As part of their strategy to divest non-core assets, Omaxe has sold its entire holding in wholly-owned arm Finishing Touch Properties. The move enables the company to exit from Vizag project, by selling 19 acre land in Visakhapatnam, at total value of Rs 112 crore. In an interview to CNBC-TV18, Mohit Goel, CEO of Omaxe, discusses the development.
Below is the transcript of Mohit Goel’s interview with Sumaira Abidi and Reema Tendulkar on CNBC-TV18.
Sumaira: Can you take us through the arm that you have which is Finishing Touch Properties; you have exited your entire stake, is this what it is amounting Rs 112 crore?
A: Yes, this is a 100 percent subsidiary of our company. We didn’t have any project in Visakhapatnam so we wanted to exit that particular region and concentrate in those regions where we are already doing our projects and so that we can concentrate more on those cities and we can do bigger projects there.
Sumaira: What are your other non-core assets that could be on the block?
A: There are around another two or three more land parcels which we are talking to potential investors and buyers. So, let us see what will happen but there is a possibility that we close another transaction in next three to six months as well.
Reema: Can you tell us the total valuation of these two to three land parcels which are non-core to you?
A: Including Visakhapatnam we are thinking of divesting Rs 250 crore which will be fetched out of these land parcels over a period of next three to six months. Whatever amount we are going to receive from these land parcels we are going to put in construction activities so that our deliveries could be faster and we can consolidate further. So, as a company strategy we are concentrating more on 10 cities which are there in majorly four states Punjab, Uttar Pradesh, Haryana and Rajasthan.
So, in these four states we are concentrating majorly on 10 cities where we are already doing projects and where we have already delivered projects so that we don’t have to basically wait to make our branding over there or make people feel that Omaxe is a very goof brand because we have already delivered so we are number one or number two player in those local markets. So, it gets easier for us and we are expecting huge potential of revenues from these entities as well.
Sumaira: This Rs 250 crore that you are saying is over and above the Rs 112 crore from your Visakhapatnam property? A: No that is including Visakhapatnam. The Visakhapatnam deal we are going to be receiving payments by end of March 31; the total amount will be with us. Reema: What you are hoping to realise about Rs 130-140 crore from sale of non-core assets, would that come in FY16? A: Yes, FY16. Sumaira: Do you have any debt on your books because you are planning to use the entire proceeds just for your construction; is there any plan to retire debt if you have any?A: We have around Rs 1150 crore of debt in our books. As I have said before as well, the debt always ranges for us between Rs 800-1200 crore. We are pretty much comfortable on debt side. The next cycle is coming for real estate, hopefully in next 6-12 months, hopefully the Budget will be nice on February 28. So, I think this is the right time to expand further and consolidate at the same time expanding; that is exactly what we are doing. We are comfortable on the debt side and the net debt equity ratio is around 0.4 so that is the reason we are just utilising the funds in construction activities.
Reema: Will you look to buy any land parcels? A: We are doing that on a regular basis. Every quarter we are buying land parcels in huge townships for example in Lucknow and Chandigarh we keep buying land from Rs 20-40 crore per quarter. If there is a good opportunity coming in these 10 cities or any other smart city opportunity is thrown in the market, we can surely think of picking up that opportunity as well. Sumaira: Any fresh launches or will you be just working on your existing launches like you said in Lucknow and Ludhiana? A: Recently we have launched group housing in Chandigarh which is around 25 acres with potential revenues of Rs 1200 crore. We have launched two group housing in Lucknow with potential revenues of Rs 1500 crore. We have received a very good response for these two group housings because 90 percent of our residential exposure or I would say portfolio is all affordable. Affordable is actually future according to me and I think whatever product to be launched if it is affordable and it is in range for affordable people I think it will sell. There will be no problem in terms of selling. So, we are not facing any such problems in selling because 90 percent stock of ours is affordable. Reema: Give us a sense about the company’s new launches in FY16, what would be the total size of the launches that you are looking at? A: FY16 we would be able to manage pre-sales of around Rs 1800- 2000 crore in these 10 particular cities which I mentioned in four states. On an average Lucknow and Chandigarh would be the major contributors to those Rs 2000 crore and rest of the eight cities will also contribute. Sumaira: If you are seeing this demand do you see realisations also going up, your average realisations for Q3 were at Rs 4000? A: We shifted our focus from selling group housing i.e. built-up units more than plots because two to three years back to improve our cash flow we shifted to the plots as a product which has lesser average realisations rate. However, now because we shifted our focus to built-up more group housing that is the reason our average realisation rate has also gone up. So, in future FY16-FY17 our realisation rate will also improve by 10-15 percent per annum.
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