Monday, December 14, 2009
IIP up 10.3% on low base; durables shine
IIP up 10.3% on low base; durables shine
The Financial Express, December 12, 2009, Page 1
fe Bureaus, New Delhi
India’s industrial output grew at a healthy 10.3% in October, despite fewer working days and export contraction during the month. Economists maintained that though the increase was not up to expectations, it was a sign of the continued uptick in the economy.
The increase in industrial output has been attributed to weak growth in the same month a year ago and increased production of consumer goods like vehicles. October’s factory output growth is a tad better than the revised 9.63% recorded in September, and a significant recovery from October 2008, when the index of industrial production (IIP) grew a mere 0.1%.
“There is no need to be euphoric about the numbers, as they are mostly on account of the base effect. But after discounting that, we see some improvement in factory output, especially in the consumer durables segment,” said Crisil economist DK Joshi.
The IIP data failed to bring cheer to equity markets, as both the Sensex and Nifty ended lower. Though the 30-share BSE Sensex closed only 39 points down at 17,150 points, this was 200 points below the intra-day high. The 50-share Nifty shed 12.55 points by the end of trading. The slide in both indices started at around noon after the IIP figures were released.
Industry and government were, however, more upbeat. “The growth rate well above 10% is not just a base effect. There is an element of growth that is taking place, which I hope will be sustained,” said Planning Commission deputy chairman Montek Singh Ahluwalia.
Ficci chairman Harsh Pati Singhania attributed the strong rise in IIP to the low interest regime and called for its continuation. “The IIP figures clearly establish that the Indian economy has recovered and can achieve a high growth trajectory provided the present policy parameters are not changed. They show all-round improvement,” Singhania added.
India’s industrial production has been on an upswing since April after the government and RBI offered fiscal and monetary relief. Significantly, exports by the industrial sector have also increased since April, even though it is still in negative territory. In October, exports contracted 6.6%.
Output from the manufacturing sector, which accounts for nearly 80% of India’s industry, grew at a 28-month high of 11.12% in October. Mining output increased 8.16%, while electricity generation expanded 4.67%. Within manufacturing, consumer durables output expanded 21%, as factories produced more cars, two-wheelers and appliances. This, despite the festive season, when companies focus on moving existing stocks and factories remained idle on account of Diwali.
FMCG production showed traction with an 8% increase, the most in 11 months. Significantly, the sector includes many processed food items, which are dependent on the farm sector for inputs.
The robust 14.3% growth in intermediate goods output was also due to a lower base effect. Production of capital goods, which is an indicator of investment in factories, grew by a healthy 12.2%. In terms of industrial sectors, only jute and vegetable fibres posted a contraction in production. Double-digit growth was seen in wool, silk and man-made fibres, basic chemicals, plastics, petroleum & products and coal-based derivatives, as well as machinery & equipment.
“A host of indicators suggest continued improvement in economic activity. However, near-term data may remain weak due to the widespread effects of the drought,” said a report by Goldman Sachs economists Pranjul Bhandari and Tushar Poddar.
The Financial Express, December 12, 2009, Page 1
fe Bureaus, New Delhi
India’s industrial output grew at a healthy 10.3% in October, despite fewer working days and export contraction during the month. Economists maintained that though the increase was not up to expectations, it was a sign of the continued uptick in the economy.
The increase in industrial output has been attributed to weak growth in the same month a year ago and increased production of consumer goods like vehicles. October’s factory output growth is a tad better than the revised 9.63% recorded in September, and a significant recovery from October 2008, when the index of industrial production (IIP) grew a mere 0.1%.
“There is no need to be euphoric about the numbers, as they are mostly on account of the base effect. But after discounting that, we see some improvement in factory output, especially in the consumer durables segment,” said Crisil economist DK Joshi.
The IIP data failed to bring cheer to equity markets, as both the Sensex and Nifty ended lower. Though the 30-share BSE Sensex closed only 39 points down at 17,150 points, this was 200 points below the intra-day high. The 50-share Nifty shed 12.55 points by the end of trading. The slide in both indices started at around noon after the IIP figures were released.
