DB Realty-Downgrade On The cards

In light of the recent events relating to the 2G spectrum issue, the ratings of DB Realty (DBRL) have been pushed to "Under Review" till further clarity emerges; DB Realty promoters own 45% in Etisalat DB.

n       Real estate business. As of 3QFY11, DBRL has sold stock worth  Rs 71bn, with outstanding receivables from the sales at  Rs 41bn. Also, the company is in the process of acquiring the Bandra Government Colony project, for which it has to pay a premium of `8.02bn. Net debt stood at  Rs 2.3bn as of Q3FY11.

n       2G spectrum issue. DBRL's promoters own 45% stake in Etisalat DB. The promoters had applied for and acquired UAS licenses under Swan Telecom, for 13 circles for `15.37bn. Post the licenses, they sold 45% share to UAE-based Etisalat for a consideration of `42bn; the new company is called Etisalat DB.

n       Impact on real estate business. Recent events related to 2G spectrum could indirectly impact the company's real estate business. DBRL could face liquidity crunch for acquisition of future projects, slower sales in existing projects and delays in project approvals.

There could be political persecution as well.