DLF, the largest realtor according to market capitalisation, is close to elling off its biggest non-core asset Aman Resorts to the China based HNA group, said sources close to the development.
The source adds, "HNA is running ahead in the race and close to finalising the deal. The valuation is slighlty above Rs 2000 crore. The bid amounts recieved from the Malaysian sovereign wealth fund Khazanah, luxury fashion group Louis Vuitton and Kingdom Holdings which owns the five star hotel chain Four Seasons were in the range of Rs 1800- 2000 crore for the property."
DLF spokesperson, Sanjey Roy, replied in an email, "We do not comment on market speculations."
DLF is expected to announce the deal by mid-January. Goldman Sachs and Citi group had been advising DLF on the deal. It is said that the founder of Aman Resorts, Adrian Zecha, was also a part of the final decision. DLF had bought 97 per cent stake in the company for a valuation of $400 million in 2007, during the realty boom. Since the downturn in the realty sector, DLF has been looking around for a buyer for this property.
An analyst tracking the company said, "They have been looking for a buyer since last two years for Aman Resorts, they were looking to raise Rs 2500 crore from the property which none of the buyers are looking to shell out. Also it is important whether it is an all cash deal or will there be staggered payments, as last week Crisil downgraded its various short term debt program worth Rs 237.3 billion according to its assesment that the debt levels may continue to remain high due to delay in disposal of assets non core assets and weakening cash flows. They really have to sell the assets now and generate cash on their books"
HNA Hotels and Resorts Group is part of the HNA group based out of China, which is headed by Chen Feng, the board chairman of the group. The hotel subsidiary operates more than 40 luxury hotels and resorts in China and has three hotel assets in Brussels and Belgium.
The Aman resorts has 25 assets across Thailand, Bhutan, Cambodia, China, France,Indonesia, Laos, Montenegro, Morocco, Philippines, Sri Lanka, the Turks and Caicos Islands and the US. It has three properties in India. After the stake offloading, DLF will retain the Delhi Aman property. The other two assets are in Rajasthan called the Aman-i-Khas and Amanbagh which will exchange hands.
On Aman sale, Saurabh Chawla, executive director of DLF had said at the end of the last quarter, "We have four bids in the second round and we are in the process of evaluating the bids, we hope to make a closure on this deal by next quarter end."
At the end of the day, DLF's stock closed at Rs 179.15 per share, down 2.13 per cent on BSE.
note written on January 2, 2012
Wednesday, January 11, 2012
Beating blues, realty consultants and data research firms line up expansion plans
Despite a lacklustre performance from domestic realtors this year, international property consultants and data research firms are gearing up for big expansion plans in the country.
IPCs and research firms are leaving no stone unturned in filing all the gaps in offerings from their stable and looking at newer avenues for product differentiation. The strategy includes a foray into newer cities to entering neighbouring the growing Sri Lankan realty market and providing realty data index to the banking regulator. Scientific data research for general home buyers is on also on the cards.
International property consultants (IPC), Jones Lang LaSalle India (JLL), Knight Frank, DTZ and research firms P E Analytics and Liases Foras have already readied a corpus.
JLL which operates in 11 cities has lined up key launches for next year which includes focussing on its Sri Lankan business and starting its industrial practice.
Anuj Puri, Chairman and Country Head for JLL in India, says, “There are a lot of developers who want to launch projects in Sri Lanka and thus we are starting our operations there and also we are going to launch operations in two more cities in tier III which are Ahmedabad and Bhuwaneshwar. We are also getting into residential services with more depth and we will start our industrial practice in the country.”
Puri adds, “There is a lot of interest from American and European manufacturers to set up manufacturing units in areas like Chennai, Gujarat, Pune , Baroda, Delhi-Jaipur industrial
belt. They want to manufacture goods and send them back to their countries and also there is a talent pool available with lower labour costs.”
In the Asia Pacific region, for the September quarter, 2011, JLL reported revenues of $201 million as compared to $165 million for the same period in 2010, an increase of 22 percent, 12 per cent. The company attributed its increase in revenues to Greater China and India.
Peer, Knight Frank India, is looking to increase its presence in the eastern belt of the country.
Pranab Datta, Vice Chairman and managing director, of the company, said, “Even though the environment is becoming turbulent with the global turmoil, we believe there is still a lot of opportunity in the Indian market. We are expanding our presence in West Bengal while consolidating in existing markets. Also we are going to look at new products which will come by the last quarter of this financial year. In our research portfoliowe are looking at more information based analysis for our clients.”
