DLF to sell wind energy business to French major
The Financial Express, December 15, 2009, Page 4
Rajat Guha, New Delhi
The country's largest real estate company, DLF, is selling its wind energy business to the world's second-largest energy major, Gaz de France Suez, for around Rs 950 crore. The deal has been finalised and the sale is likely to be concluded by January end, a person involved with the transaction told FE. Ernst & Young is understood to have advised DLF on the deal. The sale is part of the company's plan to get out of non-core businesses.
When contacted, a DLF spokesperson declined to comment.
Companies, including Akuo Energy, Adani Power, IL&FS, UK's BG Group and Essar Power, were in the fray to buy out DLF's wind energy business. DLF had created a separate subsidiary called DLF Wind Power for its wind energy business prior to the sale.
The sale of the business is part of DLF's efforts to reduce its debt, which is more than Rs 12,000 crore at present.
DLF registered a 77% drop in its net profit during the quarter ended September, as demand for real estate continued to be sluggish compared to last year. The company registered a profit of Rs 439.7 crore during the quarter, compared to Rs 1,934.1 crore during the comparable quarter last year. Sales during the quarter also dipped 53% to Rs 1,751 crore.
While declaring the results, DLF MD Rajiv Singh had said that the company would focus more on leveraging on the core assets and sell its non-core business in a bid to generate revenue and subsequently retire its debts.
"We remain committed to deleveraging the balancesheet and actions on sale of non-core assets are currently underway," Singh had said.
On the wind power front, he had said it had met with a good response from strategic partners and due diligence of the assets was underway.
Besides, the company has also made an exit from long gestation projects such as hotels. It had already withdrawn from large township projects at Bidadi (Karnataka) and Dankuni (Bengal).
Earlier in the year, the company had sold assets worth Rs 1,000 crore and sold its stake in the joint venture with Ackruti City for Rs 200 crore. All efforts are directed at bringing down the company's debt burden. Apart from the sale of land and other non-core assets, the company has received Rs 336 crore from the West Bengal government after it exited the Dankuni township.
The management had also indicated that DLF will be refunded Rs 850 crore from the Delhi government for exiting the Delhi Convention Centre project. DLF's total area for development has fallen by more than 40%, from 751 million sq ft to 425 million sq ft, mainly due to its exit from the Bidadi township project in Karnataka and Dankuni project.
Tuesday, December 15, 2009
DLF to sell wind energy business to French major
DLF is putting its house in order
DLF is putting its house in order
The Financial Express, December 15, 2009, Page 6
Akash Joshi
The DLF management's move to bring DLF Assets Ltd (DAL), a company owned by the promoters of DLF, into the fold of DLF CyberCity, has been on the cards for some time now. The Street believes the restructuring will improve transparency and bring to and end transactions between DLF and DLF Assets. According to analysts, there is unlikely to be any cash outflow from DLF and DLF CyberCity will issue warrants to the promoters. They are hoping that DLF should ultimately end up with stake close to 60% stake in Cyber City, the subsidiary in which the rental assets will be housed. The promoters of DLF will hold the remaining 40%. The merger will help monetise the combined rental assets, to be housed in the subsidiary DLF Cyber City, on the Singapore Stock Exchange. The management hopes to raise around $1.5 billion through the listing. Of course, investors will be looking forward to a swap ratio which is in favour of DLF.
DLF was selling finished properties to DAL, which, in turn, would rent them out. At the end of the September 2009 quarter, DLF Assets owed DLF around Rs 2,600 crore. In the June 2009 quarter, DAL had paid DLF Rs 2,500 crore. Analysts expect DLF's rental-yielding assets to increase by 20% from the existing 11 million sqft during 2009-10, thereby providing stability to the company revenues. The company's rental revenue, which in financial year 2010 stood at approximately Rs 500 crore, is likely to increase to Rs 750-800 crore by the end of the year. DLF's annuity income will increase as DAL currently has over 5 million sqft of lease-generating assets that are further expected to increase to 8 million sqft. DAL currently has 6.5 million sqft of commercial space earning rentals at an average of Rs 55-60/sqft. Besides another 6.5 million sqft is likely to be delivered over the next couple of years, say analysts at Prabhuda Lilladher. The stock closed at Rs 382.65, on Monday, marginally above its previous day close.
Parsvnath to raise Rs 240 cr via stake sale
The Financial Express, December 15, 2009, Page 4
Rajat Guha, New Delhi
Delhi-based realtor Parsvnath Developers plans to raise around Rs 240 crore by diluting its holdings to private equity funds in its various residential as well as commercial projects. The process is expected to be complete by the end of fiscal 2009-10, company chairman Pradeep Jain told FE.
"We are in constant talks with investors for funding requirements. I am reasonably confident that we would be able to raise Rs 242 crore by the end of this fiscal," Jain said.
So far, Parsvnath has raised Rs 115 crore from Red Fort Capital in two tranches — Rs 168 crore from qualified institutional placement (QIP) and Rs 75 crore from Sun-Apollo, a real estate private equity fund.
