“I would look at these kinds of asset light business models within real estate or the ones which have some element of even REIT kind of structures made available and so on and so forth,” says Mahantesh Sabarad, Independent Market Expert.
Let us discuss the realty space a bit more, the likes of Sobha, Mahindra Lifespace. They saw a massive up move in the week gone by. Which are the top stocks that you would recommend from the real estate pack?
I think when you evaluate real estate, you have to look at the different business models because most of the real estate companies are either asset heavy and therefore indebted. There are very few companies which are asset light. Godrej is one of them. Oberoi is another one, which is a debt-free kind of company. One has to be very careful when you pick real estate companies because debt levels can be pretty punishing for their financials, their ability to deliver profits and therefore punishing on the valuations as well.
So, therefore, I would look at these kinds of asset light business models within real estate or the ones which have some element of even REIT kind of structures made available and so on and so forth. So, try to remain focused on only those companies which typically do not consume large amounts of debt.
What is the outlook on Reliance Industries, the fact that that heavyweight has not quite played catch up as compared to at least the front liners?
Reliance is a very big stock. In fact, Reliance is also a very large component as far as the market’s capitalization is concerned. But then the overall outlook for Reliance appears to be quite positive. They have been doing steadily better over the years. They have tackled their debt issues. They have seen to it that their telecom business has become a big money spinner for them. The retail sector has also joined the party when it comes to useful profit contribution and the oil and gas sector has transformed itself from purely a refining kind of company to a well-diversified asset pool also on the petrochemical side.
Having said that, the outlook for Reliance does appear to be positive. This is a company which is directly linked to the economic activity, directly linked to the economic prospects of the country. And I believe that as the country has started recovering post the Covid lull, a company like Reliance, which has an overbearing presence on the economic activities of the country should do generally better. So I once again would say that they have done better for themselves. The only thing that now is missing is that we do not see any major trigger points coming in. We used to have triggers in the past, such as new investments that they attracted on the Jio platforms, for example. They had triggers related to certain asset sales. We have not seen any activity to a large extent from Reliance as yet. So missing are the triggers for any stock growth. Disclaimer here, I own the stock.