Industry and government were, however, more upbeat. “The growth rate well above 10% is not just a base effect. There is an element of growth that is taking place, which I hope will be sustained,” said Planning Commission deputy chairman Montek Singh Ahluwalia.
Ficci chairman Harsh Pati Singhania attributed the strong rise in IIP to the low interest regime and called for its continuation. “The IIP figures clearly establish that the Indian economy has recovered and can achieve a high growth trajectory provided the present policy parameters are not changed. They show all-round improvement,” Singhania added.
India’s industrial production has been on an upswing since April after the government and RBI offered fiscal and monetary relief. Significantly, exports by the industrial sector have also increased since April, even though it is still in negative territory. In October, exports contracted 6.6%.
Output from the manufacturing sector, which accounts for nearly 80% of India’s industry, grew at a 28-month high of 11.12% in October. Mining output increased 8.16%, while electricity generation expanded 4.67%. Within manufacturing, consumer durables output expanded 21%, as factories produced more cars, two-wheelers and appliances. This, despite the festive season, when companies focus on moving existing stocks and factories remained idle on account of Diwali.
FMCG production showed traction with an 8% increase, the most in 11 months. Significantly, the sector includes many processed food items, which are dependent on the farm sector for inputs.
The robust 14.3% growth in intermediate goods output was also due to a lower base effect. Production of capital goods, which is an indicator of investment in factories, grew by a healthy 12.2%. In terms of industrial sectors, only jute and vegetable fibres posted a contraction in production. Double-digit growth was seen in wool, silk and man-made fibres, basic chemicals, plastics, petroleum & products and coal-based derivatives, as well as machinery & equipment.
“A host of indicators suggest continued improvement in economic activity. However, near-term data may remain weak due to the widespread effects of the drought,” said a report by Goldman Sachs economists Pranjul Bhandari and Tushar Poddar.
Over Rs 25,000-cr Mumbai realty in a limbo
Over Rs 25,000-cr Mumbai realty in a limbo
Business Standard, December 13, 2009, Page 1
Sanjay Jog / Mumbai
Body blow for real estate developers as state switches off tap to high-rise projects
The Maharashtra government’s decision not to provide water connection to high-rise buildings (above seven floors) in Mumbai till 2012 has dealt a body blow to the city’s real estate developers.
Developers and independent observers said investments of over Rs 25,000 in the construction of around 1,400 high-rise buildings in the city are now in jeopardy.
The decision was announced by Chief Minister Ashok Chavan in the state legislature yesterday in view of the prevailing water scarcity in Mumbai. Stung by the decision, real estate developers have requested the state government to reconsider its decision on the ground that this will worsen the shortage of houses in the metropolis.
A Mumbai-based analyst, who did not want to be quoted, said the decision can be challenged in a court of law because it has made the real estate developers the sacrificial goat for its own failure to provide basic amenities like water.
A senior government official said the damage of Rs 25,000 crore is based on a minimum sale price of Rs 3,000 per sq ft for 1,400 projects. The loss to the real estate developers could be still higher if the sale price of Rs 7,000 per sq ft is considered.
He, however, defended the government’s decision in view of the 15 per cent water cut already in place in the city. This would in fact go up to 30 per cent if Mumbai did not have adequate rainfall by July next year. Water availability will be possible only after three reservoirs are built by 2012. Hence the ban, he said.
The official said builders and developers should also take the responsibility and avoid rampant wastage of water by going in for water recycling and treatment of saline water. Very few developers have adopted these measures and want the government to carry the can.
Niranjan Hiranandani, the managing director of Hiranandani Construction, wondered why the government ban was only for the private sector and not on the projects set up by the state-run Maharashtra Housing and Area Development Authority. “While every effort is needed to curb leakages and theft of water, the government should not do injustice to those who won't get water despite paying the required development charges and fees,” he said, adding that his company has recycled water at its projects for the last 20 years.
Dharmesh Jain and Rajan Bandelkar, vice-presidents of the Maharashtra Chamber of Housing Industry, said a representation would be made shortly to Chief Minister Chavan in this regard. Bandelkar said any such decision should have been only on a case by case basis, and a blanket ban didn’t serve any logic.
