Ultratech to Asian Paints, 5 firms that gain from Rs 25k-cr realty package

The government’s plan to set up a Rs 25,000-crore AIF or alternative investment fund, announced last week, to help the real estate sector complete unfinished projects, may have not moved the needle much in terms of stock prices. And investors should note that it may also take a while, say about a quarter or two, before potential legal issues are resolved. However, once the initiative starts rolling, there would beneficiaries even beyond the realty sector, which include companies producing cement, sanitary-ware, paints, tiles and pipes among other products. And, this is without considering the potential of the initial AIF corpus getting bigger.

While there are various estimates on the number of projects that would benefit from the government’s initiative, Binod Modi at Reliance Securities explains how it could impact the cement sector. The potential cement consumption from stalled housing projects spread across 1,443 projects in top-7 cities such as Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai Metropolitan Region (MMR), Delhi-NCR (accounting for 43 per cent) and Pune, can be as high as 20-25 million tonnes, says Modi. Likewise, demand for products such as electrical wires, switches, lights and other fittings, plywood, laminates, etc would also get a boost.

Here are some companies that could gain from the boost to real estate sector. Notably, even if there is a delay in implementing the package, analysts yet expect these companies to prosper on account of good growth in earnings in their routine business. 

For instance, at the lower end, Cera Sanitaryware is estimated to clock 15 per cent compounded annual growth (CAGR) in earnings over FY19-21, while the figure for Astral Poly and UltraTech is pegged at over 35 per cent during this period. Some of them are also leaders in their respective industry and their share prices have also corrected by 15-30 per cent from peak levels, even as leading indices are near all-time highs. 

For a few though, the upsides may not look attractive from current levels, and hence such stocks could be looked at on corrections.



Market cap and share price (both rounded off) are as on November 11, 2019; PE (FY21E) is estimated. Arrows in the boxes indicate potential upside based on one-year target price of the stock. Source: Capitaline, Bloomberg; Compiled by BS Research Bureau