Wednesday, May 27, 2009
State-run banks to cut rates by 100-150 bps
State-run banks to cut rates by 100-150 bps
The Economic Times, May 27, 2009, Page 1
Anand Rawani & Anto Antony, ET Bureau
NEW DELHI: Government-owned banks plan to cut lending rates by 100-150 basis points — one basis point is one hundredth of a percentage point — within the next fortnight, after a finance ministry directive to lower interest rates in line with falling cost of funds. The rate cut is expected before June 12, when the finance minister is scheduled to meet the chiefs of public sector banks.
Punjab National Bank (PNB), which already has the lowest lending rates in the country, will not cut rates but will provide the benchmark for other public sector banks.
Officials at State Bank of India (SBI), Bank of Maharashtra, Uco Bank, Corporation Bank and Bank of Rajasthan confirmed the development. Corporation Bank chairman JM Garg said as the cost of funds is falling, lending rates will be cut accordingly. “...the trends in interest rates have been moving downward. We have to cut the interest rates further,” said Mr Garg.
And banks like Uco might go for a sharp rate cut, which could be in the range of 100-150 basis points. According to Uco Bank chairman and managing director SK Goel, the prime lending rate (against which rates to individual borrowers are benchmarked, depending on their creditworthiness in relation to those who qualify for prime rates) will be cut to 8% from 12% over the next six months, if conditions remain favourable. “We have been cutting interest rates and expect further cuts in the coming weeks,” Mr Goel told ET.
SBI — the country’s largest lender — is also expected to bring down its PLR, currently at 12.25%, in the next couple of weeks. But according to SBI officials, the quantum of reduction could be anywhere between 25-75 basis points, as the fall in the cost of funds is not high for the bank. SBI has cut its deposit rates across all maturities by 50 basis points with effect from May 18 to bring down the cost of funds.
Finance minister Pranab Mukherjee will be meeting chiefs of PSBs in the second week of June to ensure that the cut in policy rates is transmitted and credit flow remains robust. The additional secretary in the finance ministry in charge of banking is expected to conduct video conferences on a weekly basis with PSBs to monitor lending rates and credit growth.
Finance ministry officials said they are not putting any undue pressure on banks to bring down interest rates and have only asked them to transmit the fall in the cost of funds, if they have headroom.
"The credit flow from the public sector banks is strong and they are also trying to bring down the lending rates. Many banks like Punjab National Bank have already made sincere attempts to bring down the lending rates and others have informed us that they will look at cutting lending rates by another 100-150 bps.
Fresh loan offtake from September till April-end is almost 50% above the loan offtake for the corresponding period last year. When the finance minister meets the chiefs of public sector banks towards the end of the second week of June, bringing down rates will be on top of the agenda," a finance ministry official told ET.
The lending rates of most of the public sector banks will fall, over the next couple of weeks, to align with the rates of PNB, which has the lowest lending rates in the country. The bank currently has a PLR of 11% which is 100-150 basis points lower than its peers.
PNB chairman and managing director KC Chakrabarty told ET: "We were most aggressive on bringing down lending rates and is currently offering one of the lowest rates in the country. There is no room for us to cut rates below the current levels before June 12."
Strong liquidity should spur banks to cut lending rates: Rakesh Mohan
Strong liquidity should spur banks to cut lending rates: Rakesh Mohan
The Hindu Business Line, May 27, 2009, Page 6
Our Bureau, Mumbai
Continued robust profitability and strong liquidity should encourage banks to cut lending rates, according to Dr Rakesh Mohan, Deputy Governor, the Reserve Bank of India.
Pointing out that banks’ would need to focus on lending to agriculture, MSMEs, and other priority sector areas, the Deputy Governor said that once the corporate bond market develops further, large corporates will disintermediate from the banking system.
Underscoring the strength of the Indian banking system, Dr Mohan, who was speaking at the 62nd annual general meeting of the Indian Banks’ Association said, “There is no problem in the Indian banks. The Indian banking system has negligible exposure to toxic assets or the sub-prime crisis. There has been no relaxation in lending norms…. Banks’ risk-adjusted capital adequacy ratio is above normal. NPAs are low. Despite the adverse macro-economic environment, banks have posted robust profits. Liquidity is strong. Therefore, banks will be in a position to cut lending rates.”
Stress tests conducted recently by the RBI on the banking system shows that even if NPAs were to increase by 100 to 200 per cent, overall, banks’ capital adequacy ratio would be ‘reasonable’.
The Deputy Governor underscored the fact that the fisc is under stress on account of a host of factors – subsidies on oil, fertiliser and food; pay commission payouts, debt waiver, stimulus packages, large increase in market borrowing. The combined (Centre and States) fiscal deficit, according to Dr Mohan, is very high by international standards.
