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Sunday, September 20, 2009

Ackruti City Ltd:Is it a buy/hold or sell?

Scripscan:Ackruti City Ltd

Story:Mumbai-based real estate developer Ackruti City''s fourth quarter results were the worst amongst the pack of listed realty companies. Due to negative sales, its net profit for the quarter ended March ''09 took a big hit. Despite a slight improvement in the sentiment for the sector, Ackruti could not register any sales. In fact, it had to write off close to Rs 105 crore worth of FSI sold in the previous year. The company reported a 300% drop in net sales in its fourth quarter and its net profit turned red. It fell to a negative Rs 123 crore from Rs 22 crore earned in the December ‘08 quarter.Despite a dismal quarterly performance, the annual numbers do not look as bad. For the full year ended March ''09, the company reported a 1% decrease in its topline to close the year at Rs 437.2 crore as against Rs 440 crore in the year ending March ''08. This led to a 10.5% decline in its profit after tax (PAT). On a year-on-year (y-o-y) basis its employee cost almost doubled from Rs 7 crore to Rs 15 crore. Due to a high leverage position, Ackruti''s interest cost also jumped multi-fold. It rose from Rs 61 crore in the year ended March ''08 to Rs 140 crore in the current year. This gloomy financial performance forced the company to tweak its sales strategy. Realising the growth potential in the affordable housing segment, the company has launched new projects in Mumbai and Pune. Though margins will be lower in this segment, large volumes would help the company. A lower interest rate and affordable prices would thus help Ackruti revive its sales numbers.Am scared of investing in realty,read the note and you people decide accordingly.

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