Real estate stocks have returned with a bang. The BSE Realty turned in 188.08 per cent during this current market rally (March 9, 2009 — June 11, 2009) and 65.14 per cent for the year till date (January 1, 2009 — June 11, 2009). Some fund managers have hopped on to the wagon. In May 2009, we observed a significant increase in exposure to real estate stocks, especially Indiabulls Real Estate, which was the most bought real estate stock. Approximately Rs 236 crore worth of stock of Indiabulls Real Estate was bought by fund houses. The corresponding figures were Rs 166 crore for DLF and Rs 67 crore for Unitech.
Reliance Mutual Fund and Sundaram BNP Paribas definitely favour real estate stocks. The exposure to real estate stocks by these two Asset Management Companies (AMCs) stood at Rs 229.89 crore and Rs 238.83 crore, respectively.
In total, fund houses bought close to Rs 500 crore worth of stock of real estate companies.
Reliance Vision and Reliance Growth topped the list of schemes that picked up real estate stocks. Both appear to have subscribed to the Indiabulls Real Estate QIP, as each of them bought approximately Rs 54 crore of the target company.
Other than this company, they don’t have exposure to any other real estate stock.
Incidentally, as many as 10 fund houses pared down their allocation to this sector — with SBI Mutual Fund and JM Financial Mutual Fund leading the pack. JM Mutual Fund obviously has used this boom to offload a lot of its stocks. It was the only fund house which at the end of 2008 still had a real estate exposure.
Magnum Midcap topped the list of individual funds paring down their exposure to real estate by selling close to Rs 16 crore worth of shares. Incidentally, it sold all of its exposure to Indiabulls Real Estate in the open market. On the other hand, Morgan Stanley Growth Fund had the highest exposure of Rs 143.68 crore among the equity funds. Though it did partake in the market rally in realty stocks, its portfolio contains Phoenix Mills (Rs 21.11 crore) and Unitech (Rs 122.57 crore).
The current allocation of fund houses to this space is Rs 1,280 crore, up from Rs 153 crore at the start of the year.
QIP: Qualified Institutional Placement
India Inc is fast taking the QIP route to raise funds. And housing finance, construction and real estate companies are flocking here with as much gusto — GMR Infrastructure, Gammon Infrastructure Projects, HDFC, Omaxe, Orbit, Akruti City, Parsvnath Developers, Puravankara Projects, to name a few. Indiabulls Real Estate and Unitech raised close to Rs 4,281 crore with their QIPs. With a mandatory allotment of 10 per cent to mutual funds, a lot of schemes are going to have an exposure to this sector.
Under the QIP route, companies issue shares, or securities like debentures which are later convertible into shares, at a fixed price to a defined set of buyers. The price of the shares is based on the prices prevailing in the preceding two weeks. The investors in a QIP are called Qualified Institutional Buyers (QIB) and would include mutual funds, banks, foreign institutional investors, venture capital funds, provident and pension funds.
- QIPs can only be done by listed companies.
- Promoters or parties related to promoters are not allowed to subscribe to a QIP issue.
- A minimum 10 per cent of the issue has to be allotted to mutual funds.
- There must be at least 2 allottees in an issue of Rs 250 crore or less.
- There must be at least 5 allottees in an issue larger than Rs 250 crore.
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