Ranjit Naiknavare, executive committee member of the Confederation of Real Estate Developers Association of India, termed the government's move irrational. “The government cannot simply stop giving commencement and completion approvals. Instead, the government can ask builders and developers to organise water supply on their own if the proposed reservoir projects are not complete within the stipulated time,” he added.
It would also be a long wait for consumers who have already paid a part of the booking amount in these projects.
Possible Nakheel default to affect $5.25 billion debt
Possible Nakheel default to affect $5.25 billion debt
Business Standard, December 14, 2009, Page 8
Bloomberg / Dubai
Investors are waiting to see if the Dubai state-controlled developer will pay the maturing $3.52 billion Islamic bond, known as sukuk, on Monday
Nakheel PJSC’s possible non-payment of its Islamic bond due on Monday will trigger cross defaults on two other securities, bringing the total of affected debt to $5.25 billion, bond documents show.
Investors are waiting to see if the Dubai state-controlled developer will pay the maturing $3.52 billion Islamic bond, known as sukuk. The Dubai government said on November 25 state-run holding company Dubai World is seeking a “standstill” agreement on its debt, including for the Nakheel unit.
The cross default would trigger if “the Nakheel Holdings Group, Nakheel World or the guarantor shall fail to make any payment”, at the expiration of the grace period, the bond documents said. Monday’s deadline is followed by a 14-day grace period to remedy the default and to prevent bondholders from starting legal proceedings.
Nakheel’s other two bonds are a 3.6 billion-dirham ($980 million) floating-rate note due in May next year and a 2.75 per cent $750 million sukuk maturing in January 2011.
“The chances of a full payment at this point are very slim,” said Nish Popat, head of fixed income at ING Investment Management Dubai Ltd. “There is a lack of clarity on how the standstill initiative is progressing. Investors are just waiting and speculating.”
Nakheel’s bond maturing on Monday rose 1 per cent to 53 cents on the dollar on December 11, on speculation that the developer may seek to avoid a default. The bond has dropped more than 50 per cent since the November 25 announcement. Dubai World began talks to restructure $26 billion of debt.
Nakheel’s bond repayment is the biggest maturity for a Dubai entity since the global credit markets froze after the September 2008 collapse of Lehman Brothers Holdings Inc. Nakheel accumulated debt during a six-year real-estate boom in Dubai, when the sheikhdom borrowed $10 billion and its state-controlled companies $70 billion to help diversify its the economy.
BNP Paribas SA and EFG-Hermes Holding SAE analysts said last week Nakheel may repay bondholders as much as 70 cents on the dollar and issue new securities to restructure the remainder of the debt.
While Dubai’s government owns 100 per cent of Dubai World, it hasn’t guaranteed the company’s debt and creditors must help it restructure, Abdulrahman Al Saleh, director general of Dubai’s Department of Finance, said on November 30.
Nakheel looks set to default
Nakheel looks set to default
The Economic Times, December 14, 2009, Page 12
Haris Anwar DUBAI
NAKHEEL’S possible non-payment of its Islamic bond due on Monday will trigger defaults on two other securities, bringing the total of affected securities to $5.25 billion, bond documents show.
Investors are waiting to see if the Dubai state-controlled developer will pay the maturing $3.52 billion Islamic bond, known as sukuk. The Dubai government said on November 25 that state-run holding company Dubai World is seeking a “standstill” agreement on its debt, including for the Nakheel unit. The default would be triggered by failure of Nakheel or the guarantor, Dubai World, to make payment at the end of a grace period, the documents said. Nakheel has two weeks to remedy a default and prevent bondholders from starting legal proceedings. Nakheel’s other two bonds are a 3.6 billion-dirham ($980 million) floating-rate note due in May and a 2.75%, $750 million sukuk maturing in January 2011. “The chances of a full payment at this point are very slim,” said Nish Popat, head of fixed income at ING Investment Management Dubai. “There is a lack of clarity on how the standstill initiative is progressing. Investors are just waiting and speculating.”