Datta adds, “Knight Frank's Asia Pacific region contributes a large chunk to its entire revenues and we are adopting multi- pronged strategy to contribute to the growth.”
Consultants are betting that realty industry will improve by the end of the calendar year 2012, and thus they want to be ready to ride the expected upturn.
Anshul Jain, Chief Executive Officer, DTZ India, an IPC based out of Gurgaon says, “We are really looking at cautious growth in the sector and in the coming year we are expanding our service line in the commercial office space in various cities as we expect investments to be back in the sector by the end of 2012.”
P E Analytics, which ows and operates Prop Equity, an online subscription based real estate data platform is planning to add six new cities in its database in 2012.
Samir Jasuja, Founder and Chief Executive Officer at PropEquity, said, “We are collaborating with a banking regulatory body and a commodity exchange to develop housing starts and realty indices We are also looking at launching three new products, Collateral Risk Management (CRM) targeted at financial institutions, a business to consumer product for retail customers, and Catchment Area Analysis for developers, which are expected to go live in the next six months in phases.”
Jasuja adds, “We are very well funded for our expansion plans, and if everything goes according to our plan, then we are looking at a Nasdaq listing in the next 3-4 years.”
Real estate rating and research firm, Liases Foras, founded by Pankaj Kapoor, says, “We are looking and testing to come up with a scientific research product in next 3-4 months. We are also looking at valuations of properties and also we will be expanding in other 3-4 cities for data collection.”
IPCs and research firms are leaving no stone unturned in filing all the gaps in offerings from their stable and looking at newer avenues for product differentiation. The strategy includes a foray into newer cities to entering neighbouring the growing Sri Lankan realty market and providing realty data index to the banking regulator. Scientific data research for general home buyers is on also on the cards.
International property consultants (IPC), Jones Lang LaSalle India (JLL), Knight Frank, DTZ and research firms P E Analytics and Liases Foras have already readied a corpus.
JLL which operates in 11 cities has lined up key launches for next year which includes focussing on its Sri Lankan business and starting its industrial practice.
Anuj Puri, Chairman and Country Head for JLL in India, says, “There are a lot of developers who want to launch projects in Sri Lanka and thus we are starting our operations there and also we are going to launch operations in two more cities in tier III which are Ahmedabad and Bhuwaneshwar. We are also getting into residential services with more depth and we will start our industrial practice in the country.”
Puri adds, “There is a lot of interest from American and European manufacturers to set up manufacturing units in areas like Chennai, Gujarat, Pune , Baroda, Delhi-Jaipur industrial
belt. They want to manufacture goods and send them back to their countries and also there is a talent pool available with lower labour costs.”
In the Asia Pacific region, for the September quarter, 2011, JLL reported revenues of $201 million as compared to $165 million for the same period in 2010, an increase of 22 percent, 12 per cent. The company attributed its increase in revenues to Greater China and India.
Peer, Knight Frank India, is looking to increase its presence in the eastern belt of the country.
Pranab Datta, Vice Chairman and managing director, of the company, said, “Even though the environment is becoming turbulent with the global turmoil, we believe there is still a lot of opportunity in the Indian market. We are expanding our presence in West Bengal while consolidating in existing markets. Also we are going to look at new products which will come by the last quarter of this financial year. In our research portfoliowe are looking at more information based analysis for our clients.”
Datta adds, “Knight Frank's Asia Pacific region contributes a large chunk to its entire revenues and we are adopting multi- pronged strategy to contribute to the growth.”
Consultants are betting that realty industry will improve by the end of the calendar year 2012, and thus they want to be ready to ride the expected upturn.
Anshul Jain, Chief Executive Officer, DTZ India, an IPC based out of Gurgaon says, “We are really looking at cautious growth in the sector and in the coming year we are expanding our service line in the commercial office space in various cities as we expect investments to be back in the sector by the end of 2012.”
P E Analytics, which ows and operates Prop Equity, an online subscription based real estate data platform is planning to add six new cities in its database in 2012.
Samir Jasuja, Founder and Chief Executive Officer at PropEquity, said, “We are collaborating with a banking regulatory body and a commodity exchange to develop housing starts and realty indices We are also looking at launching three new products, Collateral Risk Management (CRM) targeted at financial institutions, a business to consumer product for retail customers, and Catchment Area Analysis for developers, which are expected to go live in the next six months in phases.”
Jasuja adds, “We are very well funded for our expansion plans, and if everything goes according to our plan, then we are looking at a Nasdaq listing in the next 3-4 years.”
