Market Rumour - 17 Sep

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A consortium of investors, led by private equity player 3i, is in talks to pick up a 4-4.5% equity stake in Adani Power for Rs 1,800 crore

KSK Energy Ventures Ltd said the shareholding of Lehman Brothers and its units in the company was locked in for a year ending July 2009.Lehman affiliates hold 28.41 percent in the company, which they had acquired as part of a pre-initial public offer transaction. The stock ended positive

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The collapse of Lehman Brothers and the bailout of Merrill Lynch, the global financial behemoths, are likely to affect Indian realty companies that are in the process of raising fresh funds. Many leading realtors, already facing a paucity of funds due to a slowdown or a correction in prices, will find it more difficult to raise resources even at the project level, feel bankers.

Merrill Lynch and Lehman Brothers have exposure to more than a dozen realty companies, including, Ansal Housing, Anant Raj Industries, Unity Infrastructure, the Puravankara group and J Kumar Infrastructure, among others.

Turmoil on Wall Street, which is primarily hit by the real estate sector, bankers feel that realty stocks may continue to face selling pressure in the domestic market.




More importantly, many realty companies had raised money from hedge funds or private equity firms through structured deals in the recent past. Under the agreements, these companies have given an assurance of 18 per cent return on capital and also pledged promoters’ holding as collateral. The investors have the option to sell these shares in the secondary market in case their prices go below a certain level.

Following the turmoil on Wall Street, which is primarily hit by the real estate sector, bankers feel that realty stocks may continue to face selling pressure in the domestic market.

DLF, the largest Indian realty player, is in the process of raising $750 million through its associate company, -DLF Asset (DAL). Sources said the company was talking to JP Morgan for funds.

In 2006, DAL raised $400 million from DE Shaw, a leading hedge fund, and another $200 million from Lehman Brothers. Last year, the company had also planned to raise funds through a public issue on the Singapore Stock Exchange. Investment banking sources said Lehman Brothers had sold its investment in DAL to Standard Chartered Bank.

Unitech, which has already raised $175 million from Lehman Brothers, is expected to mop up another $500 million in three different projects in Mumbai.

Lehman Brothers had already invested $175 million to acquire a 50 per cent stake in the company’s Mumbai joint venture.

Merrill Lynch and Lehman Brothers have exposure to more than a dozen realty companies, including, Ansal Housing, Anant Raj Industries, Unity Infrastructure, the Puravankara group and J Kumar Infrastructure, among others.


MARKET MAY FACE SELLING PRESSURE IN REALTY STOCKS
BE AWARE AND CAUTIOUS

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