HDIL registered Q4 consolidated net sales of Rs 625 crore versus Rs 552 crore, YoY. Its consolidated net profit was at Rs 315.5 crore compared to Rs 185.2 crore in the corresponding quarter last fiscal.
In an interview with CNBC-TV18, Sarang Wadhawan, VC & MD, HDIL said that they have not managed to do a great deal with the Transfer of Development Right (TDR) sales largely due to the lack of clarity about development control regulations (DCR). The company is expecting TDR sales to pick up from the next quarter.
Looking forward to FY13, HDIL is looking to reduce its debts by Rs 600 crore in the first half of the fiscal. It is also targeting revenues of Rs 2500 crore in FY13.
Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.
Q: The disappointment this quarter was on the Transfer of Development Right (TDR) front where you have managed to sell precious little, is the market very sluggish out there?
A: The market primarily was waiting to see the development control regulations (DCR) which were amended last year. Finally, the DCR notification came out in the month of January.
Developers who were waiting to get their plans approved have now finally come out and submitted their plans to the BMC. Subsequently, now they are going to start purchasing TDR and finally, you are going to see a pick up in the demand for TDR.
Q: What do you reckon it may start to contribute for FY13 revenues and what kind of price do you think you will be able to strike on it?
A: We have been booking TDR income for the last one year. We had few FSI sales that we booked for the last quarter. All the residential projects that you were anticipating to be completed last year are going to be completed this year.
Since our method of accounting is project completion, you are going to see all the residential projects being booked now. We have a lot of advances on our books and those are now going to figure out in the P&L (profit and loss) statement.
Q: Would you also expect it to start doing something in terms of alleviating the margin pressure that you have seeing? How much of a recovery do you think there will be through the course of the next year?
A: Residential projects by itself are not very high margin businesses and have a 30-35% margin. But our FSI sales, which we have incurred over the last quarter, do have higher margins of 50-60%. Overall, I think the margin pressure that we have faced over the last one year is going to definitely improve.
The cost of construction has gone up. Along with that, you have to keep in mind that the government has now started the fungible FSI concept in Mumbai. So a huge quantum of money is going to move towards the BMC for this fungible FSI. That is definitely going to start increasing prices in Mumbai.
Q: A question on the balance sheet, you started FY12 by saying that you would reduce debt by Rs 600 crore, I think debt reduction has only been to the tune of Rs 250 crore, can you take us through what your plan is for FY13 and how exactly you intend to achieve that 20-25% reduction in debt that you are talking about this year?
A: I am going to reduce it by 20-25%. I think we are half way through. By September, the company is going to deleverage and our debt will come down by approximately Rs 600 crore.
We have strong internal accruals. We are not looking to have any major restructuring. We have a debt component due of approximately Rs 1000 crore this year. With FSI transactions that we have already entered, with the receivables that are due, I am pretty sure that we will be able to achieve the target of 25%, at least till September end.
Q: Any prospect of an equity infusion from promoters or through QIP like instrument to accelerate this process?
A: As of now, we are not contemplating any equity infusion. I think the promoters are comfortable where they are. The warrants that were issued to me were also forfeited by HDIL. Now, if the promoters are looking at increasing the stake, it is going to be an on market transaction rather than an equity infusion into the company.
Q: What is looking like a doable sales target for FY13?
A: We have given guidance to rating agencies of approximately the same that we did last year. We did approximately Rs 2000 odd crore revenues. I think we maintain the target that we will be achieving anywhere between Rs 2000-2500 crore of revenues.
Our profit will remain in the same area, approximately Rs 900 crore. Given the market conditions today, I think that is a great achievement and even last year was a great achievement by a company like HDIL.
Q: What is your sense of how the Mumbai market is doing right now, both commercial and residential?
A: We did an offhand calculation and we figured out that with the new concept of fungible FSI and the increase in property taxes, the end consumer is going to end up paying approximately a Rs 1000 per sq ft more and that is in any given location. Now that is the base price.
You are going to see a minimum of 10-15% increase because of the fungible FSI concept that is going to go on the consumer's head. The entire concept of developers getting areas free of FSI has gone now. Margins are going to be contracted a little bit. I am sure they are going to start increasing prices to make sure that they achieve that margin.
Q: Any significant lumpsum payments or inflows that you are expecting from any land parcel sales. There has been talk about you selling a large parcel in Andheri to Adani Group etc; do you expect any of those to go towards repayment of that debt that you are speaking about?
A: Most of our internal accruals today are earmarked towards debt repayment. We are focused towards deleveraging the balance sheet through these FSI transactions. We are still negotiating with few buyers for the Andheri project. We are negotiating with Adani for the same project as such.
But, we do have other major land parcels like the Virar project, which is now coming up. It is approximately 40 million sq ft. It will probably be the largest township outside of Mumbai city. With prices in the range of anywhere between Rs 4000 and 4500 per sq ft, that is a huge project. I am sure that the internal accruals from there will help us deleverage the balance sheet over the next two years.