Bangalore: Banks and financial institutions, which lent close to Rs 1,900 crore to Sobha Developers Ltd, have agreed to reschedule part of the debt.
Sobha Developers' managing director J C Shama said, "The company has managed to reschedule a substantial part of its loan portfolio." However, he did not elaborate. "Almost all the financial institutions have realigned our loans and our target is to bring down the debt to equity ratio of 0.5 by this fiscal from the current 0.85," he added. Of the total debt of Rs 1,900 crore, the Bangalore-based real estate developer will be able to repay Rs 1,130 crore on easier timelines.
Sobha has also refinanced/ rescheduled its near-term debt to match expected cash flows. The realty major is currently paying an average rate of interest of around 13% and has an annual interest outgo of Rs 240 crore and fixed overheads of Rs 60 crore. Sharma said, "We are looking at operational improvement and plans to bring down the debt through land monetisation, QIP and private equity deals."
Instead of paying Rs 960 crore and Rs 460 crore in FY10 and FY11, respectively, as per the rescheduled timeline, Sobha will pay an easier Rs 450 crore and Rs 690 crore in the period, the analyst said.
The company is looking to mop up between Rs 1,200 - Rs 1,400 crore by selling its land parcels at a premium. These parcels, totalling up to 475 acres, were valued at between Rs 600 and Rs 800 crore sometime back, according to market sources. However, Sharma refused to give any details .
Sobha recently raised around Rs 530 crore by diluting close to 22.5% equity through a qualified institutional placement (QIP). It intends to use Rs 410 crore of the QIP proceeds to reduce part of the debt.
Showing posts with label In The News. Show all posts
Showing posts with label In The News. Show all posts
Thursday, August 6, 2009
Sobha profit dips to Rs 13 cr in Q1
BANGALORE: Realty major Sobha Developers has seen its net profit nosedive for the first quarter ended June 30, 2009, at Rs 12.7 crore, against Rs. 50.5 crore for the same period in FY09. Income from operations stood at Rs 177.1 crore (Rs 346.8 crore).
Sobha, which bore the aftershocks of the global economic slowdown, has seen a revival in fortunes in the first quarter compared with the fourth quarter ended March 31, 2009. Net profit in the first quarter increased 76.4% to Rs 12.7 crore from the fourth quarter, while total income was sequentially up 15.6% at Rs 178.6 crore.
“The real estate industry has seen clear signals of revival in demand during the first quarter. With the Indian economy growing at 6-7% and expected to achieve a higher growth rate in the next couple of years, real estate infrastructure industries are poised to play a more significant role. It will be a domestic-driven industry, growing at a much faster pace,” a company filing made with the bourses added.
On its part, Sobha Developers has realigned debt, brought on board a private equity partner, besides successfully completing a qualified institutional placement (QIP) raising Rs 500 crore.
These steps, the filing goes on to say, have added the much-needed comfort in operations and have helped the company focus on progress in various projects across key cities, including Bangalore. The company intends to focus on debt reduction and cost optimisation and believes it is well-equipped to capitalise on the early revival in the Indian economy.
As of June 30, 2009, Sobha Developers has completed 50 residential / commercial in-house projects and 146 contractual projects covering 31.9 million sq ft of built-up space.
Sobha Developers has currently 31 residential / commercial ongoing projects totalling 9.2 million sq ft. The company has contractual projects in several states like Karnataka, Kerala, Andhra Pradesh, Orissa, Tamil Nadu, Punjab, Haryana, the NCR, besides Maharashtra.
On the bourses, the Sobha scrip was down 1.2% at Rs 219, with 3.5 lakh shares changing hands on BSE.
Sobha, which bore the aftershocks of the global economic slowdown, has seen a revival in fortunes in the first quarter compared with the fourth quarter ended March 31, 2009. Net profit in the first quarter increased 76.4% to Rs 12.7 crore from the fourth quarter, while total income was sequentially up 15.6% at Rs 178.6 crore.
“The real estate industry has seen clear signals of revival in demand during the first quarter. With the Indian economy growing at 6-7% and expected to achieve a higher growth rate in the next couple of years, real estate infrastructure industries are poised to play a more significant role. It will be a domestic-driven industry, growing at a much faster pace,” a company filing made with the bourses added.
On its part, Sobha Developers has realigned debt, brought on board a private equity partner, besides successfully completing a qualified institutional placement (QIP) raising Rs 500 crore.
These steps, the filing goes on to say, have added the much-needed comfort in operations and have helped the company focus on progress in various projects across key cities, including Bangalore. The company intends to focus on debt reduction and cost optimisation and believes it is well-equipped to capitalise on the early revival in the Indian economy.
As of June 30, 2009, Sobha Developers has completed 50 residential / commercial in-house projects and 146 contractual projects covering 31.9 million sq ft of built-up space.
Sobha Developers has currently 31 residential / commercial ongoing projects totalling 9.2 million sq ft. The company has contractual projects in several states like Karnataka, Kerala, Andhra Pradesh, Orissa, Tamil Nadu, Punjab, Haryana, the NCR, besides Maharashtra.
On the bourses, the Sobha scrip was down 1.2% at Rs 219, with 3.5 lakh shares changing hands on BSE.
Tuesday, May 26, 2009
Sobha Developers pays Re. 1 per share
BANGALORE: Sobha Developers has reported a revenue of Rs. 974.74 crore and a profit after tax of Rs. 109.68 crore for the year ended March 31, 2009. Compared to the previous fiscal, revenues had declined by 32 per cent and profit after tax 52 per cent. The directors have recommended a dividend of Re. 1 per share of Rs. 10 each against Rs. 6.50 per share in the previous year. — Special Correspondent
Sobha Developers rises on plans of raising funds
The company's stock is the largest gainer in the real estate sector.
It has appreciated by 75 per cent from Rs 111.15 to Rs 194.25 on reports that the company was going to raise funds through Qualified Institutional Placements (QIP) issue.
The board of directors of the company has called an Extraordinary General Meeting (EGM) on June 17, 2009.
The Extraordinary General Meeting will consider the increase in the share capital of the company up to Rs 1,500 crore and the increase in the limit of investment by foreign institutional investors (FIIs) in the equity shares of the company up to 100 per cent of the equity share capital of the company.
The Bangalore-based real estate firm that engages primarily in the construction and development of contractual and residential projects, is looking to raise around Rs 1,000 crore via QIP issue.
The company has posted 53 per cent fall in net profit to Rs 107.80 crore (Rs 228.10 crore) for the financial year ended 31st March, 2009, while net sales have declined by 32 per cent to Rs 974 crore (Rs 1,431 crore) during the year.
The counter clocked combined volumes of four million shares in last week as against two million shares were traded in previous week.
The real estate sector has been facing a liquidity crunch for some time now but the situation has improved post the election results.
In fact, many industry players are encouraged by the response Indiabulls and Unitech have received. Indiabulls Real Estate has raised Rs 2,656.50 crore through QIP.
The company issued 14.36 crore equity shares at Rs 185 per share. Unitech had raised about Rs 1,615.25 crore through QIP. The promoter’s stake after the QIP has come down in both the cases.
Sobha Developers says gets 2.25 bln rupees for projects
MUMBAI (Reuters) - Realtor Sobha Developers Ltd said on Tuesday it sold stake in projects in Bangalore and other cities for a total consideration of 2.25 billion rupees from Bangalore-based Purna Partners.
The firm entered into a term sheet with Purna Partners and has received 250 million rupees from the investor on Tuesday.
Sobha Developers is identifying certain land parcels in Bangalore and other cities for residential, commercial and mixed development projects via a special purpose vehicle (SPV).
Sobha Developers will be the shareholder along with Purna Partners in the SPV and will also execute the projects as the principal contractor.
Saturday, May 2, 2009
Sobha may finalise fund raising options next week
Sobha Developers, Bangalore-based real estate developer, has announced that a meeting of its board of directors will be held on May 4 to consider the various alternatives available towards raising of additional capital. The company is evaluating offloading around 25 per cent stake through preferential allotment and is expected to also evaluate the QIP route. The company hopes to raise around Rs 350 crore.