Real estate rating and research firm, Liases Foras, founded by Pankaj Kapoor, says, “We are looking and testing to come up with a scientific research product in next 3-4 months. We are also looking at valuations of properties and also we will be expanding in other 3-4 cities for data collection.”
Sunteck Realty to acquire Goregaon industrial parcel for Rs 400-440 crore
Even though realty sales have come to a standstill, realty developers have not yet given up on buying the land parcel which has caught their attention.
The Mumbai based Kamal Khetan, promoted Sunteck Realty, has acquired a 15 acre industrial land parcel near Inrobit mall at Goregaon for Rs 400-440 crore, said sources privy to the deal.
A senior official who was part of the transaction, said, “International property consultants Jones Lang LaSalle India had the mandate to sell off that cluster of industrial gala in Goregaon and they have been looking for a buyer since early 2011. They had shown the parcel to a few developers and finally Sunteck has locked the deal. It will develop high end residential project on the same. They are working out some final intricacies of the deal regarding the usuage area etc.”
When contacted, Sunteck Realty did not wish to comment on the same.
Sources say that a private equity fund will step in and the transaction is divided into two blocks.
Sunteck has partnership with the Ajay Piramal Group which has a jointly floated company called Starlight Construction which is building the high end residences in Bandra Kurla Complex and Sunteck is also backed by real estate focussed private equity fund Kotak Realty Fund which holds 9.5 per cent stake in the company. At the end of March 2011, the company’s debt to equity was 0.4x.
An analyst tracking the company in condition of anonymity, said, “ It is a fairly good deal for Sunteck keeping in mind that residential apartments are selling around Rs 8000-11000 per sft in that area. It will probably have an asset build up area of close to 3-4 million sft which is a good proposition for the developer. Also with the funds flowing in from the partnerships it is a good deal to bag in this market.”
In July 2010, Sunteck had acquired a 7 acre land parcel in SV Road in Goregaon for Rs 124 crore under its parent company from a joint family after negotiating for a year. Sunteck was planning to launch a luxury residential project on the same and had planned to launch the project in the range of Rs 10, 000- 11, 000 per sft.
In the end of the last quarter, the promoters have increased their shareholding in the company to 70.08 per cent as compared to 66.94 per cent at the end of the June quarter this financial year, a jump of 3.14 per cent.
At the end of the day Sunteck Realty’s shares closed at Rs 257. 30 per share, a fall of 16.46 per cent on the Bombay Stock Exchange.
Note: It was written on Tuesday, January 10.
The Mumbai based Kamal Khetan, promoted Sunteck Realty, has acquired a 15 acre industrial land parcel near Inrobit mall at Goregaon for Rs 400-440 crore, said sources privy to the deal.
A senior official who was part of the transaction, said, “International property consultants Jones Lang LaSalle India had the mandate to sell off that cluster of industrial gala in Goregaon and they have been looking for a buyer since early 2011. They had shown the parcel to a few developers and finally Sunteck has locked the deal. It will develop high end residential project on the same. They are working out some final intricacies of the deal regarding the usuage area etc.”
When contacted, Sunteck Realty did not wish to comment on the same.
Sources say that a private equity fund will step in and the transaction is divided into two blocks.
Sunteck has partnership with the Ajay Piramal Group which has a jointly floated company called Starlight Construction which is building the high end residences in Bandra Kurla Complex and Sunteck is also backed by real estate focussed private equity fund Kotak Realty Fund which holds 9.5 per cent stake in the company. At the end of March 2011, the company’s debt to equity was 0.4x.
An analyst tracking the company in condition of anonymity, said, “ It is a fairly good deal for Sunteck keeping in mind that residential apartments are selling around Rs 8000-11000 per sft in that area. It will probably have an asset build up area of close to 3-4 million sft which is a good proposition for the developer. Also with the funds flowing in from the partnerships it is a good deal to bag in this market.”
In July 2010, Sunteck had acquired a 7 acre land parcel in SV Road in Goregaon for Rs 124 crore under its parent company from a joint family after negotiating for a year. Sunteck was planning to launch a luxury residential project on the same and had planned to launch the project in the range of Rs 10, 000- 11, 000 per sft.
In the end of the last quarter, the promoters have increased their shareholding in the company to 70.08 per cent as compared to 66.94 per cent at the end of the June quarter this financial year, a jump of 3.14 per cent.
At the end of the day Sunteck Realty’s shares closed at Rs 257. 30 per share, a fall of 16.46 per cent on the Bombay Stock Exchange.
Note: It was written on Tuesday, January 10.