Due to the large borrowing needs of the Government (for FY 2009-10, the net budget borrowing estimate is Rs 3,08,647 crore), Dr Mohan said. He holds the view that the RBI should continue to manage the debt management function so that the Government borrowing is managed smoothly.
When advanced economies loosened their monetary policy, the emerging markets, including India received copious forex inflows. But once the reversal happened, it had a huge impact on equity markets because foreign inflows are a relatively higher proportion of floating stock. But as domestic investment was met by domestic savings this did not have much of an impact.
In 2009, it is estimated that there will be a reverse flow of capital to the tune of $200 billion from the emerging markets to the advanced economies.
As the sources of funds for corporates from overseas borrowing and equity reduced, there was high pressure on banks and this resulted in credit crunch. FDI, however, was not impacted as much as expected.
Dr Mohan felt that there was a need for financial development and deepening. Credit to the SME sector was not up to the mark. “Banks have to be active in doing proper risk assessment. There is huge amount of non-farm rural activity that is taking place which has no access to bank credit.”
FM seeks balance between growth and fiscal deficit
FM seeks balance between growth and fiscal deficit
Business Standard, May 27, 2009, Page 1
Saubhadro Chatterji / New Delhi
Finance Minister Pranab Mukherjee said here today that he would like to strike a balance between the imperatives for achieving higher growth and ensuring prudent fiscal management.
“We require growth and for that we require money. If all government resources are not adequate, you have to borrow. Naturally, the fiscal deficit would increase. Therefore, we have to strike a balance between these two competing requirements — of growth and prudent fiscal management. And it will be my effort to strike this balance,” Mukherjee said in an exclusive interview with Business Standard.
Dwelling on a wide range of economic policy issues, just about six weeks before he presents the regular Budget for 2009-10, Mukherjee said he was yet to complete the analysis of the impact of the series of fiscal stimulus packages that were announced in December 2008, January 2009 and finally in his Interim Budget a month later. A considered view on the need for fresh fiscal stimulii will be taken only after assessing the impact of those measures on the economy.
Mukherjee added that all steps needed to restore the Indian economy to a higher growth trajectory would be taken. He admitted that global developments had slowed the Indian economy and their adverse impact was still visible, with the likelihood of the last financial year clocking a growth rate of 6.5 to 7 per cent, against an average annual growth rate of 8.9 per cent in the previous four years.
The finance minister, who will present his fourth regular budget in his long political career (he had presented three budgets from 1982-83 to 1984-85 as finance minister in the Indira Gandhi government), declined to answer any budget-related questions, but offered a laconic reply, "All I will say is wait", when asked if he would like to move ahead with reforms in insurance, banking and pensions.
Mukherjee admitted that the role of the public sector was important and the inherent strength of the state-owned banks and insurance companies had helped the Indian economy weather the adverse impact of the global financial sector turmoil. Endorsing the public-private partnership model for developing infrastructure projects, he said this was the "most important mechanism" to achieve targets in the infrastructure sector. On the question of the government's policy on special economic zones, which enjoy several tax concessions, Mukherjee said those schemes had brought substantial benefits specially for exports but a few areas in these schemes could be rectified.
Asked if he was in favour of extending the national rural employment guarantee scheme (NREGS) to cover the urban poor, Mukherjee said there was no doubt that this scheme had helped create jobs for poor people in villages. He was open to examining ways to modify such schemes to ensure that the poor unemployed people in urban areas also got some benefit.
Mukherjee gave a clear hint that his budget would also address the needs of the aam aadmi by expanding employment generation schemes and social security nets.
Asked what he meant by quoting Nobel laureate Amartya Sen in his interim budget speech on the need for growth with equity and a commitment towards security in a downturn, Mukherjee said, "All this will be spelt out in my budget."
Business Standard, May 27, 2009, Page 1
Saubhadro Chatterji / New Delhi
Finance Minister Pranab Mukherjee said here today that he would like to strike a balance between the imperatives for achieving higher growth and ensuring prudent fiscal management.
“We require growth and for that we require money. If all government resources are not adequate, you have to borrow. Naturally, the fiscal deficit would increase. Therefore, we have to strike a balance between these two competing requirements — of growth and prudent fiscal management. And it will be my effort to strike this balance,” Mukherjee said in an exclusive interview with Business Standard.
Dwelling on a wide range of economic policy issues, just about six weeks before he presents the regular Budget for 2009-10, Mukherjee said he was yet to complete the analysis of the impact of the series of fiscal stimulus packages that were announced in December 2008, January 2009 and finally in his Interim Budget a month later. A considered view on the need for fresh fiscal stimulii will be taken only after assessing the impact of those measures on the economy.
Mukherjee added that all steps needed to restore the Indian economy to a higher growth trajectory would be taken. He admitted that global developments had slowed the Indian economy and their adverse impact was still visible, with the likelihood of the last financial year clocking a growth rate of 6.5 to 7 per cent, against an average annual growth rate of 8.9 per cent in the previous four years.
