Indian Property News on 'January, 2010'

Omaxe Ltd. Q3 cons net profit at Rs284.6mn

Omaxe Ltd., a premier real estate development company in India today reported Consolidated Net Sales of Rs. 280.20 crore for the quarter ended December 31st 2009 as compared to Rs. 1.8bn for the quarter ended December 31st 2008, registering a growth of 55%. Consolidated Net Profit for the quarter stood at Rs. 284.6mn, increased by 383% as compared to Rs. 58.8mn posted in the quarter ended December 31st 2008. Earnings per share (EPS) for the quarter stood at Rs. 1.64 as compared to Rs. 0.34 in the quarter ended December 31st 2008.

The company registered growth of 25% in its Consolidated Net Sales of Rs. 2.80bn for the quarter ended December 31st 2009 as compared to Rs. 2.23bn for the quarter ended September 30th 2009. Consolidated Net Profit increased by 22% as compared to Rs. 23.31 crore posted in the quarter ended September 30th 2009. Earnings per share (EPS) for the quarter stood at Rs. 1.64 as compared to Rs.1.34 in the quarter ended September 30th 2009.

For the nine months ended December 31st, 2009 Consolidated Net sales stood at Rs. 6.23bn with Consolidated PAT of Rs. 674.2mn and EPS stood at Rs. 3.88.The operating margin for the nine months ended December 31st, 2009 stood at 34.65% as against 32.06% in the corresponding nine months period of previous year. Rohtas Goel Chairman & Managing Director, Omaxe Limited said, “Demand has further improved and residential sales have picked up during the third quarter. Keeping in view the resurgent demand we are planning to launch various residential projects in Allahabad, Indore and Chandigarh. Our effort will also be to expedite execution and deliveries of scheduled residential projects. Going forward we expect the scenario to improve further.”

Vatika Group plans to raise Rs 1K crore from IPO

Real estate company Vatika Group plans to raise up to Rs 1,000 crore from an initial public offering (IPO) in May by selling around 20% stake, joining a parade of developers looking to wriggle out of the slowdown-induced IPO drought. The company will file its draft red-herring prospectus (DRHP) with market regulator the Securities and Exchange Board of India (Sebi) in a month, said two persons familiar with the matter. Investment bankers Morgan Stanley and IDFC-SSKI are estimating the valuation and preparing the DRHP, said the first person.

The Indian real estate sector was among the biggest casualties of the global downturn as buyers kept away from the market and banks became skittish about lending. But with recovery gathering pace and the stock market bouncing back, scores of realty firms are taking the IPO route to mop up funds for expansion plans as buyers are slowly returning. Vatika joins at least 40 firms, including big names such as Emaar MGF, Lodha Developers and Sahara Prime City, awaiting Sebi’s approval to tap the market. “The IPO market had dried up last year following the financial meltdown. But with the recovery in the stock market, it is natural for real estate firms to tap the IPO route,” said Jagannadham Thunuguntla, equity head with Delhi-based merchant bank SMC Capitals.

Vatika has been looking to raise funds for some time to fund several upcoming projects, including commercial complexes, corporate offices, residential projects and hotels in cities stretching from Gurgaon to Jaipur. “Vatika is developing a 1,000-acre plot in Gurgaon under the India Next brand and a part of the fund raised through IPO will be used in that,” the first person said. Meanwhile, the company’s talks with US private equity firm Brahma Capital to raise up to Rs 125 crore was called off at the final stage, said a company executive. The second person, an executive in another realty firm. He declined to give details. Vatika executives had no comment on the either of the developments. Vatika was in talks with the PE firm to develop an upcoming hotel project under the Westin brand on the Delhi-Jaipur expressway.

RLDA Makes 4th Attempt to Sell Prime Land at Commercial Hub in Mumbai

A parcel of land close to the Bandra-Kurla commercial hub in Mumbai has been put up for sale again by the Railway Land Development Authority (RLDA). The reserve price of the 45,371-square-metre plot was last pegged at Rs 3,960 crore. This is the fourth attempt by RLDA, the nodal agency for development of railway land in the country, to sell the land. It has invited expressions of interest (EoIs) from companies to develop the prime land. The last date for receiving EoIs is February 28, after which a new reserve price will be announced. The land authority had put the auctioning on hold earlier as the deputy commissioner of the area claimed part ownership of the land. “The dispute with local authorities had been partly solved. We hope to resolve it completely soon,” said a senior official from RLDA.