Sobha has a debt of close to Rs 1,900 crore and is leveraged 1.6 times. The company is looking to sell around 200 acres of its 3,000 acre land bank in addition to roping in investors at various projects to settle debt. The company is also negotiating with 12 banks and financial institutions to restructure around Rs 850 crore of debt.
Saturday, April 25, 2009
Sobha Developers plans to launch high-end apartment project in Bangalore
Even as the demand slump is forcing leading property developers across the country to prefer affordable housing in place of high value apartments, Bangalore-based Sobha Developers is firming up plans to launch a high-end apartment project in the city. The project, which would carry a price tag of about Rs 6,000 per sq ft, will be the first luxury apartment project from Sobha after crisis hit the Indian real estate sector.
According to sources, the J P Nagar project, to come up on 36 acres of land in J P Nagar in the south of the city, will be announced during the present year.
The company also plans to enter the affordable housing segment by announcing apartments in the Rs 25 lakh to Rs 30 lakh range in Coimbatore, Tamil Nadu.
Sobha’s move is in line with the industry trend to announce new launches in select areas and chosen price bands in the residential real estate segment. Availability of bank loans makes residential projects a safe bet for cash-strapped real estate developers.
Unlike other players who have lined up dozens of such project launches during the year, Sobha has decided to test the waters with just two launches in 2009-10.
“We are not in a hurry to announce future projects as our priority is to sell the ones nearing completion. Of about 2,000 flats / villas that are under various stages of construction across the country, Sobha has been able to sell about 50 per cent until now. The company expects to see the balance being sold off by the time the projects get completed within the next two and a half years,” a senior Sobha official said. He added that their projects in the neighbouring states of Kerala and Tamil Nadu are in greater demand than the ones in Bangalore.
Sobha’s plans for new investments come amidst its struggle to manage its Rs 2,000 crore debts. Company officials said the debt repayment plans are going ahead and the company will have no problems in funding the new projects.
“Of the total debts, about one-fourth has to be repaid this year. We are exploring various options, including issue of preferential shares and sale of land to generate the required amount,” company official said.
The company is also expecting a 25 per cent increase in its revenues from contract works for corporates like Infosys.
According to sources, the J P Nagar project, to come up on 36 acres of land in J P Nagar in the south of the city, will be announced during the present year.
The company also plans to enter the affordable housing segment by announcing apartments in the Rs 25 lakh to Rs 30 lakh range in Coimbatore, Tamil Nadu.
Sobha’s move is in line with the industry trend to announce new launches in select areas and chosen price bands in the residential real estate segment. Availability of bank loans makes residential projects a safe bet for cash-strapped real estate developers.
Unlike other players who have lined up dozens of such project launches during the year, Sobha has decided to test the waters with just two launches in 2009-10.
“We are not in a hurry to announce future projects as our priority is to sell the ones nearing completion. Of about 2,000 flats / villas that are under various stages of construction across the country, Sobha has been able to sell about 50 per cent until now. The company expects to see the balance being sold off by the time the projects get completed within the next two and a half years,” a senior Sobha official said. He added that their projects in the neighbouring states of Kerala and Tamil Nadu are in greater demand than the ones in Bangalore.
Sobha’s plans for new investments come amidst its struggle to manage its Rs 2,000 crore debts. Company officials said the debt repayment plans are going ahead and the company will have no problems in funding the new projects.
“Of the total debts, about one-fourth has to be repaid this year. We are exploring various options, including issue of preferential shares and sale of land to generate the required amount,” company official said.
The company is also expecting a 25 per cent increase in its revenues from contract works for corporates like Infosys.
Sobha Developers - Sobha Sunscape offers 2, 3BHK affordable units
The sluggish real estate market seems to have pushed almost all developers to jump into the affordable housing bandwagon. All of them, big and small have realised that this segment has the potential to prop up their sagging business. And they are wooing customers with the promise of offering quality homes for a lesser price.
“In these difficult time, consumers look at the brand name. When established names enter the affordable housing segment, consumers automatically go to them. They believe that these developers won’t compromise on the quality of finished products as well as raw materials and finer details that go into setting up a housing project — tiles, window panes, paint and other outdoor ammenities. It makes sense for top developers to cash in on that,” says Mitali Shairi of property consultants HJ Realtors.
Bangalore-based Sobha Developers has put up Sobha Sunscape, a project with 362 apartments, spread across 9 acres off Kanakapura Road on the outskirts of Bangalore. Till now, the company had been offering projects in the high-end and luxury category including villas, townhouses and cul de sac bungalow projects.
Sobha Sunscape offers two-bedroom and three-bedroom flats for Rs 37.99 lakh and Rs 40.10 lakh, respectively. Considering the prevailing rates, which are over Rs 50 lakh, prices of these units are affordaibe. According to the company, two-bedroom units will have a superbuilt area ranging from 1,276.34 sq ft and 1,317.78 sq ft, while three-bedroom units would have a superbuilt area ranging between 1,374.69 sq ft and 1,562.52 sq ft. The project will have 16 floors ,including the ground floor.
J C Sharma, managing director of Sobha Developers, said the real estate community has to focus on the affordable housing segment if they have to stay in the race. "The correction in the market was inevitable, considering the reasons that led to it, but the Indian real estate sector has the resilience to bounce back," he told FC Estate.
Company officials said that houses in the Sunscape project would be offered with a choice of options for home furniture for the living room, kitchen, bedroom, dining room and bathroom at an extra cost.
The company is targeting professionals who would take advantage of the connectivity factor of Kanakpura Road. Ammenities that Sobha Sunscape claims to offer include a clubhouse, gym, pantry and cafeteria, crèche, a mini market, an ATM, multi-purpose hall, stores, laundromat, clinic, indoor games hall, reading room, swimming pool, basket ball court and a children’s play area.
Kanakpura Road in southern Bangalore is one of the fastest developing areas in the city, company officials said and added that the USP of the project would be proximity to all major ring roads, including Mysore Road, Bannerghatta Road and Kanakpura ring road.
“In these difficult time, consumers look at the brand name. When established names enter the affordable housing segment, consumers automatically go to them. They believe that these developers won’t compromise on the quality of finished products as well as raw materials and finer details that go into setting up a housing project — tiles, window panes, paint and other outdoor ammenities. It makes sense for top developers to cash in on that,” says Mitali Shairi of property consultants HJ Realtors.
Bangalore-based Sobha Developers has put up Sobha Sunscape, a project with 362 apartments, spread across 9 acres off Kanakapura Road on the outskirts of Bangalore. Till now, the company had been offering projects in the high-end and luxury category including villas, townhouses and cul de sac bungalow projects.
Sobha Sunscape offers two-bedroom and three-bedroom flats for Rs 37.99 lakh and Rs 40.10 lakh, respectively. Considering the prevailing rates, which are over Rs 50 lakh, prices of these units are affordaibe. According to the company, two-bedroom units will have a superbuilt area ranging from 1,276.34 sq ft and 1,317.78 sq ft, while three-bedroom units would have a superbuilt area ranging between 1,374.69 sq ft and 1,562.52 sq ft. The project will have 16 floors ,including the ground floor.
J C Sharma, managing director of Sobha Developers, said the real estate community has to focus on the affordable housing segment if they have to stay in the race. "The correction in the market was inevitable, considering the reasons that led to it, but the Indian real estate sector has the resilience to bounce back," he told FC Estate.
Company officials said that houses in the Sunscape project would be offered with a choice of options for home furniture for the living room, kitchen, bedroom, dining room and bathroom at an extra cost.
The company is targeting professionals who would take advantage of the connectivity factor of Kanakpura Road. Ammenities that Sobha Sunscape claims to offer include a clubhouse, gym, pantry and cafeteria, crèche, a mini market, an ATM, multi-purpose hall, stores, laundromat, clinic, indoor games hall, reading room, swimming pool, basket ball court and a children’s play area.