Friday, December 23, 2011
Indian realty in 2011, bidding adieu
The Indian realty in 2011. Someone asked me to write a piece so this what I came up with...
The Indian real estate sector faced heavy headwinds from various corners throught out the year, making it a replica of 2008 when realty market went for a toss.
The trend that topped the chart for the entire year, was exponential drop in home sales across the country. The residential sector which had witnessed upturn in 2010, could not manage its dream run as the central bank, Reserve Bank of India (RBI) hiked interest rate thirteen times in last ten months . Coupled with rising borrowing cost, developer's held on to sales prices and in some cases increasing their rate cards, forcing home buyers away.
According to data released by real estate research firm, Liases Foras, for Mumbai, Delhi and Bangalore indicates that residential sales have dropped significantly in last six months in the metro cities.Home sales in Mumbai have lagged the most, as the city clocked in merely 17.4 mnsft at the end of the second quarter of this financial year as compared to 24.7 mnsft during the same period last year, a fall of 29.55 per cent. In Delhi, sales have plunged by 18.75 per cent, recording sales of 39.9 mnsft in April-September period this year as against 49.11 mn sft in the same period last year. Joining the bandwagon, is the information technology hub, Bangalore, which recorded sale of 16.1 mnsft in the first half of this financial year as compared to 20.6 mnsft in the corresponding period last year, a drop of 21.84 per cent in last six months.
Gulam Zia, National Director-Research and Advisory Services, at Knight Frank India, says, " There is no uncertainty that all across the country the residential sales numbers for last 2-3 months have come down. Volume dips in most of the cities like Ahmedabad, Chennai, Pune, Hyderabad has been in the range of 15-20 per cent, whereas Delhi has seen a fall of 20-25 per cent and Mumbai sales have plummeted by 60-70 per cent."
As home sales plummetted across the country, realtors were left with lower cash flow generation and more debt on their books. Except for Delhi based Unitech and Bangalore based Sobha developers all the realtors in the listed space have ended up adding more debt at the end of financial year 2011 as compared to financial year 2009. To add to it, the debt has been raised at higher interest cost , ranging between 12-14.5 per cent rates from banks. Non banking financial services (NBFC's) and private lenders have lent at 18-24 per cent on commercial borrowings.
To add to the woes of realty sector this year, the realty stocks were battered by both institutional and domestic investors with stocks hitting their 52-week low on the Bombay Stock Exchange (BSE). Infact, the combined price of shares of most of the players trades lesser than a combo meal at any fast food outlet.
Foreign Institutional Investors (FII's), the much coveted investors for realtors have started knocking off realty stock holdings since last six months.
Two realtors who have seen maximum sell off has been Mumbai based players, Indiabulls Real Estate (IBREL), which has major investments from Steel baron Lakshmi Niwas Mittal and Pujit Aggarwal promoted Orbit Corporation.
FIIs have also shown the door to other realtors like D B Realty, Housing Development and Infrastructure Ltd (HDIL), Sunteck Realty and Bangalore-based Nitesh Estates. As investors dumped these stocks and share prices continued their free fall, promoters of real estate majors Parsvnath Developers, Nitesh Estates, Orbit Corporation, Peninsula Land and Sunteck Realty increased their personal holding in the company. Though increasing in holding is considered to be a positive move, these realtors ended up pledging more shares to financial institutions.
For example, Pradeep Jain’s Parsvnath Developers has witnessed a continuous rise in promoter holding since March, from 67.66 per cent to 70.16 per cent at September-end. On the other hand Jain had pledged 86.47 per cent of his promoter share as of June. After raising his stake, the pledge came down to 71.24 per cent of his holdings at the end of September. Last month, he pledged an additional 16.4 per cent to various funds. Similarly, Rajeev Piramal, promoter of Peninsula Land, took his promoter holding to 55.72 per cent in June as compared to 55.18 per cent at March-end whereas his pledged shares more than doubled to 26.75 per cent at the end of September, against 13.35 per cent in June.
As investors gave a thumbs down to the developers, according to international property consultants, Jones Lang LaSalle India, private equity players infused close to USD 1.5 billion in calendar year 2011, nearly same to what it received during the down turn in calendar year 2009. International realty funds made an exit of 72 per cent in capital values and rest was made by domestic funds. But its realty promoters who have ended up buying the PE investor's stake, giving away close to USD 3 billion, 67 per cent of the total exits made this year.
