Indiabulls Real Estate Ltd., India’s third-biggest developer, was downgraded at Deutsche Bank AG, which cited the gains in the shares, a possible sale of warrants and “weak demand” for its Mumbai office projects.

The shares were lowered to “hold” from “buy,” Deutsche Bank analysts Abhay Shanbhag and Prakash Agarwal wrote in a report yesterday. They increased their share-price estimate by 18 percent to 183 rupees, the report also said.

Indiabulls raised 26.6 billion rupees ($566 million) from the sale of shares to institutions last month to fund its expansion and acquisitions. Holdings by the company’s founders have dropped to about 17 percent from 26 percent following the sale and the expiry of warrants, Deutsche Bank estimated.

“We would not be surprised if warrants were to be issued so as to increase their stake,” the analysts wrote in the report. “Demand for its marquee assets office project in Lower Parel, Mumbai, seems muted.”

Indiabulls has jumped 170 percent in the past three months, compared with a 67 percent gain in India’s benchmark Bombay Stock Exchange Sensitive Index. The target represents a 26 percent decline from yesterday’s close of 247.65 rupees.

To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net
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