Wednesday, May 25, 2011

Orbit Corporation Results.

Orbit Corporation declared its fourth results on Wednesday. Its revenues plunged 40% (QoQ) at Rs 68.12 crore for the quarter ended March 31, 2011. During the same period, the net profit declined 18% (QoQ) at Rs 19 crore, as against Rs 23.1 crore in the previous quarter.

As sales slumped at a fast pace in Jan-March earnings of the leading Mumbai developer, Pujit Aggarwal, managing director of Orbit Corporation, reasoned that the sluggish execution due to several commercial and regulatory norms have delayed supply by about 12-18 months.

"Although, volumes have dried up, but the appetite at reasonable price persists. Going forward, sales are likely to pick up by the festive season," he adds.

Below is the verbatim transcript of his interview with CNBC-TV 18's Mitali Mukherjee and Sonia Shenoy. Also watch the accompanying video.

Q: Your company's earnings look quite bleak, reporting the lowest revenues compared to many quarters now. Is there a sharp reduction seen in sales velocity?

A: The reduction in numbers has been primarily on the account of the fact that the regulatory environment has not been conducive in Mumbai. So certain projects where we had sales have not been recognized because of the inability to achieve the 25% milestone, the threshold required for recognizing those revenues. Hence, has been poor and that’s the fact of the matter.

Q: How much of that would space over into FY12? For this year what would you intend to do at least on the sales and volume off take front in the first half?

A: We have about Rs 850 crore of sales, which has already taken place and it’s not yet been recognized. The outstanding order books size exists at about Rs 800 plus crore. A substantial part of it would get recognized in this particular financial year. Clubbing everything to our current sales, we expect to start clocking in gains this year and post better result in the next year

Q: Tell us a little bit about realizations- Traditionally, Mumbai has been quite a resilient market but we have seen some sort of a dip in realizations for a couple of quarters. How do you hope to stabilize it in FY12?

A: Unfortunately, the prices have been moving up as because project launches have been few; the supply position is poor and it’s bad. Therefore, on one side the sales are weak because the environment is not very conducive. People are not in the mood to buy. On the other hand, prices are not coming down because supply is limited.

As far as pure sales are concerned, we have clocked sales at about Rs 60,000-65,000 in areas like Napean Sea Road, approximately 10-12% more than what we did in the previous quarter. In Lower Parel, the average sales price reported was over Rs 19,000-20,000 and we have been selling at Rs 21,000 – 22,000. In suburbs, where we earlier sold at Rs 9000-9500, we are now selling at about Rs 10,000-10,050.

This adds 5-10% increase across all segments in this quarter. Hence, the prices have not come off. Also, the regulatory environment in Mumbai is easing out as the parking lot FSIs and many other things have been cleared up by the government.

Q: The problem is not just diminishing sales, it’s also debt levels. Given your outlook in terms of FY12 sales off take, how much do you think you can scale down debt concurrently with that?

A: We have debt of about Rs 800 crore excluding the CCDs. Those CCDs have got converted in May. Therefore, it will remain at Rs 800-805 crore levels. Yes, debt is a bit of a concern because the cost of debt has also gone up from 13.6% to 14.1%. Hence, it is going to affect bottom-lines. However, the EBITDA margins as compared to the previous year have gone up. We were working on an EBITDA margin of about 30%, now it’s gone up to 37% this yea, a 7% increase on better sales realizations, better prices. Also, we have been able to cut down on few costs from the construction side.


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