As funds, investors and buyers shunned the realty space, developers across the country focussed more on monetisation of assets to raise money than depend on their core operations. DLF, the largest realtor according to market capitalisation, has already raised more than rs 1750 crore, by the end of this year from selling off its land assets. Following the same, is Mumbai based player, Housing Development and Infrastructure Limited (HDIL) which sold off its Navi Mumbai parcel for Rs 105 crore. Emaar MGF sold off its Kolkata property for close to Rs 120 crore. Even DB Realty, have put a few of its hotel assets on block too.
This year, realtors across the country have focussed their energies on consolidating their businesses and hiving off ancillaries where they can not scale up any further. Also some developers have resorted to only land or plotted sales to scale down its operational costs.
The Indian real estate sector faced heavy headwinds from various corners throught out the year, making it a replica of 2008 when realty market went for a toss.
The trend that topped the chart for the entire year, was exponential drop in home sales across the country. The residential sector which had witnessed upturn in 2010, could not manage its dream run as the central bank, Reserve Bank of India (RBI) hiked interest rate thirteen times in last ten months . Coupled with rising borrowing cost, developer's held on to sales prices and in some cases increasing their rate cards, forcing home buyers away.
According to data released by real estate research firm, Liases Foras, for Mumbai, Delhi and Bangalore indicates that residential sales have dropped significantly in last six months in the metro cities.Home sales in Mumbai have lagged the most, as the city clocked in merely 17.4 mnsft at the end of the second quarter of this financial year as compared to 24.7 mnsft during the same period last year, a fall of 29.55 per cent. In Delhi, sales have plunged by 18.75 per cent, recording sales of 39.9 mnsft in April-September period this year as against 49.11 mn sft in the same period last year. Joining the bandwagon, is the information technology hub, Bangalore, which recorded sale of 16.1 mnsft in the first half of this financial year as compared to 20.6 mnsft in the corresponding period last year, a drop of 21.84 per cent in last six months.
Gulam Zia, National Director-Research and Advisory Services, at Knight Frank India, says, " There is no uncertainty that all across the country the residential sales numbers for last 2-3 months have come down. Volume dips in most of the cities like Ahmedabad, Chennai, Pune, Hyderabad has been in the range of 15-20 per cent, whereas Delhi has seen a fall of 20-25 per cent and Mumbai sales have plummeted by 60-70 per cent."
As home sales plummetted across the country, realtors were left with lower cash flow generation and more debt on their books. Except for Delhi based Unitech and Bangalore based Sobha developers all the realtors in the listed space have ended up adding more debt at the end of financial year 2011 as compared to financial year 2009. To add to it, the debt has been raised at higher interest cost , ranging between 12-14.5 per cent rates from banks. Non banking financial services (NBFC's) and private lenders have lent at 18-24 per cent on commercial borrowings.
To add to the woes of realty sector this year, the realty stocks were battered by both institutional and domestic investors with stocks hitting their 52-week low on the Bombay Stock Exchange (BSE). Infact, the combined price of shares of most of the players trades lesser than a combo meal at any fast food outlet.
Foreign Institutional Investors (FII's), the much coveted investors for realtors have started knocking off realty stock holdings since last six months.
Two realtors who have seen maximum sell off has been Mumbai based players, Indiabulls Real Estate (IBREL), which has major investments from Steel baron Lakshmi Niwas Mittal and Pujit Aggarwal promoted Orbit Corporation.
FIIs have also shown the door to other realtors like D B Realty, Housing Development and Infrastructure Ltd (HDIL), Sunteck Realty and Bangalore-based Nitesh Estates. As investors dumped these stocks and share prices continued their free fall, promoters of real estate majors Parsvnath Developers, Nitesh Estates, Orbit Corporation, Peninsula Land and Sunteck Realty increased their personal holding in the company. Though increasing in holding is considered to be a positive move, these realtors ended up pledging more shares to financial institutions.
For example, Pradeep Jain’s Parsvnath Developers has witnessed a continuous rise in promoter holding since March, from 67.66 per cent to 70.16 per cent at September-end. On the other hand Jain had pledged 86.47 per cent of his promoter share as of June. After raising his stake, the pledge came down to 71.24 per cent of his holdings at the end of September. Last month, he pledged an additional 16.4 per cent to various funds. Similarly, Rajeev Piramal, promoter of Peninsula Land, took his promoter holding to 55.72 per cent in June as compared to 55.18 per cent at March-end whereas his pledged shares more than doubled to 26.75 per cent at the end of September, against 13.35 per cent in June.
