Indian Stock Market

Vijay Shanthi Builders to launch PARK AVENUE project worth Rs 200 Crores

Vijay Shanthi Builders Ltd has announced that the Company is all set to launch its new Affordable Housing Project called Park Avenue, in mid January 2010. The majestic project is located at No.3, Vengadamangalam Road, Kandigai, Mealakottaiyur, Kelambakkam, Chennai- 600 048, comprising of approximately 8,16,500 sq. ft of saleable area.

The Project value of Park Avenue amounts to about Rs. 200 Crores. The project is a select combination of an array of about 950 apartments and about 20 villa homes. A sophistication of the blend of best crafted amenities makes Park Avenue an unbelievable package. The amenities include Departmental stores, multipurpose hall, recreation hall, indoor games, gym, aerobics/ health club, creche, parlour, water bodies, walk way, O.A.T, Gazebos, Children’s Play Area, Park, Elder’s Park, Skating Rink, and Landscaped Spaces.

Nitesh Estates is a Bangalore-based real estate company planning to raise funds by IPO .

Nitest real estate cis constructing Ritz Carlton hotel and several residential and commercial buildings, plans to raise Rs 550 crore by listing its shares on the stock markets early next year. The company is expected to submit its draft red herring prospectus to Sebi in the next six weeks, two people advising the company on its capital restructuring plans told ET.

Sources, who did not want to be named, said the company will be diluting close to 30% shareholding through the IPO. Nitesh Estates’ executive director LS Vaidyanathan confirmed that the company is looking at raising money and “IPO could be one of the routes.” He declined to share other details.

Nitesh Estates has had three rounds of private equity till now. At present, hedge fund Och-Ziff has a 25% stake in the company. Citi Property Investors (CPI) is also invested in the SPV for the Ritz Carlton hotel in Bangalore. Sources said the realty player has engaged Morgan Stanley and three Indian banks for its proposed IPO and a fresh round of private equity infusion.

The funds raised will be used for the construction of 19 residential projects, a city centre mall in high street Indira Nagar in Bangalore and the proposed 267-room Ritz Carlton in the city. The Rs 125-crore firm has close to 15 square feet of developments lined up over the next four years. Part of the money will also be used for acquisition of new joint ventures. The company works only on the JV model to carry out its projects.

In recent times, Nitesh Estates has changed its focus from very high-end residential projects to mid-segment housing in the Rs 20-40 lakh category. Earlier, the focus of the company was high-end residential, which will not be abandoned totally — it is working on a villa project in Goa. The focus of the company is on four cities — Bangalore, Chennai, Kochi and Goa. The company expects the market to stabilise by the end of the year.

 DLF on Saturday said it has bought back over 76.38 lakh equity shares worth Rs 140.69 crore and will close the offer with effect from May 6. 

“The company, having purchased the requisite minimum number of equity shares, has decided to close the buy-back with effect from May 6,” DLF said in a filing to the Bombay Stock Exchange. 

All bought back shares would be extinguished and no order for the offer shall be placed after May 4, it further said. 

“As on May 1, the company has bought back over 76.38 lakh equity shares for an aggregate amount of Rs 140.69 crore,” it added.

Realty player Suncity Projects today announced its plans to develop four retail cities in the country with an investment of around Rs 2,000 crore by 2011.

The retail cities, under the brand name ‘Jewel of India’ would come up at Greater Noida, Indore, Jaipur and Mohali.

The first of these cities would become operational in Jaipur by 2011 and would be spread over an area of 40 lakh square feet. It would house premium retail brands like Lifestyle, Shoppers’ Stop, Pantaloon and Westside among many others.

Beside retail area, these cities would also house hotels, office places and entertainment zones.

“This is one of the most ambitious projects in the retail space. ‘Jewel of India’ will house some of the most prominent brands of the country along with local handicraft of the region and will redefine the entertainment criteria for the customer,” Suncity Projects VP (Retail) Vijay Arora told reporters here today.

