MUMBAI: Indiabulls Real Estate has been in focus for the last two trading days. The stock on Thursday was down by 12 per cent to Rs 90.

Analysts say that the company has strong earnings visibility. Its strategy has been to acquire premium properties in metros and tier-I cities, then premium commercial offices, IT parks and retail malls, which would attract high-lease rentals.

An ICICI Securities note states that Indiabulls Real Estate's revenue stream will be largely contributed by lease/rental income. It says that by FY11, we expect 45 per cent of Indiabulls Real Estate's revenues to come from lease income. The company also plans to acquire large land parcels in the outskirts of emerging cities to develop townships and SEZ, enabling long-term capital appreciation of low-cost suburban properties. The ICICI reports notes that Indiabulls Real Estate has a proven ability to identify premium land parcels, which is quite evident from Elphinstone and Jupiter Mills acquisitions in 2005.

Indiabulls Real Estate has sold stake in its company and in its properties to raise around Rs 5,300 crore in the past two years. The real estate major also has a strong cash position with Rs 3,400 cash and Rs 2,500 crore of debt.

Analysts observe that it is the execution of its plans that will be tested and hence the company trades at a huge discount to its net asset value of its properties. They say that projects like the Nashik or Raigarh SEZs are huge and its timely implementation will be difficult.

There are risks on the lease rentals coming under pressure, especially in the tier-II and tier-III cities like Jaipur, Kota and Vizag, where the company plans to develop 12.5 million sq feet of retail malls. The company is diversifying into retailing and power, which is not its core business.