Unitech net up 15.8%, belying slowdown fears

Unitech net up 15.8%, belying slowdown fears
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First Published: Wed, Jul 30 2008. 11 35 PM IST
Updated: Wed, Jul 30 2008. 11 35 PM IST
New Delhi: India’s second largest developer by market value, Unitech Ltd, has posted an increase of 15.8% in first quarter net profit as it benefited from sales of apartments on land it bought cheaply years ago before a surge in property valuations.
Net profit rose to Rs423.31 crore in the three months ended 30 June, from Rs365.67 crore a year earlier. Profit expansion was slower than sales growth. The realtor’s revenue for April-June rose 17.19% to Rs1,054.37 crore from Rs899.67 crore in the year-ago quarter.
Unitech’s Ebitda (earnings before interest, tax, depreciation and amortization) margin, a key measure of profitability of operations, rose to 60% in the quarter from 55% in the April-June period of 2007.
“The biggest advantage we have is an aged land bank,” said Sanjay Chandra, managing director of Unitech. “Our margins, therefore, would be different than people (developers) who started recently.” Unitech says it has a land bank of 14,000 acres and some 800 million sq. ft of saleable area.
Indiabulls Real Estate Ltd, the fourth-largest developer by market value, posted a 3.8% decline in first-quarter net profit to Rs 6.8 crore from Rs 7.07 crore a year ago. Revenue rose to Rs33.46 crore from Rs20.7 crore.
DLF Ltd, India’s largest developer, which announces its first quarter results on Thursday, is forecast to post a profit of Rs1,950 crore, according to a Bloomberg survey of analysts. In April-June 2007, DLF posted a profit of Rs1,520 crore.
One analyst said it was too early to say that Unitech had been insulated from the troubles of the real estate business, which is slowing as inflation and interest rates rise, making it more expensive for consumers to buy houses and apartments.
“The revenue that they (realtors) show right now was for projects that were sold 12-18 months back,” Shailesh Kanani, an analyst with Angel Broking Ltd, said. “While the cash comes in for developers as soon as the booking starts, since developers follow the project completion accounting method, they cannot book revenues till 25-30% of the project is completed.”
The slowdown in the real estate sector is likely to be reflected in the revenue of developers only in the second half of the year or in 2009-10, he said.
The ideal selling price of a house at which there is still demand from users is Rs40-65 lakh, Chandra said. Some 20% of the 55 million sq. ft that Unitech has under development in the National Capital Region and in Kolkata is being used for building mid-income houses; this will increase to 35% in the next six months.
Sumit Sharma of Bloomberg contributed to this story.
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First Published: Wed, Jul 30 2008. 11 35 PM IST