Despite a decline in net profit in the third quarter, Puravankara Projects is expected to post good numbers in the coming quarters on the back of sound demand for its affordable housing projects and higher realisation from mid and premium housing projects. Jackbastian Nazareth, chief executive officer, chats with Debasis Mohapatra on the prospects. Edited excerpts:
What is your outlook for the industry in 2011?
It will do well, despite a challenging environment like a rising interest rate regime, along with possible speculation in the property market. As the South Indian real estate market is fundamentally different from western and northern markets, with more emphasis on end users, it will see sound growth in this calendar year. There will also be changes in the approach from the perspective of developers, as they will rely more on effective execution, with lesser dependency on large-size projects.
Will the interest rate regime be a dampener for growth during the first half of this year?
Whenever effective interest rates go up, real end users sit in the corner and defer their plans to buy homes till these become affordable. We have witnessed its impact on sales in December and this is expected to continue in the first quarter. However, those consumers, who deferred their plans to buy a home during the recession, will be interested to own a property. So, people may not go for their second homes, but first-time buyers will enter the market space.
Why did your third-quarter net profit decline? How do you see profitability in the coming quarters?
Net profit declined by 6.2 per cent due to higher provisioning for tax, owing to a land sale in the third quarter of last year. However, numbers will look better, as many of our projects will be completed in the near future. In revenue terms, we will realise around Rs 1,200 crore in the next six-eight months from selling of nine projects (of 13 ongoing projects).
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How much did Puravankara sell in the first nine months of this financial year? Will you revise your sales volume target for 2010-11?
We sold around 2.3 million sq ft.We set a target of selling three million sq ft in 2010-11 and we are hopeful of achieving this. As of now, we will stick to our previous guidance.
How did Provident (the affordable housing arm) perform in the third quarter? How many launches are you planning under this category?
Provident Housing has seen sound demand from end users. This affordable housing subsidiary contributed around 40 per cent of total revenue and 20 per cent of net profit in the third quarter. Going ahead, we expect strong numbers from this segment, as many people still don't believe in an apartment culture and Provident will cater to this segment. As far as new launch is concerned, we have revised our estimate to 10 million sq ft this financial year from six million sq ft earlier. The new projects will come in Bangalore, Mysore, Chennai and Coimbatore.
What is your current inventory level & when will it be absorbed?
Around 3.2 million sq ft and it will be absorbed in the next six to eight months.
Your debt level has risen in the third quarter and the debt-equity ratio has increased from 0.56 to 0.62 on a year-on-year basis. How is the debt component expected to pan out in the near future?
Our debt-equity ratio is at a comfortable zone as of now and is expected to stabilise at the present level by March 2011. All the debt raised is being utilised in completion of new projects that will be realised in the next six to eight months. The current debt servicing component is too small to put any pressure on the balance sheet.
Will average realisation per sq ft come under pressure after registering 9% growth on a consolidated basis?
I think, average realisation will see an upward trend in the coming quarters from the Rs 2,660 per sq ft registered in the third quarter. Similarly, operating margin will expand in the near future.
