Total debt of domestic real estate companies rose in the third quarter marginally as collections weakened and construction spends increased. This is a reversal from the previous September quarter, when the companies saw a marginal reduction in overall debt.
Consolidated net debt of seven debt-laden real estate companies rose 2.2% but remained high at Rs 36,476 crore q-o-q.
Weakness was seen on the profit and loss accounts of the companies. Revenue booking remained low on subdued pre-sale velocity despite festive season launches. Unitech and Bangalore-based developers are the only realtors likely to go past FY13 launch volumes in FY14, says February 2014 report of Motilal Oswal.
There were Rs 3,580 crore of pre-sales recorded by eight companies in the September quarter, which was down to Rs 3,300 crore in the December quarter.
DLF Limited saw its net sales surge 57% in the quarter to Rs 2,058 crore on back of a few sales coming in from high-valued premium projects. Mumbai-based Godrej Properties (GPL) and Housing Development and Infrastructure (HDIL) saw their revenues falling due to lack of projects reaching revenue threshold. GPL?s consolidated total income fell 9% to Rs 242 crore and HDIL\’s standalone total revenue fell 83% to R71 crore.
DLF?s net debt rose by Rs 418 crore due to a negative operating cash flow resulting from weak operations and completion of high-ticket asset sales, Kotak Institutional Equities noted in February 2014.
Though DLF met its debt guidance of Rs 17,500 crore in FY14 (about Rs 17,400 crore current debt), with the sale of Aman Resorts ($358 million) and Rs 676-crore refund from Delhi Development Authority (DDA), analysts say there are not many upsides to the company\’s performance going forward. Morgan Stanley has assigned ?underweight? rating on DLF citing earning challenges with slower launches and falling new sales.
Weak collections and higher construction spending led to a marginal to moderate increase in leverage in Prestige Estates, Sobha Developers and GPL.
GPL saw the sharpest surge in net debt position, which rose by R270 crore to R1,531 crore affected by non-regular outlows of between R150 and R170 crore. GPL\’s cost of debt rose to 11.43% against 11.36% in the previous quarter.
Unitech maintained its net debt levels from the previous quarter as it remained flat at R6,299 crore. The company\’s consolidated net profit fell nearly 61% to R33 crore due to higher expenses and finance cost, however, total income stood nearly R732 crore, up 13% y-o-y.
Bangalore-based Sobha?s sales volume fell 18% y-o-y in the third quarter. Sales value was down 6% y-o-y to Rs 500 crore. HSBC Global Research said the company is at risk of missing FY14 target of Rs 2,600 crore sales, however, calling it a a short-term blip. HSBC remains overweight on Sobha Developers.
Bangalore-based Puravankara Projects reported a 14% drop in total revenues to Rs 2,683 crore, while the net profit fell 69% to Rs 201 crore. Foreign brokerage Maybank Kim Eng said the results were disappointing, but the company had a strong project pipeline.
Among Bangalore companies, Prestige was an outlier. Its Ebitda margins improved 30.6% due to cost reduction in select projects, along with the benefits of price appreciation in revenue contributing projects, says Motilal Oswal. Company\’s net debt rose by Rs 100 crore to R2,290 crore q-o-q.
