Unitech Ltd,India’s No.3 real estate developer by market value,said its quarterly profit slumped 98 percent because of high borrowing costs and a slowdown in house sales.
Thirteen interest rate increases by the central bank between March 2010 and last October to fight inflation have dealt a severe blow to the country’s debt-laden developers.
The higher rates pushed up the cost of repayments and deterred potential homebuyers,while companies have also been squeezed by the rising cost of raw materials and slowdown in construction activity.
Net profit fell to 22.6 million rupees ($0.42 million) for the fiscal fourth-quarter ended March 31 from 1 billion rupees a year earlier. Net sales dropped 32 percent to 7.16 billion rupees,the company said late on Tuesday.
Analysts on average had forecast a net profit of 1 billion rupees on sales of 7.56 billion rupees.
Unitech’s costs as a percentage of sales rose to 97 percent during the quarter,up from 84 percent in the same period a year previously.
Unitech also holds a near one-third stake in an Indian telecoms joint venture with Norway’s Telenor.
The companies are in dispute over Telenor’s plan to scrap the venture and migrate its business to a new company after the JV’s telecoms permits were ordered to be revoked by India’s Supreme Court,which in February declared all permits awarded in a scandal-tainted 2008 sale illegal and quashed. ($1 = 53.8050 Indian rupees)