In its previous attempt to sell the land in 2008, RLDA had cut the reserve price of the plot by nearly 14 per cent to the current Rs 3,960 crore. It also reduced the minimum networth requirement by similar margins in a bid to perk up the interest of bidders. Though developers such as DLF, Unitech, Parsvnath and Indiabulls expressed interest in the project, they backed out as the reserve price was considered too high given the slowdown in the real estate. Earlier, the authority had more than trebled the reserve price of the plot to Rs 4,628 crore, on the grounds that extra development could be done on the land due to relaxed norms. The state government had increased the floor space index to 4 and a developer could build up to 150,000 sq metres, or 1.6 million sq ft, of space.

The reserve price, eligibility criteria and other conditions were again set to change, said a senior RLDA official. On two other occasions in the past, the RLDA failed to continue with the auctioning of the plot due to slowdown in the real estate sector and change in development plans. “We hope that this time it goes through,” the RLDA official said. Developers are keenly watching the reserve price to be announced by RLDA, which will determine their bid. “Last time, the reserve price was too high. Given the oversupply in the Mumbai market, we have to see the reserve price and take a call,” said Rajeev Talwar, executive director of DLF, the country’s largest developer.

DLF Looking to Raise Rs 1,250 crore by Exiting Projects

DLF Ltd, the largest real-estate developer in the country by market value, is looking at raising Rs 1,250 crore by exiting projects, selling land plots and a refund from the Haryana government. The company said it is looking to divest assets at fair market value and has already realised about Rs 170 crore in the third quarter bringing the total to Rs 1,234 crore raised during the first nine months. The developer said it has visibility to raise Rs 1,000 crore as refunds from the Haryana government, resale of land plots from Gurgaon and exits from couple of projects by March end. However, the New Delhi-based company has put its plan to sell the wind power business on backburner as it is expecting the valuation of the business to go up based on healthy returns. DLF had indicated that they have an offer of Rs 1,000 crore for the business.

“This (wind power) business generates about Rs 160-170 crore revenue which gives us a return of 15%. We are thinking internally on when to divest this business given the excellent post-tax returns we get in this line of business,” Saurabh Chawla, executive director – finance, DLF said in a conference with analysts. Chawla said the company is in negotiations with Delhi Development Authority (DDA) for settlement of Dwarka project which is expected to fetch Rs 900 crore by the next fiscal. “We should achieve the target of Rs 2,500 crore of divestments for this year excluding wind and Dwarka exit,” the DLF official said.

Meanwhile, the developer said that it has been able to reduce average cost of debt from 11.9% in December 2008 to 10.6% in December 2009 as it has retired the short-term, more expensive debt with cheaper long-term debt. The earlier announced integration of DLF Assets Ltd (DAL) with DLF is expected to be completed this quarter and would be followed by a potential listing on the Singapore stock exchange. Over the last nine months, DLF has received Rs 3,000 crore from DAL and the company has reduced its net debt by Rs 1,200 crore and used the rest as operating expense.

Mumbai Based Real Estate Company DB Realty Ropes in Anchor Investors for Rs270crore

Mumbai-based real estate company DB Realty Limited, has received bids for Rs. 270 crore towards the Anchor Investor Portion of its IPO which opened today. The anchor investors to whom equity shares have been allocated pursuant to the Offer include Janus, India Capital Fund, Pru ICICI Life, Reliance Capital and India Equity Growth Fund. Janus being a US-based fund has invested in a realty company for the first time.

DB realty entered the capital markets on with its IPO of equity shares of Rs 10 each (the “IPO”) at a price band of Rs 468-Rs 486. The IPO will close on February 02, 2010. D B Realty Limited targets to raise up to Rs 1,500 crores through the issue. The IPO also marks the equity dilution of at least 10%, the minimum required to list the company.

Jointly promoted by Mr. Shahid Balwa and Mr. Vinod Goenka whose families have been in the real estate and related businesses for more than 95 years and 25 years respectively. Enam Securities Private Limited and Kotak Mahindra Capital Company Private Limited are the book running lead managers to the issue. DB Realty focuses on residential, commercial, retail and other projects, such as mass housing and cluster redevelopment, in and around Mumbai.

