HDIL seen monetising 2 million sq ft TDRs

This story first appeared in DNA Money edition on Wednesday, Nov 14, 2012.

Housing Development & Infrastructure Ltd (HDIL) is likely to see a major contribution from TDR (transfer of development rights) business to its revenues in the second half of this fiscal.

Currently, the TDR market is sluggish due to a slow pick-up in construction activity and slower TDR generation, but analysts expect revival in both demand and generation in H2.

“Though construction and sales activities have remained sluggish in Mumbai even after the new development control rules norms, we expect a revival in TDR demand and generation in the next few quarters. We believe with HDIL’s Kurla project getting conversion approval from commercial to residential project, around 2 million sq ft of TDR will get generated and monetised in H2. Further, any revival of the Mumbai International Airport Ltd project would also be the key trigger for TDR generation,” said Shaleen Silori, research analyst, ICICI Securities in a recent note on the company.

The Mumbai-based realtor’s entire sales during the September quarter were from floor space index (FSI) sale of around 2.4 million square feet in Virar, a Mumbai suburb, which helped the company to post a 52% rise in net profit for the quarter at Rs 158.56 crore.

Sarang Wadhawan, vice chairman and managing director, HDIL, said the company’s focus continues to be on project execution and debt reduction. “We expect positive and robust growth in the future quarters as well,” said Wadhawan.

HDIL had launched two new projects of around 1.4 million sq ft in the second quarter and added 16 million sq ft project in Virar, which, analysts said, would enable further FSI sales in the coming quarters.

“The realtor’s strategy of deleveraging its balance sheet through FSI / asset sales augurs well. The company is targeting sales of around 1.5 million sq ft – 2 million sq ft per quarter going forward with realisation of over Rs 1,000 per sq ft,” said Silori.

The analyst said that HDIL’s project execution remains steady with four developments expected to achieve completion this fiscal, exerting a positive impact on the profit & loss account during the second half. “This would keep the earnings buoyant,” the analyst said.

HDIL’s gross debt currently stands at Rs4,030 crore, which is down Rs71 crore from the June quarter. The company is expected to repay around Rs600 crore of debt by the end of this fiscal.