Thursday, January 29, 2009

HDIL Transcripts - Q3 Results.

(HDIL) Q3 profit before tax adjustment came in at Rs 75.6 crore compared with Rs 270.2 crore. Its standalone net sales were down at Rs 313.8 crore versus Rs 496.6 crore.

Sarang Wadhawan, MD, HDIL, said the company’s interest cost is below 14%. The company, he said, holds substantial land bank in Mumbai.

Wadhawan said the transfer of development rights prices are trading around Rs 1000-1200 per sq ft. "TDR prices have corrected substantially since September-December 2008."

Here is a verbatim transcript of the exclusive interview with Sarang Wadhwan on CNBC-TV18. Also watch the accompanying video.

Q: Your profits have been boosted by a tax write-back and a MAT adjustment. But revenues are way below Street expectations at Rs 314 crore. Anything that did not work out as planned?

A: Actually you have to understand that HDIL follows a different method of accounting. We follow a project completion method of accounting rather than the other methodology. For us the sales have been booked, whatever has been completed has been booked in this quarter.

We did not account for any TDR sales that happened in the last quarter and this quarter. We do have almost 1 million square feet of TDR in stock, which will be accounted for in the next quarter.

Q: Let me just go through the TDR if I can. Could you tell us, on the airport SRA project? Can you shed light on it?

A: As far as the airport project is concerned, we have started 75% of the buildings on our Kurla property.

Q: Could you just walk us through the amount of TDR available with you and how do you believe the pricing of the TDR was on December 31 2008 and how do you expect it to be by March 31 2009 and you were also commenting on how much the Kurla property have you started to build?

A: As far as the Kurla property is concerned, we started 75% of the buildings. They are in various stages of development. At the same given point in time, the government has given us the preliminary approvals. We also are at the verge of getting our first environmental clearance. Once that comes in we did clear it in the last environment committee meeting that will be a big upside to that project. That basically means that the Government of India has actually cleared that project as well.

As far as TDR is concerned we will have almost one million square feet of TDR as stock in trade. From September till December, since TDR is a B-to-B product, we have seen that TDR prices have corrected substantially. They are currently maintaining anywhere between Rs 1,000-1,250. At times if there is a greater demand, prices can in a higher range but at current levels these prices will maintain. As we go along, we will see how that pans out.

Q: Nevertheless your revenue fall is fairly significant. It is about a 35% fall in your revenues. How did your interest cost pan out?

A: Our interest cost are covered profit this profit. We do not have any problem there. As far as our revenues are concerned, as I said earlier, we follow different methods of accounting. It is only when the project does actually get completed, is when we book the income. We do not follow a percentage completion methodology like other players and we are very conservative as far as our accounting methodology is concerned. So what we have booked this quarter were the projects which have been just completed. We have actually launched almost three new projects. We have as far as Kurla is concerned – we have a residential component coming there and as far as Andheri is concerned it is huge project which we have started with 300 apartments and almost 1.2 million square feet of commercial space. That will bring in revenues over the next two-years to almost the tune of Rs 1,200 crore to the company.

Q: You have a huge land bank in Mumbai. Have you seen any liquidity problem, which means is raising money a problem? Why is the market valuing the stock the way it is, looking at the kind of land banks you are sitting with? What interest rates have you been paying to borrow money at the present time?

A: Our interest rates are anyway below 14%. It is not above that, our interest costs. At the given point in time, we do hold substantial landbank in Mumbai City but you also have to understand that that land bank comes relatively cheaper to us since we are one of the largest slum rehabilitation companies in the country.

The valuation of the stock is a different thing altogether. It is on every analyst how he values the company. Things have not changed that drastically from where we started.

Q: Could you tell us how much land bank you are sitting with right now, and if you are talking about SRA landbank, perhaps if you could shed some light, which is completely IOD (Intimation of Disapproval) & CC (Commencement Certificate), which is clear at the moment. How much of clear landbank are you sitting with? What FSI do you have on it?

A: As far as the airport scheme is concerned, we have four FSI on the entire airport scheme, which has been declared as a vital public project. As far as the entire landbank is concerned, we have almost 192 million square feet. That is increasing as the different phases of the airport project are coming in.

The other projects where IOD and CCs are already in place, it is very difficult since we have almost 30 projects in line. So, it is very difficult to tell you how many IODs and CCs we have in place. But most of our projects are on the verge of either being completed or on the beginning of construction. The company is putting a lot of focus on execution as we go along. We do believe that people who will actually put focus there will survive this downturn.

Q: What will you do by way of EBITDA margins in the fourth-quarter? What was your EBITDA margin in the third-quarter?

A: Our EBITDA margin in this quarter was down 62%, but at the same given point in time, we do expect that because of the fall in interest rates across the board, we have seen some sort of good rise in residential properties, commercial properties are also being sort after by people. We do expect that the fourth-quarter should be better than the third-quarter but it is very difficult to put a number to it.

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