Investor Ace Rakesh Jhunjunwala said on Thursday that property developers were suffering from a very low return on capital compared to blue chip stocks.
Jhunjunwala, who runs RARE Enterprises and is expected to be a major shareholder in a future airliner, said only affordable housing developers can consider listing because of the volumes they can deliver.
It can be noted that very few developers like Macrotech Developers formerly Lodha, and DLF are listed on the stock exchange.
Jhunjunwala cited the case of DLF, saying the share price fell to Rs 80 from Rs 1,300 per coin to illustrate the associated risks.
”If I was a developer, I wouldn’t list because it’s not a company that is likely to list,” he said at a real estate event organized by the group of CII pressure.
He also questioned the rationale for the listing, questioning whether it is done to raise capital or from a succession planning perspective.
Bluechip shares offer a return on capital of 18-25% versus 6-7% seen in the real estate segment, he said.
Investors were optimistic about real estate investment trusts (REITs) as an asset class and also about commercial real estate, which he said will be fueled by the growth of the knowledge economy like services. IT and the pharmaceutical industry.
Jhunjunwala said in the past that he had invested in up to five real estate projects and made money, but said the possibility of investing in those was very slim and the activity, if any , would be limited to rental housing.
Buying a house is deeply embedded in the psyche, Jhunjunwala said while expressing optimism about the future of the real estate industry.
However, the need to buy a house led him to sell his stake in major rating agency Crisil in 2006 to raise more than Rs 20 crore, and regretted he would have been Rs 1,000 crore richer today. today if he hadn’t sold the stake.
Meanwhile, Jhunjunwala said he was amazed at the surprise people showed for his decision to invest in a new airliner which was named Akasa.
The equity investor said he has pledged Rs 275 crore for the stake in the airline, which can potentially have a market capitalization of Rs 10,000 crore.
Half of the top management comes from the biggest airliner Indigo, which has a market capitalization of Rs 80,000 crore and it’s not so that all life has been put on the project, Jhunjunwala said, recalling that Ryan Air was profitable from day one of operations at a time when many European airlines were collapsing.
Jhunjunwala also mentioned a conversation between him and Tata Sons chairman N Chandrasekaran in which he wondered how the conglomerate had paid Rs 18,000 crore to buy struggling flag carrier Air India, while Akasa was embarking on a investment of $50 million or Rs 376 crore itself.
He recalled that his conservative Marwari family who doubted his entry into the stock markets were denied by him and in the same way he hoped to prove people wrong with the entry into the airline business as well , making it clear that “ego” is in play now.
(With PTI entries)
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Posted: Thursday February 17th 2022, 6:40 PM IST