Sobha Q1 net nosedives to Rs 12.7 crore
The Economic Times, July 30, 2009, Page 4
Our Bureau BANGALORE
REALTY major Sobha Developers has seen its net profit nosedive for the first quarter ended June 30, 2009 at Rs 12.7 crore against Rs 50.5 crore for the same period in FY09. Income from operations stood at Rs 177.1 crore (Rs 346.8 crore in the comparable quarter).
Sobha, which bore the after-shocks of the global economic slowdown, has seen a revival in fortunes in Q1 compared to the fourth quarter (Q4) ended March 31, 2009. Net profit in Q1 at Rs 12.7 crore is up 76.39% from Q4 while total income at Rs 178.6 crore was up sequentially 15.6%. “The real estate industry has seen clear signals of revival in demand during the first quarter. With the Indian economy growing at a rate of 6-7% and expected to achieve a higher growth rate in the next couple of years, real estate infrastructure industries are poised to play a more significant role. It will be a domestic driven industry growing at a much faster pace,” a company filing made with the bourses added. On its part, Sobha Developers has realigned debt, brought on board a private equity partner besides successfully completing a QIP raising Rs 500 crore.
According to the filing, these steps have added the much-needed comfort in operations and have helped the company focus on progress in various projects across key cities including Bangalore. The company intends to focus on debt reduction and cost optimisation and believes it is wellequipped to capitalise on the early revival in the Indian economy.
As of June 30, 2009, the company has completed 50 residential/commercial in-house projects and 146 contractual projects covering 31.9 million square feet of built-up space. At present, it has 31 residential/commercial ongoing projects totalling 9.2 million square feet. The company has contractual projects in Karnataka, Kerala, Andhra Pradesh, Orissa, Tamil Nadu, Punjab, Haryana, NCR besides Maharashtra. Sobha’s projects span various segments including plotted development, multi-storey buildings, row houses, villas and integrated townships. On the bourses, the Sobha scrip was down 1.2% at Rs 219 with 3.5 lakh shares changing hands on the BSE.
Thursday, July 30, 2009
Sobha Q1 net nosedives to Rs 12.7 crore
Sobha Developers net down 75%
Sobha Developers net down 75%
The Hindu Business Line, July 30, 2009, Page 14
Our Bureau, Bangalore
Sobha Developers recorded a net profit of Rs 12.7 crore for the quarter ended June 30, 2009, down 75 per cent from Rs 50.5 crore recorded during the corresponding quarter of last year. The turnover was down 49 per cent at Rs 178.6 crore (Rs 348.1 crore).
Mr J.C. Sharma, Managing Director, Sobha Developers, said that downsizing staff and restructuring employee benefits have resulted in reduced employee costs. Last year, during the corresponding quarter, the company had over 3,000 employees, which has now come down by about 1,000 employees. Besides, the company had also effected a 15 per cent cut in employee salaries. Costs were down 44 per cent to Rs 143 crore (Rs 254.1 crore).
Residential projects
He added that there has been a 45 per cent sequential growth in sales for the company, and “the process of this improvement is expected to continue in the coming months.” The company plans to launch residential projects in the National Capital Region, Mysore, Coimbatore, Bangalore and Thrissur this financial year. “We will not be competing in the Rs 20-lakh segment, but wish to compete in the 1,000-sq-ft-plus segment,” he said. The residential units would be priced about Rs 35 lakh (all inclusive), he added.
The company plans to raise about Rs 150-200 crore more during this year, in addition to the Rs 750 crore it had raised through private placements and qualified institutional placements. “We are confident of achieving our targets,” Mr Sharma said, of the Rs 900 crore, the company planned to raise in all.
HDIL net dips 66% to Rs 101cr
HDIL net dips 66% to Rs 101cr
The Economic Times, July 30, 2009, Page 4
Our Bureau MUMBAI
MUMBAI-BASED real estate company, Housing Development Infrastructure (HDIL) on Wednesday reported a 66% decline in its net profit at Rs 101.47 for the first quarter ended June 30, 2009. The company’s net profit for the same period in the last fiscal was Rs 317.94 crore. This is attributed to the slowdown that the real estate sector had been passing through since late 2008.
The company’s net profit however increased on a quarter-on-quarter basis from Rs 61.9 crore in last quarter to Rs 101.47 crore this quarter reflecting a revival in the sector. The total sales of the company stood at Rs 318.62 crore during the quarter compared to Rs 601.13 crore in the corresponding period last year. Sarang Wadhawan, managing director, HDIL said: “We expect to see significant positive changes over the next two quarters.” The real estate sector throughout the country had been going through a difficult period in the light of the slowdown.
