Sobha Developers gets FIs’ nod to restructure debt

Sobha Developers gets FIs’ nod to restructure debt
The Hindu Business Line, April 10, 2009, Page 2

Anjana Chandramouly & K. Giriprakash, Bangalore

Real estate major Sobha Developers has received in-principle approval from most of the financial institutions for restructuring of its debt. Mr J.C. Sharma, Managing Director, Sobha Developers, said that the company is “through with most of the banks, mutual funds and institutional investors for restructuring of our debt.” “They have looked into our revised cash flows and accordingly agreed to give us time,” he added.

Mr S. Baaskaran, Chief Financial Officer, said that the company now has extended the payment date by 12-18 months, for debts that were scheduled to be paid in the next 12-24 months.

“The ones that were scheduled to be paid after two years have not been restructured,” he clarified. The average interest rate is about 13 per cent, he said.

The company, which is in the process of restructuring its Rs 1,900-crore debt, plans to raise about Rs 900 crore through preferential equity, SPV-level equity and also through sale of a part of its 3,000-acre land bank. “We are looking at various options before us, and things are progressing well,” said Mr Sharma.

Mr Baaskaran said that the company hoped to raise about Rs 300 crore through preferential allotment, about Rs 300 crore through SPV-level funding, and the rest through sale of land. Through these measures, the company hopes to bring down the current leverage of 1.65 to less than 1 by March 2010.

He said that the company is also “planning two SPVs currently for our large integrated township projects at Pune and Kochi”. The Rs 1,000-crore project at Pune would see a development of 5.5 million sq ft spread over 110 acres, while the one at Kochi would see 38 million sq ft development spread over 450 acres at Rs 5,000 crore.

The company also expects to have “very comfortable cash flows for 2009-10”, thanks to its efforts to prune unnecessary costs and manpower, said Mr Baaskaran. While the company has adopted 10 per cent cut in salaries, there are also plans to downsize staff, if the situation warrants. “Things will improve from the third quarter of the next financial year. Prices won’t go up, but we will see better volumes; and with better volumes, the cash flow would be better,” he said.

The company’s contractual business is paying off well now, with 40 per cent of its revenues coming from this vertical.

“We plan to do business worth Rs 350 crore from this vertical in 2009-10, which would be 25 per cent higher than 2008-09,” he said.