Shares of cigarette companies have rallied over the past one month, with the three leading cigarette makers ITC, Godfrey Philips and VST Industries hitting record highs. All the three stocks have posted robust returns in the past one year, significantly outperforming the benchmark Sensex, helped by favourable taxation and increase in cost of competing tobacco products.

Unlike previous years, the central government has not increased excise duty on cigarettes in the budget for this fiscal, though states have varyingly raised value added tax (VAT). While northern states such as Rajasthan have significantly raised VAT on cigarettes, all the southern states have spared the sector from a major increase. In contrast, competing tobacco products such as ‘pan masala’ and chewing tobacco have witnessed cost increases in the form of higher taxation and a rise in raw material cost.

Also, prices of tobacco have remained benign compared with higher prices of ‘tendu’ leaves that are used for manufacturing ‘beedis’. The cigarette industry has cashed in on the rise in beedi prices by competitively pricing low-end and micro filter cigarettes to lure ‘beedi’ smokers to cheaper cigarettes. Also, contrary to its earlier plans the government decided to issue less gory pictorial warnings on cigarette packets, which has aided sentiment in the stocks.
In the quarter ended June, VST Industries reported a 90% year-on-year jump in net profit. ITC, which is yet to declare its first quarter earnings, is expected to have witnessed a pick-up in cigarette volumes despite price increases in some of its products. Going forward, the rally in cigarette companies is likely to continue as all factors seem to be positive for the sector.
Analysts expect cigarette companies to report strong earnings growth driven by higher volumes, price increases and lower expenses.

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NEW DELHI: The poor financial health of state electricity boards could pose significant business risks for power traders in the country, says rating agency Fitch.

In a report released today, Fitch Ratings said the credit risk of power traders has become “riskier” due to profitability and liquidity constraints faced by state power utilities.

“If these utilities are having liquidity problems which are leading to delays or defaults in their obligation to power traders, then this in turn increases the business risk for power traders,” it noted.

This could lead investors in power trading companies to either seek higher return on the investments or seek alternate avenues for investment.

Leading power traders include PTC India and Tata Power Trading Company.

Going by estimates, over the past four years, the top five trading licensees have controlled over 80 per cent of the market in terms of volumes.
Some of the large loss making state power utilities come from the states for Tamil Nadu, Uttar Pradesh, Madhya Pradesh. These are also largest buyers of short-term electricity through power traders, Fitch Ratings said.”The financial health of state power utilities, the major customers of power traders, has deteriorated with aggregate annual book losses widening to Rs 295 billion (Rs 29,500 crore) in FY 10 from Rs 70 billion (Rs 7,000 crore) in FY 06, leading to an increase in counterparty risk,” the report said.

As per Planning Commission‘s estimates, electricity distribution losses totalled a whopping Rs 70,000 crore in 2010-11.

According to Fitch, the biggest short-term buyers — SPUs in Tamil Nadu and Rajasthan — face huge energy deficits with largest cash losses on a revenue and subsidy-realised basis.

“Hence, these states will remain net-buyers on short-term power markets and continue to act as major counterparties for power traders. This increases the risk for undiversified power traders significantly,” it added.

The report pointed out that traders with strong equity base and high cash balance are better placed since they have the buffer to absorb any increase in the working capital cycle in the event of delays or defaults by SPUs.

Director in Fitch’s Asia Pacific Utilities team Salil Garg said the agency expects larger traders to face low business risk due to many factors, including economies of scale and diversified customer base.

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NEW YORK — The Dow Jones Industrial Average opened lower Friday, trading around 51,423 shortly after the bell, down about 139 points or 0.27% from Thursday’s record close, as Wall Street took a breather following a strong rally in blue-chip stocks.

The modest pullback comes after the Dow surged nearly 875 points to a new all-time high of 51,561.93 on Thursday, driven by gains in healthcare, financials and other cyclical sectors amid easing concerns over geopolitical tensions and a rotation out of overheated technology names.

