MUMBAI: City-based Sunteck Realty Limited has entered a joint development agreement with a landowner of a seven-acre land parcel at Borivali West. It plans to develop a luxury residential project here and foresees sales revenue of Rs1,750 crore from the project over the next five years.
Reacting to this, shares of Sunteck Realty surged nearly 4% on the National Stock Exchange in opening deals on Thursday. The stock currently trades at Rs291 apiece.
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Foreign brokerage CLSA sees this development as a postive for the company. It expects the company to generate an Ebitda margin of around 40% from the Borivali project. Ebitda is short for earnings before interest tax depreciation and amortization. This compares with an Ebitda of 30%-35% that it gets from its projects in Naigaon, Vasai and Vasind. CLSA has a buy rating on the stock with a target price of Rs460.
It should be noted that the company's projects in Vasind, Thane and Vasai are in the affordable category, which have comparatively lower margins when compared to a premium project.
Domestic brokerage house Antique Stock Broking Ltd has welcomed the move to acquire this project under an asset-light joint development agreement model.
According to some other sector analysts, the asset-light joint development model is cost effective, provides greater flexibility and stable growth to the developers. Also, the revenue generation is comparatively faster than traditional method of developing properties.
In a press release the company said, this residential project in the western suburbs of the city is spread across seven acres and will have a development potential of approximately 1 million square feet.
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