DLF in talks with banks, LIC to raise funds
The Financial Express, Corporates & Markets, February 21, 2009, Page I
Kakoly Chatterjee, New Delhi
The country’s largest real estate firm, DLF Ltd is in talks with Punjab National Bank, State Bank of India, Oriental Bank of Commerce and Life Insurance Corporation to raise Rs 1,000 crore to pay off its short-term debt. The company is likely to get the loan at the rate of 13-14%.
The short-term debt that DLF would be retiring from the new loan was for a period of 12 months at the rate of 11%. The new, long-term debt would be for a longer tenure.
DLF needs to repay around Rs 2,000 crore of debt by March 2009. During the October-December quarter, DLF replaced Rs 1,000 crore of short-term debt. The company had earlier announced that it plans to replace its short-term debt of Rs 4,000 crore that is going to mature in the latter part of the year with long-term debt.
At a time when demand has plunged in all segments of the realty sector, DLF is in the process of restructuring its debt, like most other realty companies. Currently, DLF has a net debt of around Rs 13,000 crore on its books.
It is also looking at raising Rs 2,000 crore by selling non-strategic assets, such as its power business and the land that was to be used for retail and commercial projects over the next few quarters.
Additionally, it plans to raise around Rs 2,500 crore in DLF Assets Ltd (DAL), owned by its promoters, by selling stakes to private equity investors. DAL was established to buy and hold completed commercial assets of the listed developer. DAL owes around Rs 5,500 crore to DLF for the assets that it has bought from the parent company.
DLF reported a 68.72% decline in net profit at Rs 670.79 crore for the third quarter ended December compared to Rs 2,144.98 crore in the corresponding period last year. The company’s revenue was down by 39.42% to Rs 673.46 crore during the quarter compared with Rs 1,111.85 crore during the corresponding quarter a year ago.
On an overall basis, realty companies have been hit really hard by the downturn. The sector’s stocks have experienced immense value erosion, with shrinking toplines and bottomlines. While toplines have declined from 60% to 70% on an annual basis, bottomlines have declined by 60% to 95% on most occasions.
Land mine
• Likely to get loan at the rate of 13-14%
• The new, long-term debt to be for a longer tenure
• Needs to repay around Rs 2,000 cr by Mar 09
• DLF has a net debt of around Rs 13,000 cr
Monday, February 23, 2009
DLF in talks with banks, LIC to raise funds
DLF, Unitech books sketchy on subsidiaries
DLF, Unitech books sketchy on subsidiaries
The Financial Express, February 23, 2009, Page 1
Sunny Verma
Audit trails of subsidiaries of India’s two largest listed real estate companies are running dry. Annual reports of DLF shows the accounts of its subsidiary, Silverlink Holdings Ltd, acquired in January 2008 and having total assets of Rs 2,291.12 crore, have not been comprehensively audited despite the listing requirements of the stock exchanges. Similarly, the annual report of Unitech Ltd show that the financial statements of many of it subsidiaries and joint ventures, with total assets of Rs 541.39 crore, were not audited as on March 31, 2008.
Neither statutory auditors nor the internal auditors have audited the accounts of these subsidiary companies of the real estate majors, the annual reports show. Clause 41 of the listing agreement of the stock exchanges mandate audit of consolidated and standalone accounts by the end of the financial year and a limited audit review at the end of every two quarters. The Institute of Chartered Accountant of India rules also require listed and unlisted companies as well as their subsidiary companies to get their accounts audited.
Incidentally, the DLF subsidiary Silverlink Holding Ltd, in turn, has 74 subsidiaries, 71 of which are incorporated abroad and hold various properties overseas. “Silverlink Holding Ltd was acquired in January 2008, so we could not audit the financial statements in the year ending March 2008,” said DLF CFO Ramesh Sanka. “But subsequently audited accounts are available,” he said.
But the limited review by the audit committee of DLF for the December 2008 quarter makes no mention of any audit conducted by Silverlink Holding’s auditor for the year ended December 2007. It also does not reflect any subsequent audit of the company.