Kanakpura Road in southern Bangalore is one of the fastest developing areas in the city, company officials said and added that the USP of the project would be proximity to all major ring roads, including Mysore Road, Bannerghatta Road and Kanakpura ring road.
Wednesday, April 22, 2009
Sobha Sunscape offers 2, 3BHK affordable units
The sluggish real estate market seems to have pushed almost all developers to jump into the affordable housing bandwagon. All of them, big and small have realized that this segment has the potential to prop up their sagging business. And they are wooing customers with the promise of offering quality homes for a lesser price.
“In these difficult time, consumers look at the brand name. When established names enter the affordable housing segment, consumers automatically go to them. They believe that these developers won’t compromise on the quality of finished products as well as raw materials and finer details that go into setting up a housing project — tiles, window panes, paint and other outdoor ammenities. It makes sense for top developers to cash in on that,” says Mitali Shairi of property consultants HJ Realtors.
Bangalore-based Sobha Developers has put up Sobha Sunscape, a project with 362 apartments, spread across 9 acres off Kanakapura Road on the outskirts of Bangalore. Till now, the company had been offering projects in the high-end and luxury category including villas, townhouses and cul de sac bungalow projects.
Sobha Sunscape offers two-bedroom and three-bedroom flats for Rs 37.99 lakh and Rs 40.10 lakh, respectively. Considering the prevailing rates, which are over Rs 50 lakh, prices of these units are affordaibe. According to the company, two-bedroom units will have a superbuilt area ranging from 1,276.34 sq ft and 1,317.78 sq ft, while three-bedroom units would have a superbuilt area ranging between 1,374.69 sq ft and 1,562.52 sq ft. The project will have 16 floors ,including the ground floor.
J C Sharma, managing director of Sobha Developers, said the real estate community has to focus on the affordable housing segment if they have to stay in the race. "The correction in the market was inevitable, considering the reasons that led to it, but the Indian real estate sector has the resilience to bounce back," he told FC Estate.
Company officials said that houses in the Sunscape project would be offered with a choice of options for home furniture for the living room, kitchen, bedroom,
dining room and bathroom at an extra cost.
The company is targeting professionals who would take advantage of the connectivity factor of Kanakpura Road. Ammenities that Sobha Sunscape claims to offer include a clubhouse, gym, pantry and cafeteria, crèche, a mini market, an ATM, multi-purpose hall, stores, laundromat, clinic, indoor games hall, reading room, swimming pool, basket ball court and a children’s play area.
Kanakpura Road in southern Bangalore is one of the fastest developing areas in the city, company officials said and added that the USP of the project would be proximity to all major ring roads, including Mysore Road, Bannerghatta Road and Kanakpura ring road.
“In these difficult time, consumers look at the brand name. When established names enter the affordable housing segment, consumers automatically go to them. They believe that these developers won’t compromise on the quality of finished products as well as raw materials and finer details that go into setting up a housing project — tiles, window panes, paint and other outdoor ammenities. It makes sense for top developers to cash in on that,” says Mitali Shairi of property consultants HJ Realtors.
Bangalore-based Sobha Developers has put up Sobha Sunscape, a project with 362 apartments, spread across 9 acres off Kanakapura Road on the outskirts of Bangalore. Till now, the company had been offering projects in the high-end and luxury category including villas, townhouses and cul de sac bungalow projects.
Sobha Sunscape offers two-bedroom and three-bedroom flats for Rs 37.99 lakh and Rs 40.10 lakh, respectively. Considering the prevailing rates, which are over Rs 50 lakh, prices of these units are affordaibe. According to the company, two-bedroom units will have a superbuilt area ranging from 1,276.34 sq ft and 1,317.78 sq ft, while three-bedroom units would have a superbuilt area ranging between 1,374.69 sq ft and 1,562.52 sq ft. The project will have 16 floors ,including the ground floor.
J C Sharma, managing director of Sobha Developers, said the real estate community has to focus on the affordable housing segment if they have to stay in the race. "The correction in the market was inevitable, considering the reasons that led to it, but the Indian real estate sector has the resilience to bounce back," he told FC Estate.
Company officials said that houses in the Sunscape project would be offered with a choice of options for home furniture for the living room, kitchen, bedroom,
dining room and bathroom at an extra cost.
The company is targeting professionals who would take advantage of the connectivity factor of Kanakpura Road. Ammenities that Sobha Sunscape claims to offer include a clubhouse, gym, pantry and cafeteria, crèche, a mini market, an ATM, multi-purpose hall, stores, laundromat, clinic, indoor games hall, reading room, swimming pool, basket ball court and a children’s play area.
Kanakpura Road in southern Bangalore is one of the fastest developing areas in the city, company officials said and added that the USP of the project would be proximity to all major ring roads, including Mysore Road, Bannerghatta Road and Kanakpura ring road.
Sunday, April 19, 2009
Sobha Developers - Panchkula to soon have first five-star boutique hotel
Panchkula, satellite township of Chandigarh will soon have its first five-star boutique hotel, The Bella Vista, which will be part of an upcoming shopping mall in City Centre, Sector 5, Panchkula. The hotel project is almost in its final stage and is expected to start by July 2009. Sobha Developers Limited will develop the project.
Confirming the project, Chetan Sood, Marketing Manager, The Bella Vista Shopping Mall and Hotel, Panchkula, said that the hotel is housed on the top three floors of the mall. It has terrace gardens will offer an unobstructed view of the Himalayan Mountains. “A unique feature of this hotel is the six luxury suites, which will have their own private plunge pools and an additional six studios and suites with private, shared swimming pools,” Sood confirms. He reveals that the hotel will have 50 rooms including 12-15 suites; the rest of rooms will be Executive and Standard rooms.
The speciality restaurant for 50 covers and round the clock coffee shop with a roof top garden will offer international cuisines. The banquet and conference facilities at The Bella Vista will provide a venue for business meets and private functions. Other facilities in the hotel include a spa, swimming pool and Health Club.
Confirming the project, Chetan Sood, Marketing Manager, The Bella Vista Shopping Mall and Hotel, Panchkula, said that the hotel is housed on the top three floors of the mall. It has terrace gardens will offer an unobstructed view of the Himalayan Mountains. “A unique feature of this hotel is the six luxury suites, which will have their own private plunge pools and an additional six studios and suites with private, shared swimming pools,” Sood confirms. He reveals that the hotel will have 50 rooms including 12-15 suites; the rest of rooms will be Executive and Standard rooms.
The speciality restaurant for 50 covers and round the clock coffee shop with a roof top garden will offer international cuisines. The banquet and conference facilities at The Bella Vista will provide a venue for business meets and private functions. Other facilities in the hotel include a spa, swimming pool and Health Club.
Thursday, April 16, 2009
Top Europeon fund may invest Rs 300 cr in Sobha
Redevco, one of Europe’s largest real estate investment and development firms, with a $10 billion portfolio, is understood to be looking at investing around Rs 300 crore in various projects of Bangalore-based Sobha Developers
Redevco, part of the diversified Cafro Holdings, which is into private equity, retail, financial services and renewable energy, in addition to real estate development, set up office in India in late 2008. If the discussions with Sobha fructify, it will be its first investment in India.
Investment banking sources indicated that Redevco has had initial discussions with the management of Sobha Developers, which is mired in debt like many of its peers. The investment, if it materialises, is expected to be tied up by September 2009, they say.
Private equity investments into Indian real estate have been slowing over the past three quarters and this deal is expected to be a major one. While Redevco said it had nothing to comment, Sobha has been maintaining that it is in talks with various funds and nothing has been finalised.
Over the past two quarters, Sobha has been aggressively looking at three options to reduce its debt burden of close to Rs 1,900 crore, a leverage of 1.6 times.
The company, which has Infosys as one of its major clients, is looking to raise around Rs 850 cr by selling around 200 acres of its 3,000 acre land bank, offloading up to 49 per cent stake through special purpose vehicles and to offload up to 25 per cent stake at the enterprise level.
Sobha is understood to have identified around 150 acres of land on which projects can be implemented through special purpose vehicles by divesting stakes.
