Will cut Rs 250cr debt by Q4 via sale of 4 projects: Orbit

Orbit Corporation blames its poor earnings to the high interest costs incurred throughout the quarter. The company, going forward, will focus on reducing its high debt of around Rs 1,000 crore.

The real estate developer has been incurring around Rs 45-46 crore in interest cost every quarter is in addition to Rs 120 crore spent annually for corporate overheads, says Ramashrya Yadav, joint CEO of the company. Bad sales in the previous quarters and reduced inventory churn have added to the company’s woes, he adds. However, on the back of better sales in Q2, Yadav expects a turnaround in 2-3 quarters. Simultaneously, debt will be reduced by around Rs 250 crore by Q4. Interest costs will also be pared down to Rs 35-40 crore per quarter, he says. Four projects will be sold for the same, while two of them will see a stake sale in FY14, he tells CNBC-TV18. Also read: Mumbai realty inventory peaks; price fall imminent: Orbit Below is the edited transcript of his interview to CNBC-TV18. Q: It has been many quarters of losses that Orbit has seen and clearly the industry is in a downtrend. How many more quarters before which the company will report profits? A: One of the key reasons of this loss is that we are spending on an average about Rs 45-46 crore per quarter on interest cost. Take into account another Rs 120 crore annually for corporate overheads. This is one of the main reasons. The inventory churn has been the slowest in last about six years. Currently, we have just close to about 16 percent of inventory out of almost Rs 1,600 crore of inventories. Just about Rs 265 crore worth of inventory is under execution. Sales have been very low. Last quarter, we had seen close to about 5,000 sq ft of sell which was the lowest in almost decade old history of the company. This quarter, fortunately, we have reached to about 20,000 sq ft. This is also kind of a green shoot that we see of course the only caution is if the prices are kept a bit lower. The volumes will start building. We were expecting that this festive season could be the turnaround in terms of the sales. But for us to reach in the positive territory, we will have to have a target of close to about Rs 100-115 crore of revenue in a particular given quarter and on a most conservative basis, we would still take about 2-3 quarters to reach there. Q: What are you planning to do in terms of bringing down the interest cost? Which assets are you planning to sell and by when? A: We have divided the entire inventory in three parts. The first part is the 16 percent inventory execution. About 80 percent of the receivables will go towards retiring the debt. _PAGEBREAK_ Q: Are you selling that to retail? A: Yes. Second; there are three projects which again form another 35 percent of the inventory and are going to be the pipeline. We are launching them in a phased manner starting between next two quarters going up to about six quarters. Third; almost about 50 percent of the inventory is parked in that parcel where we have located about four projects. We will be taking them off the balance sheet by selling them. There are two ways that we are looking at selling this inventory. One is that selling it at knocked down price and getting that cash to reduce the debt. The other way is to enter into joint developments where we would not be substantially taking the money out but we will be at least ensuring that the projects roll on further. Q: Will any of this happen within this fiscal year itself? How much do you plan to bring down your debt from the Rs 1,000 crore levels? A: Out of the four projects, we are confident that at least two will be knocked down during these two quarters. One of this may not significantly be helpful to reduce the debt because we are just ensuring that the project moves on. We are hopeful on the other one and we would be in a position to raise at least Rs 100-200 crore. It would entirely go in repaying the debt.