“It (Silverlink Holding Ltd) is in 18 countries. It is very difficult to get the audit done for different countries,” Sanka said. Another official of DLF, asking not to be quoted, said the financial statements of some subsidiaries were not audited due to the time constraint but “that is not significant since DLF has over 200 subsidiaries.”
“The consolidated financial statements include total assets of Rs 2,291.1176 crore, total revenues of Rs Nil and total cash flows of Rs 155.7814 crore, of a subsidiary (Silverlink Holding Ltd), acquired in January 2008, which have not been audited by us or any other auditor,” DLF’s auditor Walker, Chandiok & Co said in its report. “The same are included based on the unaudited consolidated financial statements as at December 31, 2007, adopted by the board of directors of the subsidiary, Silverlink Holdings Limited, and no further adjustment is considered necessary in the consolidated financial as the management has confirmed that no material event affecting the financial position of the subsidiary and its constituents has occurred during the period from January 1 to March 31, 2008.”
Unitech’s company secretary and compliance officer S Ravi Aiyar said the nature of real estate business demands creation of subsidiaries. “Accounts of some of the companies could not have been audited as on the date (of annual report) but subsequently they will be audited,” he said.
These subsequent quarterly reports of Unitech, too, do not mention the subsidiaries whose accounts were not audited in the 2007-08 fiscal year. The total number of these subsidiaries and JVs could not be ascertained. Aiyar said the company has over 10 joint ventures wherein its stake is less than 50%. “In such cases, the responsibility of the audit is with the majority shareholder,” he said.
The statutory auditor of Unitech, Goel Garg & Co, in its report had said that it did not audit the financial statements of subsidiaries and joint ventures having total assets of Rs 541.39 crore and total revenue of Rs 121.79 crore as at 31st March 2008. Their statements were ‘accounted based on unaudited financial results,’ Goel Garg & Co said.
Of the total 316 companies owned by Unitech Ltd, 30 are incorporated abroad. “They are not guided by Indian laws. These are basically SPVs to fund the main business. Their audit standards are different,” Aiyar said.
The DLF stock closed 0.83% lower at Rs 155.05 at the Bombay Stock Exchange on Friday. Unitech ended lower 0.55% at Rs 28.05 at BSE on Friday.
In a report last month, global investment banker Credit Suisse stated that DLF had “significant intangible asset/goodwill on its balance sheet”. Plus, there are significant departures from conservative accounting practices, including material related-party transactions. On a more damaging note, the report said the company has not disclosed detailed accounts of key subsidiaries on a regular basis. About Unitech it questioned the extent of related party transactions of allegedly Rs 350 crore in financial year 2007-08.
An official of ICAI, who wished not to be named, said material and non-material penalties can be imposed under the Companies Act, 1956 on companies that do not adhere to the auditing standards, including presenting audit of all subsidiary companies.
“Every subsidiary company is required to get its financial statements audited, not doing so will be a violation,” said Pavan Kumar Vijay, former president of Institute of Company Secretaries of India.
Punjab cabinet okeys Rajpura Thermal Power Project, new SEZ policy approved
Punjab cabinet okeys Rajpura Thermal Power Project, new SEZ policy approved
Punjab Newsline Network, Friday, 20 February 2009
CHANDIGARH: Decks have been cleared for setting up of 1320 MW Rajpura Thermal Power project at Rajpura with the Punjab Cabinet giving its nod to the revised tariff offer of Rs.3.309/kWh by the bidder – Lanco Infratech Ltd.
A decision to this effect was taken in the meeting of the Council of Ministers chaired by the Punjab Chief Minister Mr. Parkash Singh Badal here at Punjab Bhawan this morning.