The finance minister, who will present his fourth regular budget in his long political career (he had presented three budgets from 1982-83 to 1984-85 as finance minister in the Indira Gandhi government), declined to answer any budget-related questions, but offered a laconic reply, "All I will say is wait", when asked if he would like to move ahead with reforms in insurance, banking and pensions.
Mukherjee admitted that the role of the public sector was important and the inherent strength of the state-owned banks and insurance companies had helped the Indian economy weather the adverse impact of the global financial sector turmoil. Endorsing the public-private partnership model for developing infrastructure projects, he said this was the "most important mechanism" to achieve targets in the infrastructure sector. On the question of the government's policy on special economic zones, which enjoy several tax concessions, Mukherjee said those schemes had brought substantial benefits specially for exports but a few areas in these schemes could be rectified.
Asked if he was in favour of extending the national rural employment guarantee scheme (NREGS) to cover the urban poor, Mukherjee said there was no doubt that this scheme had helped create jobs for poor people in villages. He was open to examining ways to modify such schemes to ensure that the poor unemployed people in urban areas also got some benefit.
Mukherjee gave a clear hint that his budget would also address the needs of the aam aadmi by expanding employment generation schemes and social security nets.
Asked what he meant by quoting Nobel laureate Amartya Sen in his interim budget speech on the need for growth with equity and a commitment towards security in a downturn, Mukherjee said, "All this will be spelt out in my budget."
Growth, fiscal prudence my priorities: Pranab
Growth, fiscal prudence my priorities: Pranab
The Hindu Business Line, May 27, 2009, Page 15
Our Bureau, New Delhi
The upcoming full-fledged Budget of the new UPA Government will focus on promoting economic growth even while taking steps to return to fiscal prudence, the Union Finance Minister, Mr Pranab Mukherjee, indicated here on Tuesday. “I have both priorities — growth as well as fiscal prudence,” he told a TV channel in an interview. Highlighting that the current need was a stimulus to growth, the Finance Minister at the same time maintained that the Government cannot indulge in fiscal profligacy.
Noting that the stimulus packages rolled out by the earlier UPA Government had started to take effect, he stressed the need for faster pace of investment in infrastructure to boost growth. “I do believe that massive investments in infrastructure will bring us back to the growth path,” he added. Asked if the forthcoming Budget would provide fresh fiscal stimulus to arrest the slowdown in the economy, he said, “You will have to wait till the Budget is presented.”
He also declined to comment on issues such as auction of 3G spectrum and disinvestment. A separate ministry for disinvestment is not under consideration, the Minister noted. The country’s GDP growth for 2008-09 may be slightly lower than 7 per cent. “Growth will be close to Central Statistical Organisation’s projection,” he said.
For 2008-09, the CSO advance estimate had pegged growth at 7.1 per cent.
Housing projects are back with a vengeance
Housing projects are back with a vengeance
Business Standard, May 27, 2009, Page 1
Raghavendra Kamath / Mumbai
DLF, Unitech, HDIL & Puravankara line up 60 million square feet of new launches.
Top real estate developers are trying their best to make up for lost time. Buoyed by encouraging response from home-buyers for their marked-down properties, companies such as DLF, Unitech, HDIL and others have lined up housing projects of over 60 million square feet — all in the current financial year.
This is more than double the sales bookings in the past financial year.
Presentations by these companies to analysts show that Unitech is leading with 27 million square feet of new launches. DLF’s tally is 15 million square feet, roughly the same as last year’s. Puravankara and HDIL follow with 6 to 9 million and 8 million square feet respectively.
Mid-income housing is the flavour of the year and accounts for around 90 per cent of the projects. After a prolonged lull in the property market in 2008, which saw sales declining 70 per cent from their peak, the big developers moved into the mid-income segment and cut prices 20 to 30 per cent to generate liquidity.
With their apartments selling quicker than expected, liquidity constraints easing with debt roll-overs, the stock market rally and improved bank credit, realtors are now planning more such launches.
“We have sold 2,500 units in three to four projects in the last one-and-a-half months. The company has decided to go aggressive with new launches because we are quite confident of selling quickly,” said a spokesperson of Unitech, the country’s second largest developer.
DLF will launch 8 to 9 million sq ft of city-centre projects in Chennai, Kochi, Delhi and Gurgaon and around 5 to 8 million sq ft of mid-income housing projects in the National Capital Region (Delhi’s suburbs) and southern cities, DLF Vice-Chairman Rajiv Singh told analysts recently.
“We have met with good response for our projects wherever we have launched. If the product is good and price is right, it will sell irrespective of market conditions,” said Rajeev Talwar, group executive director , DLF.