The company is also engaged with around 12 banks and financial institutions to restructure around Rs 850 cr of debt that will be due for payment during the next 18 months.
Banking sources indicate Sobha has been able to get a nod for a part of that sum and talks are also on with mutual funds to roll over Rs 350 cr of debt.
Redevco, part of the diversified Cafro Holdings, which is into private equity, retail, financial services and renewable energy, in addition to real estate development, set up office in India in late 2008. If the discussions with Sobha fructify, it will be its first investment in India.
Investment banking sources indicated that Redevco has had initial discussions with the management of Sobha Developers, which is mired in debt like many of its peers. The investment, if it materialises, is expected to be tied up by September 2009, they say.
Private equity investments into Indian real estate have been slowing over the past three quarters and this deal is expected to be a major one. While Redevco said it had nothing to comment, Sobha has been maintaining that it is in talks with various funds and nothing has been finalised.
Over the past two quarters, Sobha has been aggressively looking at three options to reduce its debt burden of close to Rs 1,900 crore, a leverage of 1.6 times.
The company, which has Infosys as one of its major clients, is looking to raise around Rs 850 cr by selling around 200 acres of its 3,000 acre land bank, offloading up to 49 per cent stake through special purpose vehicles and to offload up to 25 per cent stake at the enterprise level.
Sobha is understood to have identified around 150 acres of land on which projects can be implemented through special purpose vehicles by divesting stakes.
The company is also engaged with around 12 banks and financial institutions to restructure around Rs 850 cr of debt that will be due for payment during the next 18 months.
Banking sources indicate Sobha has been able to get a nod for a part of that sum and talks are also on with mutual funds to roll over Rs 350 cr of debt.
Sobha Developers defers plans to raise equity
Sobha Developers has deferred plans to raise equity through a rights issue, reports CNBC-TV18, quoting sources. The company had announced plans to raise about Rs 250–300 crore via rights issue in August 2008. However, market analysts say this could be a problem because the promoters cannot really subscribe to their share. CNBC-TV18's correspondent Priyanka Ghosh reports.
Sobha Developers had announced the raising of equity via the rights issue in August 2008. We understand from sources that this has been put on hold for the time being at least because of tough market conditions, as the company says.
Sobha Developers had plans to raise about Rs 250–300 crore via the rights issue. It has 87% promoter holding in the company and market analysts say that this could be a problem because the promoters cannot really subscribe to their share and that is really the reason why this has not worked out. However, Sobha Developers has, in fact plans, to raise about Rs 900 crore going forward. They will do this through land sales and also some kind of equity infusion at the SPV level, which they have confirmed. Their landbank is about 3,000 acres. So, there are no problems there.
There are 23 acres under construction and the rest not even under construction. There are no assets in the books of Sobha Developers that are income generating. So, it looks tough that it would find a buyer in this market. It has a debt of Rs 1,850 crore in its books.
Sobha Developers had announced the raising of equity via the rights issue in August 2008. We understand from sources that this has been put on hold for the time being at least because of tough market conditions, as the company says.
Sobha Developers had plans to raise about Rs 250–300 crore via the rights issue. It has 87% promoter holding in the company and market analysts say that this could be a problem because the promoters cannot really subscribe to their share and that is really the reason why this has not worked out. However, Sobha Developers has, in fact plans, to raise about Rs 900 crore going forward. They will do this through land sales and also some kind of equity infusion at the SPV level, which they have confirmed. Their landbank is about 3,000 acres. So, there are no problems there.
There are 23 acres under construction and the rest not even under construction. There are no assets in the books of Sobha Developers that are income generating. So, it looks tough that it would find a buyer in this market. It has a debt of Rs 1,850 crore in its books.
Thursday, April 9, 2009
Leading real estate cos headed for a debt trap?
Experts say several companies may get stuck in a debt trap as the quantum of debt is too high when compared with the expected cash flow generation in the next fiscal.
Real estate developers say the worst for the sector is over. But the debt in several of the leading companies’ balance sheet suggest a different story. Experts say several companies may get stuck in a debt trap as the quantum of debt is too high when compared with the expected cash flow generation in the next fiscal.
People familiar with the developments say DLF’s debt is around Rs. 15,000 crore. On an average, the company delivers 10-11 million sq. ft per year. If we take the average cost of interest at 13%, DLF’s interest burden for FY10 will be Rs. 1,950 crore. That means the company will have to pay Rs. 163 crore every month and that’s just the interest component. Even if DLF is able to sell 10 million sq. feet at an average price of Rs. 3,000 a sq. foot, it will generate sales of Rs. 3,000 crore. However, typically just 20% of booking amount is paid upfront by customers. Going by that logic, DLF can expect an inflow of Rs. 600 crore. Compare that to the Rs. 1,950 crore of interest burden that DLF will have to pay in FY10.
Unitech’s story, sources say, is no different. With a debt burden of Rs. 8,000 crore, it will have to bear an interest burden of Rs. 1,040 crore. Assuming that one apartment of Unitech sells for Rs. 40 lakh, the company will have to pre-sell 10,400 apartments to generate Rs. 1040 crore.
There are others too in the same boat. HDIL’s debt figure is Rs. 4,000 crore. The company is launching projects aggressively. It had two launches in March and five others are planned later this year. Not surprising, since at 13% interest cost, the firm will have to bear Rs. 520 crore just as interest burden. The question several analysts are asking is will the pre-sale amount suffice for both servicing the interest cost and construction costs as well? Or is a delay in these new projects inevitable?
Sobha Developers have just 1,500 apartments ready for sale. The company has debt of Rs1,850 crore and the interest that it will have to pay is Rs. 241 crore. Sobha Developers has two launches planned later this year. While Sobha’s land bank may be 3,000 acres, just 23 acres is under construction. Company sources have confirmed that it will take additional debt to service interest cost burden in FY10. And industry players fear, several others will follow suit.
Aggressive asset sales will be another characteristic the year ahead in a desperate attempt to generate cash flow. But in the current environment, there are few takers. Unitech’s Saket property still remain unsold after four months. Experts say, like DLF and Puravankara have done in the past, developers may have to surrender back auctioned land to state governments.
We are at the beginning of earnings season, and simply going by the options several companies have to generate cash flow, it looks like FY10 is going to be a tougher challenge than the year gone by.
Real estate developers say the worst for the sector is over. But the debt in several of the leading companies’ balance sheet suggest a different story. Experts say several companies may get stuck in a debt trap as the quantum of debt is too high when compared with the expected cash flow generation in the next fiscal.
People familiar with the developments say DLF’s debt is around Rs. 15,000 crore. On an average, the company delivers 10-11 million sq. ft per year. If we take the average cost of interest at 13%, DLF’s interest burden for FY10 will be Rs. 1,950 crore. That means the company will have to pay Rs. 163 crore every month and that’s just the interest component. Even if DLF is able to sell 10 million sq. feet at an average price of Rs. 3,000 a sq. foot, it will generate sales of Rs. 3,000 crore. However, typically just 20% of booking amount is paid upfront by customers. Going by that logic, DLF can expect an inflow of Rs. 600 crore. Compare that to the Rs. 1,950 crore of interest burden that DLF will have to pay in FY10.
Unitech’s story, sources say, is no different. With a debt burden of Rs. 8,000 crore, it will have to bear an interest burden of Rs. 1,040 crore. Assuming that one apartment of Unitech sells for Rs. 40 lakh, the company will have to pre-sell 10,400 apartments to generate Rs. 1040 crore.
There are others too in the same boat. HDIL’s debt figure is Rs. 4,000 crore. The company is launching projects aggressively. It had two launches in March and five others are planned later this year. Not surprising, since at 13% interest cost, the firm will have to bear Rs. 520 crore just as interest burden. The question several analysts are asking is will the pre-sale amount suffice for both servicing the interest cost and construction costs as well? Or is a delay in these new projects inevitable?