Traders appeared to be locking in some profits while awaiting the May jobs report and other economic indicators that could influence Federal Reserve policy expectations. Broader markets showed mixed signals, with futures pointing to a cautious start to the trading day.

Thursday’s Record-Setting Session

The blue-chip index posted its 15th record close of the year on Thursday, climbing 1.73% as investors rotated into more defensive and value-oriented sectors. Healthcare giants like UnitedHealth Group and Merck, along with financial names such as Goldman Sachs, led the charge with gains of around 5%.

The S&P 500 advanced modestly, overcoming a tech pullback, while the Nasdaq Composite finished slightly lower, weighed down by weakness in chipmakers following Broadcom’s earnings report.

Broadcom shares tumbled despite solid results, as investors expressed disappointment over guidance, triggering a broader selloff in artificial intelligence-related stocks that had powered much of the year’s gains.

Analysts described the move as a healthy rotation rather than a fundamental shift, with money flowing from high-flying tech into sectors that had lagged during the AI boom.

Factors Influencing Friday’s Trading

As markets opened Friday, participants were monitoring developments around oil prices, Treasury yields and ongoing geopolitical headlines involving Iran. Easing tensions in the Middle East had supported sentiment the previous day, but any renewed flare-ups could pressure energy costs and inflation expectations.

The upcoming employment report is expected to provide fresh clues on the labor market’s health and the trajectory for interest rates. Stronger-than-expected job growth could raise the odds of fewer rate cuts, while softer data might reassure investors of a resilient but cooling economy.

Year to date, the Dow has delivered solid gains, reflecting broad participation beyond the Magnificent Seven tech stocks. Its recent record underscores resilience amid fluctuating oil prices and policy uncertainty.

Broader Market Context and Sector Performance

Friday’s early dip in the Dow contrasted with Thursday’s broad-based strength outside of technology. Financial stocks benefited from a more stable yield environment, while healthcare names drew support from defensive characteristics amid market rotation.

Energy shares faced pressure as oil prices retreated from recent highs tied to Middle East concerns. Technology, which had dominated for months, saw profit-taking accelerate after disappointing outlooks from key players like Broadcom and CrowdStrike.

Smaller companies in the Russell 2000 index have lagged the large-cap benchmarks this year, highlighting a bifurcated market where mega-caps initially led before broader participation emerged.

Investors continue to watch for signs of sustainable economic growth. Corporate earnings seasons have been mixed, with AI enthusiasm tempered by valuation concerns in some segments.

Historical Perspective on the Dow

The Dow Jones Industrial Average, celebrating its 130th anniversary earlier in 2026, remains a key barometer of U.S. economic health despite its price-weighted methodology focusing on 30 prominent companies.

Recent milestones reflect recovery and growth following periods of volatility driven by inflation, geopolitical risks and shifts in monetary policy. From levels around 41,000 in mid-2025 to surpassing 51,000, the index has shown remarkable upward momentum powered by corporate innovation and resilient consumer spending.

Experts note that while daily fluctuations like Friday’s are normal, the overall trend underscores confidence in American enterprise amid challenges.

What Investors Are Watching Next

Beyond today’s jobs data, attention turns to upcoming speeches from Fed officials and inflation metrics. Markets are pricing in a measured path for rate adjustments, with many expecting cuts later in the year if economic indicators align.

Geopolitical developments, particularly around energy supplies and international trade, could sway sentiment. Additionally, high-profile events like potential IPOs in the tech space may influence liquidity and sector flows.

For individual investors, the current environment rewards diversification. While the Dow’s blue-chip composition offers stability, exposure to growth areas through broader indexes like the S&P 500 provides balance.

Advisors recommend focusing on fundamentals rather than short-term noise. Companies with strong balance sheets and pricing power are better positioned in uncertain times.

Outlook for the Remainder of 2026

Analysts remain generally optimistic about U.S. equities, citing robust corporate profits, technological advancements and potential policy support. However, risks including persistent inflation, election-related uncertainty and global conflicts warrant caution.

