Everything that can go wrong for a real estate company is under play at Housing Development Infrastructure
16-Oct-2013 •Research Desk
At the time of this writing, HDIL trades at Rs 41. That is far down from the Rs 1,100 levels the stock was trading in the cold winter days of January 2008.
Mumbai operator HDIL made its mark in slum redevelopment projects of the Slum Rehabilitation Authority (SRA). With many of those projects in limbo, HDIL now wants to move to being a residential developer.
Everything that can go wrong for a real estate company is under play at HDIL. There has been a marked slowdown in launch of new units. Debt overhang has never left the company and receivables are due for some time now.
Under the present situation, it is no wonder HDIL has lost favour. In this business environment, realty companies have really not kept up with the market. FII shareholding in the company has plunged from 34.26 per cent a year ago to 28.46 per cent.
Should you follow the FII route?
HDIL is now staring at a slowdown of launch and sales of residential units, a debt of Rs 4,000 plus crore and receivables worth Rs 700 crore. But possibly the biggest knock-down for the company was getting booted out the Mumbai International Airport Slum rehab project -- a potential loss of 10 million square feet of FSI.
The loss of the Mumbai International Airport Slum rehab project has taken a major toll on the company. Loss of the FSI apart, HDIL had already invested Rs 5,000 crore on this project over the last three years. In the last quarter, HDIL completely wrote-off Rs 440 crore on account of unabsorbed costs. That write-off alone accounts for 4.3 per cent of its net worth.
How HDIL moves post the airport setback will depend largely on launch of new projects (that has picked up of late), recovery of receivables and meaningful debt reduction going ahead. The loss of the airport project just made it that much more difficult. Exit.