With projects being on track and nil debt will boost results in the coming quarters, believes Oberoi Realty's Vikas Oberoi. He told CNBC-TV18 that the fundamentals of the company continue to remain strong.
Oberoi Realty is confident of performing better in the coming quarters. To maintain profits, the company has sold enough and just needs to build and book profits in the next two quarters, says Vikas Oberoi, chairman and managing director of Oberoi Realty. All projects are going as per plan, he told CNBC-TV18.
In terms of financials, the company is debt-free and has ample cash in the bank too, he says. The margins for the firm have also increased as fundamentals of the company continue to remain strong, Oberoi adds.
Below is the edited transcript of his interview to CNBC-TV18.
Q: The stock has been hitting lows for a couple of days. Today the stock is down about 10 percent odd or so. Is there anything happening?
A: I am personally also surprised. All I can say is our fundamentals continue to be good. All projects are doing well. Worli continues to be under construction. We are on currently in the process of constructing the 24th floor. There were certain permissions pending for Esquire, even they have come in. So per se fundamentals of the company continue to be same. We have zero debt.
We have cash in bank and maybe just a market sentiment probably for the sector has not been favourable. However, this sort of market scenario is a plus for us, which is sitting on cash. This will throw up opportunities for us. We are also surprised, but that is it. There is really not much that I can add to what I already know.
Q: There were some disappointments in your operational performance this quarter. Given the way the macro situation is panning out, how do you see your earnings shape up? Do you expect to see more pressure on your profitability going ahead?
A: If you see the margins, they have in fact increased. So there is no pressure on margin as such. We already have an order book where we are continuing to build. To maintain my profits, I genuinely do not even need any sales, not for this quarter or for maybe couple of quarters. We have already sold enough. We just have to build and book profit. So that also is not at all a concern.
We continue to be prudent with our buying and we are the only ones who are probably sitting with so much of cash, with zero debt. So from a strategy point of view nothing has really changed.
Q: Are there any regulatory developments which are coming up on the regulatory front within the real estate space, which real estate companies might be fearing in the near-term?
A: Everyone knows that the real estate regulator is likely to come in. We have forever been advocating that. Most of the real estate developers welcome the regulator, because it will create a level playing field. It will clarify a lot of mist around the relationship between a developer and a prospective customer.
It is really good for the industry. Maybe in the short run, there maybe some pain at both ends, but going forward this will really set a stage for this industry to really boom. Looking at the population we have, looking at the way people are growing or making money, this is a basic fundamental.
Q: Is there any unusual activity on the investor or trader front that you have possibly picked up? Maybe some amount of Foreign Institutional Investors (FII) who do hold some amount of stake within your company are exiting; hence maybe the pressure that you are seeing on your stock?
A: Not at all. The entire trading is like probably 200,000 shares the value of which is not even like USD 500,000. So it is as low as that. Whenever I go for my investor meets, a huge demand from investors is seen who want a block trade.
Unfortunately, a lot of my stock is illiquid; no trading is taking place. Everyone is holding our stock including my initial investors like right from Morgan Stanley and all the blue chip investors continue to hold that. So there is very little trading that happens.
Q: What is the progress on the construction of the Phase II of Esquire; can you give us a status check on that? Have you deferred the Worli launch?
A: We have not deferred the Worli launch. All we are trying to do is build some sort of credibility. These are tall buildings. They are going to come into their own or they will be ready only by 2016 and this is not a great market where people want to book.
At the same time if you look at the Worli market, today Samudra Mahal is selling at almost Rs 150,000/square foot on carpet. It is a 30 year old building. It is a beautiful building, well built, very good people living in there.
We also happen to be in Worli. We have branded residences. I think when the building is near completion or gets ready we will probably stand a much better chance and we have the wherewithal to fund it and build it ourselves.
So we are not going into a market when the markets are uncertain. I would rather go into a market where there is certainty from the market point of view that yes these buildings come up and it is like the structure is ready and now it is only the finishing that has got to take place. We have one of the best contractors in the world doing that for us.