Realty cos back on growth track: D&B

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The report,that studied the profiles of 68 leading real estate companies,not only provided insight to the current trends and challenges in the sector ahead but also also gave a detailed analysis about the financial performance of 30 listed Indian real estate companies.

“The real estate industry has shown positive signs of recovery in FY 10-11 after a preceding year of slump in property demand. Our study revealed that many real estate companies undertook various debt and capital restructuring measures owing to an increased debt burden in FY 09,” D&B India’s President and CEO,Kaushal Sampat,said in a statement here.

He further said that the companies started to off-load their expensive short-term loans and replaced them with lower cost long-term loans,which had a positive impact in FY 10.

Further,the companies focused on deleveraging by increasing their equity capital which in turn lead to a fall in the debt-equity ratio,Sampat added.

The study also indicated that improved sentiments in the capital markets in FY 10 and FY 11 also meant that real estate developers were able to raise capital through IPOs and QIPs,he said.

The real estate developers were able to raise Rs 1,658-crore through QIPs in the first-half of FY 11 and Rs 7,240-crore through QIPs and Rs 650-crore through IPOs in FY 10.

The companies also went through capital restructuring measures following which overall interest expenses of the real estate companies declined by 10 per cent in FY 10 as compared with the previous year.

“Interest expense as a percentage of debt also reduced to 11 per cent in FY10 from 13 per cent in FY 09,” he added.

The report also stated that in FY 09,real estate companies faced a 38 per cent decline in sales against 82 per cent growth in the previous year. However,in FY 10 as the economy showed signs of recovery,sales grew by 4 per cent.

Another interesting fact was that the mid-sized real estate companies reported better recovery in sales with growth of 16 per cent in FY 10 as compared to large companies – which recorded sales growth of only 2 per cent during this period.

Companies started to off-load their expensive short-term loans and replaced it with lower cost long-term loans. This had a positive impact in FY 10 as these companies saw an overall decline in the short-term loan component by 41 per cent. Correspondingly,long-term loans increased by 17 per cent in FY 10.