The Dow’s ability to hit new highs even as tech cools suggests a maturing bull market with wider participation. Sustained gains would likely require continued economic expansion without overheating.

As trading progresses Friday, volatility may increase around data releases. Investors are advised to stay informed and avoid reactive decisions based on intraday swings.

The modest early decline in the Dow serves as a reminder of the market’s resilience and the importance of perspective. After Thursday’s surge, a consolidation phase could set the stage for further advances if upcoming data supports a soft-landing narrative.

Wall Street will continue navigating the delicate balance between enthusiasm for innovation and the realities of economic cycles. For now, the Dow’s recent records highlight underlying strength in the world’s largest economy.

NEW DELHI: Fitch on Friday said it has withdrawn the ratings on Reliance Capital as the company has decided to stop participating in the agency’s rating process.

“The ratings have been withdrawn as Reliance Capital has chosen to stop participating in the rating process. Therefore, Fitch will no longer have sufficient information to provide ratings or analytical coverage of Reliance Capital,” Fitch Ratings said in a statement.

A leading financial services company Reliance Capital, an Anil Ambani group firm, has interests in diverse areas including asset management, mutual funds, portfolio management services, life and general insurance.

SEOUL — Nvidia CEO Jensen Huang highlighted deepening ties with South Korea’s tech and industrial giants during a high-profile visit to Seoul on Friday, joining top business leaders for a casual samgyeopsal dinner while announcing expanded hiring for artificial intelligence research and celebrating new product launches.

Huang met with SK Group Chairman Chey Tae-won, LG Group Chairman Koo Kwang-mo and Naver Chairman Lee Hae-jin at a barbecue restaurant near Hongik University in Mapo-gu. The gathering drew crowds of citizens eager to see the executive, whom Huang engaged by distributing snacks outside the venue.

“We are growing together with Hyundai Motor, LG, SK hynix, Samsung, and Naver,” Huang said while interacting with the public. He emphasized the importance of Korean partners, stating, “Korea is doing really well. Like a PC bang, bang!, business is coming back. Korea’s business partners are very important to me.”

The Nvidia chief arrived around 7:10 p.m., toasting with the chairmen before sharing grilled pork and conversation. Outside, he sampled and distributed “HBM Chips” — honey banana-flavored corn snacks developed by 7-Eleven and SK hynix — along with other treats like banana milk. Huang took the microphone to address cheering onlookers, praising the country’s economic momentum.

“My friends had a really good year. But this is just the beginning,” Huang said. He expressed satisfaction with business performance and Nvidia’s stock price while noting Korea’s strong economy.

New Product Push and Collaborations

During the event, Huang spotlighted Nvidia’s recent advancements in artificial intelligence infrastructure. “Nvidia unveiled four new products this week,” he said. He detailed the next-generation AI supercomputer Vera Rubin, which relies heavily on high-bandwidth memory (HBM) and low-power DRAM (LPDDR), along with a new Vera CPU that also incorporates significant memory components.

Huang introduced the RTX Spark, describing it as “a new form of PC platform appearing for the first time in 40 years” that will “open a completely new era.” He noted its demand for advanced memory like LPDDR5. Additionally, he mentioned new processors for autonomous driving and robotics, highlighting “major collaborations with Hyundai Motor in Robotics.”

“All my friends, LG, SK hynix, Samsung, Naver, we are all booming,” Huang added. “I came here to celebrate our great partnerships.” He previewed even more activity ahead, saying, “I also came to prepare for next year. If there was one product this year, there are four new products next year. Please get ready for a very exciting new year.”

The executive also touched on Korean culture, expressing enthusiasm for samgyeopsal, snacks, fried chicken, K-pop and K-dramas. “K-dramas always make me happy,” he said, describing them as family stories often featuring emotional moments.