Sobha Developers have just 1,500 apartments ready for sale. The company has debt of Rs1,850 crore and the interest that it will have to pay is Rs. 241 crore. Sobha Developers has two launches planned later this year. While Sobha’s land bank may be 3,000 acres, just 23 acres is under construction. Company sources have confirmed that it will take additional debt to service interest cost burden in FY10. And industry players fear, several others will follow suit.
Aggressive asset sales will be another characteristic the year ahead in a desperate attempt to generate cash flow. But in the current environment, there are few takers. Unitech’s Saket property still remain unsold after four months. Experts say, like DLF and Puravankara have done in the past, developers may have to surrender back auctioned land to state governments.
We are at the beginning of earnings season, and simply going by the options several companies have to generate cash flow, it looks like FY10 is going to be a tougher challenge than the year gone by.
Shriram in talks to buy Sobha assets
In what could perhaps be the first sign of consolidation in the slowdown-hit realty sector, Shriram Properties — part of the $5.5-billion Chennai-based Shriram group of companies — is believed to be in talks with Bangalore-based residential market leader Sobha Developers.
It is understood that Shriram may be looking to buy some of Sobha’s asset portfolio — up to seven of them. These assets could be land with development rights or projects under development, a source close to the process said. The deal is likely to be worth Rs 200-300 crore. “Sobha is in discussions with us. But we have not taken any in-principle decision.
Sobha is evaluating to hive off assets/projects and merger options with Shriram,” a top Shriram group official told ET. Talks between both companies are going on for the past four weeks, another source said. ET learnt that Sun Apollo, an equity partner in some of Shriram’s properties, may help Shriram by putting in some of the money, even though this could not be confirmed.
When contacted, Shriram Properties MD M Murali denied any deal with Sobha. He, however, said the company was actively pursuing its expansion plans. Sobha’s JC Sharma, too, denied the development, although he maintained the company was pursuing various options to raise capital.
Sobha MD JC Sharma had earlier told ET that the company was looking at dilution of stake in the company at the entity level by up to 26% and was also open to divest stakes in its SPVs. Sobha, which is facing a liquidity crunch like many other realty players, is looking at a variety of options to raise up to Rs 600 crore in the coming months.
It was also looking to sell some of its land holdings in Chennai, Bangalore and Pune. Sobha holds about 400 acres in these cities.
The deal, if and when happens, will help the Rs 480-crore Shriram Properties — a pure-play fund manager and development company — scale up its size in the residential market. It is not known how Shriram will raise funds for the purchase.
The deal will also generate much-needed cash for Sobha. The Bangalore-based developer has debt of about Rs 1,850 crore on its books. Sobha also needs cash to develop its various projects. It is developing about 1,400 apartments in Bangalore and other parts of the south. Promoters hold 87% stake in Sobha Developers. Some of these land parcels in Bangalore are in Minerva Mill, Bangalore East and Thanisandra. Sobha’s total land bank assets are in the region of 3,000 acres.
The realty sector is groaning under the collective weight of heavy debt and slump in consumer demand. Many firms bought land when prices were very high hoping to sell the apartments at those rates and make decent returns. But the fall in prices has quashed those plans, putting many of them in quandary. They have to complete the building for which there are few takers. Banks are still unwilling to lend while public markets have turned unfriendly to builders. One solution is to consolidate, get rid of non-core properties and projects while focusing on the important ones which can generate returns. Shriram has completed projects covering 4.5 million sq ft in Bangalore, Chennai, Coimbatore and Kolkata, while 80 million sq ft of projects are in the pipeline at Vizag, Kolkata, Chennai, Coimbatore and Bangalore. Walton Street Capital made its first investment in India through Shriram Properties, while Starwood is the other investor at the entity level of the Chennai group.
Shriram also has a 50:50 joint venture with Sun Apollo, which has brought in Rs 600 crore for executing two special purpose vehicle projects in Chennai and Vizag.
The Sobha scrip closed 6.03% up at Rs 94.05 on BSE on Wednesday.
It is understood that Shriram may be looking to buy some of Sobha’s asset portfolio — up to seven of them. These assets could be land with development rights or projects under development, a source close to the process said. The deal is likely to be worth Rs 200-300 crore. “Sobha is in discussions with us. But we have not taken any in-principle decision.
Sobha is evaluating to hive off assets/projects and merger options with Shriram,” a top Shriram group official told ET. Talks between both companies are going on for the past four weeks, another source said. ET learnt that Sun Apollo, an equity partner in some of Shriram’s properties, may help Shriram by putting in some of the money, even though this could not be confirmed.
When contacted, Shriram Properties MD M Murali denied any deal with Sobha. He, however, said the company was actively pursuing its expansion plans. Sobha’s JC Sharma, too, denied the development, although he maintained the company was pursuing various options to raise capital.
Sobha MD JC Sharma had earlier told ET that the company was looking at dilution of stake in the company at the entity level by up to 26% and was also open to divest stakes in its SPVs. Sobha, which is facing a liquidity crunch like many other realty players, is looking at a variety of options to raise up to Rs 600 crore in the coming months.
It was also looking to sell some of its land holdings in Chennai, Bangalore and Pune. Sobha holds about 400 acres in these cities.
The deal, if and when happens, will help the Rs 480-crore Shriram Properties — a pure-play fund manager and development company — scale up its size in the residential market. It is not known how Shriram will raise funds for the purchase.
The deal will also generate much-needed cash for Sobha. The Bangalore-based developer has debt of about Rs 1,850 crore on its books. Sobha also needs cash to develop its various projects. It is developing about 1,400 apartments in Bangalore and other parts of the south. Promoters hold 87% stake in Sobha Developers. Some of these land parcels in Bangalore are in Minerva Mill, Bangalore East and Thanisandra. Sobha’s total land bank assets are in the region of 3,000 acres.
The realty sector is groaning under the collective weight of heavy debt and slump in consumer demand. Many firms bought land when prices were very high hoping to sell the apartments at those rates and make decent returns. But the fall in prices has quashed those plans, putting many of them in quandary. They have to complete the building for which there are few takers. Banks are still unwilling to lend while public markets have turned unfriendly to builders. One solution is to consolidate, get rid of non-core properties and projects while focusing on the important ones which can generate returns. Shriram has completed projects covering 4.5 million sq ft in Bangalore, Chennai, Coimbatore and Kolkata, while 80 million sq ft of projects are in the pipeline at Vizag, Kolkata, Chennai, Coimbatore and Bangalore. Walton Street Capital made its first investment in India through Shriram Properties, while Starwood is the other investor at the entity level of the Chennai group.
Shriram also has a 50:50 joint venture with Sun Apollo, which has brought in Rs 600 crore for executing two special purpose vehicle projects in Chennai and Vizag.
The Sobha scrip closed 6.03% up at Rs 94.05 on BSE on Wednesday.
Friday, April 3, 2009
Realtor Brigade cuts rate by 15% across projects
Plans to build cheaper flats for buyers with Rs. 25-30 lakh budgets, construct hospitals, residences and malls
Close on the heels of DLF Ltd slashing ticket prices of its homes by 30%, Brigade Enterprises Ltd cut rates by 10-15% in all its projects and will build small, cheaper apartments to cater to buyers with budgets of Rs25-30 lakh.
The Bangalore-based developer has lined up 12 projects, which include hospitals, residences and malls, and would start building them before the end of this year. It plans to raise Rs1,000 crore for its ventures.
“We are planning to raise the money this year through a combination route of private equity and institutional funding,” said chairman and managing director M.R. Jaishankar.
Brigade, which has around 14 million sq. ft under development in southern India, is aggressively looking at expanding its hospitality business in 2009.
On Friday, the company, in partnership with Accor hotels and resorts, launched Mercure Homestead, which is a 126-room luxury service apartment complex in north-west Bangalore. This also marked the launch of Accor’s global Mercure brand in India, with the next property lined up at the hill station of Lavasa, near Pune in Maharashtra.
“We are positive on the Indian market and are planning 50 properties here by 2012 under our various brands, such as Mercure, Novotel and others,” said Daniel Tannenbaum, Accor’s India regional director of sales and marketing. He was responding to a query on a dull hospitality sector and dipping demand in the serviced-apartments segment.