The company sold 1,356 apartments at its Shivaji Marg (better known as Najafgarh Road) project within a day in early April as the price was nearly 25 per cent lower than the existing market price.
Aditi Vijayakar, executive director-residential, Cushman & Wakefield, said most developers were making good sales as they have cut prices. “The new projects are certainly attractive for home buyers,” he said.
Unitech added the cut in prices was inevitable since it’s clearly a buyers’ market. So a lot of marketing and sales efforts went into selling space. The efforts, he said, were worth its because the company was selling more flats now that what it sold even during the peak of 2007.
Unitech has cut its home prices by roughly 25 per cent and reduced ticket sizes. Currently, the average size of apartment is 700 to 800 sq ft against 1,500 sq ft a couple of years ago.
Analysts, however, said developers had taken huge hits on their margins. Mid-income apartments have a margin of 25 to 30 per cent versus 50 to 70 per cent in premium housing. For instance, DLF’s EBITDA (earnings before interest, tax, depreciation and amortisation) margins have been falling continuously.
“The days of 70 per cent margins are over. They have to be happy with 20 to 25 per cent margins now since liquidity is the bigger issue than profits today,” said an analyst from a Mumbai-based brokerage.
Apart from sales in the mid-income housing category, several other factors have also given developers confidence to move ahead, the primary being relief from immediate debt payments.
All the top developers have rolled over their short term liabilities by 12 to 18 months after the Reserve Bank of India (RBI) allowed commercial banks to restructure their debt.
Unitech has cut debt by Rs 2,000 crore and DLF, the country’s biggest developer, has repaid Rs 1,700 crore of loans in the past year. Between them the top three realtors — DLF, Unitech and HDIL — have restructured as much as Rs 4,100 crore worth of loans with commercial banks and mutual funds.
Developers have also benefited from the recent surge in the stock market, which has given many of them the opportunity to tap institutional investors to reduce debt and investing in new projects. After Unitech raised Rs 1,625 crore from a qualified institutional placement (QIP) in April, DLF’s promoters sold 9.9 per cent in the company for Rs 3,860 crore and Indiabulls Real Estate raised Rs 2,656 crore through a QIP. Now, smaller realtors such as Sobha, Puravankara and Parsvnath have lined up QIPs to raise money.
QIPs become chosen option
QIPs become chosen option
The Hindu Business Line, May 27, 2009, Page 10
Our Bureau, Mumbai
PTC India’s issue subscribed within 4 hours.
Qualified institutional placements (QIPs) are becoming popular means to raise funds for public listed companies.
Successful QIPs by some fund-starved real estate companies that took the lead have encouraged others like PTC India to tap this route. Unitech Ltd, DLF and Indiabulls Real Estate have raised more than Rs 8,000 crore through QIPs since mid April 2008.QIP guidelines were issued in May 2006 and the first QIP placement happened in September 2006. Since then 49 QIPs have hit the market (until December 2008), most of them in 2006 and 2007. Only four companies raised money through QIPs in 2008, according to a January 2009 report by SMC Capitals.
PTC India (earlier known as Power Trading Corporation) has successfully raised Rs 500 crore ($105 million) through a QIP offering at Rs 75 a share. It has been the only non-real estate company that did a QIP this year.
“The entire issue was fully subscribed within four hours of opening of the books on May 25, and was finally subscribed 2.4 times,” Kotak Mahindra Capital Company, the book running lead managers to the issue, said.
“The deal witnessed overwhelming response from both domestic and foreign investors with select mutual funds and long FIIs acting as cornerstone investors.”
The PTC board approved an offer of 6.66 crore shares at Rs 75 a piece aggregating to Rs 500 crore to qualified institutional buyers (QIBs).
PTC stock closed 4 per cent lower at Rs 86.20 on Tuesday.
This issue represents 22.67 per cent of PTC’s post issue share capital.
Unitech Ltd was the first listed company to raise funds through QIP this calendar year. It raised Rs 1,621 crore ($325 million) through a QIP in April. Earlier this month DLF raised Rs 3,860 crore by placing 9.9 per cent of the promoters’ stake before QIBs. Last week India Bulls Real Estate raised Rs 2,656 crore through the QIP route.
Some QIPS are in the pipeline too. Parsvnath has announced plans to raise Rs 2,500 crore and HDIL $600 million (over Rs 2,800 crore) through QIPs.
“QIPs have become popular of late as a convenient way of raising money for the listed companies compared to some other routes like rights issue where the process is much more time consuming and complicated,” an expert familiar with the subject said.
The Hindu Business Line, May 27, 2009, Page 10
Our Bureau, Mumbai
PTC India’s issue subscribed within 4 hours.
Qualified institutional placements (QIPs) are becoming popular means to raise funds for public listed companies.
