India's major realty company Unitech's performance for the quarter ended December 31, 2011 was characterised by lower sales, contracted margins, slow execution of projects and an unchanged debt burden.
The consolidated net profit of Rs. 58 crore has been the lowest ever in recent years.
The company's project execution also has been slow. Low revenues & high cost hit the Unitech's operating margin, which was 21 per cent in the quarter against 32% a year ago. Increased tax and interest cost also hit the bottom line. The company nevertheless is among the few real estate companies to launch new projects during the quarter. Its focus on low cost, affordable housing has helped it to generate cash flows and monetise its land bank instead of looking at selling non-core assets to augment funds like other real estate companies.
Though it has a comfortable debt equity ratio of 0.43, its absolute net debt is still high at Rs. 5,400 crore. Unitech's cash flows are being utilised to meet construction cost & service debt; but the flow has not been adequate to cut debt.
On a sequential quarter basis, there has been no reduction in net debt levels. Unitech has an estimated land bank about 7,000 acres with an average cost of acquisition of land of nearly Rs. 250 per sq. ft. This is the biggest strengths of the company. It should look at liquidating non-core assets them so that it is able to substantially reduce its debt. In case interest rates fall, the core real estate business of Unitech has the potential to grow better
The consolidated net profit of Rs. 58 crore has been the lowest ever in recent years.
The company's project execution also has been slow. Low revenues & high cost hit the Unitech's operating margin, which was 21 per cent in the quarter against 32% a year ago. Increased tax and interest cost also hit the bottom line. The company nevertheless is among the few real estate companies to launch new projects during the quarter. Its focus on low cost, affordable housing has helped it to generate cash flows and monetise its land bank instead of looking at selling non-core assets to augment funds like other real estate companies.
Though it has a comfortable debt equity ratio of 0.43, its absolute net debt is still high at Rs. 5,400 crore. Unitech's cash flows are being utilised to meet construction cost & service debt; but the flow has not been adequate to cut debt.
On a sequential quarter basis, there has been no reduction in net debt levels. Unitech has an estimated land bank about 7,000 acres with an average cost of acquisition of land of nearly Rs. 250 per sq. ft. This is the biggest strengths of the company. It should look at liquidating non-core assets them so that it is able to substantially reduce its debt. In case interest rates fall, the core real estate business of Unitech has the potential to grow better
No comments:
Post a Comment