The Jaipur retail city would house Johari Bazaar showcasing traditional Rajasthani jewellery, a five star hotel, business suites, food courts, six-screen multiplexes, besides other entertainment segments, he added.

Maytas Properties Ltd has announced the launch of its first IT/ITES Special Economic Zone (SEZ), with an investment of Rs 2,500 crore, at Bachupally on the outskirts of Hyderabad.

The company has also signed up the first client, Wells Fargo India, a wholly-owned subsidiary of US-based financial services company, Wells Fargo & Co.

The client would occupy a fourth of the total 60,000 sq ft ‘Incubation Space’ that Maytas Properties has created initially, said K. Thiagarajan, Chief Executive Officer.

The SEZ will be spread over 74 acres and will have a total built-up area of eight million sq ft.

It would be developed in 4-5 phases. The first phase, with 1.3 million sq ft would be ready by October-December, 2009, he told newspersons here on Thursday.

Pvt Equity finance

The funds would be raised through debt-equity route. Already, Maytas Properties has raised private equity funds of Rs 600 crore for four projects, the SEZ being one of them, he explained.

It has been designed by New York-based architects Skidmore Owings & Merrill (SOM), who designed the Sears Towers, Chicago, said Sanjay Chawla, Business Head (Commercial & SEZ).

The SEZ, which would be walking distance from the Maytas Hill County, a large integrated township, which is ready for occupation, is also Green rated by the Green Building Council, he said.

The June quarter ’08 results for the real estate sector are expected to be lackluster. According to the estimates of brokerages, performance is likely to be much lower than the corresponding quarter in the previous year. Rising interest rates, tightening monetary policy and fall in property prices are cited as some of the concerns for the sector.

The sector is also expected to witness pressure on margins. Both small as well as large realty players are expected to post dismal performance. “In Q1FY09E, we expect companies to struggle given the difficult operating environment. We expect realty companies to face difficulty in booking incremental sales; focus will shift towards executing ongoing projects” said an ICICI securities report. Reduced unit sales are likely to result in a drop in net sales. Growth in the overall industry sales is likely to be 39% on a year-on-year (YoY) basis. This is much lower compared to the triple digit growth reported by many of the players in the earlier quarters.

However, analysts expect that out of all the listed companies, only Indiabulls real estate may see a triple digit growth given the lower base effect. On YoY basis, revenues for DLF, HDIL and Sobha are estimated to grow at 27%, 23% and 27% respectively. On a standalone basis this growth seems to be decent. However, it is lower as compared to what these players were showing during the time of their initial public offers.

Though sales growth might be good, margins are expected to be under pressure, particularly EBIDTA margins. Companies may witness about 5-10% average drop in EBIDTA margins on account of high input costs and lower realisations. For Delhi based developer Unitech, EBIDTA margin is anticipated at 20%. The number is much lower at 10% for its peer, Parsvnath.

The situation at the bottomline doesn’t seem to be any different. With alternate sources of funds getting dried up, builders are facing huge cash crunch. Higher working capital loans are eating into the net profits. Developers with highly leveraged balance sheets would be the worst hit. However, the companies, which have tweaked their business model to increase volumes, appear to be better placed than the other players.
DLF, Puravankara and Peninsula Land are expected to report PAT margins
upward of 30%.

The overall PAT margins for the June quarter are expected to be at 30%.
The expectation of a somber performance has been looming large on the performance of the real estate companies on bourses in last couple of months. The BSE realty index has fallen by 43% since April’08 as against the drop of 20% in the Sensex.

Unitech Ltd today said it has received Rs 740 crore from global investment bank Lehman Brothers Real Estate Partners for a 50 per cent stake in the country’s second largest realty firm’s project.

“On satisfactory completion of all the conditions under the transaction documents, Unitech Ltd today received subscription amount of Rs 740 crore,” the realty major said in a filing to the Bombay Stock Exchange.