The company also said it would issue securities worth $450 million and the EBITDA margins have improved by 9.39% compared to the fourth quarter last year. The company also declared that the debt equity ratio improved and stood at less than 0.5, post the qualified institutional placement (QIP). Earlier this month, the company had raised Rs 1,688.40 crore through QIP. The company’s stock fell by Rs 20.55 or 7.13% at Rs 267.85 on Wednesday.
On Monday, the company in an announcement to BSE informed that resignations of Dheeraj and Kapil Wadhawan, the former directors of the company, have been accepted. This was part of the company’s succession plans, the company officials maintain. Dheeraj and Kapil Wadhawan are also on the board of DHFL.
HDIL’s numbers reflect stabilisation in realty
HDIL’s numbers reflect stabilisation in realty
The Hindu Business Line, July 30, 2009, Page 15
Improved transferable development rights realisation.
Vidya Bala
BL Research Bureau Housing Development and Infrastructure’s (HDIL) financials for the quarter-ended June 2009 are a reflection of the stabilisation being witnessed in the Mumbai realty market.
While the 48 per cent decline in sales and the 66 per cent drop in net profit for the latest quarter over the June 2008 numbers is sufficient indication that the company is far from its peak performance, the sequential improvement (over the March 2009 quarter) suggests that profitability could be back on track.
HDIL’s revenues declined 18 per cent to Rs 295 crore compared with the March quarter; operating profits, nevertheless jumped 87 per cent to Rs 180 crore as a result of better prices from Transferable Development Rights (TDRs) as well as a decline in construction costs. The company has stated that it has sold about 1.8 million sq. ft. at an average price of Rs 1,500 per sq. ft.
Clearly, TDRs accounted for a chunk of the revenues for the June quarter. The average price of TDRs now is also a significant improvement from the Rs 1,000-1,200 per sq. ft. rate at which the company sold in the March quarter.
Operating profit margins at 60 per cent have not only improved over the March quarter, but also exceeded the 44 per cent clocked a year ago, probably reflecting lower material costs. However, the current OPMs do not appear sustainable, as the company had launched residential projects at massive discounts in the June quarter. The effect of this would be felt in its profit margins only after a few quarters. A 40-45 per cent OPM appears more sustainable.
Net profits at Rs 107 crore were a good 73 per cent higher than the March quarter. Pressure from interest costs appears to have abated with a 44 per cent decline in interest cost on a sequential basis. HDIL may see further relief in the coming quarters as a good Rs 1,400 crore of the Rs 1,689 crore raised through qualified institutional placement went to repay loans. With this, the company would not have any principal repayment commitments until October 2010.
HDIL has deployed the rest of the QIP proceeds towards its key project — airport land rehabilitation. The project is expected to gather pace as a result of the infusion.
Going forward, the sustainability of the revived TDR sales/prices (peak rate for the quarter was Rs 2,070 per sq. ft.) and residential sales could hold the key to reviving volumes. In this regard, a marginal improvement in property prices is already visible in the Mumbai market.
Wednesday, July 29, 2009
RBI leaves rates untouched
RBI leaves rates untouched
The Financial Express, July 29, 2009, Page 1
fe Bureau, Mumbai
The Reserve Bank of India (RBI) kept policy rates unchanged in its first-quarter review of monetary policy for 2009-10, indicating that it was preparing to abandon pumping more money into the economy as inflation concerns return. But the finance ministry, while welcoming RBI’s focus on growth, said the time was not ripe for such an ‘exit’ policy. Finance secretary Ashok Chawla told reporters, “An exit policy is certainly at the back of the mind of central banks all over the world. But there is nothing at this point of time…”
In turn, RBI governor D Subbarao has blamed high government borrowing that “clearly militated against the low interest-rate regime the economy requires in the current situation”. On the way forward, his policy said RBI would have to reverse the expansionary measures to “anchor inflation expectations and subdue inflationary pressures while preserving the growth momentum”. According to the finance secretary, however, “(RBI does) not see the need at this point in time of reversing the accommodative and balanced policy, which they have been following so far.”
The end of the soft monetary policy, which was initiated last October, was criticised by industry. Ficci president Harsh Pati Singhania said, “There are signs of revival in business confidence and some reduction in policy rates at this stage would have helped to provide a fillip to corporate investment, thereby boosting economic growth.”
Industry expected a slight easing of the reverse repo—the rate at which RBI buys surplus cash from banks from the current 3.25%. CII director-general Chandrajit Banerjee also said, “The economy could grow at around 7%, as the fiscal and monetary measures have (an) impact on domestic demand.”