Successful QIPs by some fund-starved real estate companies that took the lead have encouraged others like PTC India to tap this route. Unitech Ltd, DLF and Indiabulls Real Estate have raised more than Rs 8,000 crore through QIPs since mid April 2008.QIP guidelines were issued in May 2006 and the first QIP placement happened in September 2006. Since then 49 QIPs have hit the market (until December 2008), most of them in 2006 and 2007. Only four companies raised money through QIPs in 2008, according to a January 2009 report by SMC Capitals.
PTC India (earlier known as Power Trading Corporation) has successfully raised Rs 500 crore ($105 million) through a QIP offering at Rs 75 a share. It has been the only non-real estate company that did a QIP this year.
“The entire issue was fully subscribed within four hours of opening of the books on May 25, and was finally subscribed 2.4 times,” Kotak Mahindra Capital Company, the book running lead managers to the issue, said.
“The deal witnessed overwhelming response from both domestic and foreign investors with select mutual funds and long FIIs acting as cornerstone investors.”
The PTC board approved an offer of 6.66 crore shares at Rs 75 a piece aggregating to Rs 500 crore to qualified institutional buyers (QIBs).
PTC stock closed 4 per cent lower at Rs 86.20 on Tuesday.
This issue represents 22.67 per cent of PTC’s post issue share capital.
Unitech Ltd was the first listed company to raise funds through QIP this calendar year. It raised Rs 1,621 crore ($325 million) through a QIP in April. Earlier this month DLF raised Rs 3,860 crore by placing 9.9 per cent of the promoters’ stake before QIBs. Last week India Bulls Real Estate raised Rs 2,656 crore through the QIP route.
Some QIPS are in the pipeline too. Parsvnath has announced plans to raise Rs 2,500 crore and HDIL $600 million (over Rs 2,800 crore) through QIPs.
“QIPs have become popular of late as a convenient way of raising money for the listed companies compared to some other routes like rights issue where the process is much more time consuming and complicated,” an expert familiar with the subject said.
MF interest building in real estate companies
MF interest building in real estate companies
The Hindu Business Line, May 27, 2009, Page 10
Positive sentiment after realtors raised funds: Analysts.
Sharvari Patwa, Mumbai
There are signs of renewed mutual funds interest in real estate companies.
Mutual funds’ exposure to this sector tripled in April, though it still constitutes a small proportion of their total equity investments.
The funds’ investments in real estate companies stood at Rs 308 crore at the end of April against Rs 98 crore in March, said a research report by broking firm Bonanza Portfolio.
The absolute numbers are small, but point to a trend as the exposure in the earlier months of the year was minimal, said fund managers.
The BSE realty index rose 37 per cent in April compared with 10 per cent in March.
The fund-raising plans of debt-ridden real estate companies have brought in a wave of positive sentiments for these stocks, said analysts. Investor appetite has been stirred after the Qualified Institutional Placements (QIP) by companies such as Unitech and DLF, as they signal that the real estate companies have enough liquidity to sustain themselves in the downturn, Mr Sameer Narayan, Head of Equities, Fortis Mutual Fund, said.
“With the recent fund-raising by Unitech through a QIP and with Indiabulls Real Estate proposing another and similar plans by several developers, we believe the risk appetite for this sector may be returning,” said a research report from Enam Securities.
Unitech Ltd, the country’s second-biggest real estate developer, has raised over Rs 1,600 crore from selling new shares to QIPs to repay a part of its debt of over Rs 8,900 crore.
Earlier, realty stocks had distressed valuations. But now with the debt overhang decreasing, the stocks are starting to look attractive, said Mr Ajay Argal, Equity Co-head, Birla Sun Life Mutual Fund.
Though the situation has not improved dramatically for the real estate companies, there is some stability in the sector, he added.
In April, many real estate companies brought down prices and there was visible increase in demand, which has led to an optimistic outlook for the sector, said Mr Sanjay Sinha, Chief Executive Officer, DBS Cholamandalam Mutual Fund.
According to fund managers, the increase in exposure to real estate stocks is not across the board but selective.
According to a research report by Sharekhan, top additions to the holdings of the portfolio of equity (mutual) funds include Unitech Ltd, IRB Infrastructure Developers and Indiabulls Real Estate.
Some analysts said the easing of liquidity crunch in these companies does not justify the steep price increase of these stocks.
Share prices of DLF, Unitech Ltd, Parsvnath Developers, IndiaBulls Real Estate have gone up by 26 per cent to 38 per cent in April. These stocks are catching investor fancy in the current market upturn as they are high beta stocks, which gain more than the Sensex in a rally, said Mr Shailesh Kanani, an analyst with Angel Broking.
In April, the Sensex rose by 17 per cent but the BSE-Realty Index gained 30 per cent.
