Will use proceeds from sale of Guj plot to pare debt: HDIL

A: It is a positive sign by the Reserve Bank of India (RBI). We have already seen 50 basis point reductions in the fourth quarter and as we move ahead there will be more reduction that is the indication which we get from the various comments of the RBI.

Now specifically for real estate it is a very positive sign because it helps you to get more capital for the working capital kind of stock and you can launch more projects. Also it helps the customers because mortgage rates can decline.

So it is a good positive sign and we expect that going ahead, first of all this 50 basis points gets translated into reduction of base rates and is passed on to the corporate. Second we expect further rate cut reduction.

Sumaira: Would your own borrowing cost come down and if so by how much?

A: Currently our borrowing cost is around 14 percent so as of now we have not seen any pass by any of the bankers. However if we take a 50 basis points reduction in the borrowing cost that should help us to get our total interest cost down by around 10 percent.

Reema: So just a 50 basis points reduction in your borrowing cost to 13.50 percent can reduce your interest cost by 10 percent?

A: Yes, because what happens is that 70 percent of our borrowings are on floating cost. Even if there is a 50 basis point reduction on the overall interest cost and also we are reducing our debt so if we take both the aspects into consideration our borrowing cost can fall down by 10 percent.

Sumaira: We have just got news that you had a land parcel in Baroda which is now on the block. I understand it is an over 100 acre industrial plot. Can you tell us how much you are expecting this to fetch and how much it could bring your debt down by?

A: We had given an advertisement today and we have given a mandate to couple of brokers for getting us a bet on this property. This is a very large industrial plot which we have been owing for last 5 years. So can not put on the bed amount exactly but the whole idea is to diverse some of these non core assets and strengthen the balance sheet and focus more on working capital and debt reduction as we move ahead.

Reema: There has been no even a rough estimate of what the value of this 114 acre land plot will be even a ballpark estimate?

A: I would not be bale to give a numbers because we are in the process where in we are get the best from various clients so it may not be appropriate for me to give a number as of now. However, as I said the intention is to use this money for working capital requirement and get the debt down.

Sumaira: One of your peers there is a private equity (PE) player who perhaps is looking to invest some money into that. Is that something that HDIL would be interested in would you be in talks with any PE players for the same to try and take benefit perhaps of real estate investment trust (REIT) etc?

A: Specifically on the REITS we do not have a very large rental portfolio with us. For residential project yes, we have been having a discussion but it is an ongoing process actually but not specifically for any of the projects as of now.

Reema: You said it will aid the working capital situation can you tell us what the working capital loans are for the HDIL and how much would you ideally like to bring it down to?

A: If you look at, the peak level of debt for us was in September 2013 we were at around Rs 42 billion which we have now reduced it to around Rs 32 billion. We have set a target that over a period of next one year by FY16 we should be somewhere around Rs 25 billion kind of a debt. So we are working on this number.

Reema: Will this land sale be sufficient to bring down your debt to Rs 2,500 crore or will you also require to sell some other non core assets and secondly if you can give us the total value of your non core asset?

A: We have set the target for debt reduction of Rs 25 billion even before we had this land sale thought. So Rs 25 billion is basically done with respect to our internal accruals. Now the non core assets what we have bought it out in Baroda as of today we have to see how this transaction goes ahead.

However, as I said that the intention is to use all the non core assets whichever we have outside Mumbai. We have couple of land parcel in Hyderabad and Cochin. So between Hyderabad, Cochin and Baroda we want to off load this land parcels and try and bring the debt further down. However Rs 25 billion is irrespective of whether whatever sales proceeds come from this land parcel.

Sumaira: Will you manage closing it in this financial year itself or would it stretch into FY16 for this particular parcel?

A: As I said out intention is to offload this land parcel. It is difficult to give a timeline whether we will be able to do it in this financial year or next year.

Reema: Cochin and Hyderabad is that something you would look to sell in FY16?

A: Cochin and Hyderabad the market is slightly subdued. Hyderabad again we are working on to find out a Joint Venture (JV) partner on monetisation. Cochin as of now we do not have any interest on the ground. As I said our strategy on the long-term is to divest some of these assets.