GARNET CONSTRUCTION Results Analysis

From being a relatively small realty company, Garnet is now donning the avatar of some mega realtor. The company has shot into the limelight by taking up the development of a Rs.1200 crore mega township, spread over 400 acres in Panvel. To woo international buyers, it has tied up with the Dubai-based real estate developer Sternon group. The company had also announced another major Rs.800 crore residential project in Nasik. Surprisingly, none of these mega projects find any mention on the website of the company. Infact the website also does not make any mention about the financials of the company. Surely a very unprofessional website for a company, which talks about international tie-ups and is trying to project itself as a very professional company.

The results for the first quarter ended 30^th June 2008 were as insipid as the website. High working capital has taken the toll on the company’s bottomlines. There has been an overall drop in all the profit margins of the company. OPM has slipped down from 17.16%% to 7.39%. NPM was down from 16.97% to 7.08%. The point to be noted here is that as against a net loss of Rs.2.45 crore, it managed to post a PAT of Rs.73 lakhs. Does that call for a celebration?

Well, looking at the grandiose plans, these financials figures seem to have no correlation with the plans. It makes one wonder whether the company is chewing more than what it can bite? With such falling bottomlines, ill this company be capable enough to manage such huge townships?

Realty sector, as such, is currently not exactly the darling of the marketmen. Realty stocks, even those of established players are being butchered down to new lows. And in that context, Garnet stock price falling down is no big deal. It touched a new low at Rs.23 and is now at Rs.28. Get out if you have not yet!
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