Nvidia’s AI Expansion in Korea

Nvidia began the hiring process Friday to establish an AI technology center in South Korea. Huang encouraged local talent to apply, stating, “We are expanding AI research and engineering and Robotics research in Korea, and we are hiring talent with several partners. If you know AI researchers or engineers, tell them to apply to Nvidia.”

The move aligns with Nvidia’s strategy to strengthen its presence in key markets driving AI demand. South Korea’s semiconductor leaders, including Samsung Electronics and SK hynix, are critical suppliers of HBM chips essential for Nvidia’s GPUs powering data centers and AI training. Hyundai Motor Group has pursued robotics and autonomous vehicle initiatives that complement Nvidia’s technology.

Naver, one of Korea’s largest internet companies, collaborates with Nvidia on AI cloud services and research. LG contributes through electronics and battery technologies that support broader AI ecosystems. These partnerships underscore Korea’s role as a vital hub in the global supply chain for advanced computing.

Broader Context of Nvidia’s Global Dominance

Nvidia has solidified its position as the leading provider of AI accelerators, with its chips powering much of the world’s generative AI infrastructure. Demand for HBM and related memory has surged, benefiting Korean manufacturers amid the global AI boom. Huang’s visit reinforces these symbiotic relationships at a time when geopolitical tensions and supply chain resilience remain key concerns.

The CEO’s approachable style — engaging directly with citizens and sharing snacks — generated positive local buzz in Hongdae, a vibrant Seoul neighborhood known for youth culture and entertainment. Crowds gathered as word spread of the dinner, turning the evening into a public celebration of business ties.

Industry analysts view Huang’s trip as strategic outreach ahead of further AI infrastructure investments. With major Korean conglomerates investing billions in chip production and data centers, Nvidia’s expanded local hiring could accelerate talent development and innovation collaboration.

Economic and Cultural Significance

South Korea’s economy has shown resilience, with tech exports playing a central role. Nvidia’s success has indirectly boosted Korean firms, as HBM demand from AI servers drives revenue for Samsung and SK hynix. Government initiatives to position the country as an AI powerhouse complement these private-sector partnerships.

Huang’s comments on enjoying Korean food and entertainment reflect a personal affinity that strengthens business diplomacy. Such gestures often humanize corporate leaders and foster goodwill in international dealings. The casual samgyeopsal setting, complete with soju toasts, contrasted with formal boardroom meetings, highlighting a blend of professional and cultural exchange.

For young Koreans in tech, Huang’s call to apply at Nvidia signals opportunities in a high-growth field. The company’s AI centers could create specialized jobs in research, engineering and robotics, contributing to brain gain in a competitive global talent market.

Outlook for Nvidia and Partners

As Nvidia prepares multiple new platforms for 2027, partnerships in Korea are poised to play a larger role. The Vera Rubin architecture and RTX Spark platform are expected to set new standards in performance and accessibility for AI computing. Robotics collaborations with Hyundai could extend to autonomous vehicles and industrial applications.

Market observers anticipate continued strong performance for Nvidia, driven by insatiable demand for AI capabilities across industries. Korean partners stand to benefit from this trajectory, provided they maintain leadership in memory and related technologies.

Huang’s Seoul visit caps a week of product announcements while laying groundwork for sustained collaboration. His optimism about mutual growth reflects confidence in the Asia-Pacific region’s contribution to the AI revolution. For South Korea, it affirms its strategic importance in the semiconductor and AI value chain.

The event also offered a moment of levity and connection amid intense business focus. By distributing snacks and chatting with citizens, Huang bridged the gap between global tech titan and local enthusiast, embodying the approachable innovation culture Nvidia cultivates.

As AI continues reshaping economies worldwide, initiatives like Nvidia’s Korea expansion and high-level engagements signal a bright outlook for collaborative advancement. Huang’s message was clear: the partnership is thriving, with even greater achievements on the horizon.

NEW YORK — GameStop Corp. shares traded modestly lower Friday morning, hovering around $22.04, down about 1.06% or 0.24 points in early trading, as investors digested the company’s recent strong quarterly results and capital return plans amid ongoing retail sector dynamics.