As investors gave a thumbs down to the developers, according to international property consultants, Jones Lang LaSalle India, private equity players infused close to USD 1.5 billion in calendar year 2011, nearly same to what it received during the down turn in calendar year 2009. International realty funds made an exit of 72 per cent in capital values and rest was made by domestic funds. But its realty promoters who have ended up buying the PE investor's stake, giving away close to USD 3 billion, 67 per cent of the total exits made this year.
As funds, investors and buyers shunned the realty space, developers across the country focussed more on monetisation of assets to raise money than depend on their core operations. DLF, the largest realtor according to market capitalisation, has already raised more than rs 1750 crore, by the end of this year from selling off its land assets. Following the same, is Mumbai based player, Housing Development and Infrastructure Limited (HDIL) which sold off its Navi Mumbai parcel for Rs 105 crore. Emaar MGF sold off its Kolkata property for close to Rs 120 crore. Even DB Realty, have put a few of its hotel assets on block too.
This year, realtors across the country have focussed their energies on consolidating their businesses and hiving off ancillaries where they can not scale up any further. Also some developers have resorted to only land or plotted sales to scale down its operational costs.
Saturday, December 10, 2011
Fitch withdraws Unitech and Parsvnath from its rating coverage
The lack of information from realtors have grappled the realty industry since long, but now it has come to haunt the realtors themselves.
International agency, Fitch Ratings, has withdrawn ratings for various debt programmes for two north-based listed real estate companies, Unitech and Parsvnath Developers Ltd, from its coverage. It has also removed them from analytical coverage.
Fitch's report says, "the ratings have been withdrawn due to lack of adequate information. Fitch will no longer provide ratings or analytical coverage of Parsvnath and Unitech."
Parsvnath Developers Ltd was migrated to the 'non-monitoring' category on June 2 this year, whereas Unitech was moved to the same category in March. They were moved to the non-monitoring category due to unavailability of clear information on the debt programmes.
For Unitech, the rating agency has withdrawn its national long-term rating of 'Fitch B-(ind)nm'. The agency has also withdrawn Unitech's bank loan ratings on various instruments which includes "short term debt of Rs 1,100 crore which entailed Fitch A4(ind)nm. Rs500 crore, Rs 2,000 crore and Rs 1,900 crore long-term debt programmes with 'Fitch B-(ind)nm rating, Rs 100 crore short-term bank loan programme with a Fitch A4(ind)nm rating, and Rs 300 crore non-fund based bank limits with Fitch A4(ind)nm rating."
Unitech had mandated Fitch to rate a total of Rs 5,900 crore for its various debt instruments.
An official from Unitech who did not wish to be identified, said, "it is not a negative move for us, they have just withdrawn their rating. We had not sought their rating on the debt programmes and they had already moved us to the non monitoring category in March." There was no official comment from the developer.
Due to inadequate information, Fitch Ratings had put both the companies in the non-monitoring category. Once a company is put on non-monitoring, it falls under survelliance. After six months if adequate information is not available from the company, Fitch withdraws its rating on the company and its entire instruments which it was mandated to rate.
Analysts on the street who have Unitech under their coverage consider this move to be a negative development.
A research analyst with a domestic brokerage said, "It is a negative move because Fitch has clearly stated that they do not have enough information on the debt programmes. It is a concern why Unitech has not disclosed how the debt is being taken care of, how stressed are they keeping in mind that they have been paying off their debt in the last one year. Also the promoter pledging has slighlty gone up at the end of the September quarter. "
Parsvnath has been raising best part of its money through private equity route since last year, but hardly any analysts track the company.
The rating agency said in its release, "Fitch Ratings has withdrawn India-based Parsvnath Developers Limited's national long-term rating of 'Fitch B-(ind)nm'. Simultaneously, the agency has withdrawn the 'Fitch B-(ind)nm' rating on Parsvnath's long-term loans of Rs 200 crores and Rs 900 crores, and the 'Fitch A4(ind)nm' rating on its short-term loan of Rs 200 crores." It turns out to be a total debt burden of Rs 1300 crores.
As promoter and chairman of Parsvnath, Pradeep Jain, is travelling, the company declined to comment on the development.
Note: The copy was half published by my employer Business Standard Ltd.
International agency, Fitch Ratings, has withdrawn ratings for various debt programmes for two north-based listed real estate companies, Unitech and Parsvnath Developers Ltd, from its coverage. It has also removed them from analytical coverage.
Fitch's report says, "the ratings have been withdrawn due to lack of adequate information. Fitch will no longer provide ratings or analytical coverage of Parsvnath and Unitech."
Parsvnath Developers Ltd was migrated to the 'non-monitoring' category on June 2 this year, whereas Unitech was moved to the same category in March. They were moved to the non-monitoring category due to unavailability of clear information on the debt programmes.