Lehman Brothers Real Estate Partners have been allotted 50 per cent stake in the initial phase of a master-planned project on the Western Expressway of Mumbai.

The construction cost for the initial phase would be borne by Lehman Brothers Real Estate and the Western Expressway JV, a joint venture of Unitech Ltd and its local partners, the filing added.

The initial phase entails development of one million square feet of office space out of the total developable area of around 18 million square feet.

Lehman Brothers’ Real Estate group is a capital and advisory services provider to the real estate firms.

The group has presence in all of the major international markets, with investment bankers in New York, Los Angeles, London, Milan, Tokyo and Hong Kong.

Goldman Sachs, the global financial powerhouse, has picked up a minority stake in Sterling & Wilson, a Shapoorji Pallonji group company, for $50 million. No other financial details were available.

Sterling & Wilson is one of the leading mechanical, electrical and plumbing (MEP) contracting companies in the country. It is one of those few companies in India that offer this kind of services, people acquainted with the industry said.

The fund infusion by Goldman Sachs would supplement the existing support from the Shapoorji Pallonji group and enable the company to accelerate its growth plans both domestically and internationally, a top company official said. Avendus Capital was the financial advisor for the transaction.

While realty industry as a whole is estimated to grow at an annual rate of about 20% fro the next few years, there’s a growing trend towards consolidation and organised structure.

Life Insurance Corporation of India (LIC), which is among the largest property owners in India, is planning to acquire land worth Rs 2,000 crore this year to develop commercial and residential complexes.

This will be in addition to the Rs 1,100 crore it spent last year for purchasing lands across the country.

The public sector insurance giant has identified Kolkata, Jaipur, Agra, Vishakhapatnam and Bangalore as possible cities where it may acquire land and develop it.

LIC had hired consultants, which had identified the growth centres in the country and based on the report, the company intends to invest in real estate. “We will evaluate the locations, which earn higher returns when we invest,” a company executive said.

The insurer is next only to Indian Railways in terms of property ownership in the country and, at present, it holds 1,708 properties in the country which are estimated to be worth around Rs 20,000 crore. In the eastern region alone, the life insurer owns 187 properties.

While a part of the real estate has been acquired by LIC in the last five decades of its existence, it also inherited a majority of the properties owned by it at the time of nationalisation in 1956. Most of the inherited real estate is in prime location, typically in central business district in most cities, including the metros.

A bulk of the commercial complex developed by LIC is being used to earn rental income, company executives said.

In Kolkata, for instance, the state-owned company is developing around 700,000 square feet of commercial area opposite the Science City, LIC zonal manager R R Dash said.

The company acquired the five acre plot from the Kolkata Municipal Corporation for over Rs 276 crore through a bidding process and is working on a 50-storied commercial building that may be the tallest building in the eastern city. It has already shortlisted around 10 design consultants for the project that is estimated to cost around Rs 400 crore.

LIC Chief Engineer BK Banerjee said that during the last five years, the PSU’s rental income has increased four folds and during 2007-08, in the eastern zone it stood at Rs 22 crore.

“We expect that in the current fiscal the rental income would be close to Rs 30 crore in the Kolkata region. We would like to double this in the next two years,” Banerjee said

The originally proposed 10,000-hectare Mumbai Special Economic Zone (MSEZ) project, being set up by Reliance Industries Chairman Mukesh Ambani and his associate Anand Jain on the outskirts of Navi Mumbai, appears to take off with the Maharashtra government clearing the developer’s rehabilitation and resettlement (R&R) package.

MSEZ Pvt Ltd, which is executing the project that will cover 45 villages in Raigad district, had declared its R&R package in February 2007. The company had announced compensation of Rs 25 lakh per hectare for land under paddy cultivation and Rs12.5 lakh per hectare for varkas or unproductive land.

The multi-product SEZ has received in-principle approval from the Union government. Originally promoted by Gujarat Positra Port Infrastructural Ltd, the zone saw Reliance Industries Chairman Mukesh Ambani and close associate Anand Jain pick up a stake in it.

