Since last July, Housing Development and Infrastructure Ltd (HDIL) has tapped markets to fund expansions and reduce debt. News reports state its intent to raise about Rs2,000 crore through a qualified institutional placement (QIP).
In July, it had raised Rs1,688 crore through a QIP. What’s more, it has just completed raising around Rs1,084 crore through non-convertible debentures (NCDs).
According to an analyst with a leading Mumbai-based broking house, part of the Rs2,000 crore will be used to pay for the land parcel for its airport rehabilitation project. HDIL will relocate around 85,000 families for GVK Power & Infrastructure Ltd’s Mumbai airport project.
HDIL has debt outstanding of Rs3,300 crore, down from Rs 4,100 crore in April 2009, which in turn has cut interest costs from 8.3% of revenue in the March 2009 quarter to around 4.7% in the December quarter. As the NCD proceeds replace high-cost debt, interest costs could come down by about 0.5-0.75 percentage point.
Yet, uncertainty remains on the Mumbai transfer development rights (TDR) prices, which constitute a major portion of HDIL’s revenue. TDRs are at around Rs3,000 per sq.ft after hitting a low of Rs1,000 per sq.ft during the real estate slump. A decision is awaited from the Mumbai high court on the case where developers are seeking higher floor space index (FSI), a measure of how high the building can rise.
“Volumes, however, have fallen steeply, as players expect Mumbai HC to rule in favour of increasing FSI in suburbs from 1x to 1.33x,” says a report from India Infoline Ltd. If it happens, this along with the earnings dilution after the QIP, could prevent a rise in the stock, in spite of the reduction in interest costs.
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