The videogame retailer closed Thursday at $22.27 after posting its highest quarterly net income in company history earlier in the week. The modest pullback reflects normal profit-taking following a positive reaction to earnings that showed significant improvement in profitability driven by collectibles sales growth.

GameStop on June 2 reported net sales of $835.3 million for the first quarter ended May 2, up 14% from $732.4 million in the prior-year period. Collectibles, including trading cards, apparel, toys and pop culture merchandise, surged to $348.9 million, accounting for nearly 42% of revenue compared to about 29% a year earlier.

Operating income reached a record $143.3 million for the quarter, swinging from an operating loss of $10.8 million in the prior year. Net income soared to $389.6 million, boosted by a $268.4 million unrealized gain on options tied to eBay stock and interest income, compared with $44.8 million a year ago. Adjusted figures also showed strength, with the company beating expectations.

The board approved a new $2 billion share repurchase program, signaling confidence in the company’s financial position and strategy under Executive Chairman Ryan Cohen. GameStop ended the quarter with approximately $9.7 billion in cash, marketable securities and related assets, providing substantial liquidity for potential investments or returns to shareholders.

Strategic Shift Toward Collectibles and Efficiency

GameStop has been pivoting its business model beyond traditional video game hardware and software sales, which have faced headwinds from digital downloads and industry transitions. Collectibles have emerged as a high-margin growth area, capitalizing on enthusiast demand for Pokémon cards, Funko Pop figures and other memorabilia.

Selling, general and administrative expenses declined to $201.6 million from $228.1 million, reflecting ongoing cost-cutting efforts that have improved margins. The company continues to optimize its store footprint and explore e-commerce enhancements while maintaining a presence in physical retail.

The $2 billion buyback authorization, valid through 2029, offers flexibility to return capital as the stock trades well below its 52-week high around $31. Analysts view such programs positively in a volatile meme stock environment, potentially supporting the share price over time.

Ongoing Interest in eBay and Broader Ambitions

GameStop has also been active in pursuing strategic opportunities, including increasing its stake in eBay and exploring broader e-commerce plays. These moves have generated attention and occasional volatility but underscore Cohen’s activist-influenced approach to transforming the retailer into a more diversified consumer entertainment company.

Shares remain sensitive to retail investor sentiment, a legacy of the 2021 short squeeze that catapulted GameStop into the spotlight. While trading volumes have normalized compared to meme stock peaks, the stock continues to attract dedicated followers monitoring fundamentals and corporate actions.

Market Context and Analyst Views

In the broader market, retail and consumer discretionary stocks have shown mixed performance amid economic uncertainty and shifting consumer spending. GameStop’s results highlight resilience in niche categories even as core gaming sales face pressure from console cycles and competition.

The company reported strong liquidity and no long-term debt concerns, positioning it well for potential acquisitions or further buybacks. Year-to-date, shares have posted gains, though they remain below peaks seen in prior years.

Some analysts caution that while profitability has improved markedly, sustainable revenue growth in a challenging retail landscape will be key. Others highlight the balance sheet strength as a significant positive, allowing flexibility in an evolving industry.

Company Background and Evolution

Founded in 1984, GameStop grew into a dominant brick-and-mortar videogame retailer but faced existential threats as the industry shifted online. Under new leadership, it has refocused on profitability, inventory management and diversified revenue streams. Store count has been rationalized, with emphasis on experiential retail and collectibles.

The stock’s history includes dramatic swings, from pandemic lows to extraordinary highs in 2021 fueled by social media coordination. Today, with a market capitalization around $9-10 billion, GameStop operates with a more mature investor base balancing nostalgia with forward-looking strategy.

What Lies Ahead

As GameStop navigates the second quarter, attention will turn to holiday season preparations, further collectibles momentum and execution on capital allocation. The buyback program could provide a floor for the stock while management explores growth initiatives.

