Bangalore: In December 2006, P.N.C. Menon, chairman of Sobha Developers Ltd, was so happy after his company raised Rs570 crore through an initial public offering that he donated 70kg of gold to Guruvayur temple in Kerala.
Credit crunch: A plot owned by Sobha Developers in Bangalore. The company’s stock has plunged 90.76% from February last year. Hemant Mishra / Mint
A little over two years later, the developer is requesting lenders to reschedule Rs1,800 crore in debt that was due on 31 December.
“We are still in the process of negotiation to reschedule the dates for payment, which is basically trying to turn our short-term loans into long-term loans,” managing director J.C. Sharma told Mint on Thursday. The company has seen its net profit fall by 88% to Rs7.5 crore and revenue by 49% to Rs181 crore in the December quarter compared with a year ago.
To be sure, the property developer in southern India is not alone in its plight. India’s real estate firms are reeling under a fund crunch and falling property values. Their market value has also been declining, reflected in the Bombay Stock Exchange’s realty index shedding 85.25% in 12 months when its benchmark Sensex index fell 49.97%.
New Delhi-based Unitech Ltd announced this month that it has rescheduled at least 75% of its debt of Rs25 billion due by March, the Reuters news agency reported.
The sharp decline in property markets has led DLF Ltd, the country’s largest real estate developer by market value, to plan selling assets and reorganizing debt in the coming quarters, as reported in Mint on 2 February.
Sobha Developers is now trying various ways to push sales, earn cash and repay some high-interest debts. After failing to sell even after announcing a blanket 8% discount in November on all its properties, it is now trying out a new way to gather people to showcase various properties lying unsold for months.
Through a two-day seminar-cum-exhibition this weekend, a first of its kind for the developer, Sobha Home Mela will display 18 of its residential properties in different Bangalore neighbourhoods. For the first time, it will sell plots in north Bangalore. The exhibition is scheduled to be held on a 1.5-acre plot on Church Street in Bangalore’s central business district that the company has been trying to sell.
“The seminars and discussions are primarily meant to brief buyers about the current slowdown and about the various benefits attached to home-buying in the present situation,” Sharma said. “Properties on display range from below Rs2,000 per sq. ft to above Rs6,000 per sq. ft.”
In a report after Sobha’s December quarter results, Mumbai-based brokerage Angel Broking Ltd said the developer did not have any project launches between October and December last year as its net sales slumped.
Sobha’s maiden venture in northern India in partnership with QVC Realty, a Rs2,000 crore integrated township in Gurgaon near Delhi, has also been indefinitely delayed. It has also stalled its Mysore residential venture.
According to a 30 January report by Centrum Broking Pvt. Ltd, the company went on an overdrive to aggressively acquire land, mostly in Bangalore, after its public stock offering, borrowing heavily for the purpose.
Shobha Developers’ stock has plunged 90.76% from Rs875—its 52-week high on 29 February last year—to Rs80.80 on Thursday.
Reuters contributed to this story.