Rakesh Jhunjhunwala recently made an investment into DB Realty. This is the same company whose Chairman, Shahid Balwa, was made a party to 2G accusations list a few months ago. The Chairman and the company was shown to have provided Mr. Sharad Pawar, Agriculture Minister with certain favours.
In financial year ending March 2012, DB Realty did an annual sales of Rs. 590.86 crores, almost half of what it did in the previous year. Operating Profit is at Rs. 124 crores at a margin of around 20%. Debt/Equity ratio is at 0.06. Total Assets of the company is at Rs. 5191.08 crores. Working Capital of the company is Rs. 1363 crores. Fixed Assets is Rs. 245 crores. RoCE is 7.11%. Share price is Rs. 98.75.
What we can see from here id that DB Realty is very under-leveraged as compared to other real-estate companies. Debt is at a very comfortable situation. If we talk about Total Assets, Total Assets per share of the company is coming out to be Rs. 213.44 crores. If we talk about Capital Employed, Capital Employed per Share is at Rs. 66.11. In June quarter this year, the company did Sales of only Rs. 85 crores made a net loss. If we see just at Project Expenses only as a percentage of Sales, its ranging between 60-90% over several quarters.
So, what could have made Rakesh Jhunjhunwala commit an investment into this company. First, Total Assets per share of the company is way beyond the current Share price. Second, certain projects of the company have been recently completed and others are due completion in near months. Will one invest into it based upon these parameters? Will this company provide a steady stream of revenues, profits and operating cash flows?
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