The first quarter results of real estate major HDIL indicate an improvement in the domestic realty sector. Not only are volumes increasing, but prices are also on the rise.
Despite declines in both sales and profit margins during the June quarter, the fall was less than anticipated and the pace of decline is slowing. Revenues decreased by 47% year-on-year to Rs 318.61 crore from Rs 601 crore in the same quarter the previous year. With more than three-fourths of its revenue coming from low-yielding land development and slum rehabilitation scheme projects, the margins have taken a significant hit. Operating margin also fell from 58% to about 43%. Net profit stood at Rs 107.47 crore compared to Rs 317.9 crore reported in the corresponding quarter of the last year.
In this quarter, HDIL sold less than 1.8 million square feet of TDR at an average price of Rs 1,500 per square foot. It is expected to cumulatively sell around 6-7 million square feet of TDR in the financial year 2010. HDIL has managed to restructure a major part of its debt liability, with repayments due only by October 2010. Due to the completion of the mall and multiplex at Kandivili, a Mumbai suburb, about Rs 21 crore worth of investments have been transferred to fixed assets from the Profit & Loss account in the current quarter. Since the company follows the project completion method for revenue recognition, it is only in 2011 that the ongoing residential projects will be completed.
Regarding the airport project, phase I is expected to be completed by the fiscal year 2010, and land acquisition for other parts of the project is ongoing. Recently, the company has entered into a rental-housing scheme with the MMRDA. This is anticipated to add 30 million square feet of space to its existing 196-million square feet of land bank.