Will meet FY12 guidance despite rate hikes: Ansal Prop

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Thirteen continuous interest rate hikes has had its impact on Ansal Properties , whose property sales have halved on a year-on-year basis. However, Dinesh Gupta, chief operating officer of Ansal Properties is not too worried about meeting their FY12 guidance.

"There was sluggishness on the sales, but we did almost 2 million sq feet, which was our totally sales for Q2, in the month of October alone. So I don't see any worries. As per our business plan, we are almost on target," he explained to CNBC-TV18 in an interview.

The company's FY12 guidance is maintained at 16-18 million square feet in terms of sales value.

Gupta goes to say that he expects to see a slight improvement in margins in the second half of the year. "We have done some recent sales which will pass through the revenue counts in the next couple of quarters and this will help us some improvement in margins."

Below is an edited transcript of his interview. Also watch the accompanying video.

Q: Q2 property sales were quite dismal on a year on year basis. Was there any particular reason why it was down so much and what can we expect in the second half of the year?

A: Logically speaking, we had released a lot of inventories and couple of new projects were last year therefore there was a sudden spurt on the sales and volumes that we clocked. The Q2 for this year had a combination of certain periods where property deals were slightly slower, coupled with monsoons and the interest rate hike. So there was sluggishness on the sales

But in the month of October, which is the festive season, we have done almost 2 million sq feet of sales where we just released an operational uptake yesterday. For the quarter went by we did almost 2 million sq feet and the same in the month of October. So I don't think that is a worry and as per our business plan we are almost on target.

Q: FY12 guidance maintained at 16 to 18 million sq feet?

A: Yes. That is correct. Even in terms of volume as well as sales value.

Q: What about the margins? Are you seeing any kind of pressure on pricing or is pricing relatively stable as compared to what we have seen in Q1?

A: I think in terms of sale value or ticket sizes, prices are behaving a little tricky the reason being because the cost of construction and other operational cost have gone up. So logically they are passed on to the customers and eventually you will see stagnation in the pricing. I don't envisage any drop in prices or a significant drop in prices, except for slight corrections on a territory to territory basis.

As far as gross profit margin and EBITDA margins are concerned, I think there has been improvement as far as we are concerned. We are seeing a slight improvement in these margins as we have done some recent sales which will pass through the revenue counts in the next couple of quarters.

Q: As per your Q1 numbers, you have done EBITDA margins of close to about 18%. If there is improvement, to what tune it will be?

A: We are just about to release the results in the next couple of days so it will not be correct for me to mention. But I think there will be a slight improvement. For the next couple of quarters also we will see a positive side on the EBITDA as well as gross profit margins. The exactly quantum we will have to wait for another couple of days for the results to come out.

Q: Employee cost has been a significant concern across the board in India. Q1 clearly showed the pressure on your financials as well, it was up 33% year on year. Has that pressure continued to persist? Do you see employee cost slightly drag margins going forward?

A: After the economic slow down, there has been revision in salaries across the real estate companies and there has been increase in the salaries being paid to the executives. I think that is in line with the business operations. If you see a couple of companies including us and other north India related players, they have been on a war footing strategy to sell out and increase their sales as well as operations. So once the operations increase, it is bound to happen that your employee cost and operational cost will increase.

But as a percentage of sales and as a percentage of collection that you do in a particular year, I think it is still within the margins and still within the range that probably most of the companies operate on. I don't see any worry on that but I guess efficiency would be a greater concern. I think most of the companies are working on increasing the efficiency within the employee strength that is being maintained by most of these companies.

Q: You were previously in talks of hiving off two of your townships, one in Punjab and the other one in Haryana? Is that a done deal, has it happened already?

A: Yes, some finalizations have happened. I will have to wait for a day or two to get back to you for the exact details. Hopefully with the results we should come with some news as well.

Q: Could you give us an update on your current debt situation? You have previously spoken about getting your debt to levels of Rs 1300 crore, does that stand still?

A: For the year, the target is Rs 1300-1350 crore. Hiving off assets will help us in reducing the debt in one shot probably in the next 2-3 months time. Currently we are looking about Rs 1470-1480 crore of debt, which is what it was last month. There has not been any reduction in the debt, but we are making sure that once of hiving off the assets happens and the money that comes in from there we will utilize it for debt reduction immediately.