Nakheel’s bond maturing tomorrow rose 1% to 53 cents on the dollar on December 11, on speculation the developer may seek to avoid a default. The bond has dropped more than 50% since the November 25 announcement. Dubai World began talks with banks this month to restructure $26 billion of debt.
Nakheel’s bond repayment is the biggest maturity for a Dubai entity since the global credit markets froze after the September 2008 collapse of Lehman Brothers Holdings.
The 2009 sukuk redeems at $115.52, increasing the Nakheel’s total payment to $4.1 billion. The amount includes a 6% premium to bondholders in case the developer is unable to do an initial public offer during the life of the bond, and the remaining part of the annual coupon. Nakheel accumulated debt during a six-year real-estate boom in Dubai, when the sheikhdom borrowed $10 billion and its state-controlled companies $70 billion to help diversify its the economy. BNP Paribas and EFG-Hermes Holding analysts said last week Nakheel may repay bondholders as much as 70 cents on the dollar and issue new securities to restructure the remainder of the debt.
“Such an outcome would be beneficial for both parties involved,” EFG’s Dubai-based strategist Fahd Iqbal wrote in a research report. “Creditors would receive a portion of their money back with a promise for the remainder to be delivered at a later stage while Dubai World, along with other government- related parties, would have continued access to capital markets.”
While Dubai’s government owns 100% of Dubai World, it hasn’t guaranteed the company’s debt and creditors must help it restructure, Abdulrahman Al Saleh, director general of Dubai’s Department of Finance, said on November 30. Dubai World may need more than six months to complete its debt restructuring, Al Saleh told the Al Arabiya TV channel on December 8.
Nakheel, the developer of palm-tree shaped islands off the Dubai coast, had a first-half loss of 13.4 billion dirhams as real-estate prices crashed in the Gulf business hub. — Bloomberg
DAL to merge with DLF in cash-equity deal
DAL to merge with DLF in cash-equity deal
The Financial Express, December 14, 2009, Page 1
Rajat Guha, New Delhi
Country’s largest real estate firm DLF is set to merge the real estate investment trust DLF Assets Ltd (DAL) into itself. The move is aimed at repaying some of DAL’s debt and bring the commercial properties under DLF to generate an annual income of around Rs 600 crore in the form of lease rentals from 2009-10. DAL currently earns around Rs 325 crore from lease rentals.
DAL, which is promoted by DLF promoters K P Singh and son Rajeev Singh, buys commercial property from DLF and collects lease rentals from it. Sources said for the merger, DLF would have to buy the assets of DAL for around Rs 6,500-7,000 crore. The DLF board is meeting on Tuesday to take a final call on the matter. The company has appointed Citibank, Ernst & Young and Grant Thornton India as advisors. When contacted a DLF spokesperson declined to comment.
The DLF-DAL deal will be a combination of cash and equity. Sources close to the development said an all-cash deal would involve a tremendous cash outgo, which would be difficult for DLF in the current scenario given its debt burden. Hence, the promoters are planning to go in for a major share swap between DLF’s cyber city in Gurgaon and DAL. The share swap ratio has been finalised and would be discussed in the Tuesday’s board meeting. In addition, around $700 million invested by the PE firm Symphony Capital and some debt from other lenders will be transferred to DLF Ltd’s books.
Analysts view the option of equity-cash mix an ideal way to close the deal as it is not prudent on the part of promoters to further dilute their stake in DLF. The Singh family had last diluted its stake by around 10% in DLF to raise Rs 3,800 crore to pay hedge fund DE Shaw, an initial investor in DAL.
The DLF-DAL merger would also help scale up DAL’s valuation ahead of its listing on Singapore Stock Exchange in April 2010. As fist reported by FE, the promoters expect to mop up around $1.2 billion through the listing for which the backing of DLF is seen as a must.
The company has decided to file for the listing in January. Citibank is advising the company on the listing.
