"We are aiming at debt reduction; this move was primarily to fund the land acquisition we had entered into about a year back," Wadhwan explained to CNBC-TV18.
The shares of Housing Development & Infrastructure ( HDIL ) cracked as much as 15.8 percent on Wednesday after vice chairman and managing director Sarang Wadhawan offloaded partial stake in the company. He sold 5 million shares worth Rs 57 crore in secondary markets on Tuesday, reducing his stake to 0.99 percent from 2.19 percent.
"We are aiming at debt reduction; this move was primarily to fund the land acquisition we had entered into about a year back," Wadhwan explained to CNBC-TV18. No details were shared about this land purchase but the company expects this acquisition to add substantial value.
HDIL’s debt currently stands at Rs 4,000 crore, but the company is confident of reducing it significantly in quarters ahead.
"The debt is already coming down. We have started receiving approvals from various authorities, the funds which were tied up with other developers who we had sold the Floor Space Index (FSI) too have started coming in," he added.
Below is the edited transcript of Sarang Wadhawan’s interview with CNBC-TV18.
Q: What is the reason behind the huge crack that we are seeing in the stock price today?
A: Yesterday a sell of almost 5 million shares had taken place under my own name. This was primarily so that the promoters can fund an acquisition which the company had entered into about a year back. This was one of the payment tranches which was due.
Since the company is on the mode of debt reduction over the last six months the promoters thought fit that we should fund the company to make sure that the land acquisition goes through. It is an opportunity which has presented itself over the last year. We assured that over the next quarter we will be disclosing the entire details of this acquisition.
Q: How much of the total promoter holding has been sold?
A: 1 percent has been sold.
Q: Have you sold anything in today’s trade?
A: No, nothing whatsoever. This was primarily only to support HDIL, so that HDIL can go ahead and close out the acquisition which it had envisaged for the next quarter. The opportunity presented itself over the last year and the promoters have stood by the company as always.
Q: What about the debt situation? It currently stands at Rs 4,000 crore or so. Are there any plans to pare off the debt?
A: The debt is already coming down. We have started receiving approvals from various authorities, the funds which were tied up with other developers who we had sold the Floor Space Index (FSI) too have started coming in. I am sure this quarter end you will see that debt figure will be substantially reduced.
Q: Since this land acquisition has been done by the promoter money will the land be in the promoter’s name or will it be in the company’s name?
A: The promoters have funded HDIL to acquire this land. We will try and see over the next year as to what is best way to do the accounting on that, it can be either by issuance of warrants or something else. As of today, the promoters have stood by what the company required and that says a lot.
Q: Yesterday you sold about 5 million shares which should get you just close to about Rs 50-60 crore odd. Would you require to sell more shares?
A: No, the promoters will not be selling anymore. Since the funding for HDIL internal accruals has started and is coming in quite rapidly, now all further payments for this land acquisition will only be done by HDIL.
Q: Where does the promoter group shareholding stand at at this point in time post the sell?
A: I do not have the current figures with me, but maybe they will be online.
Q: There are lot of rumours in the market about bankruptcy etc. Would you want to comment on that at all?
A: The market is what market does. People can make all sorts of stories, but the end result is that the promoters are standing headstrong with the company. I am sure that you will see the company reducing its debt substantially over the next year.
Q: In today’s big fall in volumes and prices have you sold anything in today’s trade?
A: Nothing whatsoever.
HDIL stock price
On October 30, 2014, Housing Development and Infrastructure closed at Rs 81.35, up Rs 4.60, or 5.99 percent. The 52-week high of the share was Rs 113.85 and the 52-week low was Rs 38.70.
The company's trailing 12-month (TTM) EPS was at Rs 6.70 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 12.14. The latest book value of the company is Rs 248.81 per share. At current value, the price-to-book value of the company is 0.33.
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