In choppy trade, the BSE Sensex closed 43.10 points lower at 15,331.94. But bankers said they did not anticipate lending rates to rise immediately. SBI chairman OP Bhatt said “There is ample liquidity in the system. Rates will remain the same as long as liquidity is comfortable. As credit growth picks up, there may be some pressure on rates.”
Credit rating agency Moody’s said, “Although the global climate is still a little unstable, cutting rates cannot help to immediately boost domestic activity. Instead, policymakers are counting on previous rate cuts to influence market rates now.”
RBI has raised its inflation forecast for the year to 5 % from its April estimate of 4% and pushed the GDP estimate for 2009-10 to 6%, with an upward bias. “The overall macroeconomic scenario continues to be uncertain, although it is expected that the fiscal and monetary stimulus measures will supplement domestic demand in 2009-10. On balance, an uptrend in the growth momentum is unlikely before the middle of 2009-10,” the policy stated.
RBI has argued that inflation will rise because of the large government expenditure and the accompanying borrowing programme, 54% more than in 2008-09. Subbarao said the abrupt increase in government borrowing has resulted in a hardening of yields, which clearly militated against the low interest-rate regime.
According to him, “The first challenge is to manage the balance between the short-term compulsions of providing ample liquidity and the potential build-up of inflationary pressure on the way forward by maintaining the accommodative monetary stance until demand conditions further improve and credit flow takes hold.”
Endorsing the position, ICICI Bank MD & CEO Chanda Kochhar said, “The strong commitment to managing the government borrowing programme in a manner that is not disruptive to markets and does not crowd out private sector investment should give confidence to market participants.”
Subbarao said the challenges for RBI included maintaining policy rates and liquidity conditions conducive to spurring private investment demand, which has been dented by the crisis. RBI has said the government needs to return to a path of fiscal consolidation, which would lend credibility to the fiscal stance and also give predictability to economic agents. It is also necessary to focus on the quality of fiscal adjustment even while pursuing quantitative targets.
According to Subbarao, RBI’s steps had augmented actual and potential liquidity of over Rs 5,61,700 crore since last October.
Rates unchanged, RBI hints at tightening
Rates unchanged, RBI hints at tightening
The Economic Times, July 29, 2009, Page 1
Pegs Growth Rate At 6%, Prods Banks To Lend
Our Bureau MUMBAI
INDIA Inc should take the hint. While prodding banks to cut rates and assuring easy money to stoke growth, the Reserve Bank of India (RBI) indicated on Tuesday that interest rates will not remain low forever and banks will not continue to sit on a mountain of cash.
As inflation rises, interest rates will harden and the surplus money sloshing around in the system will be mopped up by RBI. But till there are “robust signs of recovery”, the central bank has promised liquidity to help a decent GDP growth, which it has pegged at 6% with an upward bias. RBI’s decision to keep key interest rates unchanged in Tuesday’s quarterly monetary policy statement perhaps marks the end of a rate-cut cycle.
In the policy document, RBI governor Duvvuri Subbarao said, “The accommodative monetary stance is not the steady state stance. On the way forward, RBI will have to reverse the expansionary measures...The exit strategy will be modulated in accordance with the evolving macroeconomic developments.”
No one knows when the U-turn will happen, but the money market is already talking about a rate hike next year. “I think the central bank will hike interest rates in April...It will watch inflation, particularly food prices, very carefully and move swiftly when it goes for an unwinding,” said Pradeep Madhav, MD of the biggest bond house, STCI Primary Dealer.
In the next few weeks, only a few banks may give in to RBI’s persuasion and go for a token rate cut.
BEHIND CLOSED DOORS
Guv: There’s room for lending rates to come down
Bankers: But we won’t be able to cut rates further... look at corporates, they haven’t cut prices. Overall demand will rise when companies also lower prices of their products
Guv: So far, lending rate cuts have been less than adequate...
Bankers: Not exactly. A comparison of this quarter’s corporate numbers with the preceding quarter and June ‘08 will show that interest cost has come down
Guv: Loans are getting restructured, so what’s the view on credit quality?
Bankers: Non-performing assets could rise in a few sectors, but bad loans will not go up to the extent the market fears
Guv: Infrastructure projects are a must to boost growth. Can you fund them?
Banks: One-year deposit is as high as 72% of total liability, compared to 52% a few years ago... depositors are not renewing their money with banks. It’s tough to fund long-term assets with such short-term liabilities
India Inc: no news, good news
The Financial Express, July 29, 2009, Page 1
fe Bureau, Mumbai
Corporate India on Tuesday said it could live with interest rates unchanged by RBI, though the real estate and textiles sectors were clearly disappointed that rates had not come down.