Last week, Parsvnath offloaded around 50% stake in a special purpose vehicle that is to be set up to execute the Parsvnath Exotica Part-II project in Gurgaon.
Sun Apollo, a $630-million, India-focused realty fund, is a joint venture between Sun Group led by Delhi-based Khemka family and US-based AREA Property Partners.
With this deal, Parsvnath Developers has raised Rs 358 crore in the last six months through private placement of shares and stake sales at project level. The fund-raising exercise is meant to downsize its debt amounting to Rs 1,600 crore by at least half by the end of this fiscal. Parsvnath posted nearly three-fold jump in its net profit at Rs 61.42 crore for the quarter ended September 30, against Rs 21.90 crore in the year-ago period. Its total revenue, however, declined to Rs 200.77 crore from Rs 226.36 crore in the review period.
Jain added that the company is not looking to launch any new projects and would concentrate on delivering the existing 42 million square feet of properties in the next 24 months, of which 90% belong to the residential segment. Parsvnath has already received revenue of Rs 3,500 crore from these projects and additional Rs 3,500 crore is expected during the completion and possession process. "I expect 2010 to be slightly better than 2009 and margins would remain at healthy levels of 25-30%," Jain said.
SEZs may have to take the green route
SEZs may have to take the green route
The Financial Express, December 15, 2009, Page 11
Rituparna Bhuyan, New Delhi
The Indian government has linked up its biggest investment idea in recent years with Climate change concerns. The commerce and industry ministry on Monday unveiled its plans to make all special economic zones (SEZs) eco-friendly by mandating the use of renewable energy sources, and energy efficient buildings that conform to internationally recognised standards. Further, the norms, that have been issued as draft guidelines, require SEZ developers to create nurseries as well as provide electric rickshaws for transport within the zone.
When operationalised, developers will have to ensure that SEZ buildings are highly energy efficient by complying with standards set by Indian green building council and energy conservation building code of the Bureau of Energy Efficiency. Even existing buildings will have to comply with these standards within two-three years after the norms are operationalised. The measures taken by SEZs to comply with the norms will be audited and certified by the Indian green buildings council and Tata energy research institute.
Though the draft guidelines are yet to be finalised, developers are not enthusiastic. “For future projects, there is no problem. But if they are made mandatory for existing SEZs, it will be near impossible to comply to many of these norms. It will also have a large impact on the cost of development of SEZs,”said P C Nambiar, director, Poonawala group of industries which set up one of the first bio-pharma SEZs in India.
Experts say there are long-term gains from the plan. “In the short-term, it means additional cost, regulation and permissions. But in a long- term perspective, it is a win-win situation for developers and units. Such norms had to come in some point of time and it is goods for the country and the industry,” said Tapan Sangal, partner, senior manager, PricewaterhouseCoopers.
At the moment, there are nearly 580 SEZs, out of which 100 are operational and have started exporting. The tax free zones account for more than a quarter of Indian exports, in rupee terms.
The new norms also propose that 2% of the total energy consumed by SEZs will have to be sourced from renewable energy sources like solar energy. In addition, the dependence in renewable energy sources will have to be increased to 20% of the total energy consumed by the zones. Moreover, a quarter of the external lightning and half of the billboards, traffic lights and signage will have to be powered by solar energy. The new norms ban use of incandescent lights within SEZs while it makes use of LEDs mandatory for lights in public spaces.
Vehicles for internal transportation within SEZs will have to be driven by electrical energy, CNG or bio diesel within three years of establishment. The norms also make the use of electric rickshaws mandatory and calls for separate lanes for bicycles.
To ensure that SEZs do not have an impact on the environment, it has been proposed that solid waste from the zones will either be converted to vermi-compost or used for power generation. Waste like paper, cardboard, plastics will have to be diverted to local vendors engaged in recycling. Developers will also have to use sewage treatment plants so that no effluents are released from the zones. Moreover, 30% of the rain water will have to be harvested for use within the SEZ.
Residential realty sales bounce back with 40-50% growth in 2nd quarter
Residential realty sales bounce back with 40-50% growth in 2nd quarter
The Financial Express, December 15, 2009, Page 12
Mona Mehta, Mumbai
Top builders witnessed a growth of 40-50% in sales of residential ready-possession and under-construction properties across metros during the second quarter of the current fiscal. There has also been a rise of about 5-10% in resale registration of residential apartments amidst the recovery in stock markets and the positive consumer sentiments, according to industry experts.
The residential real estate sector started picking up from July after a lull until June, and has bounced back with a good rise in demand. However, genuine buying is being seen only if builders offer practical rates which offer value for money, and not hike rates to unrealistic levels. With the move, experts feel the growth in sales of residential real estate, which constitutes 80% of the overall real estate market, is poised to gain momentum in the third and the fourth quarters.
Ambar Maheshwari, head—investment advisory, DTZ International Property Advisers said, “During the second quarter, there has been a 5% rise in the number of registrations for resale apartments across metros, especially in Mumbai and Delhi. Developers have been successful in doing so because they have reshaped the resale model to suit per-apartment pricing. End-buyers, who had earlier preferred to buy three to four-bedroom apartments, are now looking at buying two-bedroom apartments.”
