HDIL Q2 performance falls short of expectations

HDIL Q2 performance falls short of expectations

Bangalore: A boost in trading of development rights and robust home sales helped Housing Development and Infrastructure Ltd (HDIL) increase its second-quarter net profit by 38.26% over the preceding three months. The performance, however, fell short of market estimates. Compared with the corresponding period last year, the net profit declined 44%.

In the June-September quarter, the country’s third largest realtor by market value and its biggest slum developer, launched three large residential projects. It also sold nearly 1.7 million sq. ft of so-called transfer of development rights (TDR) at an average price of Rs2,000 per sq.ft, about 40-60% higher than in the first quarter.

Slum TDR is a tradable paper issued by state governments in exchange for free development of slums by builders, who use the paper to develop other sites.

“HDIL, going ahead, would continue to fare well because TDR prices will pick up and sales will happen. Also, HDIL, being a Mumbai player has gained because the city was one of the first to bounce back after the slowdown," said Shailesh Kanani, senior analyst, Angel Broking Ltd.

HDIL’s net profit fell to Rs148.59 crore for the September quarter, from Rs265.68 crore a year ago but rose from Rs107.4 crore in the first quarter indicating a sequential improvement. Revenue declined 19.14% over a year ago to Rs381.04 crore, HDIL said in a statement on Thursday.

HDIL shares declined 5% to Rs329.00 on Thursday on the Bombay Stock Exchange, whose benchmark index, Sensex, fell 1.42% to close at 16,052.72 points.

“We are currently focusing on Mumbai and are not looking at markets such as Hyderabad, Cochin and Pune where we had planned projects," Hari Pandey, vice-president, finance and investor relations, HDIL, told analysts in a conference call. “We are also looking at launching about 4.5 million sq.ft. of residential space by March, which will give back about Rs1,000 crore in the next three years."

Pandey said the company benefited particularly from TDR sales, which accounted for about 80% of its revenues, and that it expects to sell about 1.5 million sq.ft. of TDR every quarter. HDIL, after raising Rs1,680 crore in a qualified institutional placement (QIP) in May, has considerably reduced its debt to Rs3,271.14 crore.

HDIL has to set aside Rs250 crore in the next two quarters as income to be booked after a raid by the Income Tax department in September.

In another results announcement, South India-focused realty firm, Sobha Developers Ltd, said its second-quarter net profit dropped to Rs27.5 crore from Rs44.5 crore a year ago as revenue fell 21% to Rs224 crore due a continuing slow property market in Bangalore and other cities.

Another Bangalore firm, Puravankara Projects Ltd, said on Wednesday its September-quarter revenue increased 62% year-on-year to Rs226.39 crore on strong sales in its affordable housing projects in Chennai and Bangalore, developed by its unit Provident Housing Ltd.

Net profit increased 21% to Rs60.86 crore.

Analysts said Puravankara’s shift in focus to mid-market homes has given it a push.

Sobha, whose debt equity ratio stands at 0.88 now, plans to judiciously launch another 8 million sq.ft. of development over the next year.

“Both Sobha and Puravankara need to still be conservative about pricing their projects because unlike Mumbai, where the property market has already revived, Bangalore and other markets are still lagging behind," said Ramnath S., director (research), IDFC SSKI Securities Ltd.