Despite slowing sales in June, Dinesh Gupta, COO of Ansal Properties holds their FY13 sales guidance at 18 million sq feet. The strategy of moving from plotted development to the built-up segment is leading to the reduction in sales volumes, explains Gupta.
Despite slowing sales in June, Dinesh Gupta, COO of Ansal Properties holds their FY13 sales guidance at 18 million sq feet. The strategy of moving from plotted development to the built-up segment is leading to the reduction in sales volumes, explains Gupta. Since it takes more time for the market to absorb the built-up variety, sales figures have almost halved in April-June, he added.
In an interview with CNBC-TV18, Gupta further said that realisations have increased on each asset class and the company's debt currently stands at Rs 1300 crore. Ansal Properties is presently trying to reduce its debt to Rs 1150 crore by the end of this fiscal. To reduce the debt burden and increase cash flows, the company is looking at asset sales, many of which are in the final stages of negotiation.
Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.
Q: When we look at your June figures, we see your sales have almost halved to 4.88 million sq ft, that is the April-June figures. And the total area sales for June itself is down by 27%. Do you think that this is going to be the nature of things in the year?
A: We have to get into the line by line item of why the sales in terms of volumes have gone down. The strategy is very clear. Just from the plotted development, the management is now moving towards the built-up segment as well. Built-up segment takes some time to get absorbed in the market.
Along with that we are comparing on a year on year basis and last year, we had a flurry of launches which saw a quick upside or quick upsurge in the volumes. Although a 50% drop is not very discouraging, as per the business plan we are very much on target because we set a target of about 18 million sq ft for the year.
For the quarter we have completed almost 5 million sq ft, but the quality of sales is very important. Out of 5 million only 1.2 million sq ft is FSI and the rest is in the constructed segment or plotted development.
Along with that if you see the drop of 50% in volume, the drop in the value of the sales is only 20-22%. It basically means that the realizations on each of the asset classes have gone up. It is a very positive and an encouraging sign because the markets are adopting these or absorbing these products, plus they are very happy with the price target or price points because they see development on ground.
The focus of the management has been on the construction developing and delivering the products. The moment you start delivering the products in your townships or in your projects, the prices are always going up. That is what we are seeing in our realizations. Therefore a 28% YoY realization increase is a very healthy trend.
Q: Given the decline in volumes and the significant improvement in realizations are you expecting margins to improve quite a bit?
A: Yes, definitely. On the plotted development the margin is very different and when you move into the built-up segment, the profit margins are much higher of course. Though it takes a longer time to complete the development and handover the properties, these built-up developments definitely command a better price, better realizations and even EBITDA margins.
Q: Can you elaborate a little on your debt position? The last number we had is Rs 1,480 crore debt on the balance sheet. You had indicated when we last spoke to you that about Rs 250 crore of asset sales will be done and your debt will come down by Rs 300 crore in the current year. Any progress towards these numbers?
A: Sure. The number that you just mentioned, Rs 1,480 crore is not the total number which is owed to the banks and financial institutions. What we owe to the financial institutions is only Rs 1,350 crore which was at the beginning of the financial year. During the quarter, we have reduced it by about Rs 50 crore. The debt number which today stands owed to banks and financial institutions is about Rs 1,300 crore.
The target is to reduce the debt on a continuous basis and the management had set a target of reducing it to about Rs 1,100-1,150 crore by the end of FY13. To support that we were looking into asset sales. I mentioned last time that Rs 250 crore worth of asset sales are under discussion or probably in the final stages of negotiations.
However, they have not yet been signed, although we are on the final stages of doing some condition precedents as per the term sheet. Once those condition precedents are completed, we will be able to announce them and seal the deals which will allow us enough cash flows to reduce the debt burden.