demand recovery and have also posted great Q3 results. However, we must understand an interesting concept that defines the trend of this particular industry. We shall look at how the present conditions prove to be favourable for large real estate companies. Let us dive right in. 

What is the Real Estate Cycle?

The real estate cycle is a concept that helps predict the income and appreciation performance of a real estate property. It is a sequence of recurrent events based on the economic and emotional factors that affect supply and demand for properties. Historically, it is found that the average real estate cycle spans 15-18 years. However, these cycles are unpredictable and can sometimes last much longer. The population structure, interest rates, overall health of the economy, and government policies (taxation) are some of the major factors that affect this cycle. With interest rates of loans at very low levels, there is no doubt that Indian Real Estate is in a booming cycle now.

Four Phases of the Real Estate Cycle

The real estate cycle consists of four main phases- recovery, expansion, hyper-supply, and recession. This means that there has never been a sustained period of expansion or hyper-supply without a recession- followed by recovery. Let us understand each phase in detail:

1. Recovery: This is a period when rental growth remains stagnant and there are no signs of new construction. Due to financial setbacks, people would be hesitant to buy or construct new properties. It is also a phase when investors buy and hold distressed properties and add value to them. This would allow them to sell or rent out these properties at high rates, right as the economy shifts into the expansion phase.

2. Expansion: This refers to a period when the general economy is improving, with more people being employed. They will regain their confidence in the economy, and thus, the real estate market. Individual renters and homebuyers will be in a better position to move to higher-quality houses/apartments. Real estate developers receive greater demand for their properties. New residential or commercial projects would be launched to meet this growing demand.

3. Hyper Supply: During the expansion phase, there would be a tipping point when supply begins to exceed demand. This could be due to the availability of too many apartments or houses in the market. And, there could be a sudden shift in the economy that leads to a decline in demand. Property owners often start to liquidate their assets out of fear that their properties will go vacant or unsold. 

4. Recession: This is a period when supply exceeds demand by a wide margin, and property owners suffer from high vacancy rates. People would be suffering from the economic downturn, and landlords would be forced to lower their rental rates. At the same time, certain investors use this opportunity to purchase distressed properties at very high discounts. They hold on to these properties, add value to them, and finally sell or rent them out just as the economy begins to recover.

The Current Scenario in India

Major real estate developers in India feel that the real estate cycle has now turned for the better. According to Pirojsha Godrej (Executive Chairman of Godrej Properties), demand is picking up and inventory is getting absorbed steadily. Customers and investors who had stayed away from residential real estate over the last 4-5 years are returning to the sector. This is primarily due to lower interest rates and higher disposable income among individuals. With the removal of all lockdown restrictions, we are witnessing a great recovery in economic activities. Developers have been receiving an influx of demand from home buyers or even investors who wish to buy and hold properties. There is a marginal increase in demand for commercial spaces, as people are now slowly returning to work from offices.

As we know, people were forced to work from home amidst the Covid-19 pandemic. Many felt an urge to shift to better locations or apartments/houses. The geographical markets of Bengaluru, Hyderabad, Pune, and Gurugram have contributed heavily to the overall sales volumes of real estate companies. These firms believe that the real estate sector will continue to perform well over the next 6 months. The Maharashtra Government even reduced all premiums related to this sector by 50% till December 31, 2021. It has been reported that other states would follow suit and introduce cuts on stamp duties and registration fees. The Centre had also introduced a ‘last-mile’ funding mechanism for delayed housing projects. These measures would bring down the financial burden on developers and allow them to offer properties at cheaper rates. 

On the other hand, construction activities have resumed and are now in full swing. To meet the growing demand, developers are focusing on completing existing projects. They have also acquired land in major cities and towns to launch new projects. This ultimately provides a well-needed boost for the cement, steel, paint, and other allied industries. It also generates employment opportunities for lakhs of people in India.

Listed Companies in Focus

As mentioned above, real estate companies in India are now showing an improvement in overall operational performance. Some of the major players in this sector had posted very strong results for the October-December quarter (Q3). Let us look at some of these: 

  • Oberoi Realty Ltd reported a 93% year-on-year (YoY) increase in net profit to Rs 286 crore in Q3, while its revenue rose 57% YoY to Rs 828 crore. There was a sharp surge in demand for higher-end apartments in Mumbai, where the company has a strong foothold.
  • Indiabulls Real Estate Ltd reported a 64% YoY increase in net profit to Rs 80.69 crore in Q3. Its revenue stood at Rs 756.81 crore during the same period. We saw that the share price of the company jumped 12% after it posted these results.
  • Sobha Ltd is yet to post its Q3 financial results. However, the company announced that it had achieved its highest-ever quarterly sales volume in Q3 FY21. It posted a total sales volume of 11.33 lakh square feet of super built-up area, valued at Rs 888 crore. Sales volume and total sales value were up by 27% and 29%, respectively, as compared to Q2 FY21.

It is expected that prominent firms such as DLF, Godrej Properties, Phoenix Mills, Prestige Estate, Embassy Office Parks REIT, and others are very likely to show robust sales growth during Q3. These companies have a positive outlook on India’s real estate sector for the upcoming fiscal year.

Allied Sectors

As construction activities have resumed, the demand for steel and cement are at a record high. At the same time, the prices of both these components have skyrocketed due to alleged cartelisation by large domestic players. China has also been importing and hoarding large quantities of steel, even though they contribute ~51% to global steel production. Now, companies such as SAIL, Tata Steel, JSW Steel, ACC, JK Cements, and Ambuja Cements are benefiting from increased margins. 

Similarly, we are also witnessing strong sales growth of companies such as Asian Paints, Berger Paints, and Kansai Nerolac Paints. The paint business in India is booming, and we can see conglomerates having a strong desire to enter this segment. For example, Aditya Birla Group’s flagship company- Grasim Industries Ltd – announced its plans to enter into the paints business with an initial capital of Rs 5,000 crore. 

Conclusion

After going through a prolonged period of difficulties, things are finally looking positive for the real estate sector. With the anticipation of robust growth and financial performance, we could see an uptrend in the share prices of companies mentioned above. These firms are highly confident about the future prospects of the industry as a whole. This is supported by the present economic conditions, which encourage people to invest or buy new properties. The very low interest rates offered in housing loans, and lower stamp duties and other taxes are making this a perfect time for house-owners.

Developers are in a position to offer incentives or attractive payment schemes. The state and central governments had also introduced mechanisms to decrease the financial burden faced by these companies. The changing patterns of consumer behaviour and the integration of online and offline retail formats have positively influenced the real estate sector. Firms that offer interior-decoration solutions will also obtain a massive boost.

In the upcoming Union Budget 2021, this sector will look forward to additional measures that can support a further recovery in demand and remove supply-side challenges faced by developers. Such policies would help them show increased growth in the prevailing favourable conditions. Exemptions or deductions in tax rates would encourage people to acquire the houses or apartments of their choice. All eyes are focused on how the developers make use of the recovery and expansion phases of the real estate cycle. Will they be able to leverage the current situation and cater to the rising demand? Let us wait and watch.