Brigade has a debt of Rs. 350 crore, but will not restructure its loans like other developers that include Unitech Ltd, Sobha Developers Ltd and Housing Development and Infrastructure Ltd.
“We didn’t commit the mistake of buying land indiscriminately and only bought enough that would be developed within five-seven years. So, if there is a good piece of land, we are still looking to buy,” said Jaishankar. The company has a land bank of about 450 acres.
Brigade’s net profit for the nine months to 31 December dipped by 17.3% to Rs67.44 crore from Rs81.55 crore in the same period a year earlier.
The company’s stock closed at Rs. 38.75, up 5.59%, on the Bombay Stock Exchange on Thursday, on a day when the Sensex rose 4.51%.
Close on the heels of DLF Ltd slashing ticket prices of its homes by 30%, Brigade Enterprises Ltd cut rates by 10-15% in all its projects and will build small, cheaper apartments to cater to buyers with budgets of Rs25-30 lakh.
The Bangalore-based developer has lined up 12 projects, which include hospitals, residences and malls, and would start building them before the end of this year. It plans to raise Rs1,000 crore for its ventures.
“We are planning to raise the money this year through a combination route of private equity and institutional funding,” said chairman and managing director M.R. Jaishankar.
Brigade, which has around 14 million sq. ft under development in southern India, is aggressively looking at expanding its hospitality business in 2009.
On Friday, the company, in partnership with Accor hotels and resorts, launched Mercure Homestead, which is a 126-room luxury service apartment complex in north-west Bangalore. This also marked the launch of Accor’s global Mercure brand in India, with the next property lined up at the hill station of Lavasa, near Pune in Maharashtra.
“We are positive on the Indian market and are planning 50 properties here by 2012 under our various brands, such as Mercure, Novotel and others,” said Daniel Tannenbaum, Accor’s India regional director of sales and marketing. He was responding to a query on a dull hospitality sector and dipping demand in the serviced-apartments segment.
Brigade has a debt of Rs. 350 crore, but will not restructure its loans like other developers that include Unitech Ltd, Sobha Developers Ltd and Housing Development and Infrastructure Ltd.
“We didn’t commit the mistake of buying land indiscriminately and only bought enough that would be developed within five-seven years. So, if there is a good piece of land, we are still looking to buy,” said Jaishankar. The company has a land bank of about 450 acres.
Brigade’s net profit for the nine months to 31 December dipped by 17.3% to Rs67.44 crore from Rs81.55 crore in the same period a year earlier.
The company’s stock closed at Rs. 38.75, up 5.59%, on the Bombay Stock Exchange on Thursday, on a day when the Sensex rose 4.51%.
Real Estate Developers On the Debt Bed - Sobha Developers Situation?
Real estate firms may be opting for loan rescheduling for some breathing space, but additional interest rate is only adding to the stress.
The real estate sector, which received a shot in the arm in the form of debt rescheduling package, is unlikely to get the full benefit as the package comes with several riders.
While rescheduling helps realty firms realign the payment tenure, it comes with an additional burden of 1-2 per cent interest, more collaterals and pledging of receivables. Bankers, taking into account the risk involved in rescheduling loans for real estate sector, raise interest rate. Confirming the move, a senior official of HDFC said, without wanting to be named. “When extending the time, banks can levy extra interest rate to compensate for the additional risk they take in restructuring accounts.”
However, additional interest rates can put severe strain on real estate companies as they had taken loans at high rates in the past. Levying extra interest would mean additional pressure on the troubled companies. T Y Prabhu, executive director of Union Bank of India says, “The idea of restructuring is to provide respite to the beleaguered companies. Increasing the interest rate only adds to the stress. Staggering of repayment is a better option.”
Until last year, builders and developers went on an overdrive to acquire land and launch projects, borrowing heavily for the purpose. However, the global slowdown has brought about a reversal of fortune for the once-booming realty sector, which is now saddled with liquidity crunch and falling property values, forcing companies to request banks to re-schedule loans.
Bangalore-based Sobha Developers, New Delhi-based Unitech and Mumbai-based HDIL have requested for rescheduling of some of their debt. These companies are not willing to comment on the rates at which they had borrowed money. However, according to a research report compiled by Credit Suisse in January, quoting NSDL data: “Sobha and Unitech borrowed at 19-30 per cent. Also, average borrowing for property companies was 200-300 basis points higher than most other sectors during the same period, indicating the higher risk attached by lenders to the sector.”
The report further added: “Sobha borrowed funds at 24-30 per cent for short periods of 1-2 months in October-November 2008. Further, it also appears that Sobha defaulted on some of the repayments during this time. Unitech borrowed at 19 per cent in November 2008.” The present rate of interest on commercial loans for real estate companies is 14-16 per cent. Banks reassess cash flows and viability of a project while restructuring and give preference to projects that are nearing completion. S Ananthakrishnan, executive director of IDBI Bank said, “As per the restructuring norms, the net present value (NPV) of principal and interest over the term of the loan cannot be diluted.” He also said that “to compensate for any such dilution, interest rate would need to be appropriately increased if the duration of repayment has to be extended to protect the NPV.”
Companies such as Sobha and Unitech are looking at easing their monthly quarterly obligations towards servicing debts.
“Real estate companies want the period of loan to be extended by converting short-term liability into long-term debt. Though it may result in higher rate of interest, a builder would be happy so long as his monthly obligation is reduced,” said Shuva Mandal, managing partner of Fox Mandal and Little, a law firm that specialises in real estate projects.
“If a developer furnishes more collaterals, then the interest rate is kept unchanged. Otherwise, additional interest burden of around 1-2 per cent is levied. We have been involved in 2-3 such instances in the last 45 days,” said Ameet Hariani, managing partner of Mumbai-based Hariani & Co, another law firm.
R Nagaraju, general manager for corporate planning and strategy at Unitech, said, “Interest rates are linked to prime lending rate (PLR).” He refused to comment specifically on additional interest burden because of loan rescheduling. Unitech had earlier revealed that the company had a debt of around Rs 8,000 crore, of which it had to pay Rs 1,100 by March 31 to various banks as opting for loan extension could give some breathing space. Besides Unitech and HDIL, another Mumbai-based real estate company is in the process of rescheduling non-convertible debentures of around Rs 1,275 crore that are due for payment starting April 2009.
S Baaskaran, chief financial officer of Sobha Developers, said, “We do not know about other players, but for us there is no additional burden. It depends upon the project completion and the revised cash flow of the company.”
The real estate sector, which received a shot in the arm in the form of debt rescheduling package, is unlikely to get the full benefit as the package comes with several riders.
While rescheduling helps realty firms realign the payment tenure, it comes with an additional burden of 1-2 per cent interest, more collaterals and pledging of receivables. Bankers, taking into account the risk involved in rescheduling loans for real estate sector, raise interest rate. Confirming the move, a senior official of HDFC said, without wanting to be named. “When extending the time, banks can levy extra interest rate to compensate for the additional risk they take in restructuring accounts.”
However, additional interest rates can put severe strain on real estate companies as they had taken loans at high rates in the past. Levying extra interest would mean additional pressure on the troubled companies. T Y Prabhu, executive director of Union Bank of India says, “The idea of restructuring is to provide respite to the beleaguered companies. Increasing the interest rate only adds to the stress. Staggering of repayment is a better option.”
Until last year, builders and developers went on an overdrive to acquire land and launch projects, borrowing heavily for the purpose. However, the global slowdown has brought about a reversal of fortune for the once-booming realty sector, which is now saddled with liquidity crunch and falling property values, forcing companies to request banks to re-schedule loans.
Bangalore-based Sobha Developers, New Delhi-based Unitech and Mumbai-based HDIL have requested for rescheduling of some of their debt. These companies are not willing to comment on the rates at which they had borrowed money. However, according to a research report compiled by Credit Suisse in January, quoting NSDL data: “Sobha and Unitech borrowed at 19-30 per cent. Also, average borrowing for property companies was 200-300 basis points higher than most other sectors during the same period, indicating the higher risk attached by lenders to the sector.”
