Home / Markets / Mark To Market /  Prestige Estates’ sales hit a record, but Street’s eyeing Blackstone deal closure

South-based realty developer Prestige Estates Ltd saw robust bookings in the December quarter and reported the highest ever pre-sales of 2.3 million square feet for 1,570 crore in Q3FY21, aided by two new launches. Sales volume in 9MFY21 was 21% higher than in 9MFY20.

With this sharp increase in sales volumes, sales losses during the covid-peak have largely been compensated for, analysts said.

The company expects to maintain similar pre-sales momentum for Q4FY21 in the residential segment with a further ramp-up in new launches, it said in a post-earning conference call.

Debt burden
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Debt burden

Prestige has planned launches of new residential projects in Bengaluru, Noida, and Mumbai, the management said.

An upbeat residential sales outlook is welcome, but investors are eagerly awaiting the closure of the Blackstone deal. Prestige Estates has signed a term sheet with Blackstone Group for the sale of specified assets in the office, both operational and under-construction, mall, and hotel segments for a transaction value of 9,160 crore.

The letter of intent for this deal was signed in October. The delay in the closure of the deal is one of the reasons for an underperformance in the company’s shares vis-à-vis the Nifty Realty index.

A part of the proceeds from this deal is likely to be used to pare debt, which is comforting, considering its highly leveraged balance-sheet. At the end of the December quarter, its net debt reduced marginally from 8,670 crore in the September quarter to 8,460 crore. Its key debt metric, the net debt-to-equity ratio, is at 1.5 times and after the Blackstone deal, the management expects to maintain it at 0.5 times.

“The Blackstone deal is expected to be completed in Q4FY21. Exact utilization of funds is a key monitorable considering its high debt and aggressive growth plans. The management intends to be debt free in its resident segment, so post the deal-closure, debt would be a function of new capital expenditure on office and retail assets," said an analyst with a domestic brokerage house, requesting anonymity. At the end of the December quarter, debt in its residential segment stood at around 2,100 crore.

After the deal closure, Prestige plans a further capital expenditure of 9,160 crore for its annuity project, which will have annuity rentals of 250 crore. The management said it expects rentals to increase to 2,700 crore over five years through construction completion of ongoing and under-planning assets. Further, the management plans to fund this capex through a mix of debt and equity and may again consider monetizing its rebuilt portfolio through an asset sale.

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