After selling 316 residential apartments in Delhi and Gurgaon during the first two quarters, Delhi-based Raheja Developers now hope to sell approximately 1,500 apartments in the Delhi-NCR region. Harinder Dhillon, vice-president, marketing, Raheja Developers Limited, says, “We sold 316 apartments largely on account of just one new relatively small-size project launch and finishing sales of older projects which we had in first half of 2009-10. The second half will witness at least four new project launches and we expect to sell about 1,500 apartments in this period in Delhi and NCR.”
Mumbai-based Royal Palms India witnessed a 300% jump in residential real estate sales, both in the ready-possession and under-construction segments. Dilawar Nensey, joint managing director, Royal Palms India, said, “Overall, in the Mumbai real estate sector, the growth has been about 50% during the second quarter of 2009-10. We expect this trend to continue for the coming quarters as the recession in India is over and consumer demand across industries is picking up”. Nensey also added, “While our sales in Q1 were negligible, during Q2 we sold over 750 residential apartments in the affordable-housing category. We have on offer another 750 apartments, which we expect to sell during the current fiscal. This reflects a massive growth over the corresponding period in the previous year, in which apartment sales were affected by the slowdown.”
Ahmedabad is also poised to prosper in real estate terms, feel industry experts. Talking about Gujarat, Ashutosh Limaye, associate director – strategic consulting, Jones Lang LaSalle Meghraj JLLM, said, “There is a lot of thrust on infrastructure development. Gujarat is perhaps the only state that puts infrastructure first and then effects planned development. The state government development agencies for urban development and city administrations play an important role in overall development, including real estate. Also, industrial development has helped Gujarat to emerge as a prime SEZ and industrial location.”
Godrej Properties which has real estate projects in 10 cities is strongly focusing on developing a mixed-used development project, spread across 330 acre. Adi Godrej, chairman, Godrej Group, said, “Residential real estate segment has recovered and is doing exceedingly well.” Places in South India, especially Bangalore and Mysore, apart from Chennai and Kerala, have started witnessing residential and retail developments by top builders from markets in the South, West and East.
India tops Asian real estate investment markets
The Hindu Business Line, December 15, 2009, Page 3
Study points to Mumbai, Delhi as good destinations.
Our Bureau, Mumbai
India leads the pack of top real estate investment markets in Asia for 2010, according to a study by PricewaterhouseCoopers (PwC) and Urban Land Institute, a global non-profit education and research institute.
The report, which provides an outlook on Asia-Pacific real estate investment and development trends, points out that India, particularly Mumbai and Delhi, are good destinations. Residential properties are viewed as more promising than other sectors and Mumbai, Delhi and Bangalore top the pack in the hotel ‘buy' prospects as well.
The study is based on the opinions of over 270 international real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.
Asia-Pacific hold up
Since the global economic meltdown, asset markets in the Asia-Pacific region have been holding up surprisingly well compared with their peers in Europe and the US. While pricing and rentals in the region fell steeply in 2008 and early 2009 in line with those in the West, markets across the region were boosted in the second half of the year by the remarkable resilience of the Chinese economy, which was buoyed by a series of fiscal and monetary stimulus measures.
As a result, many Asian markets have begun to flash positive signals toward the end of 2009. Transaction volumes have rebounded, although from a very low base, led overwhelmingly by China, the report said.
“The relatively stronger fundamentals and the lack of dependence on foreign demand are seen as key advantages as India has managed to mitigate the severe recession that has hit most other Asian countries.
“The recapitalisation by players in equity markets across Asia has been successfully replicated by some Indian developers, which has helped ease the liquidity stresses,” said Mr Gautam Mehra, India Leader for Real Estate Practice, PriceWaterhouse Coopers.
Unlike the US and Europe, distress sale in Asia had been relatively minimal. This was due to several factors, including a relative abundance of liquidity; low loan-to-value ratios, leaving borrowers less vulnerable to loan servicing problems when the prices declined, the report said.
Further, Asian banks remain well-capitalised, having experienced few major losses from derivative investments and also because of the ability of many large investment institutions to recapitalise via the capital markets, (particularly in Australia and Singapore) allowing them to pay down debt.
Tentative rebounds
Despite the recent bullish atmosphere, rebounds in most Asia-Pacific markets (with the exception of China) appear tentative and fragile. Although Asia-Pacific governments will probably be able to sustain high rates of liquidity for the foreseeable future, their near term prospects are probably tied to developments in the West and in particular the US, where de-leveraging is far from over.
“The idea that the recession is likely over gives rise to the widespread notion that global economies will now revert gradually to the same trajectories as in the past, which is normally what happens when recessions end,” said the ULI Chief Executive Officer, Mr Patrick L. Phillips.
He said the aftermath was likely to be different because the imbalances that led to the global downturn remain embedded in the system and could not be quickly eliminated. Moreover, with spending by the Western consumers no longer acting as the primary engine of global economic growth, a new driver was needed to boost the world's economy, and, in turn, the global real estate industry.
Monday, December 14, 2009
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.
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.
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