Bangalore Marches up Property Sales on Brigade’s Back
Location is a key factor for buyers, whether it’s for property or stocks. Bangalore exhibits this case best, where city-based developers like Sobha Developers, Prestige Estates, and Brigade Enterprises show an increase in sales of 40% at a time when prominent developers in Mumbai like Oberoi Realty and HDIL are facing a revenue drop of 30%.
Brigade Enterprises has especially lent tremendous strength to the Bangalore realty market. A number of factors have propelled their chances of growth in earnings, some of which include their lease rentals and hospitality, diversified revenue mix from sale of property, and inclination towards allied property domains such as retirement homes.
Currently, the Brigade share price is Rs 77, which discounts the brand’s 12-month earnings by 12 times, compared with the 7-20 times recorded in the last three years.
Brigade’s Diversified Revenue
Brigade primarily focuses on building gated communities, which include homes, retail outlets, commercial spaces, and infrastructure such as hospitals and schools. The sale of both residential and commercial property, however, forms the backbone of Brigade’s revenue, at over 60% of the total. Over the last 5 years, the revenue has grown annually at an average rate of 15%.
Growth Prospects
Home prices in Bangalore have increased 5-10% in October-December 2013 compared to the same period last year, according to National Housing Bank’s Residex index data. This is likely to benefit Brigade. With over 7,00,000 sq ft of office space in its kitty, Bangalore’s well performing office market bodes well for Brigade.
Brigade’s hospitality and retirement home segments are also poised to grow.
Stable Financials for Brigade
Brigade’s revenue increased 16% to Rs 916 crore and profits grew 40% to Rs 90 crore from the year 2012-13 to 2013-14.
Brigade can also now avail debt at a lower cost, thanks to the ICRA, who upgraded Brigade’s credit rating in January from BBB plus to A minus.
The company’s strong rental income of Rs 40 crore every quarter augurs well for its cash flow.
Source: The Hindu Business Line
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