Indiabulls to build on improving demand
MUMBAI (Reuters) - India's third-largest listed property developer, Indiabulls Real Estate (INRL.BO), plans to use more than $500 million raised from a recent share sale to launch projects, at a time its peers are struggling to raise funds and repay debt.
Gagan Banga, chief executive of the group's flagship, Indiabulls Financial Services (IBUL.BO), told the Reuters Global Real Estate Summit that the developer aimed to launch 6-7 residential projects in the financial year ending in March 2010 on the back of an expected recovery in demand.
"We would like to pursue some large and interesting projects, which we hope to get at a decent value given the fact that we are sitting on cash and the rest of the market is not," Banga said in a telephone interview on Monday.
In addition to its realty portfolio, the company is developing 3 power plants of 6,600 MW capacity in western and central India and needs about 15 billion rupees ($310 million) in the near term as equity contribution.
The company raised $556 million in May through a share sale to institutions, including TPG Capital and Fidelity.
"Some portion may be used for infusing the equity component for the power projects. Apart from that there are some real estate auctions we would like to pursue," Banga said.
Unlike its peers, Indiabulls has always been quick to spot opportunities to raise money from public offers.
Last year, it raised $257 million from its property trust (IBPI.SI) in Singapore-- which holds its two largest projects for developing 5 mln sq ft office space in Mumbai, even as larger rivals DLF (DLF.BO) and Unitech (UNTE.BO) shelved similar plans.
But its preference for equity capital has resulted in slower growth compared to its peers. Its Mumbai projects were also hit by delays as office space rentals slumped by a quarter last year, aggravated by the global financial crisis.
It also had to push back plans to develop retail space.
DEMAND AT RIGHT PRICE
To balance the commercial space slowdown, Indiabulls launched seven residential projects last year, mostly in second-tier cities such as Baroda, Ahmedabad and Indore, and targeted at a wider customer base.
With the residential segment now showing signs of a rebound as falling mortgage rates and lower-priced homes help buyers take the decision to invest, Indiabulls plans to further leverage on its land holdings in smaller cities.
The prices ranged between 2,000 to 5,000 rupees per sq ft, lower than the prices prevalent in these markets.
The company plans to launch 6-7 similar residential projects in this financial year, in Ahmedabad, Visakhapatnam, and also in Chennai and Mumbai.
With its investment plans in place and the market sentiment looking up, the company expects to reap the cash flows now.
"This will be the first quarter in which we will see operating income. By the third quarter (Oct-Dec) this should improve significantly," Banga said.
"We hope to be direct and indirect beneficiaries of the improvement in sentiment.
($1=48.3 rupees)
(Editing by Muralikumar Anantharaman)
