To reduce debt by Rs 2500 cr over next few months: HDIL

The company does not have any non-core assets in its balance sheets at the moment, Wadhawan said.

Below is the transcript of Sarang Wadhawan's interview with Sonia Shenoy & Ekta Batra on CNBC-TV18.

Sonia: Your debt figures have gone down considerably in the last say six-eight months. Just take us through what the plan is going forward? From this Rs 3,100 crore debt how much do you think you could bring it down by in the next say 12-18 months and how do you plan to do that?

A: What we have been able to achieve over the last one year has been exemplary. We have done about 15 percent reduction in debt from last December to this December. This last quarter we were able to reduce debt by another Rs 140 crore odd. Over the next couple of quarters we are targeting about Rs 2,500 crore odd. Our peak debt at one given point of time was Rs 4,200 odd crore. We are on track, a couple of better commercial sales, residential sales are picking up and we should be able to achieve the target over the next few months.

Ekta: One of the reports indicating that you would possibly look to reduce your debt or the feasibility would be around Rs 700 crore of debt reduction in the next on year? Is that a fair assumption?

A: Our net debt is about Rs 3,100 crore; we are targeting Rs 2,500 crore over the next one year. So a reduction of around Rs 600 crore is what we are looking at. At Rs 2,500 consolidated debt we would be very comfortable. Our cash flows and internal accruals are strong enough to service that kind of debt level and overall in these times company like us where sales are lumpy and at the same time the market dynamics have not improved substantially over the last couple of years. Debt reduction is what we should be looking at.

Sonia: So how will you achieve this Rs 2,500 crore will it be through sales of non core assets and if yes what all do you have that you are looking to sell now?

A: We have few properties outside Mumbai that we are looking to offload. At the same time Mumbai by itself has the biggest amount of properties that we can get rid off. We have floor space index (FSI) transactions that we have entered into last few quarters which have helped us bring the debt down. Residential sales have picked up substantially and because of that there will be a debt reduction through those cash flows. Over all the scenario is improving but it is going to be couple of quarters before we see the debt reduction take place from our end.

Ekta: Tell us about this Virar project which is supposed to be a big trigger in terms of revenues as well for the company in going forward as most of the analyst that look at your stock. Can you tell us more about when it will kick off what is the potential revenue estimate? How much are you pumping into the project?

A: The Virar project Planet HDIL is going to be one of the largest integrated residential developments in the city and in the state. It is a development about 500 acres with a huge potential of about Rs 5 crore square feet. It is going to take a little while for the project to get completed. We are looking at launching the project may be this quarter itself we are getting ready we have all the approvals in hand. That will gives us the revenue for the next five years and that will be the game changer for us.

Sonia: What could the revenues be for the next 3-5 years and what could the run rate look like?

A: Virar by itself the pricing in that area is anywhere between Rs 4,500-5,000 per square foot. We have a total of about Rs 5 crore square feet so you can guesstimate what the number could be. However, I cannot give you a specific run rate because our accounting methodology is different from others and we do not account for projects on percentage completion. So as and when we will be completing the buildings we will be accounting for those revenues so our revenues anyway are going to be very lumpy over the next few years.

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Ekta: What other projects can we expect from the group within the affordable housing segment? How bigger thrust will we see from HDIL within that space?

A: We are focused primarily on residential and affordable housing. Our focus over the next five years is going to be on that segment that is where the potential lies. We have couple of other properties in Panvel and other areas of MMR. Our focus remains Mumbai and affordable housing is the next step. We like that segment it has its own cash flows, negative cash flow, we do not need to raise any debt on that in that segment and that is where the key is and that will help us reduce our debt further.

Sonia: In your presentation you stated that you have two new launches Berkeley Square in Ghatkopar and Daulat Nagar in Santa Cruz. Can you just tell us about these projects what is the rate currently over there and how much of revenues do you think you can accrue from these projects?

A: These projects have been with us for few years. We have been trying to get the approvals for these projects Berkeley Square in Pant Nagar has been embroiled in the Coastal Regulation Zone (CRZ) issue. It is now out; we have approvals on the hand. We are going to launch that project in the next month. Prices there are anywhere between Rs 15,000-20,000 a square foot.

Daulat Nagar is in Santa Cruz, which is a slum rehabilitation scheme. Revenues there also could be to the tune of about Rs 20,000 a square foot. So these are the projects are in pipeline. We were waiting for approvals for a very longtime. Couple of years we were stuck in garnering these approvals and now that we are poised to actually launch these projects, we are going to see a lot of noises made on the affordable housing segment as well as the high-end luxury segments in the suburbs.

Ekta: Is there a risk that the Virar project might constrain your debt reduction plans in the next three to five years just based on the fact that you will be pumping in a significant amount of energy and funds?

A: It won’t because most residential projects have a negative cash flow and our sales itself help us fund the construction. We do not envisage taking any further debt on that project. The other projects in Mumbai are helping us stem our debt down. We have FSI transactions which we are entering into. We have few transfers of development rights (TDR) transactions which are currently going on and all of these factors and various revenues streams are going to help us stem the debt down. So I really do not foresee any issue in coming out with our reducing the debt.

Sonia: You will be achieving this debt target only through your operational performance, there will be non core assets that you will see right?

A: We have no other non core assets. We had the leisure business which we sold off; we sold off the entertainment business. Now it is only operational performance that is going to help us come down.