It may be recalled that at present the total power generation capacity in the state was 6609 MW against the peak demand of 7428 MW. Perhaps it was the biggest ever initiative by any state government in the power sector to usher in power revolution by generating additional capacity of 6480 MW to make Punjab as a power surplus state within next three years by setting up four super thermal plants at Talwandi Sabo (1980 MW), Goindwal Sahib (540MW), Rajpura (1320 MW) and Gidderbaha (2640 MW).
Disclosing this here Friday a spokesman of the Punjab government said that the Cabinet also approved a slew of concessions for affordable housing and relief to the promoters/developers in response to the memorandum submitted by Confederation of Real Estate Developers' Association India (CREDAI) and National Real Estate Development Council (NAREDCO) to the Chief Minister. These concessions included reduction in government charges (External Development Charges (EDC), license fee, Change in Land Use) moratorium of EDC payment, increase in the period for payment of EDC and waiver of penal interest on delayed payment of EDC installments.
The Cabinet also approved the Special Economic Zone Policy to facilitate the development of Special Economic Zones in the State of Punjab to give boost to the economic and industrial development of the state leading to generation of new employment opportunities. The SEZ policy would provide a comprehensive framework for establishment, operation and sustainability of SEZs in the state.
In another significant decision the Cabinet also approved a comprehensive policy for the survival and revival of Goindwal industries for the promotion of existing and new industry there.
The Cabinet also authorized the Chief Minister to approve the draft of the Governor's Address for the 6th session of 13th Punjab Vidhan Sabha beginning from 27th February, 2009 and also approved the tentative date-wise programme of the forthcoming session of Punjab Vidhan Sabha.
The Cabinet also gave approval for amending the Punjab Government Houses (General Pool) Allotment Rules 1983 for the allotment of Government accommodation to its employees. The amended rules would now entitle the government employees to retain the house till the completion of the academic session of their children in order to avoid harassment caused to them on account of mid session transfers. The permissible period for retention of the house has also been increased from the period of four to six months. Likewise, the House Allotment Committee would also now allot a house on out of turn basis to the spouse on retirement of the government employee provided such spouse was working at the same headquarter and entitled to the said type of accommodation.
The Cabinet also approved the conversion of the Punjab Entertainment Tax (Cinematograph shows) amendment Ordinance, 2009 (Punjab ordinance No.1 of 2009) and Punjab Tax on Luxuries Ordinance, 2008 (Punjab ordinance No.4 of 2008) into Acts through presentation of a Bill in the forthcoming session of Punjab Vidhan Sabha.
The Cabinet also approved the enactment of Punjab Public Records Act 2009 for acquisition of 25 years or more old records of the various departments of Punjab government and their proper maintenance, preservation and conservation. This initiative would enable the researchers to pursue their research works for their M.Phil and Ph.D thesis and the historians for writing books which throw light on the historical and cultural heritage of the Punjab.
The Cabinet also gave approval for the enactment of the Punjab Preservation of Sub Soil Water Act, 2009 in order to stop depletion of water level on account of early sowing of paddy in the month of April and May through the conversion of Ordinance into Act presentation of a Bill in the forthcoming session of Punjab Vidhan Sabha.
The Cabinet also approved to increase the official as well as non-official members in the Punjab Mandi Board under Section 3(1) of the Punjab State Agricultural Produce Markets Act, 1961 from 8 to 10 in both categories. In light of the amendment the reconstituted board would now have Chairman, Farmers Commission and Vice Chancellor, Punjab Agriculture University as two more additional official members and one member each from the category of licensees under section 10 of the Act and one from progressive farmers as non-official members. The newly reconstituted board would also now have the Director Agriculture in place of Director Animal Husbandry as an official member.
The Cabinet also considered the new industrial Policy and to enable the Industries Department to further take a holistic view before finalizing it, deferred the item to be brought again in the next Cabinet.
The Cabinet also gave approval for the grant of Rs.1 crore for the 'Advocate Welfare Fund' to be utilized for the needs of advocates from time to time.
