HDIL lowers TDR sale target for FY12

HDIL lowers TDR sale target for FY12

Analysts think its unlikely HDIL would be able to cut debt by 20-25 per cent


Housing Development and Infrastructure Ltd (HDIL), the Mumbai based realty player has indicated that it would clock around 0.7-1 msft of transfer of development right (TDR) sales for FY12, a drop of 20 per cent as compared to FY11 average sales run rate. Till date the biggest contributor to HDIL's balance sheet and cash in hand is TDR sales.
In FY10, it generated a total revenue of Rs 1492 crore and Rs 1396.6 crore came from its TDR business, a whopping 93.61 per cent of total revenue. In FY11, the TDR sales contribution was Rs 1242.5 crore, mere 68.91 per cent of the total revenue. Thus, TDR sales revenue contribution dropped by 26.38 per cent year on year.
Hari Prakash Pandey, Vice President- Finance, HDIL, said during the conference call, “ We would clock a run rate of 0.7-1 msft for FY12 and and the future will mainly depend on the whole approval process.”
Pandey expects the realisations to be better than the last quarter. With the on-going slowdown in the realty market , the realtor managed to sell only 0.9 msft of TDR at Rs 2500 per sft for Q4FY11 which is a drop of 32 per cent as compared to Q3FY11.
An analyst from a domestic brokerage in condition of anonymity says, “They have a left over TDR of 0.5 msft and even though the company has already included the TDR which would be generated from the Phase III of the Mumbai International Airport Ltd (MIAL) in its land bank asset the fact is they haven't yet received approval for Phase III. So in all they can expect around 2 msft for the year which is lesser than the company's expectation.”
Also lesser TDR sales will lead to more outgo on taxes as TDR attracts Minimum Alternate Tax (MAT) rates.
HDIL had also sold Floor Space Index (FSI) worth Rs 1300 crore and has received Rs 500 crore. The company expects to cut its debt through the FSI sales and new project launches. Last quarter it did not launch any project and sales have been sluggish as HDIL managed to sell only 30% in its new launch in April, 2011.
Another analyst adds, “The airport project is in limbo so selling off prime land areas in Andheri and Goregaon to its peers was not a right decision and the project line up for FY12 would not be sufficient to cut debt by 20-25 per cent. Also there is conversion of 26 million promoter warrants which was issued at Rs 272 per share. The present value of HDIL's share is Rs 166.95 per share.”
The realtor has a long term debt burden of Rs 4195 crore and has to repay around Rs 500 crore by FY12 and has cash reserves of Rs 226 crore. The company paid Rs 600 crore to its subsidiaries for acquisition of land and other payments. The present average cost of debt is 14 per cent.