Business of Puravankara Projects Limited
Puruvankara is in the business of acquisition, development and marketing of real estate both residential and commercial properties. The promoters have over 31 years of experience in this field and the area of operations cover Bangalore, Kochi, Chennai, Coimbatore, Hyderabad, Mysore, Colombo and the United Arab Emirates (“U.A.E”).
The promoter group company has so far completed 12 residential projects and 1 commercial project covering approximately 3.18 million sq. feet of Saleable area and currently is engaged in 12 residential project and one commercial project covering 10.02 million square feet of saleable area.
The company has also entered into a partnership with Keppel Investment Mauritius Ltd. And is currently engaged in developing a residential venture in Kolkata.
Risks that Puravankara Faces
There are litigations that amount to Rs. 150 million as on December 2006 which Puruvankara faces and in the case that some of these proceedings are decided against the company the bottomline will be impacted by that amount of money.
Apart from the above risk the real estate market in India is hotting up and this would lead to an increase in the prices of land and can further dent the profitability of the company.
The company has shown phenomenal growth in top line with profits growing from just Rs.169.75 million in 2002 to Rs.2804.22 million in 2006. Similarly the profits have also grown from just about Rs.17.6 million to Rs.766.36 million in the last year. The EPS for the last fiscal has been Rs.2.71 however the company may not be justified in charging a very high P/E because the growth has really exploded rather than one that has been steady and can be expected in the future years as well. The reason for this is as the numbers keep growing and the base keeps increasing it s simply not possible to grow at past rates.
The real estate market is hotting up and expanding and even though there have been a slew of players intensifying the competition there may still be room for everyone. The RBI in recent times has also shown concern and is of the view that the real estate market runs the risk of over heating and may place controls via interest rate manipulations which will dent investor confidence and ability to raise loans.
All in all at decent valuations this may be a good stock to hold in one’s portfolio.