DAL had acquired four special economic zones (SEZs) from DLF Ltd with a built-up area of 4.5 million square ft, and has increased it to 9.5 million sqft and plan to further increase it to 19 million sqft when fully ready. As reported by FE last week, DE Shaw has finally redeemed its investment in DAL, with DLF buying out its stake, a move that would facilitate the merger process and the eventual listing.
DAL had earlier raised $1.1 billion from DE Shaw and Symphony Capital through optionally convertible preference shares with a coupon rate of 4 to 6 %.
Realty IPOs: Bubbles that make little sense for serious investors
Realty IPOs: Bubbles that make little sense for serious investors
The Economic Times, December 14, 2009, Page 8
OF ALL the bubbles that were floating around back in the heady days of 2007 and 2008, the one that was the biggest is still hanging around, being maintained by a determined (or perhaps desperate) set of people. At that time, it was clear to most of us that India’s real estate sector was a massive bubble. The froth was equally visible in the prices of real estate itself as well as the way real estate scrips were doing on the stock markets. And then came the crash and everything collapsed around the world. This is a crash that is still continuing — Dubai’s real estate disaster is still said to be only half done. And without a doubt, there are many more zombie developers around the world who are still staggering around in the hope that one day things will turn around.
In India, we now seem to have entered a phase where many of these zombies are now planning to try and revive themselves with IPOs. The coming months will see a spate of issues from real estate developers. Currently, we are seeing an elaborate PR and advertising exercise that is aimed at convincing investors that there is a real estate ‘revival’ on the way. The reality is that nothing could be further from the truth. It is true that at the ground level, people are buying more houses than they were a year ago. Companies too are renting and buying more offices. However, there is a complete disconnect between the supply that exists and the actual demand. There is an even bigger disconnect between the prices which these consumers are willing to pay and the prices that the developers need to realise to make their projections justified.
As a potential investor in the real estate sector, you shouldn’t be reading any broker or analyst reports, nor should you be reading ads or articles in the media. Instead, you should be doing some research yourself. Just find out the officiallyquoted prices for some of these IPOing (or about to be IPOing) developers’ properties. And then, try and make some enquiries about the same properties pretending to be an actual buyer. Generally, you will discover that the real prices are a fraction of what is claimed publicly. Or in some cases, you may also discover that there are no real price quotes because no one is even pretending to sell properties because no one has any expectations of the underlying projects being executed in any realistic timeframe. Almost without exception, the coming realty IPOs are desperate rescue missions, which seek to use the collected funds to replace some of the masses of debt that they’ve taken on. And almost without exception, the IPO funds will do nothing for the basic commercial viability of the products that these companies are supposed to produce and sell.
The Economic Times, December 14, 2009, Page 8
OF ALL the bubbles that were floating around back in the heady days of 2007 and 2008, the one that was the biggest is still hanging around, being maintained by a determined (or perhaps desperate) set of people. At that time, it was clear to most of us that India’s real estate sector was a massive bubble. The froth was equally visible in the prices of real estate itself as well as the way real estate scrips were doing on the stock markets. And then came the crash and everything collapsed around the world. This is a crash that is still continuing — Dubai’s real estate disaster is still said to be only half done. And without a doubt, there are many more zombie developers around the world who are still staggering around in the hope that one day things will turn around.
In India, we now seem to have entered a phase where many of these zombies are now planning to try and revive themselves with IPOs. The coming months will see a spate of issues from real estate developers. Currently, we are seeing an elaborate PR and advertising exercise that is aimed at convincing investors that there is a real estate ‘revival’ on the way. The reality is that nothing could be further from the truth. It is true that at the ground level, people are buying more houses than they were a year ago. Companies too are renting and buying more offices. However, there is a complete disconnect between the supply that exists and the actual demand. There is an even bigger disconnect between the prices which these consumers are willing to pay and the prices that the developers need to realise to make their projections justified.