A dipstick survey of companies by FE spanning the manufacturing and services sectors show they are pinning greater faith on government spending to improve top lines, rather than policy rates to keep their bottom lines strong. This is because in the current financial year up to June, aggregate credit flow to the commercial sector dwindled to just Rs 5,697 crore, compared with Rs 30,631 crore in the same period of 2008-09--a massive 81% decline, according to RBI data.
However, Niranjan Hiranandani of the eponymous Hiranandani Constructions said, “Due to the unchanged policy, the cost of property construction is expected to increase, leading to lower supply of properties. This will ultimately increase real estate prices in the long term.” He further added that any concession is beneficial in today’s difficult times. Shree Cement Ltd CMD HM Bangur said, “I think there will be adequate finance available in the system for growth and, hence, it is positive.”
RBI data shows that as on May 22, while bank credit to the real estate sector has risen 52% over that of last year, growth in credit for housing has dipped sharply to just 5%.
Echoing the feeling of relief that RBI had not increased rates, Ispat Industries executive director (finance) Anil Surekha said, “As long as rates are unchanged, it’s always good. I think this indicates that the government will not allow banks to increase interest rates. This comes as a good sign for industry as a whole.” “No change is always good,” echoed Grasim president & deputy CFO Sanjeev Bafna.
Until April, the slowdown had caused a drastic fall in domestic as well as international demand, with international prices falling between 15%-40% for various categories of steel. However, following the stimulus package announced by the gov-ernment, and with the higher spend on infrastructure, the sector has seen a recovery.
The sectoral flow of credit from banks to industry slipped to 21.2% by May 22, compared with 27.1% in 2008-09. Overall credit to all sectors declined to 17.6%, against 24.2% year on year.
Banks may not take RBI’s call
Banks may not take RBI’s call
The Economic Times, July 29, 2009, Page 13
While A Few May Cut Lending Rates Marginally, Most Banks Likely To Hold Rates At Current Levels
Our Bureau MUMBAI
AFEW lenders may fall in for RBI’s moral suasion and cut their lending rates marginally, but most banks are likely to maintain status quo. The general consensus seems to be that rates are likely to go up from the next calendar year.
RBI governor D Subbarao has been categorical that lending rates have to come down even without a revision in policy rates. “There is scope for reduction of lending rates within the policy rate adjustment already done by RBI... The lending rate should have come down to 9.5% but they are now at around 10.5% and above so there is scope for banks to reduce lending rates. We have also said that as deposits contracted at higher rates mature and get repriced, the cost of funds will go down for banks and they can reduce lending rates further,” he said.
Incidentally, a host of bankers made it clear to the governor on Tuesday that there was no scope for bringing down lending rates from their current levels. During an interaction with the RBI governor, CEOs of some of the bigger banks said that net interest margins were under pressure. They also told him that while banks had lowered the interest rates for borrowers, corporates have refrained from lowering the cost of their products. In fact, bankers pointed out to RBI that the first quarter results declared by companies clearly indicate that their expenses on account of ‘interest paid to lenders’ have come down over the preceding and year-earlier quarters. This indicates that the cost of funds for corporates has come down.
“Banks have passed on the benefit of easing interest rates to borrowers,” MV Nair, CMD of Union Bank of India, told ET. “Going forward, interest rates are not likely to fall from their current levels.”
Chanda Kochhar, MD & CEO, ICICI Bank, said, “We have cut our prime lending rate by 1.5%, the maximum by any private sector bank. Going forward, the rates would be dependent on credit growth. The rates currently are likely to be stable with a very minimal downward bias.”
Adds Neeraj Swaroop, regional CEO (India & South Asia), Standard Chartered Bank, “Over 90% of our lending is not linked to BPLR and judging our interest rates by BPLR doesn’t reflect the actual situation. Our rates have come down as much as the market rates have come down. We keep reviewing our BPLR from time to time.”
However, some bankers, on condition of anonymity, said they expected any reduction in lending rates to be marginal, at 25 bps. “We do not expect any changes in interest rates immediately. Historically, there is a time lag in terms of repricing of deposits. Therefore, a reduction in lending rates can happen only at a later date. Meanwhile, we feel that rates have almost bottomed out, given that inflation is expected to rise in the second half coupled with high chances of pick-up in credit,” said M Narandran, ED, Bank of India.
Most bank CEOs told the governor that there has been a pick-up in credit. Private and foreign bankers point out that BPLR has lost its relevance. “The borrower owes us no loyalty. If our rates are not competitive, they will go to some other bank. There are very few loans which are linked to the BPLR,” said an official from Axis Bank.
