Sobha Developers the top pick in real estate: Vinay Khattar

In a chat with ET Now, Vinay Khattar, Head Research (Individual Clients), Edelweiss Financial Services Limited shares his market outlook. Excerpts:

ET Now: There has been some activity in real estate as well. Are you building conviction in that space at all, spotting opportunities or just keeping off?

Vinay Khattar: We have been very stock specific. One idea that we have liked and we continue to like at the current level is Sobha Developers. The dominant part of its business comes from south and the company is developing almost a million square feet a quarter and continues to do well in that particular segment and has been generating almost 16-17% kind of revenue growth. In the last quarter, they did exceptionally well which we should look at as a one off with almost 28-30% topline growth and at Rs 300 it appears very attractively priced.

So amongst the entire pack, Sobha looks much better on the balance sheet side, in terms of debt equity ratio. A number of others, you may want to avoid, given the stress that exist on the balance sheet, huge amount of debt and if the rate cycle does not turn, then the ability to service that debt will continue to remain challenged.

The only exceptions could be where you see a large degree of asset sale happening which will allow the debt to be reduced and again that is an event specific bet that you could end up taking on one or two odd companies, but otherwise if you want to play safe, then Sobha could be a good bet.