For Unitech, the rating agency has withdrawn its national long-term rating of 'Fitch B-(ind)nm'. The agency has also withdrawn Unitech's bank loan ratings on various instruments which includes "short term debt of Rs 1,100 crore which entailed Fitch A4(ind)nm. Rs500 crore, Rs 2,000 crore and Rs 1,900 crore long-term debt programmes with 'Fitch B-(ind)nm rating, Rs 100 crore short-term bank loan programme with a Fitch A4(ind)nm rating, and Rs 300 crore non-fund based bank limits with Fitch A4(ind)nm rating."
Unitech had mandated Fitch to rate a total of Rs 5,900 crore for its various debt instruments.
An official from Unitech who did not wish to be identified, said, "it is not a negative move for us, they have just withdrawn their rating. We had not sought their rating on the debt programmes and they had already moved us to the non monitoring category in March." There was no official comment from the developer.
Due to inadequate information, Fitch Ratings had put both the companies in the non-monitoring category. Once a company is put on non-monitoring, it falls under survelliance. After six months if adequate information is not available from the company, Fitch withdraws its rating on the company and its entire instruments which it was mandated to rate.
Analysts on the street who have Unitech under their coverage consider this move to be a negative development.
A research analyst with a domestic brokerage said, "It is a negative move because Fitch has clearly stated that they do not have enough information on the debt programmes. It is a concern why Unitech has not disclosed how the debt is being taken care of, how stressed are they keeping in mind that they have been paying off their debt in the last one year. Also the promoter pledging has slighlty gone up at the end of the September quarter. "
Parsvnath has been raising best part of its money through private equity route since last year, but hardly any analysts track the company.
The rating agency said in its release, "Fitch Ratings has withdrawn India-based Parsvnath Developers Limited's national long-term rating of 'Fitch B-(ind)nm'. Simultaneously, the agency has withdrawn the 'Fitch B-(ind)nm' rating on Parsvnath's long-term loans of Rs 200 crores and Rs 900 crores, and the 'Fitch A4(ind)nm' rating on its short-term loan of Rs 200 crores." It turns out to be a total debt burden of Rs 1300 crores.
As promoter and chairman of Parsvnath, Pradeep Jain, is travelling, the company declined to comment on the development.
Note: The copy was half published by my employer Business Standard Ltd.
Wednesday, December 7, 2011
FII's cutting down realty exposure
Foreign Institutional Investors (FII's), the much coveted investors for realtors have started knocking off realty stock holdings since last six months.
Two realtors who have seen maximum sell off has been Mumbai based players, Indiabulls Real Estate (IBREL), which has major investments from Steel baron Lakshmi Niwas Mittal and Pujit Aggarwal promoted Orbit Corporation.
At the end of March, 2011 FIIs held a 53.73 per cent stake in IBREL, which has fallen to 45.33 per cent in the September quarter of this financial year, a drop of 8.4 per cent. The heavy selling by institutional investors has battered the stock too .
Two realtors who have seen maximum sell off has been Mumbai based players, Indiabulls Real Estate (IBREL), which has major investments from Steel baron Lakshmi Niwas Mittal and Pujit Aggarwal promoted Orbit Corporation.
At the end of March, 2011 FIIs held a 53.73 per cent stake in IBREL, which has fallen to 45.33 per cent in the September quarter of this financial year, a drop of 8.4 per cent. The heavy selling by institutional investors has battered the stock too .
The stock hit its new low since listing at Rs 60, down 5.06 per cent at the end of the day on the Bombay Stock Exchange (BSE).
FIIs have also shown the door to other realtors like D B Realty, Housing Development and Infrastructure Ltd (HDIL), Sunteck Realty and Bangalore-based Nitesh Estates.
The real estate sector has been grappling with interest rate hikes, slowdown in sales and an increase in debt burden of developers. Even though sales have dried up developers are not ready to cut prices and they are borrowing at a higher cost.
An analyst with a foreign brokerage who did not wish to be identified says, “Indiabulls Real Estate has failed to generate any cash flow earnings and most of its net asset value lies with its power venture where it will take time before any concrete results can be seen. The company has bought land parcels from National Textile Corporation (NTC) at very high prices where they are not able to capitalise. Even in its existing projects cash flow is a concern, and the sales slowdown in Mumbai is a negative sentiment.”
IBREL isn't the only case. Following the footsteps are fund managers who had bought stake in Orbit Corporation promoted by Pujit Agarwal.
