Subscribe to Parsvnath IPO for 1-2 years: India Infoline

Investment concerns

Rising competition in the north Indian markets

Majority of India’s largest real estate players have their operations in the north Indian markets. Most of PDL’s projects are in the same region-district as these big players. Greater supply coming to the market in the same area could lead to drop in property prices and consequently impact profitability.

Slowdown in property prices

All real estate stocks are a direct play on the property prices. Any rise in property price directly seeps in the bottom line and any drop impacts profitability severely. Property prices have run up sharply in the past two years, resulting in greater supply coming in to the market. Lower economic activity in any regions might not be able to create enough demand to sustain high prices pulling them down.

Valuations attractive - Subscribe

The issue has been priced in the range of Rs 250-300, giving PDL a market cap of Rs 55.4 billion (including the green shoe option). This looks attractive in comparison to the discounted net value of its projects in hand. We avoid valuing and comparing the company on earnings multiple as it would not reflect the true potential of the company. While we could see some value on listing, there is much more in store for the long term. We advise investors to subscribe to the issue with a 1-2 years time horizon.