These little-known realty shares gave sky-high returns in last two years

Real estate shares were every investors’ darling before the 2008 global financial crisis. After the outbreak of crisis, mounting losses, ballooning debt levels, higher inventory due to sluggish demand and unwarranted venturing into non-core businesses took the sheen off the sector. Even as the sector continues to remain in doldrums and top-notch realty shares remain the worst performers on the bourses over the past few years due to all these nagging issues, some little-known gems have performed exceedingly well giving investors overwhelming returns in the last couple of years. Some nine companies in the mid-cap realty space posted returns in the range of 126 percent to around 600 percent in the last two years (July 2103-2015), boosted by prospects of accelerated quarterly earnings, clarity in business fundamentals and improving balance sheet in many of the firms. [caption id=“attachment_2323608” align=“alignleft” width=“380”] Reuters[/caption] Vipul Ltd was the biggest gainer in the mid-cap realty space, zooming 585 percent in past two years as its stock surged to Rs 49.90 on July 1 from Rs 7.28 in the same period in 2013. Ashiana Housing followed it with gains of 423 percent as the stock advanced from Rs 46.14 to Rs 241.40 during the period. While CHD Developers flared up 267 percent to Rs 16.55, Tirupati Sarjan vaulted 210 percent to Rs 13 and Countro Condo zoomed 209 percent to Rs 2.66. Among other gainers, HDIL, Citadel Realty, Pressman Advertising and RDB Realty clocked gains in the range of 126-144 percent, respectively. The rally was not just restricted to these companies, as shares of 10 more small-to-midcap firms surged between 26-61 percent during the period under review. At a time when smaller listed realty companies witnessed significant buying interest in recent years, bigger established players on the other hand struggled badly on the bourses making their shares vulnerable to harsh investor treatment. Some of the big names such as Unitech tanked 65 percent in the last two years, Orbit Corporation 54 percent, DLF 38 percent, Parsvnath Developers 32 percent, Sunteck Realty 29 percent, Lok Housing 20 percent and Ansal Properties 13 percent during the period under review. Even if one takes into consideration the performance of big realty companies in the last one year when equity markets were on a roll due to change of guard at the centre, investors continued to shun these big names despite improved sentiment. In fact, in the past one year, shares of Unitech plunged 77 percent, Orbit Corp 64 percent, DLF 46 percent, Ansal Properties 44 percent and Sobha Developers 34 percent during the period. However, in comparison to the above some of mid-cap names in the realty space appreciated sharply, gaining 36-323 percent in last one year. “Some of the mid-cap realty companies can still be looked upon as a good long-term bet as many of them have seen their business fundamentals improving in last few years. Also, debt levels coming down in some of these companies is a good sign considering that several big realty peers are still struggling to reduce their debt levels,” said Jaspreet Singh, head of institutional research, Systematix Shares & Stocks Ltd. For instance, realty major HDIL in the last financial year ending March 2014-15 posted 19 percent rise in net sales at Rs 1,005.64 crore, while net profit jumped 23 percent on year to Rs 219 crore and total debt eased 2.3 percent to Rs 2,707 crore from Rs 2,770 crore in FY14. In case of CHD Developers, the company’s net debt dropped 27 percent to Rs 155.38 crore in last fiscal (2014-15) from Rs 213 crore in a year ago fiscal. For Ashiana Housing, investors cheered the company’s 104 percent jump in net profit in the last financial year. This seemed to be the reason behind the stock’s robust performance. Another such company RDB Realty saw its total debt shrink by around 80 percent in last fiscal. In FY14, the debt was reduced by 5 percent. However, investors need to exercise caution incase of some of these smaller listed realty companies which have run-up sharply even as their key financial parameters failed to show any major improvement during these years. One such company has been Vipul Ltd where its total debt increased 186 percent in 2014-15 to Rs 253 crore even as its net sales declined consistantly in last three fiscal years.