‘There is scope for banks to reduce lending rates’
‘There is scope for banks to reduce lending rates’
The Economic Times, July 29, 2009, Page 13
As Deposits Mature And Get Re-Priced, Banks’ Cost Of Funds Will Go Down And They’ll Have Room For Cutting Lending Rates
Unlike his predecessors, RBI governor D Subbarao is quite direct on what action banks should take place on the interest rate front. The governor has repeatedly stressed on the central bank’s efforts to work in a transparent manner. Following his monetary policy meeting with chairmen of banks, Mr Subbarao addressed the media on RBI’s take on the economy and what transpired in his meeting with bankers . Excerpts:
On the scope for bank lending rates to come down…
There is scope for a reduction in lending rates within the policy rate adjustment already done by RBI. Even if we take into account the inflation rate and returns to depositors, the lending rate should be around 9.5%, but they are 10.5% and above… so there is scope for banks to reduce lending rates. We have also said in the policy statement that as deposits mature and get repriced, the cost of funds will go down for banks and they will have room for reduction of lending rates.
On when can the market expect a reversal of the exapansionary monetary policy…
We will look at non-oil imports, we will look at credit growth, we will look at inflation and we will look at manufacturing. However, it will be inappropriate and improper to speculate on the future. We have been debating to exit strategies in our internal meetings, but are not in a position to give any more details. In fact, central banks around the world have been talking of exit strategies… you must have heard Fed chairman Ben Bernanke’s statements and US president Barack Obama’s roadmap.
On the math behind RBI’s 6% growth rate estimate…
We debated a lot internally on the growth rate for the economy. Besides numbers, we also looked at when the forecasts were made. Several of the forecasts were made before the monsoon situation became clear. But let us first consider the risk factors for the economy. A lot will depend on agriculture. We all know the rainfall situation at present is 19% below normal. The foodgrain production-weighted rainfall index number is at 69 against 129 at this time last year. The agriculture performance could spill into industry and services, with a lag effect. Exports have been negative for the past eight months. Although exports only account for 15% of the economy, they are significant, but they will depend on the state of the global economy. Lastly, investments (in the economy) also have to pick up, although some bankers said credit from the housing and retail side have picked up.
On RBI’s stance on open market operations…
We will follow the calendar that we have laid out in respect of OMOs and MSS desequestering. But let me clarify that the calendar is only indicative. It is very difficult to predict liquidity, but we do try to estimate it regularly. Should the numbers deviate from our estimates, we will tailor the OMO programme accordingly. But, by and large, we will stick to the calendar. We want to give the market as much certainty as we have, but cannot give you what we do not have.
On the need for a government roadmap for fiscal consolidation…
The government has given a number of 6.8% for the current year and I believe in the mediumterm policy document, there are numbers for the next year and the year after.... we have said it will be good for the economy, the government, the central bank for everybody if those numbers are fleshed out. They have to be backed up by expenditure and revenue numbers. Also, in the process, the focus is on the quality of fiscal adjustment, i.e, how much do you spend on capital expenditure and how much do you spend on plan expenditure. Since I have been with the finance ministry in the past, now I can step back and speak more comfortably about fiscal adjustments from the Centre. But, it’s really the quality of fiscal adjustments that will be important. We do not expect market borrowings to be higher than what was mentioned in the Budget. Even the fiscal implications of the measures announced this week are small. Having said that, should there be any increase in borrowings from the government, RBI should (be able to) manage that.
On analysts’ concerns that restructuring is dressing up of books…
The focus on restructuring is not to hide anything. It is to provide liquidity to sectors that would have found it otherwise unviable. It’s so that they can get over difficult conditions and get back to business. Besides, its not that restructuring does not require provisioning. In fact, we are providing floating provisioning facility to banks for the restructured assets. So, the risk management systems are still in place. Some of the restructured loans could turn sour, but bankers tell us these are at acceptable levels. However, there is no proposal to extend the restructuring deadline from hereon. On continuation of floating provisions facility, we have an open stance and are awaiting international norms.
On the weakening correlation between CPI and WPI inflation indices…
Historically, the CPI has tracked WPI. The last time when I had come for the April policy, we had done some research which showed that the tracking has somewhat lagged. Now, we find that the correlation between CPI and WPI is further weakening. I had said earlier that all four CPI indices are at an elevated level and in the past month have moved up. So there is concern over prices that ordinary consumers are seeing in the market and that is a concern that we have kept in our mind while formulating this policy.
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