As a potential investor in the real estate sector, you shouldn’t be reading any broker or analyst reports, nor should you be reading ads or articles in the media. Instead, you should be doing some research yourself. Just find out the officiallyquoted prices for some of these IPOing (or about to be IPOing) developers’ properties. And then, try and make some enquiries about the same properties pretending to be an actual buyer. Generally, you will discover that the real prices are a fraction of what is claimed publicly. Or in some cases, you may also discover that there are no real price quotes because no one is even pretending to sell properties because no one has any expectations of the underlying projects being executed in any realistic timeframe. Almost without exception, the coming realty IPOs are desperate rescue missions, which seek to use the collected funds to replace some of the masses of debt that they’ve taken on. And almost without exception, the IPO funds will do nothing for the basic commercial viability of the products that these companies are supposed to produce and sell.
All realty cos may get ECB access for townships
All realty cos may get ECB access for townships
The Economic Times, December 14, 2009, Page 19
As Of Now, Only Companies Which Are Purely Into Integrated Townships Of Specified Size Are Eligible For ECBs
G Ganapathy Subramaniam ET NOW
THE Reserve Bank is considering a proposal to allow real estate companys to access external commercial borrowings (ECBs) for integrated townships even if they deal with other types of real estate projects.
As of now, only companies which are purely into integrated townships of specified size are eligible to access ECBs as the RBI was keen to make sure that funds are not diverted to other projects.
Real estate companies have argued that setting up a special purpose vehicle (SPV) for integrated townships entails higher costs. Flagship companies have a credit rating which is obviously better than what a new SPV can get, they have emphasised.
To ensure that ECB funds are not diverted, real estate companies have said that ECB proceeds can be kept in a separate bank account and all accounting for this money can be done separately. A source in RBI confirmed the proposal from real estate companies on condition of anonymity, but declined to go into the details.
An escrow account for this purpose is what realty companies have proposed and they are willing to undertake strict accounting specifications to prove that ECB proceeds are used only for integrated townships.
RBI was not willing to consider any relaxation earlier, but the issue is under discussion now after the central bank re-imposed an all-inclusive interest ceiling for ECBs recently. Since SPVs cannot borrow at rates as fine as the parent entities, real estate companies have argued, integrated townships would be deprived of funding from this window. In the case of ECBs with tenure of three to five years, RBI has said that interest paid should not exceed 300 basis points above Libor.
“It is a win-win situation for real estate companies as well as overseas lenders,” said Anil Kumar, CEO and deputy MD of Ansal API. “Real estate companies can get long term funds at competitive cost and lenders will be able to do business with real estate companies even if they are not dealing exclusively with integrated townships,” he said.
ECB proceeds for integrated townships has been allowed to promote infrastructure development. The government has specified that such townships should be built on a minimum area of 100 acres. Detailed guidelines have been provided by the department of industrial policy and promotion (Dipp) through press notes meant to lay down guidelines for foreign direct investment (FDI) in real estate. “Ceiling on borrowing cost is a major factor for real estate players. Even though ECBs can be used for integrated townships, realty players have not been able to use this window,” said a senior executive from a leading real estate firm who did not wish to be quoted.
The RBI has recently decided to allow real estate companies to access ECBs till December 31, 2010 for integrated townships. Originally, this facility was available only till the end of 2009.
In 2007, when there were apprehensions that the economy was overheating, a number of restrictions were imposed on funds flowing into real estate. The RBI felt that a real estate bubble was building up. When the financial sector meltdown hit the global economy last year many of these restrictions were eased. With liquidity becoming abundant now and signs of economic revival visible, the government is looking at tightening the norms once again.
Nitesh Estates to raise Rs 700 cr
Nitesh Estates to raise Rs 700 cr
The Hindu Business Line, December 12, 2009, Page 3
To go the private equity route to fund Rs 1,350-cr Chennai project
Anjana Chandramouly, Bangalore
Real estate developer Nitesh Estates plans to raise about Rs 700 crore through the private equity route for its Chennai mixed-use development. This is in addition to the Rs 450 crore the company plans to raise by tapping the market.
Mr L. S. Vaidyanathan, Ex¬ecutive Director, Nitesh Estates, said, "We are looking at 1:1 debt-equity deal. We plan to raise Rs 700 crore of private equity for the Rs 1,350 crore Chennai project."