Even as mutual fund houses increase their exposure to real estate stocks, their long-term call is one of guardedness “ as a lot of these companies are showing a keenness to issue debt paper, one will have to review them again in that case”, said a fund manager.
HDIL: Signs of revival in volume
HDIL: Signs of revival in volume
The Hindu Business Line, May 27, 2009, Page 10
Deep discounts help sales.
Vidya Bala
BL Research Bureau HDIL’s results for the quarter ended March 2009 belies the sharp re-rating enjoyed by the stock from Rs 140 to Rs 280 between January and now.
A 64 per cent decline in sales and 91 per cent decline in net profits in the fourth quarter of FY-09, compared to March 2008, does not come as a surprise, given the real estate slowdown and more specifically the decline in price of transferable developments rights (TDRs) compared with a year ago.
Debt restructuring, a pick up in sales volumes and plans to seek funds through qualified institutional placement – the new mantras (suggestive of a revival) that have buttressed the recent rally in realty stocks – are a feature of HDIL’s results as well.
Relief from high raw material costs did not provide much support to HDIL’s operating profit margins as a result of a steep drop in turnover. OPMs declined to 27 per cent, a 3 percentage point slide even with respect to the December quarter. Net profit margins too suffered what with interest costs rising manifold.
Improving sequentially
A comparison of the recent quarter numbers with that of the December quarter, however, offers a hint of revival. Sales was up by 14 per cent on a sequential basis though operating and net profits declined, suggesting that volumes could be reviving but perhaps only due to steep price discounts offered.
In the March quarter, the company launched residential projects in Kurla and Andheri at discounts of 20-30 per cent on the prevailing market prices. However, the recent units sold would not reflect in its revenues in the near future.
HDIL’s Mumbai airport slum rehabilitation project is also running on schedule. This could be crucial to its growth as slum rehabilitation continues to be HDIL’s primary business.
A more positive aspect of sales could be TDRs. The management has stated that it has seen a revival in TDR volumes even as prices appear to be at the same levels as the December quarter.
TDRs are allocated parcels of land received from the Government in return for Slum Rehabilitation Schemes (SRS) undertaken. These also typically carry higher Floor Space Index of up to 3 times, thereby improving volumes for the builder.
Of the ongoing projects of 64 million sq.ft, 80 per cent of the developable area fall under SRS/TDRs. TDRs can be used for development or can be sold by the company. Hence, a revival in TDR volumes may be crucial to quickly improve the company’s cash flow position.
HDIL suffered negative operating cash flows at the end of March quarter.
QIP
HDIL’s current debt stands at over Rs 4,000 crore. The qualified institutional placement of about Rs 2,800 crore, which was recently approved, can help reduce debt by 50 per cent. However, this placement combined with preferential allotment planned to be issued to promoters could result in capital expanding by a good 40-45 per cent if issues are priced at current market prices. Slow revival in revenues and expanded capital could mean earnings dilution in the near term.
Unitech sells hotel for Rs 200 crore
Unitech sells hotel for Rs 200 crore
Business Standard, May 27, 2009, Page 4
BS Reporter / New Delhi
Third sale in two months, more to follow.
Unitech Ltd, the country’s second-largest real estate developer, has sold its under-construction hotel on National Highway-8, Gurgaon, for Rs 200 crore to an individual, according to a company executive.
“We have signed a memorandum of understanding with the buyer and will receive the payment in two-three weeks,” he said.
“The hotel property will have 190 rooms and would be completed by the end of this year,” he added.
The company is also in an advanced stage of selling a service apartment property in Gurgaon for Rs 200 crore. “ We will close the deal for our service apartments in the coming weeks,” the executive added.
Unitech is selling its non-core business assets, including hotels and office space, to generate cash for debt repayment.
This is the third such sale by the Sanjay Chandra-managed company in two months. Unitech raised Rs 231 crore in April from the sale of its 199-room Marriott Courtyard hotel in Gurgaon, while its office space in Saket was recently sold for Rs 500 crore to another individual.
Unitech has about Rs 7,800 crore of debt on its books and plans to cut this by at least Rs 1,000 crore by the end of this fiscal. Most of the repayment is expected to come from additional capital infusion into the company by promoters and by asset sales.
The company aims to raise Rs 1,600 crore in the fiscal, ending March 31, from the sale of non-core assets, including the Saket office complex and four additional hotel properties located in Noida, Kolkata and Gurgaon. The developer had earlier indicated plans to raise at least Rs 900 crore by June from such asset sales.
Unitech’s promoters raised Rs 1,625 crore in April from the sale of shares to qualified institutional investors. The company’s board has also approved a plan to allow the promoters to infuse an additional Rs 1,000 crore through issue of warrants that are convertible into shares at a later date.
Business Standard, May 27, 2009, Page 4
BS Reporter / New Delhi
Third sale in two months, more to follow.
