Realty's debt nightmare: What are DLF, Unitech's options?

94413 Investors following DLF. Share this News with them.

0

Like this story, share it with millions of investors on M3

Realty's debt nightmare: What are DLF, Unitech's options?

The debt reduction drive of India's top real estate companies have gone off track, reports CNBC-TV18's Priyanka Ghosh.

Post your opinion here

 

0

Tweet

Share on Tumblr

Excerpts from India Business Hour on CNBC-TV18 Watch the full show » DLF BSE | NSE 30/05/12 Are Mutual Funds betting on DLF? Other Stocks in this news Unitech | Housing Development and Infrastructure |

The debt reduction drive of India's top real estate companies have gone off track, reports CNBC-TV18's Priyanka Ghosh.

The real estate sector's debt nightmare continues after market analysts say they expect India's top three real estate companies to get entangled in a debt trap as they race against the March 31 deadline to repay debt.

So how bad is the debt situation, and what are the options before DLF , Unitech and HDIL ?

If you look at the figures of the top three real estate companies, it paints a very worrisome picture in that it reiterates the sector's failure in combating high debt this financial year. We have heard one buzz word since the beginning of last year and that has been asset sales. If you look at DLF and HDIL, both companies have had certain successful transactions, but the bottomline is that it has just not added up for one very simple reason and that is the expenditure has simply outweighed the liabilities by a margin.

What particularly has gone wrong has been the working capital requirement especially due to the tough liquidity situation. High interest payments have run into hundreds of crore. Given the high debt in the books of these companies, slow realisations in particular from HDIL and Unitech signify that there might be a certain slowdown in project completions as well. Currently, what we are still seeing in the market is that these companies are quite aggressive as far as their target of debt reduction is concerned.

DLF has targeted about 14% while HDIL has targeted to reduce debt by about 20%, Unitech also has spoken about targeting a higher loan availability which will reduce their debt significantly as it will take care of the working capital requirements. What we are picking up from banking and market analyst sources is that several of these companies have been meeting their lenders on a regular weekly basis over the past one month.

So there will be greater borrowing to pay-off the existing debt, which is exactly what a debt trap means. It's really going to be a case of good loans chasing bad. There will be lots of window-dressing going on to really bailout the real estate development companies as well as to avoid NPAs as far as banks are concerned.