Why is Akruti City stock buzzing?
Published on Wednesday, September 24th, 2008 at 1:00 PMAuthor: admin (5507 Articles)
Here is a verbatim transcript of Varinder Bansal’s comments on CNBC-TV18. Also see the accompanying video.
The Akruti City stock had rallied around 30% in the last five days whereas the real estate index is down 6%. DLF is down 6.5%, Unitech is down nearly 11%. The stock had recovered nearly 40% from the July lows.
It is believed that there is a very low float of the stock in the market. And that is because 90% of the stock is held by the promoters and around 4-4.5% is held by three institutions. So there is just 6-6.5% equity floating in the market.
The stock has rallied because Indiabulls Financial Services had acquired around 5.5 lakh shares on September 12. This was a pledge made by the company to Indiabulls Financial Services. Indiabulls Financial Services, via pledge of equity shares would hold around 5.62% stake in the company.
Normally, promoters with high holdings pledge their share to a brokerage and later on when they are full with money, they return the money to these guys and get their shares back. So, Indiabulls Financial Services have been putting in some money. They have been buying shares and supporting the price at this level.
The management said it will check and provides details on this later. Importantly, we don’t know whether this 5.5% is locked-in and for period of time.
In the past, if there is a pledge of shares, there is a lock-in period of around six months or one year depending on how you have negotiations with brokers.
There was a deal that the company was in the process of fructifying with Citi Venture Capital and AIG in January, which didn’t pass through. They were trying to place around 40-50% equity with both the private equity partners, which was a Rs 1500 crore deal. The Board has already passed an enabling resolution to raise up to USD 500 million and this could be done by QIP.
But the management has said that at this point, they are not considering any money raising activity, although they have an enabling resolution, because of current market conditions.
If you look at the outperformance in the stock, there are some doubts and people do not believe there is any fundamental justification to the kind of upsurge that we have seen in Akruti City, compared to any stock in the real estate pack. The low float also raises certain questions because there are some groups in the market community, which has a certain number of shares.
There are only 67 lakh shares in the market and the rest is with the promoters. So, only 67 lakh shares can make the stock move up or down.
Source : MoneyControl
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