Bangalore:
Housing Development and Infrastructure Ltd (HDIL) posted steeply lower profit for the June quarter as it struggled to recover from the scrapping of its largest slum redevelopment contract.

The Mumbai-based developer has been battling eroding stock value and high debt. Announcing the financial results on Wednesday, the company said it is focused on reducing debt and completing ongoing projects.

HDIL’s net profit plunged 84.5% from a year earlier to 16.24 crore in the June quarter, and revenue dropped 25.1% to 150.66 crore.

The realty firm had reported a loss of 279.9 crore for the March quarter, having written off 441.98 crore after Mumbai International Airport Ltd (MIAL) terminated the slum rehabilitation contract it had signed with the developer and sought 276.46 crore in damages on account of delays.

HDIL had won the contract in 2007 to rehabilitate slumdwellers encroaching on Mumbai airport land, raising the prospect of a bonanza for the real estate company and its investors.

The country’s largest slum redevelopment and rehabilitation project entailed building new tenements for 85,000 families and relocating them, freeing up 276 acres for MIAL to build a new terminal and other facilities and expand the runway. Based primarily on this, brokerages had forecast yearly revenue growth at HDIL in excess of 50% over the next three years, valuing the stock at a premium.

Following the termination of the contract, HDIL has now taken the airport operator, in which Hyderabad-based GVK Group has a majority stake, to court.

Hari Prakash Pandey, HDIL’s vice-president, finance and investor relations, said the case is still in court.

HDIL’s net debt as of 30 June was 3,630 crore.

The company reduced its debt by 203 crore in the June quarter and has a a debt equity ratio of 0.34 now.

“The debt reduction strategy for the remaining nine months is to cut debt by another 400-500 crore, most of which will be done from internal accruals as cash flows from our projects keep coming in," said Pandey.

Though HDIL isn’t buying new land or starting a new slum redevelopment project in the coming months, it will focus on the execution of four to five ongoing residential projects.

“The company has provided possession of Residency Park, an affordable housing project at Virar West," a distant Mumbai suburb, Sarang Wadhawan, vice-chairman and managing director, said in a release.

Though the company didn’t launch any project during the June quarter, and may not launch any in the current quarter ending 30 September, HDIL is looking to start a phase of a 500-acre township project in Virar in October.

In July, HDIL promoters Rakesh Kumar Wadhawan and Sarang Wadhawan were served a default notice by Indiabulls Housing Finance Ltd for not servicing a mortgage loan. This month, the promoters said they repaid Indiabulls 3.22 crore.

“The company seems to be on the right track because it is reducing debt and trying to kick off some projects. Its cash flows should also get a boost from the 600 crore of FSI (floor space index, or development rights) sales receivables due this year," said Adhidev Chattopadhyay, an analyst at HDFC Securities Ltd.

Shares of HDIL rose 2.3% to 33.4 on Wednesday on BSE, while the exchange’s benchmark Sensex gained 0.72% to close at 19,367.59 points and the BSE Realty Index gained 2.25%.

The stock has lost 70% of its value this year, while the Sensex has dropped 0.3% and the realty index 36.26%.

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