Omaxe in black, but margins under pressure

Omaxe in black, but margins under pressure

New Delhi: New Delhi-based property developer Omaxe Ltd reported a profit of Rs45.12 crore in the three months ended 31 March, compared with a loss of Rs41.62 crore a year earlier, as it benefited from increased demand from buyers in small cities.

Net sales increased almost sixfold to Rs378.20 crore in the term from Rs64.01 crore in the year-ago period, Omaxe said on Thursday.

For the full fiscal, Omaxe’s net profit more than doubled to Rs112.54 crore from Rs46.72 crore in the previous 12 months. Net sales for the year ended 31 March rose to Rs1,001.2 crore from Rs798.7 crore in the previous fiscal.

“Fiscal 2010 has been comparatively much better from fiscal 2009 for various reasons. The sales have improved considerably and especially in the tier II and III cities..," said chairman and managing director Rohtas Goel.

Property developers are emerging from the downturn of 2008-09 that hurt demand for houses and apartments and caused prices to drop. Accelerating economic growth has led to renewed demand in the real estate sector.

Omaxe’s Ebitda (earnings before interest, tax, depreciation and amortization) margin, a key measure of operating profitability, rose to 19.6% in 2009-10 from 18.5% in 2008-09.

Still, margins have been under “a slight stress", said Goel. He said consumer demand had prompted the company to restructure its property portfolio and convert proposed high-rise developments into so-called independent floors that typically consist of the ground plus two or three floors. The low-level developments offer lower margins.

“Moreover, cost of some of our projects launched in 2006–07 have gone up due to addition of interest, which added to the stress on the margins," Goel said.

Omaxe shares rose 0.61%, or Re0.55, to Rs91 on the Bombay Stock Exchange on a day when the benchmark Sensex gained 278.56 points, or 1.7%, to 16,666.40.