Book Losses - DB REALTY

[INSERT_1]

DB Realty, Mumbai’s biggest residential real estate developer was recommended by us in our Analysis column, issue No 3, at a price of Rs 195. We recom mended the scrip because of its presence in one of India’s most lucrative real estate markets and expertise in execution of large scale redevelopment projects in south and central Mumbai, a huge real estate development pipeline of 61.1 msf at the end of Q2FY10 and was available at a huge discount to its project’s NAV. At current market price of Rs 122, the scrip is down by almost sixty per cent from our recommended level. The reason for such dismal performance is the unfolding of events that ultimately resulted into arrest of DB Realty's co-promoter Shahid Balwa in relation to the 2G scam. This arrest is likely to affect the company in two ways: First,Shahid Balwa was active in negotiating deals regarding getting the mandatory consent of 70 per cent from the tenants before starting the redevelopment of the area. So this may delay some of the projects and will affect new projects. Also, this arrest is going to increase the complexity of the fund-raising deals by the company. DB Realty has to make payments of around Rs 800 crore in the near future for a redevelopment project to Maharashtra government, besides starting of 12-13 projects in the next 7-8 months and the arrest of Shahid  Balwa is certainly going to impact the visibility of the project. Therefore we ask our readers to book losses and exit from the counter.