DLF to see reasonable upside: Uday Kotak

94420 Investors following DLF. Share this News with them.

0

Like this story, share it with millions of investors on M3

DLF to see reasonable upside: Uday Kotak

Uday Kotak, Vice Chairman and Managing Director of Kotak Mahindra Bank sees significant institutional appetite for DLF. He expects reasonable upside in DLF for investors and the pricing fair.

Post your opinion here

 

0

Tweet

Share on Tumblr

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS DLF will have pronounced impact on real estate stocks DLF may list between Rs 560-Rs 565: SP Tulsian DLF will not get 'Vishal' listing: Experts DLF hits a high of Rs 583.95 on first day DLF more interesting for institutionals than retail & HNIs ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets DLF BSE | NSE 30/05/12 Are Mutual Funds betting on DLF? Other Stocks in this news Industrial Credit & Investment Corporation |

Uday Kotak , Vice Chairman and Managing Director of Kotak Mahindra Bank sees significant institutional appetite for DLF . He expects reasonable upside in DLF for investors and the pricing to be fair.

He sees DLF as key stock for investors playing on India. The execution ability will be a key to valuation of real estate companies.

He thinks short-term interest rates trend will soften. The appetite for quality paper is huge and large issues will up the interest.

Excerpts from CNBC-TV18's exclusive interview with Uday Kotak:

Q: The QIB portion did 5 times, what kind of post-listing appetite are you expecting from large or global institutions?

A: We think, there is a very positive feel about the company and there is significant interest from institutional investors in the stock. Some of it will be reflected on the volumes. I believe that DLF, besides having created history for being the largest IPO in India, is also beginning to reflect a very important trend, which the company, the lead managers and the investors now should be ready for, that there will be fair and reasonable upside for investors. But disproportionate upside compared to a very low price increase is not fair for the company.

DLF listing highlights the fact that the deal was fairly priced, from the point of view of investors. There is upside on the table for the investors on listing. At the same time, the pricing is fair to the company as well. That is a very significant trendship.

Q: Did you encounter concerns on valuations, when you did the road shows? As there is still some ambiguity in India on how real estate companies should be valued - on NAV, on future cash flows, or on earnings expectations. What is your general observation on how these stocks are being valued today in India and on what benchmarks?

A: When you are looking at valuations of a company like DLF, obviously the value of the land bank and the NAV and others are an important criteria. But more than anything else, the execution ability of the management and the team to make things happen on the ground in a difficult market like India, should be priced in, for investors. There is also a huge advantage to size that DLF have. If you combine, besides other things, quality of management, ability to execute deals on the ground and make projects happen and combine with the scale and size DLF has, this is a key stock for anybody wanting exposure, not only in the sector but at some level the India play itself.

Q: Are you saying that for Indian property stocks, there might be a case for them to be listed at a premium to their NPV, because many would be trying to understand what the parameters are?

A: Different people have different values for the same NPV (net present value) and you can see that in the NPV numbers which have come out on DLF. There are NPV numbers, which are 600 plus, and also lower. Therefore, that may be a judgment call. But I believe that, in addition to NPV, who can execute that scale and size, who can seize the new opportunity for the investor base, who has the management, quality and the bandwidth to be a truly national player, should also be kept in mind. Those are the things for which investors will be ready to go that extra mile, put their money and bet on truly the largest and the highest quality company in the sector.

Q: As a banker, do you think that concerns for real estate companies on interest rates and the fact that prices might get stymied from here, are overdone? Or do you think that concern is behind us?

A: We deal with interest rates for a living. And in the last 30 days, we are seeing the first signs of interest rates actually softening in the short end and upto 12-24 months. As you can see, even the long end, the 10-year bond is now at 8% down from 8.4%.

So we are actually beginning to see a little bit of a softening trend in interest rates, we are seeing our deposit rates beginning to go down and the world of interest rates is beginning to look much better than it looked three months ago. I don't think the market has adjusted to this new change in the real world of interest rates, which I think is very good for all assets, including real estate assets.

Q: How has this market absorbed the kind of paper, which has come its way in the last one month? There were some concerns with ICICI , DLF, these mega size issues, that the secondary market might get stifled. You would have to say that the market has done pretty well in that context?

A: Absolutely. If you remember you interviewed me in the context of the London Conference, I had said that there is a wall of money directed and that wall is humungous. The appetite for quality paper is fantastic. Therefore, I do not believe that the large issues will reduce the flow in the market. In fact, it will increase the interest from investors both in India and overseas. It will actually fuel greater appetite - it's a reverse logic.