Friday, February 20, 2009
Another stimulus possible: Pranab
Business Standard, February 20, 2009, Page 1
Tells Parliament he will hold talks with RBI and finance ministry officials
BS REPORTER New Delhi
Two days after announcing an Interim Budget that disappointed industry for lacking stimulus measures, Finance Minister Pranab Mukherjee today announced that he would discuss the possibility of another set of fiscal and monetary measures to counter the economic slowdown with officials and the Reserve Bank of India.
Replying to a question in the Rajya Sabha, Mukherjee said, “I have just discussed with my officers, my colleagues and with some experts, and Iam also going to have another round of discussion, because I do believe that fiscal corrections and monetary policy changes go side by side, so that the impact is felt.” Although Mukherjee categorically stated that he could not give any commitment on possible measures, he told the House, “The Reserve Bank enjoys a certain autonomy. Iwill have consultations with the Governor of the Reserve Bank, and after doing that, Ido hope that while replying to the debate on the Budget, Imay be in a position — I am not making any assurance or commitment — to indicate some more detailed information.” Mukherjee also admitted that to overcome the problem of slowdown, the government has to “ensure that more jobs are generated, and more investments in the employmentoriented sectors have to be done.” While pointing out that the full impact of the slowdown was yet to be felt, the finance minister expressed confidence that in the course of time, it would be possible to put the economy in the right track.
He also told the Rajya Sabha that even as many Indian workers were returning home and exports were affected, there was no concern about the availability of foreign exchange reserves. “We need not press the panic button,” he told the House.
Replying to another question from Rahul Bajaj, Mukherjee said, “All measures necessary to boost the economy will be taken. The support that the Indian economy requires will be given. That is why I am laying emphasis on both the fiscal corrections and the monetary corrections. Unless these two are moved together and they move in harmony, it would be difficult to tackle the problem.”
Inflation below 4%, but Pranab warns of tougher times
The Financial Express, February 20, 2009, Page 1
Economy Bureau
Finance minister Pranab Mukherjee warned on Thursday that the full impact of the global slowdown is “yet to be felt”, though the UPA government had refrained from doing “too many radical things” in the interim Budget due to constitutional constraints. But he stressed that the government is willing to take more steps to spur the economy, broadly hinting at monetary measures like rate cuts.
“I am laying emphasis on both fiscal corrections and monetary corrections. Unless these two are moved together and they move in harmony, it would be difficult to tackle the problem,” he said, adding that “simply pressing the panic button” won’t achieve anything.
“If the economy demands certain things and if these could be done within (the constitutional constraints of an outgoing government), surely we would like to do them,” he said. Markets already anticipate a cut in policy rates by RBI with inflation touching a 14-month low of 3.92% for the first week of February.
“I will have consultations with the governor of the Reserve Bank. After that, I hope that while replying to the debate on the Budget (next week), I may be in a position—I am not making any assurance or commitment—to give more detailed information,” Mukherjee said.
The minister’s comments came a day after RBI governor D Subbarao said in Tokyo there is more room to reduce key rates. “The question is whether we should cut rates, when we should cut rates and by how much we should cut rates,” the governor said.
Warning of a sharper impact of the global slowdown on India than expected, he said the challenge for the government and RBI would be to “minimise the pain”. However, Subbarao dismissed suggestions to slow external liberalisation to protect Indian industry: “We should not give a wrong signal right now. The support—I would not use the word ‘protection’—that the Indian economy requires will be given.”
The government has already announced two stimulus packages to spur economic growth, which is expected to moderate from 9% to 7.1% in 2008-09.
Economic growth to recover next fiscal, assures Montek
The Economic Times, February 20, 2009, Page 10
Piyush Babele NEW DELHI
PLANNING Commission deputy chairman Montek Singh Ahluwalia has said the next financial year will be the year of economic recovery and the Indian economy is expected to grow between 6.5% and 7% in 2009-10. “The growth next year is expected to be more than the growth witnessed in the second half of current financial year. This would mean that the economy is on the path of recovery,” he told ET Hindi on its first anniversary.
