Sobha Developers' full year net down 52%

Sobha Developers' full year net down 52%
The Hindu Business Line, May 20, 2009, Page 3

Bangalore: With a slowdown that has practically brought the real estate market to a standstill, Sobha Developers recorded a 32 per cent dip in revenues for the financial year 2008-09 at Rs 967.9 crore compared with Rs 1,422.6 crore for the previous year.

Its net profit decreased 52 per cent for the year at Rs 109.7 crore (Rs 228.3 crore). Its contractual business, which has been contributing significantly to its revenues, stood at Rs 397 crore (Rs 583 crore).

J.C. Sharma, Managing Director, Sobha Developers, said the economic downturn has had a major impact on the company in terms of reduction in sales and profits.

"While we have been able to successfully negotiate with most of our lenders for rescheduling the debt repayments in the near term, we also plan to raise long-term capital during the fiscal so as to augment the capital base and reduce the debt levels," he said.

Raising funds

S. Baaskaran, Chief Financial Officer, said the company plans to raise "anywhere between Rs 325 crore and Rs 400 crore" through qualified institutional placement depending on the valuation.

Besides, it also plans to raise about Rs 200 crore through investment via a special purpose vehicle.

Land sale

Sharma said the company is "discussing with various investors for the development of specific projects. We are also in the process of disposing of certain land in which projects cannot be launched in the near future."

According to Baaskaran, the company plans to raise about Rs 200 crore through the sale of land.

Sharma said the company is confident that these efforts will lead to a significant improvement in cash flows and the debt-equity ratio will come down before the end of this financial year.

The company has also realigned its sales and marketing focus to meet the emerging opportunities, both at the strategic as well as tactical levels.

"To do this, we have initiated several proactive measures to target this audience and invigorate sales through adopting 'innovative practices' in marketing, varying product mix, designing customised offerings for institutional sales, enhancing both the width and depth of customer reach," said Sharma.

Though these are challenging times, "there is no fear that the market might collapse. The worst is over. Market is thriving, and we are trying to tap that market now", he said.

In order to make cash flows comfortable for the next year, the company is also pruning unnecessary costs and manpower.

The company has implemented a 10 per cent cut in salaries and would downsize staff, if the situation warrants.