Decline in DLF LTD’s Asset Sale Target

India’s largest real estate firm by market value, DLF Ltd, will be able to raise only half of the targeted Rs5,500 crore this fiscal—by selling assets that are not central to its business of developing property. DLF is selling non-core assets to reduce debt. The company’s net debt for the quarter ended 31 December went up by Rs695 crore to Rs12,830 crore, compared with Rs12,135 crore in the preceding quarter. The realtor’s net debt to equity ratio is 0.5. In an analyst presentation published on the company’s website, DLF has said that it will raise around Rs1,250 crore from asset sales and refunds by the end of the fiscal. This will take the total amount raised from asset sales during the fiscal to around Rs2,500 crore.

The remaining amount of Rs3,000 crore would be raised in the next fiscal. In the third quarter DLF raised around Rs170 crore from sale of non-core assets. DLF’s gross debt on 1 October was Rs14,729 crore. While it repaid Rs444 crore out of this during the third quarter, the company also borrowed an additional Rs2,703 crore. Also, its debt increased by Rs180 crore due to consolidation in its business, which has led to an increase in net debt. DLF had tied up with Laing O’Rourke in a 50:50 joint venture in 2006 to undertake projects worth Rs5,000 crore by 2010.

Chawla also said the progress in sale of assets has been slow because the company wanted to get a fair value for its assets. “There is no rush or compulsion to sell at distress prices.” DLF is still in talks with the Delhi Development Authority for refund of Rs900 crore after it withdrew from a project to develop a convention centre in Dwarka, it said. Besides this, the developer is considering an offer of Rs1,000 crore for the sale of its wind power business.

“DLF had a very aggressive target of asset sales,” said Bhaskar Chakraborty, an analyst with brokerage India Infoline Ltd. “In the worst case scenario, around three-fourths of the asset sales target will be postponed to the next fiscal, and in the best case scenario, half of the asset sales will be delayed.” DLF reported third quarter results on Wednesday. Its revenue increased by 43% to Rs2,152 crore from Rs1,503 crore a year ago. Net profit fell by as much as 30% to Rs468 crore from Rs 671 crore in the year-ago quarter. DLF Assets Ltd contributed to 10% of DLF’s revenue in the quarter ended 31 December. In the previous quarter, DLF announced the integration of its wholly owned subsidiary DLF Cyber City Developers Ltd with Caraf Builders and Constructions, a promoter owned company which in turn owns DLF Assets. DLF Assets buys and holds completed commercial assets of DLF. After the integration, the relationship between DLF and DLF Assets will remain unchanged, Chawla said, adding that the decline in profit was because of a lower revenue realization from sales.

“Revenue realization in the third quarter is down by 20% compared to the second quarter,” Chakraborty said. “Last quarter, they were realizing from Capital Greens project which is selling at around Rs8,400 per sq. ft. Realization in Gurgaon projects is far less than Delhi projects.” DLF’s share price rose 2.37% to Rs324.55 on the Bombay Stock Exchange on Thursday.

Big TV Collaborates with Real Estate Developers to market DTH services

Anil Dhirubhai Ambani Group company Reliance Big TV today said it has reached deals with real estate developers to market its Direct-To-Home television services in their residential building projects. The company has signed multi-dwelling units (MDU) agreements worth about Rs 20 crore with developers, including Kalpataru, Super Tech, Arihant Builders and Elysium Builders, to target residential and commercial clusters, Reliance Big TV (RBTV) said in a statement.

“The MDU strategy will be an integral part of RBTV’s focus to achieve leadership position in the Indian DTH sector… Such MDU agreements are expected to contribute nearly 15 per cent of its volumes in the circle,” RBTV DTH Senior Vice President Sales Ashutosh Srivastava said. The company is targeting a market share of 40 per cent in the MDU segment within the first year of starting operations, the statement added.

MDU is a customised DTH solution targeted to tap sections like residential societies, commercial complexes and townships where a single dish antenna can provide the connection to multiple households. The company also said it has branched its entire sales operations into two divisions — retail and institutional. “While the retail division will focus on driving sales through its nationwide retail network and channel associates, the newly-formed institutional division will focus on high- wicket MDU deals,” it said.

30% Decline in DLF’s Net Profit

Despite a substantial jump in revenue, India’s largest real estate company DLF posted a 30% decline in net profit to Rs 468 crore for the quarter ended December 31, 2009, compared to Rs 671 crore from a year-ago period. This is primarily due to substantial increase in interest outgo to Rs 257 crore in the third quarter of the current fiscal as against Rs 94 crore in the corresponding period in 2008-09.

Even tax provisioning has increased to Rs 168 crore in the quarter ended December 2009 from Rs 106 crore in the same period last year. But consolidated revenues of the company rose 43% to Rs 2,152 crore in the quarter ended December 2009 from Rs 1,503 crore in the corresponding period a year-ago. Going forward, DLF targets to become a zero-debt company in medium term. Currently, its debt stands at around Rs 12,500 crore.