Investors will also monitor macroeconomic factors affecting discretionary spending, including inflation, employment and consumer confidence. Positive developments in gaming hardware or partnerships could offer tailwinds.

Friday’s slight decline comes after Thursday’s modest gain and follows the post-earnings pop earlier in the week. Trading remains active but within recent ranges, with the 52-week low near $19.93 and high around $30.61.

GameStop’s transformation story continues to captivate, blending legacy retail with modern capital management. The record quarter and aggressive buyback underscore progress, even as challenges in the core business persist. For long-term holders, the focus remains on consistent execution and shareholder value creation in a competitive entertainment landscape.

Market participants will watch upcoming trading sessions for direction, with earnings momentum potentially setting the tone into the summer. GameStop’s substantial cash position provides optionality rarely seen in traditional retailers, offering a buffer and strategic flexibility uncommon in its peer group.

NEW YORK — The Nasdaq Composite fell sharply Friday, shedding about 498 points or 1.86% to trade around 26,333 in morning action, extending losses from the previous session as technology and semiconductor stocks faced renewed pressure amid disappointing guidance from key AI players and a stronger-than-expected jobs report.

The decline comes after Thursday’s mixed session, where the tech-heavy index closed slightly lower despite a record-setting performance for the Dow Jones Industrial Average. Broadcom’s post-earnings plunge continued to weigh on sentiment, triggering a broader selloff in artificial intelligence-related shares that have powered much of the market’s gains this year.

The May nonfarm payrolls report showed 172,000 new jobs added, significantly beating consensus estimates around 85,000. Unemployment held steady at 4.3%, while prior months’ figures were revised upward, signaling a resilient labor market. The data pushed Treasury yields higher, with the 10-year note climbing as investors dialed back expectations for near-term Federal Reserve rate cuts.

Broadcom and Chip Sector Weakness

Broadcom shares, already down over 12% on Thursday after its fiscal second-quarter results and forward outlook disappointed investors despite beating estimates, extended losses. The semiconductor giant’s AI revenue growth, while robust, fell short of the lofty expectations baked into its premium valuation, sparking concerns about the sustainability of the AI boom.

The weakness rippled across the sector. Marvell Technology, Micron Technology, Advanced Micro Devices and others traded lower, amplifying the Nasdaq’s vulnerability as a tech-centric benchmark. Nvidia, the poster child for AI enthusiasm, also faced modest pressure despite its recent dominance.

Analysts described the move as a healthy rotation or profit-taking after months of concentrated gains in a handful of mega-cap tech names. However, the pullback highlights the market’s sensitivity to any perceived softening in AI demand signals.

Jobs Data and Policy Implications

The strong employment figures reinforced a “good news is bad news” dynamic for equities. While underscoring economic strength, the report raised fears that the Fed may maintain higher rates for longer to combat lingering inflation pressures, especially with energy costs influenced by geopolitical developments.

Market participants now price in fewer rate cuts for 2026, with some even contemplating the possibility of a hike if data remains robust. Higher yields typically pressure growth stocks, which derive much of their value from future cash flows discounted at lower rates — a dynamic particularly painful for the Nasdaq.

Broader Market Rotation

In contrast to the Nasdaq’s struggles, the Dow Jones Industrial Average showed relative resilience earlier in the week, benefiting from gains in healthcare, financials and other cyclical sectors less exposed to tech volatility. This rotation from high-growth tech into value and defensive names has been a recurring theme amid valuation concerns.

The S&P 500 also faced downward pressure but to a lesser degree, reflecting its more diversified composition. Small-cap stocks in the Russell 2000 offered mixed signals, sometimes benefiting from rotation but vulnerable to higher rate expectations.

Context of Recent Market Trends

The Nasdaq has enjoyed substantial gains in 2026, up around 15% year-to-date prior to Friday’s move, driven by enthusiasm for AI infrastructure. However, periodic pullbacks like this serve as reminders of concentration risks, with a few names accounting for a disproportionate share of index performance.