The company plans to dilute 74 per cent of its stake in the project, he told Business Line. The company was talking to a few private investors, "but nothing has been firmed up as yet," he added.
When launched, the Chennai Boat Club project would develop about one million sq ft of residential, commercial, retail and hospitality spaces. Nitesh Estates has signed a memorandum of understanding with Ritz-Carlton, said Mr Vaidyanathan.
The company, in fact, is developing the country's first Ritz-Carlton at Bangalore, which is expected to be ready by April 2011, he added.
The company has filed the Draft Red Herring Prospectus for its proposed initial public offering, through which it plans to raise Rs 450 crore with a greenshoe option for an additional about Rs 45 crore.
Mr Vaidyanathan said that stake dilution would largely "depend on market conditions", refusing to divulge any other details. The funds would be "used for our hospitality and retail projects, repay certain debts of the company and sign up new land parcels," he said. The company has development rights for about 20 million sq ft developable space in the next three- four years, he added.
As a company strategy, Nitesh Estates plans to have 80 per cent of its residential projects aimed at the mid-market, which is a deviation from its earlier upscale luxury business model. "The mid market (Rs 20 lakh to Rs 40 lakh) is where the demand is, and this is where a bulk of our projects would be focussed," said Mr Vaidyanathan.
In the next few months, the company plans to launch two mid-market projects in Bangalore, through which it plans to add over 1,100 units.
However, the company would stick to the upscale luxury model for its Goa project. Though there are land parcels identified for commercial development, the company would wait till "the market for commercial space picks up," he added. Next year, Nitesh Estates would have over three million sq ft under development, said Mr Vaidyanathan.
The Hindu Business Line, December 12, 2009, Page 3
To go the private equity route to fund Rs 1,350-cr Chennai project
Anjana Chandramouly, Bangalore
Real estate developer Nitesh Estates plans to raise about Rs 700 crore through the private equity route for its Chennai mixed-use development. This is in addition to the Rs 450 crore the company plans to raise by tapping the market.
Mr L. S. Vaidyanathan, Ex¬ecutive Director, Nitesh Estates, said, "We are looking at 1:1 debt-equity deal. We plan to raise Rs 700 crore of private equity for the Rs 1,350 crore Chennai project."
The company plans to dilute 74 per cent of its stake in the project, he told Business Line. The company was talking to a few private investors, "but nothing has been firmed up as yet," he added.
When launched, the Chennai Boat Club project would develop about one million sq ft of residential, commercial, retail and hospitality spaces. Nitesh Estates has signed a memorandum of understanding with Ritz-Carlton, said Mr Vaidyanathan.
The company, in fact, is developing the country's first Ritz-Carlton at Bangalore, which is expected to be ready by April 2011, he added.
The company has filed the Draft Red Herring Prospectus for its proposed initial public offering, through which it plans to raise Rs 450 crore with a greenshoe option for an additional about Rs 45 crore.
Mr Vaidyanathan said that stake dilution would largely "depend on market conditions", refusing to divulge any other details. The funds would be "used for our hospitality and retail projects, repay certain debts of the company and sign up new land parcels," he said. The company has development rights for about 20 million sq ft developable space in the next three- four years, he added.
As a company strategy, Nitesh Estates plans to have 80 per cent of its residential projects aimed at the mid-market, which is a deviation from its earlier upscale luxury business model. "The mid market (Rs 20 lakh to Rs 40 lakh) is where the demand is, and this is where a bulk of our projects would be focussed," said Mr Vaidyanathan.
In the next few months, the company plans to launch two mid-market projects in Bangalore, through which it plans to add over 1,100 units.
However, the company would stick to the upscale luxury model for its Goa project. Though there are land parcels identified for commercial development, the company would wait till "the market for commercial space picks up," he added. Next year, Nitesh Estates would have over three million sq ft under development, said Mr Vaidyanathan.
There are also plans to enter the Ahmedabad market, as "we have a land parcel being offered to us there: We are getting it evaluated and also studying the market to identify the kind of development to opt for," said Mr Vaidyanathan.
Subscribe to:
Posts (Atom)
Posts
