DB Realty to roll out 3 projects, eyes Crown for jewels

Vipul Bansal, group CEO, DB Realty, talking to CNBC-TV18, says the company, which has an inventory above Rs 30,000 crore, plans to launch three key projects in the next 3-4 months.  He attributes the jump in sales this quarter as compared to the previous one to the company getting complete clarity from the government on the new Development Control (DC) regulations, allowing it to market and sell products aggressively. The company has about Rs 300 crore of liquid transfer development rights (TDR) in its books, at about Rs 2500-2600 per square foot. Even in the prevailing scenario of high interest rates, he feels that with the current exposure of Rs 300 crore, debt is not a matter of concern for the company.
 

Below is the edited transcript of Bansal's interview to CNBC-TV18 Q: What would be the company’s interest cost burden for the rest of the year, and what steps is the company taking to alleviate that load? A: We have about Rs 300 crore of debt, which for a company of our size is really not much. Three of our key projects are expected to go live in the next three-five months, the inventory of which is worth about Rs 15000 crore. We would be organising debt funding for that. So, debt is not really a concern and any softening in interest rates will not really impact us too much. Q: Between the last quarter (Q2) and this quarter (Q3) your sales jumped from about Rs 50 crore to Rs 125 crore. Can you give us the reason for this? A: Sales of Rs 125 crore is the number which is recognised in our revenues. Including sales of DB Crown, which has not reached that threshold of construction where you begin to recognise revenues, our sales numbers are about Rs 432 crore for the quarter. The jump in sales is because we got complete clarity from the government on the new Development Control (DC) regulations in the last quarter. So we could market and sell the products wholeheartedly. That period also coincided with the markets opening up a little. Q: So in the current quarter, which properties will you be recognising revenues from? Can you give us a breakdown of how much each property will contribute? A: I cannot give you the specifics, but the major kicker will be DB Crown, which is expected to cross the 25 percent construction threshold when you begin to recognise your revenues. That is the accounting policy we follow.
Other than that, DB Woods, DB Suburbia and DB Ozone have been the major contributors, with DB Woods being the primary one. However, being suburban projects, they have relatively low margins. Q: What are the rates that you are managing to book these properties on? A: The average rate of realisation is going up. We have about Rs 300 crore of liquid transfer development rights (TDR) which sits on our books. This sells at about Rs 2500-2600 per square foot. Our suburban projects are about Rs 15,000 per square foot (sq ft), and the south Mumbai projects are northwards of Rs 30,000 per sq ft. Q: Do you have any pent-up inventory that you hope to sell through the course of this calendar year? A: Inventory had been pilling up because you don’t want to hit the market where you are not clear about what the market impact of the new regulations will be. Now that there is clarity, the last quarter was pretty strong with Rs 432 crore of sales. I expect this momentum to continue. I wouldn’t be surprised that with three premium projects - DB Turf at Mahalaxmi, DB Heights at Jacob Circle and DB Paradise at BKC – covering about 4 million sq ft of residential area coming live, sales numbers should definitely be strong. There will be a lag in the profit numbers because the recognition will take some time to come through. Q: Promoters have been revoking some of the stake pledges they had with many banks. What is the situation on that front? A: That is between the promoters. The executive management and ownership are separate. I cannot comment on that. Q: I believe you have also resumed negotiations on the big redevelopment project in Bandra. How do things stand there? A: With the inventory and cash flows we hope to get now, we will have to scout around for projects. There are very interesting projects available at comparative prices, and we are exploring all kinds of opportunities.