The report further added: “Sobha borrowed funds at 24-30 per cent for short periods of 1-2 months in October-November 2008. Further, it also appears that Sobha defaulted on some of the repayments during this time. Unitech borrowed at 19 per cent in November 2008.” The present rate of interest on commercial loans for real estate companies is 14-16 per cent. Banks reassess cash flows and viability of a project while restructuring and give preference to projects that are nearing completion. S Ananthakrishnan, executive director of IDBI Bank said, “As per the restructuring norms, the net present value (NPV) of principal and interest over the term of the loan cannot be diluted.” He also said that “to compensate for any such dilution, interest rate would need to be appropriately increased if the duration of repayment has to be extended to protect the NPV.”
Companies such as Sobha and Unitech are looking at easing their monthly quarterly obligations towards servicing debts.
“Real estate companies want the period of loan to be extended by converting short-term liability into long-term debt. Though it may result in higher rate of interest, a builder would be happy so long as his monthly obligation is reduced,” said Shuva Mandal, managing partner of Fox Mandal and Little, a law firm that specialises in real estate projects.
“If a developer furnishes more collaterals, then the interest rate is kept unchanged. Otherwise, additional interest burden of around 1-2 per cent is levied. We have been involved in 2-3 such instances in the last 45 days,” said Ameet Hariani, managing partner of Mumbai-based Hariani & Co, another law firm.
R Nagaraju, general manager for corporate planning and strategy at Unitech, said, “Interest rates are linked to prime lending rate (PLR).” He refused to comment specifically on additional interest burden because of loan rescheduling. Unitech had earlier revealed that the company had a debt of around Rs 8,000 crore, of which it had to pay Rs 1,100 by March 31 to various banks as opting for loan extension could give some breathing space. Besides Unitech and HDIL, another Mumbai-based real estate company is in the process of rescheduling non-convertible debentures of around Rs 1,275 crore that are due for payment starting April 2009.
S Baaskaran, chief financial officer of Sobha Developers, said, “We do not know about other players, but for us there is no additional burden. It depends upon the project completion and the revised cash flow of the company.”
Job losses spur cancellations in luxury residential projects
The developer fraternity now faces a new crisis: buyers queuing up to cancel transactions after months of paying the booking amount
When Sobha Developers Ltd, a listed realty firm, was recently approached by a buyer who wanted to cancel an apartment purchase in Petunia, a luxury residential project in north Bangalore, out of fear that her husband could lose his job, the developer promptly transferred her booking to one of its more affordable projects.
The buyer, who had already paid Rs. 1.25 crore of the Rs. 1.65 crore for the under-construction Petunia apartment didn’t have to pay anything more.
An economic slowdown and fears of job losses are forcing realty firms to accommodate such requests, said Keshav Menon, executive director, Sobha Developers, without divulging the identity of the buyer. “The idea is not to lose a customer and try to accommodate him within what we can offer,” he said.
At Sobha, which has been grappling with dipping sales and sizable debt, at least one in 10 cancellations every month are due to reasons involving sudden unemployment and the fear of losing jobs, Menon added.
With monthly sales down to single digit at several projects and serious liquidity issues, the developer fraternity now faces a new crisis: buyers queueing up to cancel transactions after months of paying the booking amount. There is no readily available estimate for job losses across the country, but there have been reports of layoffs in sectors such as software services and automobiles.
As such instances increase, developers are beginning to ignore a forfeiture clause that typically allows a refund only after a deduction of 5% to 20% from the booking amount in case of a cancellation.
“The panic to withdraw from bookings is particularly noticeable in high-end projects where the buyer is simply scared of financial insecurity. We try to counsel and retain them but if it is a case of genuine job loss, we ask them to provide some proof and then refund,” said A.R.P. Raman, global head (marketing and sales) for Shriram Group, which has eight projects in Bangalore, Coimbatore, Chennai, Visakhapatnam and Kolkata.
Developers stress it is only in genuine cases that the deduction is held back. At Sobha, for instance, in cases where a refund is demanded without a job loss, “around 25% is deducted from the booking amount and returned”, said Menon.
Six months ago, as the economic slowdown started settling in, Sobha introduced a clause in its sale agreement that the developer will refund the booking amount only after re-selling the same apartment and after a 25% deduction.
Another luxury project, Aquilla Heights in Bangalore has also seen cancellations over the last few months with job loss being cited as a reason. The project, being developed by Tata Housing Development Co. Ltd and billed the tallest residential project in the technology hub, has 244 apartments priced between Rs. 70 lakh and Rs. 1.2 crore. But, “we are also telling buyers to hold on as there are exit options. They are allowed to sell the unit six months after allotment,” said a senior executive at Tata Housing, who asked not be identified citing company policy.
Mint reported on Tuesday that DLF Ltd, the country’s largest developer by market value, has assured around 250 buyers who want to exit a housing project in Chennai that they will be refunded this month after they demanded that the company cut prices by 25%; DLF had previously offered to do so by 10% to 18%. A DLF spokesperson told Mint that a small portion of the buyers, numbering up to 30, wanted refunds claiming job loss.
At least one developer said it was not in a position to make refunds even when the reason was genuine. “We can’t refund right away and if the booking is or an under-construction project, the deductions are 15-20%,” said Mohan Kumar, vice-president (sales and marketing) of Bangalore’s Alliance Infrastructure Pvt. Ltd.
Some can afford refunds but “how many builders can refund immediately with each one suffering a cash crunch?” asked Raminder Grover, chief executive of Homebay Residential Pvt. Ltd, a unit of Jones Lang LaSalle Meghraj, a property advisory firm. Nearly 70% cancellations are in the luxury segment where buyers are feeling jittery about paying a huge monthly installment, said Grover.
When Sobha Developers Ltd, a listed realty firm, was recently approached by a buyer who wanted to cancel an apartment purchase in Petunia, a luxury residential project in north Bangalore, out of fear that her husband could lose his job, the developer promptly transferred her booking to one of its more affordable projects.
The buyer, who had already paid Rs. 1.25 crore of the Rs. 1.65 crore for the under-construction Petunia apartment didn’t have to pay anything more.
An economic slowdown and fears of job losses are forcing realty firms to accommodate such requests, said Keshav Menon, executive director, Sobha Developers, without divulging the identity of the buyer. “The idea is not to lose a customer and try to accommodate him within what we can offer,” he said.
At Sobha, which has been grappling with dipping sales and sizable debt, at least one in 10 cancellations every month are due to reasons involving sudden unemployment and the fear of losing jobs, Menon added.
With monthly sales down to single digit at several projects and serious liquidity issues, the developer fraternity now faces a new crisis: buyers queueing up to cancel transactions after months of paying the booking amount. There is no readily available estimate for job losses across the country, but there have been reports of layoffs in sectors such as software services and automobiles.
As such instances increase, developers are beginning to ignore a forfeiture clause that typically allows a refund only after a deduction of 5% to 20% from the booking amount in case of a cancellation.
“The panic to withdraw from bookings is particularly noticeable in high-end projects where the buyer is simply scared of financial insecurity. We try to counsel and retain them but if it is a case of genuine job loss, we ask them to provide some proof and then refund,” said A.R.P. Raman, global head (marketing and sales) for Shriram Group, which has eight projects in Bangalore, Coimbatore, Chennai, Visakhapatnam and Kolkata.
Developers stress it is only in genuine cases that the deduction is held back. At Sobha, for instance, in cases where a refund is demanded without a job loss, “around 25% is deducted from the booking amount and returned”, said Menon.
Six months ago, as the economic slowdown started settling in, Sobha introduced a clause in its sale agreement that the developer will refund the booking amount only after re-selling the same apartment and after a 25% deduction.