In April 2007, an empowered group of ministers decided that no SEZ can exceed 5,000 hectares in size. In effect, under current norms, the Mumbai SEZ cannot exceed 5,000 hectares.

MSEZ has offered to return 12.5 per cent fully-developed land to associations, cooperatives or companies formed by project-affected persons (PAPs). Each PAP’s share will be linked to the land sold to the SEZ developer. The company had offered cash compensation to those who did not want a share of the PAP land.

It had also offered vocational training to one person from each PAP family and landless labourers and small artisans, who do not have any land of their own. In addition, the landless were promised a subsistence allowance for two years.

Last week, the Rehabilitation and Resettlement Authority chaired by the state’s minister for cooperation and rehabilitation Patangrao Kadam cleared the MSEZ package. State’s rehabilitation and aid secretary Ramesh Kumar confirmed the development.

Sources said the Raigad District Collector has convened a meeting of sarpanchs and other elected representatives from the 45 affected villages to officially convey the state government’s decision.

When contacted, an MSEZ spokesperson said, “We welcome the state government’s decision and will implement the R&R package both in letter and spirit.” He, however, refused to comment on the amount of land acquired by the company.

Vaishali Patil, convenor of the Anti Mumbai SEZ Action Committee, said, “Villagers from all the 45 villages have decided to refuse the package as we are opposed to SEZ itself. We had decided to go to the meeting called by the district collector armed with a resolution passed by the gram panchyats but we were informed that the meeting has been postponed indefinitely.”

A state industry ministry source said that the developers had been able to buy around 2,500 hectares directly from the farmers, of which 1,000 hectares is contiguous land enough to get the formal approval from the Board of Approvals (BoA) for multi-product SEZ.

Mukesh Ambani-controlled Reliance Industries had planned two SEZs spread over 10,000 hectares. While one of them was planned near Mumbai another project is lined up in Jhajjar (Haryana) but both ran into trouble on land acquisition.

Mumbai-based firm will invest Rs 18,000 crore in 12 years.

BSEL Infrastructure Realty plans to set up a company in Malaysia to execute its operations in that country.

The Mumbai-based company has signed a memorandum of understanding with Malaysia’s Iskandar Regional Development Authority (IRDA) to develop properties in Johar Bharu region of Malaysia. The company has plans to invest Rs 18,000 crore in the next 12 years.

The new company will be either made a subsidiary of BSEL Infrastructure Realty, or its UAE subsidiary BSEL Infrastructure Realty FZE.

Dharmendra Raichura, managing director, BSEL, said that the company will use the proceeds from UAE projects to finance the Malaysian projects. The company generated revenues of Rs 300 crore in 2007-08 from the UAE operations and expects to make Rs 700 crore in the current financial year. BSEL will borrow funds to finance the projects.

The company will develop 70 million sq ft of space in three phases with 10 million sq ft in the first phase and double in every subsequent phase. It will invest Rs 2,500 crore in the first phase and Rs 5,000 crore in the next phase.

Raichura said the company expects returns of 35 per cent to 40 per cent from the project. Private equity companies invest in realty projects in India with expectations of 25-30 per cent rate on investment.

“Johar Bharu is a 25-minute drive from Central Singapore, where property prices are 25 times more than the rest of the country. The authority plans to transform Johar Bharu into the next hot spot after Singapore in five to seven years. That is why we chose that city,” Raichura said.

BSEL will get a tax holiday on land sales and premises sales till 2015 and exemption on rental income till 2020.

Larsen & Toubro (L&T) has announced that its property development division will spend Rs 3,500 crore to develop a commercial complex at Seawoods railway station in Navi Mumbai. Spread over 40 acres of land the company will also develop a railway station in the area. over the next three years, the company informed the Bombay Stock Exchange.

L&T and the City and Industrial Development Corporation of Maharashtra (Cidco) signed a development agreement today. The companies plan to complete the devel;opment project over the next 5 years.