For India, this is the first year of economic slowdown, mainly for the services sector and the manufacturing sector. The slowdown is due to external forces and not due to country’s economic policies, Mr Ahluwalia said. But India has left no stone unturned to avert the economic downturn, he added.
He said the impact of the global slowdown on the Indian economy was negligible in the first half of the current financial year, but the growth dipped in the second half. “The government has taken several steps that would improve the condition of the economy in the next financial year,” Mr Ahluwalia said.
“When we talk about the current economic situation, we should not forget that despite slowdown India is still the second-fastest growing economy of the world. We must also see the economic growth from another perspective. Even if we combine this year’s growth rate with the previous year; the figure will be higher than the 6-6.5% growth rate achieved during the NDA government,” he said.
Mr Ahluwalia expressed satisfaction the slowdown had not hit the farm sector and was limited to modern forms of the economy. “In this background, the government will invest in the infrastructure sector and NREGA. These schemes will strengthen the economy,” he said.
Obama unveils $275b housing rescue plan
The Economic Times, February 20, 2009, Page 19
$75B Lifeline For Homeowners, $200B To Freddie Mac & Fannie Mae
AFP PHOENIX, ARIZONA
US PRESIDENT Barack Obama on Wednesday targeted the housing crisis at the root of the US economic meltdown, with a program which could cost $275 billion and reach nine million homeowners.
The strategy includes $75 billion designed as an incentive for lenders to reduce interest rates to prevent at-risk mortgage debtors joining the millions who have already fallen victim to foreclosures.
The government will also put up an additional $200 billion dollars to bolster confidence in efforts by federal lenders Freddie Mac and Fannie Mae to offer affordable mortgages and bring stability to the housing market.
Obama opened the new front in the broad battle against the economic crisis a day after signing a huge, $787-billion stimulus plan into law, and as he simultaneously attempts to restructure the debilitated US auto industry.
"All of us are paying a price for this home mortgage crisis and all of us will pay an even steeper price if we allow this crisis to continue to deepen," Obama said as he unveiled the plan in Arizona, one of the states worst hit by the crisis.
"When the housing market collapsed, so did the availability of credit on which our economy depends. "We will help between seven and nine million families restructure or refinance their mortgages so they can avoid foreclosure," Obama said.
Treasury officials said the plan could reach or make affordable one-and-a-half trillion dollars in mortgage debt and deal with a large proportion of the six million foreclosures expected over the next four years.
The plan includes incentives for lenders to help debtors who cannot make monthly payments but also cannot sell their homes due to negative equity, to lower mortgage payments to no more than 31% of their income.
The plan will see the treasury department double its financial support to troubled mortgage finance giants Fannie Mae and Freddie Mac, to $200 billion each, in an effort to stabilise the real estate sector.
A $75-billion initiative will target those who cannot afford to pay their mortgages and have seen the price of their properties plunge so cannot sell them and move into cheaper accommodation.
The initiative also aims to help families who put money down on homes and met their regular payments, yet cannot take advantage of refinancing made attractive by low mortgage rates because the value of their homes have sharply dropped.
Fed sees unusually prolonged recovery
THE United States' economy would face an "unusually gradual and prolonged" period of recovery as it struggles to climb out of a deep global downturn, the US central bank has warned. Releasing its economic outlook for 2009 on Wednesday the Federal Reserve or Fed said it expected that the economy would contract by 0.5% to 1.3% this year, unemployment would rise to 8.5% to 8.8% and inflation would remain under greater pressure. Bleak economic data reflecting a sharpening slide in housing, trade, industrial production, spending and employment rates "more than offset" any potential impact from an economic stimulus plan, the Fed said, forcing it to cut its economic outlook. — IANS/Washington.
Lok Housing to restate accounts
Business Standard, February 20, 2009, Page 4
BS Reporter / Mumbai
In a first of its kind development, Mumbai-based Lok Housing and Construction is planning to restate its accounts for the past three financial years as the revenue it booked hasn’t materialised after investors and buyers backed out of its projects.
