Mar 11, 2013, 05.23 PM IST | Source: CNBC-TV18

49% buyout of two arms via internal accruals: Kolte-Patil

Kolte-Patil's group chief executive officer, Sujay Kalele says the company’s 49 percent buy out of the investor's stake was financed entirely by their internal accruals. The amount paid, according to Kalele is Rs 65 crore and will reflect in the balance sheet from the next quarter.

There is no debt that has been taken so I don't see any reason why the interest cost would go up.

Sujay Kalele

CEO

Kolte-Patil Developers

Sujay Kalele, Group CEO, Kolte-Patil Developers expects a total payout of stake buy from its foreign subsidiaries at Rs 65 crore  Last month, the real estate firm had acquired a 49 percent stake in its two subsidiaries namely Oakwoods Hospitality and Jasmine Hospitality. Formerly these subsidiaries were formed by KPDL with a 51% stake ownership, and Epsilon Investments Limited, a Foreign Investor had 49% stake in both the subsidiaries.

Speaking to CNBC-TV18, Kalele says, the Rs 65 crore pay-out, which was generated by the company via internal accruals, will reflect on balance sheet from the next quarter.

The two projects, according to him, should earn the company Rs 700-800 crore. "Oakwood Hospitality has about half a million square feet of developable potential where we plan to develop a mixed use comprising of high street retail as well as high end residential apartments," he says. 

"For Jasmine Hospitality in Bangalore, the total development potential stands at about 0.6 million so totally we have about 1.1 million square feet as the total development potential," Kalele told CNBC-TV18.

Below is the edited transcript of Kalele's interview to CNBC-TV18.

Q: How much have you bought out your financial investors’ stake in two of your subsidiaries? How much has the pay-out been? When will it show up in your P&L?

A: We bought out 49 percent of the investor’s stake in two of our special purpose vehicle (SPVs) each in Pune and Bangalore. The total pay-out stood at about Rs 65.62 crore. The transaction has already been completed as was reported to the stock exchanges couple of weeks back. It will start reflecting in the balance sheet from next quarter.

Q: What did they buy it at? What is the difference between their purchase price and sale price?

A: As it is an unlisted entity, I will not be able to disclose their purchase price. However, they have made decent returns and obviously the price that we bought at was lucrative to us in the current market scenario.

Q: Will this Rs 65 crore come entirely from internal generation? Or will it cast a bit of an impact on your P&L in terms of interest cost?

A: It is 100 percent generated through internal accruals. There is no debt that has been taken so I don’t see any reason why the interest cost would go up. It was 100 percent funded through internal accruals and the excess cash that we had.

Q: Could you tell us the outlook of both Oakwood and Jasmine Hospitality in terms of future revenues?

A: Oakwood Hospitality has about half a million square feet of developable potential where we plan to develop a mixed use comprising of high street retail as well as high end residential apartments. For Jasmine Hospitality in Bangalore, the total development potential stands at about 0.6 million so totally we have about 1.1 million square feet as the total development potential. We are looking at combined revenue recognition of about Rs 700-800 crore of both the projects put together. Oakwood is at an advance stage of approval, so we hope to launch that project in the next quarter while Jasmine will take about couple of quarters more to reach the launching stage.

Q: Can you give us an idea of how real estate prices have been doing in Bangalore and Pune? One hears positive noises about Bangalore but was this quarter better than last quarter in any of the parameters say, sale of flats per sq ft or lease rentals?

A: Yes, residential space in both the markets continues to be very robust. Prices have bettered this quarter as compared to last quarter. The sales offtake across all asset classes were also pretty decent that way. As far as lease rentals go, we haven’t seen any movement on commercial office lease rentals as compared to last quarter although absorption has slightly picked up. It remains to be seen whether it is a structural uptrend that we are seeing, but yes, as far as lease rentals go, there wasn’t any significant movement as compared to last quarter.

Q: Last time you told us that you were in process of signing two new redevelopment projects in Mumbai. What is the update on that and how soon are you likely to close it?

A: One of the redevelopment projects is in the final stages of due diligence. Hopefully, if the due diligence goes alright, then we should be through with the transaction pretty soon.

Q: What would be the size of this redevelopment project?

A: The total built-up potential will be about 0.1 million sq ft which includes the component that has to be given to the society members and also includes the sale component that we will have.

Q: Will such projects keep your margins at about 26-27 percent?

A: Yes. Typically, redevelopment projects have a higher margin as well as the investment. So, you get some flexibility as far as investments go, so on a combined effect, they become very attractive. Although, the time taken to close such redevelopment projects is pretty long so the margins we will maintain at about the current levels.

Q: What is the residential trend in Mumbai real estate looking like? Are prices stable, rising, falling?

A: It is dependent on micro-market. In some of the micro markets, we have seen prices getting corrected. In some micro markets, we have seen prices stabilising, in some they are going up. For example, in outskirt locations or greater MMRDA locations like Panvel, we have seen decent off tick driven by individual demand. In some of the micro markets, typically central Mumbai, we have seen newer launches coming in at a slightly lower price points than the existing projects which are going on there. In some micro markets like Bandra, the residential prices have gone up if we compare them to couple of quarters ago. So, it really depends from market to market and what is the status of supply that will hit the market.

Q: Any change in your FY13 guidance of sales volume of three million sq ft?

A: No, as things stand now, we have actually given a guidance of between 2.5-2.8 million sq ft. As of today, we are closer to the higher end of that target than the lower end.

Kolte-Patil stock price

On April 23, 2014, Kolte-Patil Developers closed at Rs 98.75, down Rs 1.3, or 1.3 percent. The 52-week high of the share was Rs 114.30 and the 52-week low was Rs 49.40.


The company's trailing 12-month (TTM) EPS was at Rs 8.20 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 12.04. The latest book value of the company is Rs 100.27 per share. At current value, the price-to-book value of the company is 0.98.

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