Housing Development and Infrastructure Ltd (HDIL), the Mumbai-based realty player, has indicated it would clock 0.7-1 million sq ft of transfer of development right (TDR) sales for 2011-12, a drop of 20 per cent compared to last year. TDR sales are the biggest contributor to HDIL's balance sheet and cash in hand.
In 2009-10, it generated a total revenue of Rs 1,492 crore and Rs 1,397 crore came from its TDR business, about 94 per cent of total revenue. In 2010-11, the TDR sales contribution was Rs 1,242.5 crore, a mere 69 per cent of revenue.
Hari Prakash Pandey, vice president, finance, said during a conference call on the expectation for this year: “The future will mainly depend on the whole approval process.”
Pandey expects the realisations to be better than the last quarter. With the ongoing slowdown in the realty market, it managed to sell only 0.9 m sq ft of TDR at Rs 2,500 per sq ft for the fourth quarter of 2010-11, a drop of 32 per cent as compared to the third quarter.
An analyst from a domestic brokerage, on condition of anonymity, says, “They have a leftover TDR of 0.5 m sq ft and though the company has already included the TDR which would be generated from Phase III of the Mumbai International Airport Ltd in its land bank asset, the fact is, they haven't yet received approval for Phase III. So, in all, they can expect around two m sq ft for the year, lesser than the company's expectation.”
Also, lesser TDR sales will lead to more outgo on taxes, as TDR attracts Minimum Alternate Tax rates.
HDIL had also sold Floor Space Index (FSI) worth Rs 1,300 crore and received Rs 500 crore. It expects to cuts debt through the FSI sales and new project launches. Last quarter, it did not launch any project and sales have been sluggish, as HDIL managed to sell only 30 per cent in the launch this April.
Another analyst adds, “The airport project is in limbo, so selling off prime land areas in Andheri and Goregaon to its peers was not a right decision and the project line up for FY12 would not be sufficient to cut debt by 20-25 per cent. Also, there is conversion of 26 million promoter warrants, which was issued at Rs 272 per share. The present value of HDIL's share is Rs 166.95 per share.”
The realtor has a long-term debt burden of Rs 4,195 crore and cash reserves of Rs 226 crore. It has to repay around Rs 500 crore by FY12. The company paid Rs 600 crore to its subsidiaries for acquisition of land and other payments. The present average cost of debt is 14 per cent.
