Bangalore-based real estate major Sobha Developers may be running out of elbow room, when it comes to managing its cash flow. Recent reports that the company was looking to sell a 26% stake to raise cash, may be just the tip of the iceberg. CNBC-TV18’s Sunanda Jayaseelan delvees deeper.
Sobha Developers was planning to build a 5-star hotel, but the project that was announced two years ago has been put on hold and the land is now being used as a venue for a Home Mela, marketing apartments developed by the builder. The company has a 99 year lease on this land, and CNBC-TV18 has learnt that it is talking to several players to sell this lease.
When contacted specifically on this latest development, the management simply said it has now decided not to go ahead with the hotel project, and refused to explain why. But sources said that cash flow problems may be forcing the company to rethink its aggressive expansion plans, and stick to its core business.
CNBC-TV18 has also learnt that Sobha Developers is now asking its suppliers to accept apartments instead of cash. A cement supplier who meets close to 70% of Sobha's cement demands says the company owes him close to Rs 90 lakh for supplies over the last 3 months.
He said the company has asked him to accept apartments instead and he refused. A steel supplier, who meets around 35% of the developer's steel needs, says he's in the same boat.
When contacted, the company said, “There is no stated policy as to offer apartments to vendors. In the past also suppliers have taken apartments. "
But sources believe that such apartments are being offered at huge discounts. But most suppliers are reluctant to accept these terms, and say they would rather wait till the company's cash flow situation improves.
Thursday, March 5, 2009
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