Mumbai-based DB Realty faced several headwinds after its promoters were sent to jail in connection with their alleged role in the 2G telecom spectrum allocation case. N sridhar, group director (business strategy & finance) played a key role in managing the property and hospitality business of the company in the absence of the promoters. Raghavendra Kamath spoke to him about the state of DB Realty projects and the way ahead for the company, within days of Etisalat DB (the telecom joint venture of the group with UAE’s Etisalat) announcing closure. Edited excerpts:
What is the progress on the Bandra MIG project in Mumbai? When will you start that?
DB Realty plans to launch the MIG project in the current financial year. We are in the process of getting the necessary approvals and are fully equipped to execute the project.
When will you complete your projects such as Orchid Turf View, Orchid Crown and others in South Mumbai which have faced environmental issues and regulatory hurdles?
With the new regulatory changes (changes in development control rules), we are looking at optimising these projects as per the new norms and securing fresh approvals wherever required. Work continues at most of our projects based on the permissions that we have already obtained.
What about the ones such as Orchid Woods, Orchid Suburbia and Orchid Ozone in western suburbs of Mumbai?
The Mahul project—with 8.7 million sq ft —is on schedule for completion by end March 2012. Orchid Ozone, Dahisar —with 2.6 million sq ft —will be completed in a phased manner starting from June 2014, a year ahead of schedule. Orchid Woods, Goregaon (E) —1.2 million sq ft, is nearing completion and will be completed and delivered in this calendar year. All other DB Realty projects are on stream, the company remains committed to completion and delivery of its projects within stipulated time frames.
The BMC (Brihanmumbai Municipal Corporation) had issued a stop-work notice to your hotel project in Marine Lines and the government cancelled higher FSI (floor space index) in your Pune project. What is the status on that?
In our hotel project, there was a difference in interpretation by the government and by us on the levy of premiums. The matter is currently in court; so we cannot comment on it. But we expect a positive outcome. In Pimpri-Chinchwad New township Development Authority project, we have gone for an appeal in the High Court, we expect a favourable outcome and FSI to be granted, keeping the prevalent regulations in mind.
There is a buzz that you are selling your hotel properties and some projects in property business.
They are all baseless speculations. We are not selling any hotels or any properties. On a regular basis we keep evaluating non productive assets which do not generate cash flows and we will continue to optimise all cash generating assets. We are not planning to sell any specific asset either in hospitality or in real estate and have no specific asset on the block for sale.
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How many of such non-productive assets have you identified?
On a regular basis, we keep evaluating assets. If we find a good value proposition for disposing them, we may look at the same. As of now, we have not identified any assets to be sold.
What are the headwinds you are facing given the overall economic environment and your image?
Given the current slowdown and tightness in liquidity, it is a challenge to raise funds going forward. As far as DB Realty goes, we have very low gearing. We have gearing of 0.08 to our net worth, leaving us ample headroom to raise funds. As you are aware, most of our projects under execution are sold between 45-90 per cent and thus the collection from the same is adequate for fulfiling our project execution. Wherever there is a minor gap we raise debt for construction finance in specific projects.
How has the whole controversy regarding 2G scam impacted the brand and image of the company? What are you doing to negate that perception?
DB Realty is in the business of real estate development and has no direct or indirect share holding in Etisalat DB. The promoters of DB Realty in their individual capacity invested in Etisalat DB, a company engaged in telecom business. Both the entities are separate and have nothing to do with each other at all. Though the brand has taken a beating in the last one year, buyers, investors and other stake holders through constant communication know that DB Realty’s operations and financials are not impacted by the ongoing 2G proceedings.
How will the shutting down of Etisalat DB impact DB Realty?
Etisalat’s decision to shut down the operations of its Indian joint venture was taken independently by Etisalat UAE and this decision has no bearing or impact on the financials of DB Realty. This matter is for Etisalat DB to comment on as it is not related to DB Realty and there is no connection between the two entities whatsoever.
No suit or claim has been filed against DB Realty since it was never party to any agreements or otherwise. DB Realty was and remains an independent corporate entity managed by a professional team. DB Realty is in the business of real estate development and has no direct or indirect share holding in Etisalat DB. The promoters of DB Realty in their individual capacity invested in Etisalat DB, a company engaged in telecom business. Both the entities are separate and have nothing to do with each other at all.