The company has raised Rs 170 crore through sale of its non-core assets in the last quarter taking the total divested proceeds to Rs 1,234 crore in the current fiscal. It expects to mop up another Rs 1,250 crore by way of asset sale or refunds by the end of the current fiscal taking the total for the year to Rs 2,500 crore. DLF vice chairman Rajiv Singh said: “With the economy on path of recovery, we witnessed renewed demand for luxury and high-end housing, in addition to stable demand for residential homes.”

However, he also added: “Though overall we remain cautious, we are on track to meet our targets in current fiscal.” For the past one year, DLF has been looking to focus on its core business area and has put many of its other businesses on the block. The firm has kick-started a major restructuring exercise to focus on its four key realty verticals—residential, commercial, retail and rental. The Delhi-based firm was recently in news as it decided to exit from its mutual fund venture by selling its entire stake to the overseas joint venture partner, the US-based Prudential Financial. Last year it sold security services firm TerraForce to the world’s largest security services provider G4S Plc. DLF shares closed at Rs 317, down 7.83% at BSE on Wednesday. The company announced its earnings after the market hours.

Real Estate India Still in Negative Mode- Fitch Report

Fitch Ratings in a Special Report, said that its 2010 Outlook for the Indian real estate sector remains Negative; however, the sector could exhibit signs of stability by the second half of the year. Fitch notes that the fundamentals of India’s real estate sector are improving, as seen by better liquidity and improved demand in the residential segment. The agency expects growth in 2010 to be driven by government support, especially for the affordable housing segment, improved access to debt and capital markets, and the recovery of real estate demand. Yet, there are concerns that the government may roll out moderately adverse policies to keep property prices in check when economic conditions become more stabilised. In addition, the government may also find it politically difficult to provide a supportive environment if developers continue to increase real estate prices.

In order for Fitch to take a more favourable view of the sector, sustainable operating performances and continued deleveraging by developers over a longer period will be key positive factors, which the agency expects to see during the second half of the year. Demand for both residential and commercial real estate segments slowed down considerably in H109, with a significant drop in property prices. However, H209 witnessed some revival, particularly in the residential segment. Enhanced affordability, lower mortgage rates, and better job security have helped revive demand for homes.

Conversely, demand in the commercial segment remains weak, primarily impacted by over-supply and the scale-back of expansion plans by corporate India. During the crisis, the Information Technology/Information Technology Enabled Services (IT/ITES) sector, where the bulk of the demand for India’s commercial office spaces come from, adopted a conservative staffing approach. This has led to demand lagging behind supply; however, Fitch expects demand for commercial spaces to improve in H210 consequent to the expected resumption of hiring in key sectors like IT/ITES and financial services. That said, based on the current commercial spaces under construction, oversupply risk persists in the sector, which would keep lease rentals under pressure in 2010.

The affordable entry or low-income housing segment is expected to remain the primary growth driver for the Indian residential sector in 2010, and its potential is supported by the government. Affordable housing will require better and more efficient construction practices from homebuilders to maintain overall operating margins, as this segment generally has lower margins and a shorter construction and sales cycle. These factors should also reduce working-capital requirements. A more favourable overall economic environment in India and improved market sentiment on the part of homebuyers should clearly have a positive effect on the credit quality of homebuilders.

Overall, credit metrics are expected to recover in 2010, as developers should be able to improve their capital structure, operating margins, and liquidity. Fitch notes that a substantial amount of equity funds raised has been utilised in the repayment of debt and interest costs, which has helped in developers deleverage. However, risks remain as significant repayments would be due in H2FY11 and FY12 from restructured loans. The ability of leveraged players to service their interest costs and fulfil their immediate term debt/land obligations continues to be a concern.

DLF Reports Sequential Rise in Quarterly Profit

Shares in DLF Ltd, India’s top listed real estate firm, rose more than 3 percent on Thursday after it reported a sequential rise in quarterly profit, signalling a recovery in the realty market was gaining momentum. DLF said late on Wednesday consolidated net profit rose 6 percent to 4.68 billion rupees ($101 million) in the December quarter from 4.40 billion in three months to September.

By 0352 GMT, shares in the company valued at about $12 billion, were up 3 percent up at 326.40 rupees, having risen as much as 3.2 percent earlier. The broader Mumbai market was up about 1 percent.