Mumbai: After riding on bank-based valuations on land, real estate developers now are turning to a new accounting method that allows booking profits on ongoing projects to keep valuations high.
Most real estate developers, who are planning to list their companies, are beginning to book profits, based on the proportion of projects that have been completed.
Pune-based realtor Kolte Patil Developers Ltd that plans to raise between Rs230 and Rs275 crore from a public offering of shares later this month, with an issue of 19 million shares, is one such firm.
Kolte-Patil has priced its shares between Rs125 and Rs145 a share. The issue will open on 19 November and close on 22 November. The company is diluting 25.25% of its equity.
Kolte Patil had a net profit of Rs2.8crore for fiscal 2006, compared with Rs83.5 crore in fiscal 2007. Total income too jumped from Rs55.1 crore to Rs251.4 crore in fiscal 2007.
The leap in profits came from a switching to the newer method of accounting, said Kolte Patil’s chief executive Hardeep Dayal.
“We moved from project completion to percentage completion method last year, which accounts for this jump,” Dayal said.