'Realty cos with weak balance sheet may see de-rating'

Prakash Agarwal, Analyst (realty sector), RBS Equities talks to Krishna Merchant on the markets and favourable sectors.

DB Realty and Oberoi Realty have tanked after their names appeared in the loan bribery investigation case yesterday. What is your broad outlook on the sector?

Oberoi Realty's Chief Financial Officer (CFO) indicated that they were not involved. DB Realty too has clarified saying that they have taken a loan. This could be a part and parcel of some companies, which do not have strong project finance departments to raise funds.

If companies do not have a strong financial back up, they would opt for vendors who give loan. This is bad on corporate governance part and would lead to sector de-rating. 

Do you expect further de-rating of some realty companies?

The companies that have weaker balance sheet may get de-rated because it will be difficult for them to get loans, and they might be scrutinized for existing loans as well. However, companies with stronger balance sheet will not be affected.

For full story read: 'Realty cos with weak balance sheet may see de-rating'