Unitech Ltd, the country’s second-largest real estate developer, has sold its under-construction hotel on National Highway-8, Gurgaon, for Rs 200 crore to an individual, according to a company executive.
“We have signed a memorandum of understanding with the buyer and will receive the payment in two-three weeks,” he said.
“The hotel property will have 190 rooms and would be completed by the end of this year,” he added.
The company is also in an advanced stage of selling a service apartment property in Gurgaon for Rs 200 crore. “ We will close the deal for our service apartments in the coming weeks,” the executive added.
Unitech is selling its non-core business assets, including hotels and office space, to generate cash for debt repayment.
This is the third such sale by the Sanjay Chandra-managed company in two months. Unitech raised Rs 231 crore in April from the sale of its 199-room Marriott Courtyard hotel in Gurgaon, while its office space in Saket was recently sold for Rs 500 crore to another individual.
Unitech has about Rs 7,800 crore of debt on its books and plans to cut this by at least Rs 1,000 crore by the end of this fiscal. Most of the repayment is expected to come from additional capital infusion into the company by promoters and by asset sales.
The company aims to raise Rs 1,600 crore in the fiscal, ending March 31, from the sale of non-core assets, including the Saket office complex and four additional hotel properties located in Noida, Kolkata and Gurgaon. The developer had earlier indicated plans to raise at least Rs 900 crore by June from such asset sales.
Unitech’s promoters raised Rs 1,625 crore in April from the sale of shares to qualified institutional investors. The company’s board has also approved a plan to allow the promoters to infuse an additional Rs 1,000 crore through issue of warrants that are convertible into shares at a later date.
Sobha ties up for PE funding
Sobha ties up for PE funding
The Hindu Business Line, May 27, 2009, Page 2
Bangalore
Sobha Developers has entered into an agreement with a private investor for joint development of projects. Mr J.C. Sharma, Managing Director, said that the company has entered into a term sheet with a private equity investor, Purna Partners, for an investment of Rs 225 crore “at the special purpose vehicle (SPV) level for development of certain projects in Bangalore and other cities.” The company received Rs 25 crore on Tuesday. Both the partners have to “mutually agree on the percentage of stake that the private investor would hold in these developments,” said Mr Sharma. “We are not averse to giving more than 51 per cent stake in these projects also,” he added. Each of these projects would be valued separately, said the company in its announcement. Sobha Developers has identified the land parcels for these projects, which could be residential, commercial or mix development, “but the number of projects will be decided by the investor,” he said. The company will use land parcels from its land bank, execute and market these projects too, he said. —
Our Bureau
The Hindu Business Line, May 27, 2009, Page 2
Bangalore
Sobha Developers has entered into an agreement with a private investor for joint development of projects. Mr J.C. Sharma, Managing Director, said that the company has entered into a term sheet with a private equity investor, Purna Partners, for an investment of Rs 225 crore “at the special purpose vehicle (SPV) level for development of certain projects in Bangalore and other cities.” The company received Rs 25 crore on Tuesday. Both the partners have to “mutually agree on the percentage of stake that the private investor would hold in these developments,” said Mr Sharma. “We are not averse to giving more than 51 per cent stake in these projects also,” he added. Each of these projects would be valued separately, said the company in its announcement. Sobha Developers has identified the land parcels for these projects, which could be residential, commercial or mix development, “but the number of projects will be decided by the investor,” he said. The company will use land parcels from its land bank, execute and market these projects too, he said. —
Our Bureau
Indian HNIs bitten by overseas realty bug
Indian HNIs bitten by overseas realty bug
The Economic Times, May 27, 2009, Page 3
Prices In US, UK, Australia, South Africa, Singapore Fall Up To 35%
Writankar Mukherjee KOLKATA
THE slump in global realty markets has thrown open opportunities for Indian high networth individuals (HNIs). The near 25-35% fall in property prices in Australia, the US, the UK, South Africa and markets closer home such as the Gulf and Singapore, has triggered a huge surge in demand from Indian buyers keen to invest in overseas property.
Realty brokers claim Mumbai and Delhi — which usually lead the pack in overseas property deals — are witnessing nearly 100% growth in such transactions since February with some 25 to 30 such transactions taking place every month. Brokers claim buyers in Surat, Bhubaneshwar, Jaipur, Ahmedabad, Vadodara, Kolkata and Amritsar are also showing interest.
“It’s really a good time to buy property overseas since prices in most of these markets are even cheaper than in some top Indian cities. The demand is more in Dubai, Malaysia, Singapore, Thailand, Australia and London,” CB Richard Ellis CMD (South Asia) Anshuman Magazine told ET.