Geopolitical factors, including developments around Iran and energy markets, added another layer of uncertainty. While some progress toward de-escalation had supported sentiment previously, any renewed tensions could influence oil prices and inflation expectations.

Company-Specific and Sector Dynamics

Beyond Broadcom, other recent earnings like CrowdStrike’s contributed to the cautious mood, with shares slipping on operating expense concerns despite beats. The semiconductor index faced particular scrutiny as investors questioned whether current multiples reflect realistic growth trajectories.

Positive undercurrents remain in areas like consumer stocks and certain industrials, which rose on Friday amid dipping oil prices and the broader rotation. This divergence underscores a maturing bull market where leadership broadens beyond pure tech plays.

Investor Implications and Outlook

For investors, Friday’s action emphasizes the importance of diversification and a long-term perspective. While tech corrections can feel sharp, they often create opportunities for those with conviction in underlying secular trends like AI adoption.

Looking ahead, focus shifts to upcoming inflation data, Fed speeches and corporate earnings. The market will gauge whether the jobs strength alters the Fed’s path or if cooling signals emerge. Analysts generally remain constructive on equities, citing solid corporate fundamentals, but warn of volatility as the year progresses.

The Nasdaq’s 52-week range reflects both its upside potential and capacity for corrections. With the index still well above levels from a year ago, the current dip may represent consolidation rather than a trend reversal, provided economic growth remains balanced.

Market participants are advised to monitor volume, sector leadership shifts and policy signals closely. In a landscape defined by technological disruption and macroeconomic crosscurrents, adaptability remains key. Friday’s decline, while notable, fits within normal market fluctuations amid an evolving economic backdrop.

As trading continues, attention will remain on whether bargain hunters step in or if selling pressure intensifies around key technical levels. The interplay between strong fundamentals and valuation discipline will likely dictate the Nasdaq’s trajectory in the sessions ahead.

The stocks of DB Realty and Unitech rose after top executives of these companies were granted bail in the 2G scam case. The DB Realty stock has risen 40%, while Unitech gained 4%. However, some of the intrinsic problems which plague these companies, and uncertainty over the outcome of the 2G scam case may prevent any major appreciation in the stock.

Scrapping of projects involving the government, delayed execution and difficulty in securing approvals for new projects – DB Realty has seen it all. The company did not launch any new projects in the September quarter and sold around 50-75% of its existing seven projects. Even the analyst community has washed its hands of the stock with most brokerages discontinuing their coverage on the stock.

The company’s net sales for the first half year ended September are down by 36%, while its net profit dropped by 76% during the same period. However, the company is extinguishing its debt by selling non-core assets.

At the end of the September quarter, the company managed to reduce its debt from Rs600 crore a year ago to Rs 230 crore. It is sitting on a substantial pileup of TDR (transfer of development rights), which can be realised to further boost cash flows of the company. However, the outcome of the 2G scam case on its promoters will weigh heavily on the business prospects of the company which has its projects predominantly in Mumbai.

Unitech is the second big real estate company to be impacted because of the alleged involvement of its top deck in the 2G scam. Besides the problems associated with all real estate companies, there are other challenges.

For instance, the company was at the receiving end of shareholders’ ire at its annual general meeting as they refused to approve a resolution to pay dividend on equity shares for the fiscal 2011. The company’s net sales and earnings have dropped by 17% and 45% respectively for the first half of this fiscal.
However, the business model continues to remain strong. Unitech has a presence in the affordable and mid-income housing segment which enables it to generate cash flows. It has been launching new projects, although the scale of execution is slow. Despite lower revenue recognition, it has managed to lower its debt through internal cash accruals.

It has an outstanding net debt of Rs 5,144 crore and a land bank of close to 7,000 acres with an average cost of acquisition of land of around Rs 250 per square feet. Despite strong fundamentals, the loss of credibility and uncertainty over the 2G probe will restrict any major upside in the stock. The stock continues to trade at a significant discount to its land value that analysts estimate to be at Rs 60.