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Why HDFC’s Prashant Jain Invests in Nitesh Estates ?

April 25, 2010

HDFC AMC through its fund HDFC Monthly Income Plan Long Term Option has participated in the Anchor Investment Option of Nitesh Estates IPO, currently open for subscription. We don’t care what Citigroup does or other Financial Institution do, however, we have been tracking every move of Sr. Fund Manager Prashant Jain for the past 10 years and this is quite an abnormal move from Mr. Jain, especially in the Real Estate space. Almost all have recommended AVOID Nitesh Estates IPO.

Mr. Jain never took any exposure to real estate stocks except that of Ansal Properties, but then the HDFC Group had participated with larger interest in its housing projects but later abandoned and Mr. Jain sold off, all within a span of 6 months. HDFC group seemed desperate to invest in realty projects and they did take exposure to Nitesh Estates 12-18 months ago in some of its projects.

It is widely known that Mr. Jain is known for transparency in his moves, appreciated by investors for picking up turnaround stocks and Dark Horses and consistently beating the benchmark of the funds he manages. But why did Mr. Jain choose Nitesh Estates of all the Realty stocks to invest in ? We can think of two Options

Option – 1 Mr. Jain has been taking exposure to Bangalores based realty companies [Brigade Enterprises, Sobha Developers] since Jan-Feb through various funds he directly manages. At first we thought it was the IT Growth saga that would indirectly boost profitability of these companies. However, all reports of Real Estate trends in India suggest Bangalore Residential Market [Brigade and Sobha have Major Exposure] has stagnated and mere 3% rise in prices, in selected pockets. So it doesn’t really explain his BUY in the near term. And why did he AVOID Mumbai based companies which saw a major rise in Prices after the big fall in 2009 ?

Option – 2 HDFC Group through its Real Estate Investment Arm has taken direct exposure to some projects of Nitesh Estates. Maybe, Mr. Jain knows that these projects are latent Goldmines and hence want to ride the growth.

Lets keep our fingers crossed and wait for the Time to Tell the story. But how to interpret Mr. Jain’s exit from NItesh Estates ?

Mr. Jain Exists Nitesh Estates within 3 Months – If he exits in Loss, then it is evident that Nitesh Shetty made a killing by making Mr. Jain to lend his Goodwill and Name for the IPO. But then this deal may have been struck by Mr. Shetty with HDFC Group leader and not Mr. Jain.

Mr. Jain Exists Nitesh Estates in 3 Months in Profit – This scenario is unlikely but you never know. Since they have better access to Books and management, their investment paid off. This still proves that Nitesh Shetty wanted HDFC to lend their Goodwill during IPO.

Mr. Jain exits all Bangalore Based Realty Companies – And the reason that could be attributed in the SELL off is appreciation of INR against USD and less than expected rise in property prices, etc. However, interpret this move as a beautiful cover for Nitesh Estates IPO investment under obligation.

Mr. Jain Holds the Stocks for Long Term – Oho! well, we will wait for Time to tell the story as we are lesser mortals than any of the Dalal Street Fund Managers 🙂

Comments

4 Responses to “Why HDFC’s Prashant Jain Invests in Nitesh Estates ?”

  1. Srikanth Matrubai on April 30th, 2010 10:44 PM

    Prashatth Jain is too good a Fund Manager to blindly invest in a unknown company. He would have surely done his home work.
    Let us wait and watch

  2. Khabri on July 15th, 2010 11:31 AM

    They have been slowly unloading the shares in the market of Nitesh Estates Ltd

    Holding as on May-31st 1808000
    Holding as on June-30th 1096000

    Shares Sold in LOSS by HDFC Asset Management company 712000

    HDFC AMC Led by Mr. Jain & Barve have not sold any shares of Brigade Enterprises and Sobha Developers in June, they have bought 3.89 Lakh more shares of Purvankara Projects in June-2010.

    This proves your theory to be correct about HDFC AMC being under pressure to lend their name for the low quality IPO after the debacle of Citigroup.

  3. Khabri on August 12th, 2010 7:56 PM

    Holding as on July-31st in Nitesh Estates 1,096,000

  4. Khabri on September 7th, 2010 10:04 PM

    Continues to Hold Nitesh Estates and other Bangalore based Realty Stocks.

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