DLF Ltd and Unitech Ltd, India’s two largest property developers, were downgraded by Merrill Lynch & Co on concern that sales will slow and prices will decline as the nation’s economic growth falters. DLF was lowered to “neutral” and Unitech was cut to “underperform”, analysts Amit Agarwal and Gagan Agarwal said in a note to client on Tuesday. Indiabulls Real Estate Ltd. Was also downgraded to “neutral.”
New Delhi-based Unitech, the nation’s second largest developer, appears weaker than its larger rival and is selling assets to raise funds, the analysts wrote. The stock is the second-worst performer among Indian realty companies this year after plunging 95%.
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Unitech fell 4.6% to Rs 22.9 local time in Mumbai trading after earlier falling to its lowest level in more than two-and-a-half years. DLF, based in New Delhi, dropped 4.3% to 171, the lowest since Oct 27. Indianbulls Real Estate declined 5.2% to Rs 85.7.
“Unitech’s cash flow is under severe stress due to weakening sales, high net debt to equity ratio of 1.8:1 and commitments for the telecom venture,” the analysts wrote.” We expect the pressure on the cash flow to increase due to weak sentiment which will deter buyers.”
The Realty Index of the BSE fell 4.2% on Tuesday. The index decline 89% this year, outpacing the 58% drop in sensex. |