Another luxury project, Aquilla Heights in Bangalore has also seen cancellations over the last few months with job loss being cited as a reason. The project, being developed by Tata Housing Development Co. Ltd and billed the tallest residential project in the technology hub, has 244 apartments priced between Rs. 70 lakh and Rs. 1.2 crore. But, “we are also telling buyers to hold on as there are exit options. They are allowed to sell the unit six months after allotment,” said a senior executive at Tata Housing, who asked not be identified citing company policy.
Mint reported on Tuesday that DLF Ltd, the country’s largest developer by market value, has assured around 250 buyers who want to exit a housing project in Chennai that they will be refunded this month after they demanded that the company cut prices by 25%; DLF had previously offered to do so by 10% to 18%. A DLF spokesperson told Mint that a small portion of the buyers, numbering up to 30, wanted refunds claiming job loss.
At least one developer said it was not in a position to make refunds even when the reason was genuine. “We can’t refund right away and if the booking is or an under-construction project, the deductions are 15-20%,” said Mohan Kumar, vice-president (sales and marketing) of Bangalore’s Alliance Infrastructure Pvt. Ltd.
Some can afford refunds but “how many builders can refund immediately with each one suffering a cash crunch?” asked Raminder Grover, chief executive of Homebay Residential Pvt. Ltd, a unit of Jones Lang LaSalle Meghraj, a property advisory firm. Nearly 70% cancellations are in the luxury segment where buyers are feeling jittery about paying a huge monthly installment, said Grover.
Sobha Developers to declare FY 2009 results by Jun 30, 2009
Sobha Developers Ltd has announced that the Company will publish the Audited Financial Results for the entire financial year 2008-09 within three months from the end of the financial year ended March 31, 2009.
In view of the above, the Un-audited Financial Results of the last quarter ended March 31, 2008 will not be published.
The stock closed the day at Rs.81.55, up by Rs.2.10 or 2.64%. The stock hit an intraday high of Rs.82.05 and low of Rs.79.
The total traded quantity was 27114 compared to 2 week average of 55152.
In view of the above, the Un-audited Financial Results of the last quarter ended March 31, 2008 will not be published.
The stock closed the day at Rs.81.55, up by Rs.2.10 or 2.64%. The stock hit an intraday high of Rs.82.05 and low of Rs.79.
The total traded quantity was 27114 compared to 2 week average of 55152.
Thursday, March 26, 2009
Sobha Developers seeks debt recast from Banks, FIs
The report stated that the company is open to “even 49% participation from private equity players at a special purpose vehicle (SPV) level.
Sobha Developers is reportedly in talks with banks, financial institutions and private funds to restructure over Rs10bn of its total debt of about Rs18bn, according to a report in a business daily. "We feel that banks, financial institutions and funds have agreed to support us. A clearer picture will emerge in the next 2-3 weeks," said J.C. Sharma, Managing Director, Sobha Developers.
Sharma added that the company had no overdue in principal payment, nor were there any interest delays. "We are confident that we could bring down the debt-equity ratio to less than 1:1," he said. The current debt equity ratio is 1.56:1. The company is open to even 49% participation from private equity players at a special purpose vehicle (SPV) level.
Sobha Developers is reportedly in talks with banks, financial institutions and private funds to restructure over Rs10bn of its total debt of about Rs18bn, according to a report in a business daily. "We feel that banks, financial institutions and funds have agreed to support us. A clearer picture will emerge in the next 2-3 weeks," said J.C. Sharma, Managing Director, Sobha Developers.
Sharma added that the company had no overdue in principal payment, nor were there any interest delays. "We are confident that we could bring down the debt-equity ratio to less than 1:1," he said. The current debt equity ratio is 1.56:1. The company is open to even 49% participation from private equity players at a special purpose vehicle (SPV) level.
Wednesday, March 25, 2009
Revenue down 50%, Sobha Developers cuts workforce
The firms’ managing director J.C. Sharma said unlike the real estate sector, the income from our contractual business has been steady & we don’t really have to look out for customers
Sobha Developers Ltd, a leading realty firm in south India, has witnessed its monthly revenue reduce by more than half, from Rs. 120 crore to Rs. 50 crore. With sales down, Sobha has been forced to cut its 3,000-strong workforce by about 30%, to 2,170.
However, with revenue from the real estate sector going down, the company's other source of income, its contractual business, has been the saving grace. “Unlike the real estate sector, the income from our contractual business has been steady and we don’t really have to look out for customers,” said J.C. Sharma, managing director of the Bangalore-based company, which is expecting a Rs. 400 crore turnover from the contractual business by 2010 and has completed over 120 contractual projects for various corporate customers such as Infosys Technologies Ltd, Hewlett Packard and Dell Inc.
Sobha’s net profit fell by 88% to Rs. 7.5 crore and revenue by 49% to Rs. 181 crore in the December quarter against the same period a year ago. The developer is also in the last leg of restructuring its debt of Rs. 1900 crore. “We are restructuring over Rs. 1,000 crore and are in the final stage of getting approvals from various financial institutions,” said Sharma.
The company is also looking at various funding options ranging from equity dilution, private equity funding at project level as well as land sales. Mint had earlier reported that the developer would try to sell parts of its 3,000-acre land bank—the process seems to have started. It has managed to sell land worth Rs100 crore over the last few months.
Sales have not picked up even after developers such as Sobha are trying out various out-of-the-box marketing techniques such as its recent Home Mela. The two-day property exhibition that showcased 18 different properties of the company concluded with only six apartments being sold.
Sobha, which till now, focused on high-end and luxury apartments and villas is finally joining the affordable housing bandwagon. It is launching its first budget housing project in the next three-four months in Bangalore, though officials didn’t divulge pricing details.
“Contractual work in real estate has also been hit as most corporates have stalled expansion plans. Which is why we find lot of contractual business coming in for developers from industrial or education sectors. Like Sobha, we will find more developers going in for debt restructuring to pull down high interest rates on short term loans and converting them to long-term loans,” said Abhinav Bhandari, research analyst (construction and infrastructure) with Pioneer Invest Corp Ltd.
Sobha Developers Ltd, a leading realty firm in south India, has witnessed its monthly revenue reduce by more than half, from Rs. 120 crore to Rs. 50 crore. With sales down, Sobha has been forced to cut its 3,000-strong workforce by about 30%, to 2,170.
However, with revenue from the real estate sector going down, the company's other source of income, its contractual business, has been the saving grace. “Unlike the real estate sector, the income from our contractual business has been steady and we don’t really have to look out for customers,” said J.C. Sharma, managing director of the Bangalore-based company, which is expecting a Rs. 400 crore turnover from the contractual business by 2010 and has completed over 120 contractual projects for various corporate customers such as Infosys Technologies Ltd, Hewlett Packard and Dell Inc.
Sobha’s net profit fell by 88% to Rs. 7.5 crore and revenue by 49% to Rs. 181 crore in the December quarter against the same period a year ago. The developer is also in the last leg of restructuring its debt of Rs. 1900 crore. “We are restructuring over Rs. 1,000 crore and are in the final stage of getting approvals from various financial institutions,” said Sharma.
The company is also looking at various funding options ranging from equity dilution, private equity funding at project level as well as land sales. Mint had earlier reported that the developer would try to sell parts of its 3,000-acre land bank—the process seems to have started. It has managed to sell land worth Rs100 crore over the last few months.
Sales have not picked up even after developers such as Sobha are trying out various out-of-the-box marketing techniques such as its recent Home Mela. The two-day property exhibition that showcased 18 different properties of the company concluded with only six apartments being sold.
Sobha, which till now, focused on high-end and luxury apartments and villas is finally joining the affordable housing bandwagon. It is launching its first budget housing project in the next three-four months in Bangalore, though officials didn’t divulge pricing details.
“Contractual work in real estate has also been hit as most corporates have stalled expansion plans. Which is why we find lot of contractual business coming in for developers from industrial or education sectors. Like Sobha, we will find more developers going in for debt restructuring to pull down high interest rates on short term loans and converting them to long-term loans,” said Abhinav Bhandari, research analyst (construction and infrastructure) with Pioneer Invest Corp Ltd.
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