Mumbai: Through the past 3 months, the HDIL stock has more than more than, in line with some of its peers that recorded sharp gets, as well as ideas to decrease debt. The share has obtained 45% through the past month on expectations of good results. And, the company did not disappoint — increased revenues (up 47 % year-on-year), improving cash streams and debt decrease in the March quarter were positives. At Rs 110 crore, the company’s net profit for the March quarter (against a loss of Rs 280 cr in the year-ago period) was better than expectations, led by revenue from the Premiere project in Kurla (Mumbai), asset sale & tax reversals.
As the company follows a project-completion method of accounting, the completion of the Kurla residential project helped to post higher numbers.
JPMorgan experts consider in FY15, revenue & earnings growth will see a important increase owing to completion of 3-4 residential projects & new floor-space-index (FSI) sales. During the March quarter, the company concluded new FSI sales worth Rs 200 cr; these were accounted for by its Goregaon & Vasai-Virar projects in Mumbai’s suburbs.
Although slowing sales have been an issue, the Street is also anxious about the company’s debt. HDIL’s consolidated net debt stands at Rs 3,284 cr, even after repayment of about Rs 500 cr in the past 2 quarters, such as repayment Rs 360 cr in the March quarter. Although client advances & collections (HDIL collected Rs 221 cr on this account in the March quarter) have aided repayments, realizations from earlier FSI sales and the sale of its 45 per cent share in a hotel project in Mumbai (part of its associate company, HDIL Leisure) also helped.
Aided by increasing cash flow, HDIL estimates debt reduction of Rs 600-800 cr in FY15. In add-onto higher client collections on new launches & existing inventory sales on the operational front, higher asset sales at Kurla and Hyderabad could increase cash flow and help decrease debt. In this consider, response to the 550-acre affordable township project (at Virar, Mumbai) in the 2nd half of FY15 is significant.
While there has been progress on various aspects, many experts continue to have a ‘sell’ rating on the HDIL stock. For most, the key concerns are the high promoter share pledge (96% of the 37 & share), litigation relating to the airport project and debt. Of the 11 analysts tracking the share, 6 have ‘sell’ ratings, 4‘hold’ and 1‘buy’. The consensus target price is Rs 74 and, given the current price of Rs 96, there is little scope for further appreciation.
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