The plight of the Bombay Stock Exchange-listed company may befall on other real estate players, with analysts claiming that many more companies could follow suit by restating accounts.
The developer will write off Rs 225.01 crore worth of profit and Rs 282.14 crore of sales it recognised in its books in the previous financial years, according to the notes on the accounts. The profit to be written off will be marginally lower than that declared by the company.
"Due to the financial meltdown and severe economic recession, some of the parties with whom the company had entered into agreement to sell have failed to meet their commitments and considering the overall interest of the company, the agreement for sale entered into in the past financial years and in respect of which revenues already recognised have been mutually terminated/ cancelled," the company said in a statement to the exchanges recently.
Lok Housing had reported a profit of Rs 112.85 crore in FY08, Rs 91.67 crore in FY07 and Rs 21.86 crore in FY06. The company reported losses prior to these periods. The company would seek shareholder’s approval in May for the restatement of accounts, a company official said. It has already got the court's approval for the same.
As a common practice among developers, Lok Housing recognised sales and profit thereon at the time of entering into such agreements. Lok Housing Chairman and Managing Director Lalit C Gandhi refused to comment on the matter, saying it is sub judice. A source said both the end-users and investors failed to pay money for some of their projects. The company is expected to write off the amounts in one or two quarters.
"Considering the overall interest of the company, the agreement for sale entered into in the past financial years and in respect of which revenues already recognised have been mutually terminated/ cancelled," the company release added.
Analysts said other developers could also come out with such disclosures, given the slowdown and credit crunch faced by home buyers.
Realtors may divert surplus FDI via makeshift window
The Economic Times, February 19, 2009, Page 7
PROPOSED NORM IGNORES END-USE RESTRICTIONS, NULLIFIES FDI CONDITIONS
Rajat Guha NEW DELHI
IN A move to help the cash-strapped real estate sector, the commerce and industry ministry is likely to waive enduse restrictions and allow realty developers to divert surplus foreign direct investment to real estate projects where it was not allowed so far. According to the norms, FDI is allowed only in projects with a minimum investment of $10 million (in wholly-owned subsidiaries) or $5 million in joint ventures, and which has a minimum area of 10 hectares.
As per the proposal, which will require a Cabinet approval before being implemented, a real estate company which has brought in FDI in a project meeting the mandated conditions can now use the surplus funds in another project which may not meet the prescribed conditions. For example, a realty company that has raised FDI for a township in Faridabad which meets the minimum capitalisation and minimum area norms may now use a part of the surplus funds for a project in Gurgaon which may not have got a clearance from Foreign Investment Promotion Board (FIPB). Put simply, while the new norm does away with the end-use restrictions, it also nullifies the mandatory meeting of conditions for using FDI.
In the last FIPB meeting, the board deliberated that in view of the difficulties being faced by the real estate sector, some leeway is required, even if for a temporary period.
“We will soon issue the guidelines to be followed in case of requests for receiving FDI by realty companies engaged in various projects, not all of which are FDI-compliant as per Press Note 2 of 2005,” a senior official directly dealing with the new policy told ET. He asked not to be identified. The official added that the relief would be extended to the realty sector for a temporary period with an in-built sunset clause.
Interestingly, this comes even as the government had recently stepped up vigilance against companies channelling FDI money to projects that had not received FIPB clearance. While examining real estate company Keystone’s proposal in a meeting held in January, the board had asked the department of industrial policy and promotion (Dipp) to set up a monitoring cell to track FDI inflows into non-FDI compliant projects under the veil of FDI. The board was apprehensive that in such cases, there could be a possibility of funds getting diverted to projects that had not been cleared by FIPB.
In fact, Dipp has prepared a draft Press Note on guidelines on induction of FDI into Indian real estate companies with both FDI-compliant and non-FDI-compliant projects, where FDI is required to flow into FDI compliant projects only. Officials say this would be the fourth PN to be issued by the present government before the polls.
Posts