Pujit Agarwal, managing director, of the luxury realty company said, “The realty market has been hit badly, FIIs have sold our shares but as I understand in the last two weeks FIIs have started re-investing. Our stocks have fallen down considerably but sales are slowly picking up now.”
The company's FII holding has fallen from 11.97 per cent in the March quarter to 6.73 per cent in the June quarter and stands at 2.26 per cent at the end of the September quarter, a fall of 9.71 per cent. Orbit's stock hit its 52-week low at Rs 26.05 per share at intraday, finally closing at Rs 26.40 down 1.12 per cent.
R Sridhar, group director, DB Realty, said, “I think the problem with the Indian market is that the FIIs are under a lot of pressure and they are trying to cut their exposure. But the shares at these prices are quite attractive and real estate is a long term story.”
DB Realty's promoters who are embroiled in the telecom 2G- scam, has seen a drop in FII holding from 5.46 per cent in March, 2011 to 4.54 per cent in September, 2011, a drop of 0.92 per cent.
Kamal Khetan, Managing Director of Sunteck Realty, indicated that institutional investors own close to 14 per cent stake.
The FII holding in the company has fallen from 6 per cent to 4.44 per cent, a drop of 1.56 per cent in the last six months.
The FII holding in Nitesh Estates has fallen to 21 per cent in the September quarter as compared to 23.07 per cent by March-end, a drop of 2.07 per cent.
An analyst from a domestic brokerage said, “Some funds had started selling IBREL shares in the open market, which has pulled the stock price to its new lows and we expect this to continue for sometime. Also the stock price of all the realty stocks have fallen to the same levels as it had hit when market was trading at 8000 points and at present we are trading at 16,065 points, if markets falter any further the funds will continue their heavy selling. This time around not only the Mumbai based players but Delhi based players will also bear the brunt.”
Real estate promoters increase their stake as share prices continue their freefall
Amidst a challenging business environment and falling share prices, promoters of real estate companies have shown faith in their businesses by increasing their shareholding by up to three per cent this financial year.
However, poor cash flows and high debt have made their lenders jittery. While some have raised the collateral requirement for existing loans, margin calls resulting from falling share prices have also led to additional pledges.
Real Estate majors Parsvnath Developers, Nitesh Estates, Orbit Corporation, Peninsula Land and Sunteck Realty are among the entities which witnessed promoters raising stake in the company over the past six months.
Pradeep Jain’s Parsvnath Developers has witnessed a continuous rise in promoter holding since March, from 67.66 per cent to 70.16 per cent at September-end. Rajeev Piramal, promoter of Peninsula Land, took his holding to 55.72 per cent in June as compared to 55.18 per cent at March-end.
Kamal Khetan, promoter of Sunteck, said, "We have been doing creeping acquisitions and our financial institutions’ holding is always around 14.5 per cent. The company's promoters hiked holding to over 70 per cent from around 67 per cent."
Pujit Aggarwal of Mumbai-based Orbit, who raised his holding from 46.99 per cent in June to 47.51 per cent in September, said: “We have been increasing our stake and are trying to bring down our share pledging. Though the stock has fallen significantly in the last one year, we are hoping things will improve from the next quarter. Even FIIs (foreign institutional investors) have started looking at us, so we are hopeful.”Normally, buying back of shares from the open market is considered a positive indication. But, analysts are not very bullish, as a significant portion of these shares are marching to the financial institutions to meet additional margin requirements. Earlier, realty developers had to provide collateral worth three times the loan. Now, bankers are asking for collateral of up to five times against existing loans, say experts.
“Cash flows are drying up, while debt is on the rise for the sector. As stocks have plunged, triggering margin calls, promoters need to pledge more shares as collateral with the lenders,” said an analyst.
For example, Jain of Parsvnath had pledged 86.47 per cent of his promoter share as of June. After raising his stake, the pledge came down to 71.24 per cent of his holdings at the end of September.
Last month, he pledged an additional 16.4 per cent to various funds. Similarly, Piramal’s pledged shares more than doubled to 26.75 per cent at the end of September, against 13.35 per cent in June.
In Bangalore-based Nitesh Estates, too, while the promoters' stake rose from 43.64 per cent to 44.15 per cent in the September quarter, promoter Nitesh Shetty pledges had increased to 29.42 per cent of his holding by then.
The head of investment banking at a financial firm says, “Developers need to cut their debt and start selling their inventories. These developers are increasing stake just to pledge these against the old debt. A fresh loan is difficult for them. Unless they have a good relationship, bankers are unlikely to lend further.”
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