There are plenty of projects in Dubai which are selling at a price band of Rs 2,500-5,000 per sqft. Land in the UK countryside such as Cheshire is being sold for Rs 1,100 per sqft, while that in Helsby at just Rs 370 per sqft. By comparison, prices in some major Indian realty hotspots are equally competitive—flats in Gurgaon are priced at Rs 3,000-5,000 per sqft, in Kolkata’s Rajarhat at Rs 2,800-3,500 per sqft and Navi Mumbai between Rs 1,800 and Rs 6,000 per sqft.
In the US, home prices have reportedly fallen in nine out of 10 cities. Brokers claim realty prices in cities like Fort Myers (Florida), Saginaw (Michigan), Akron (Ohio), San Francisco, Riverside and San Jose (California) have dropped by more than 40%. What’s more, nearly 40-odd islands are up for sale in Australia at three-year old prices—one can grab an island for A$1.3 million.
The ambassador of Ireland in India, Kenneth Thompson, said the global meltdown has reduced property prices in Ireland by 25%. “As a result, we are now seeing several Indian HNIs and NRIs buying property in Ireland, especially holiday homes in western parts of the country,” he said.
Even as a pure play investment option, foreign real estate is becoming attractive. “In fact, several of the buyers plan to give their flats on rent. Even now, the return on investment through rental earnings is around 10-12% in the US compared to a 2-5% return in India,” said Jones Lang Lasalle Meghraj associate director Mayank Saksena.
The Gulf and the UK are turning into investor havens due to their investor-friendly regulations. For instance, in UAE a foreigner does not need to pay tax on income on purchase and sale of property. Similarly, Qatar, too, is turning out to be a good option since it is a tax-free country.
“Even three years back, some of these markets had strict regulations for foreigners buying property. However, the liberalised policies in the backdrop of the global real estate slump is now a big trigger,” REBI head (East) Hemant Sikaria said. REBI has handled several overseas deals in Dubai and the Southeast Asia.
The Economic Times, May 27, 2009, Page 3
Prices In US, UK, Australia, South Africa, Singapore Fall Up To 35%
Writankar Mukherjee KOLKATA
THE slump in global realty markets has thrown open opportunities for Indian high networth individuals (HNIs). The near 25-35% fall in property prices in Australia, the US, the UK, South Africa and markets closer home such as the Gulf and Singapore, has triggered a huge surge in demand from Indian buyers keen to invest in overseas property.
Realty brokers claim Mumbai and Delhi — which usually lead the pack in overseas property deals — are witnessing nearly 100% growth in such transactions since February with some 25 to 30 such transactions taking place every month. Brokers claim buyers in Surat, Bhubaneshwar, Jaipur, Ahmedabad, Vadodara, Kolkata and Amritsar are also showing interest.
“It’s really a good time to buy property overseas since prices in most of these markets are even cheaper than in some top Indian cities. The demand is more in Dubai, Malaysia, Singapore, Thailand, Australia and London,” CB Richard Ellis CMD (South Asia) Anshuman Magazine told ET.
There are plenty of projects in Dubai which are selling at a price band of Rs 2,500-5,000 per sqft. Land in the UK countryside such as Cheshire is being sold for Rs 1,100 per sqft, while that in Helsby at just Rs 370 per sqft. By comparison, prices in some major Indian realty hotspots are equally competitive—flats in Gurgaon are priced at Rs 3,000-5,000 per sqft, in Kolkata’s Rajarhat at Rs 2,800-3,500 per sqft and Navi Mumbai between Rs 1,800 and Rs 6,000 per sqft.
In the US, home prices have reportedly fallen in nine out of 10 cities. Brokers claim realty prices in cities like Fort Myers (Florida), Saginaw (Michigan), Akron (Ohio), San Francisco, Riverside and San Jose (California) have dropped by more than 40%. What’s more, nearly 40-odd islands are up for sale in Australia at three-year old prices—one can grab an island for A$1.3 million.
The ambassador of Ireland in India, Kenneth Thompson, said the global meltdown has reduced property prices in Ireland by 25%. “As a result, we are now seeing several Indian HNIs and NRIs buying property in Ireland, especially holiday homes in western parts of the country,” he said.
Even as a pure play investment option, foreign real estate is becoming attractive. “In fact, several of the buyers plan to give their flats on rent. Even now, the return on investment through rental earnings is around 10-12% in the US compared to a 2-5% return in India,” said Jones Lang Lasalle Meghraj associate director Mayank Saksena.
The Gulf and the UK are turning into investor havens due to their investor-friendly regulations. For instance, in UAE a foreigner does not need to pay tax on income on purchase and sale of property. Similarly, Qatar, too, is turning out to be a good option since it is a tax-free country.
“Even three years back, some of these markets had strict regulations for foreigners buying property. However, the liberalised policies in the backdrop of the global real estate slump is now a big trigger,” REBI head (East) Hemant Sikaria said. REBI has handled several overseas deals in Dubai and the Southeast Asia.
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