Oberoi Realty raises Rs.750 cr via NCDs for Tata land payment

Bangalore: Oberoi Realty Ltd has raised Rs.750 crore by selling non-convertible debentures (NCDs) to part-fund its purchase of a 25-acre land parcel in suburban Mumbai.

The Mumbai-based developer had emerged as the highest bidder for the piece of land in Borivali that was auctioned by Tata Steel Ltd. Oberoi Realty had agreed to buy the land for Rs.1,155 crore.

“For the NCD issue, we have offered securities in the form of cash flows from one of our residential projects,” Saumil Daru, chief financial officer of Oberoi Realty, said in an analyst call on Monday. The debentures have been issued by Incline Realty Pvt. Ltd, a unit of Oberoi Realty.

Chairman and managing director Vikas Oberoi said the payment for the land has been made and approvals are being awaited. He didn’t disclose payment and approval details, saying they were confidential.

CARE Ratings has assigned an AA+ rating to the issue, ascribing it to the experienced management of the company, the group’s robust business risk profile and strong market position in the Mumbai real estate market, low debt and healthy cash accruals.

The ratings company has, however, warned about risks such as delays in project execution, poor sales, high dependence on advances from customers to fund the projects and the developer’s concentration in the premium housing segment which is susceptible to slowing economic growth.

Last week, Oberoi Realty, along with its project partner Sahana group, named Ritz-Carlton as its hospitality partner for a 17-acre project in Mumbai’s Worli area. Ritz-Carlton will also manage luxury residences for Oberoi Realty in the same project.

In an analyst presentation, the developer said it had availed of a Rs.300 crore construction loan for the project, in which the residential component is currently under construction.

On Saturday, Oberoi Realty reported a 46.8% drop in March quarter net profit to Rs.77 crore from a year ago. Revenue fell 27.4% to Rs.220.5 crore.

In a 12 May report, Sandipan Pal, an analyst at brokerage firm Motilal Oswal Securities Ltd, said that though pre-sales had improved in the March quarter on a quarterly basis, annual pre-sales have been significantly low.

Shares of Oberoi Realty lost 1.74% to close at Rs.203.40 each on Monday on BSE, while the exchange’s benchmark Sensex index gained 2.42% to end at 23,551 points and the realty index rose 0.92% to 1,433.64.

  


MUNTAZIR ALAM
PGDM 2ND SEM 
IIMT COLLEGE OF MANAGEMENT