Cidco, which is responsible to devlopment of new urban areas, had floated this proposal in mid-2007. L&T was one of the three qualified developers and bagged the project by bidding Rs 1,809 crore.

The project will involve the development of a railway station, large format retail and entertainment space, multiplexes, office complex, and premium category hotel and service apartments.

L&T is in the process of short listing international architects to develop the concept and master plan for the project, it told the BSE

Indiabulls Real Estate Ltd has informed that Indiabulls Power Generation Ltd (IPGL) has been awarded the Letter of Intent for Bhaiyathan Thermal Power Project (Bhaiyathan TPP) in Chhattisgarh state by Chhattisgarh State Electricity Board (CSEB). IPGL is a subsidiary of Indiabulls Power Services Ltd (IPSL), a subsidiary of Indiabulls Real Estate Ltd (the Company).

Chhattisgarh State Electricity Board (CSEB) had invited bids for procurement of power produced on Long Term basis from Project comprising building, owning, operating, maintaining of a coal fired thermal power project at Bhaiyathan in Chhattisgarh. The project includes development of captive coal mines containing proven reserves of 349 million tonnes in District Korba of Chhattisgarh to provide low cost coal supply to the power project. 35% of power produced from the Bhaiyathan project is available for merchant sale at market rates and the remaining 65% has to be sold to CSEB at the quoted levelised tariff. CSEB shall be soon handing over the land, water and environmental clearances for the project.

The DLF group has deferred the Singapore listing of DLF Office Trust, the real estate investment trust (REIT) of DLF Asset (DAL), till the market condition improved, said sources close to the Gurgaon-based real restate group.

DLF Asset has received investments worth $600 million from hedge fund DE Shaw and Lehman Bothers. DLF may now raise Rs 2,000 crore through private trusts or a private placement by March end.

‘‘They had the approvals and written commitments from investors. The issue would have sailed through but they didn’t want to get into a situation similar to Reliance Power, where it becomes difficult to sustain the price,’’ said sources.

DAL may now create a private trust, which works basically like a REIT, except that it’s not listed and has no retail participation.

The REIT market in Singapore is down by 25-30 per cent, which may have lead to the decision to put on hold the listing.

DAL was targeting to raise around $1.3 billion. Now, DLF will raise at least $500 million which it was supposed to receive for the assets sold to its sister firm DAL, said merchant banking sources close to the group.

A REIT is a property investment trust that raises money from investors by listing on exchanges and uses funds to buy out investments from a developer. It then leases out the property, using the rental income to pay dividend.

Earlier, real estate major Unitech had put on hold a $1.5 billion qualified institutional placement (QIP) issue planned for the first quarter of 2008 in the light of the instability in the domestic stock markets and the global liquidity crunch

Tough lending norms, an unfavourable primary market and subprime woes may squeeze the money flow to the domestic property market. Real estate deals are expected to slow down and fancy valuations projected by developers could witness a deep correction, industry officials said. “Our recent experience is that valuation expectations for deals have moderated.

Developers have been increasingly willing to negotiate on terms and conditions, including controls, percentage of divestment and valuations, for SPV-level investments,” Sourav Goswami, managing director of Walton Street Capital India — a leading US based real estate fund — said.

Given the investor apathy for IPOs, developers may have to knock the doors of private equity (PE) investors. Nitesh Estates chairman Nitesh Shetty said, “On a fair valuations, the PE firms are keen to struck deal with the developers. Properties with clear titles, right location and time of delivery are the crucial parameters of the PE funds. If these terms met, valuations may not a issue.” Nitesh Estates had struck three large scale PE deals in the past two years.

“Global uncertainty on the capital flows would also have its impact on the investment scenario in the Indian market. This would in turn affect deal values and values in the real estate sector in the short term attest,” Balaji Rao, India head of Starwood Capital — one of the largest real estate and hospitality fund in the US — said