Housing Development and Infrastructure, country's third largest listed realty developer, has forayed into entertainment, power, oil & gas and broadcasting, among others, either directly or by acquiring stake.
The company recently acquired a 51 per cent stake in Broadcast Initiatives, promoted by Sri Adhikari Brothers. Sarang Wadhawan talks about his company's plans and projects in an interview with Business Standard. Excerpts:
How do you see the decline of real estate stocks in recent days?
The price of a stock depends on many factors, such as the market sentiment and macro-economic factors, which are beyond our control. As far as the company is concerned, we have only added value, which should show in our stock price.
After our listing last July, we have taken up the Mumbai airport project and 10 new projects, which are being implemented.
The company has declared three results that have been excellent. Things have not changed for the worse. But unfortunately, market dynamics have changed, reducing the stock price.
DLF has announced a buyback of its shares. Are you also thinking on similar lines?
I want to instill confidence in my investors by completing my projects on time and by investing money in the projects concerned instead of going for a buyback, where the current market price is less than the buyback value. Investors can be kept happy in many ways.
In the first year of our operation, we declared a bonus and also announced a 50 per cent dividend.
What is your outlook on the property market?
Volumes have gone down by 20-25 per cent, at least in the middle-income housing segment. Luxury flats have not been selling the way they used to get sold. The capital markets have pressured the realty market, too. Since the earnings from markets have fell, we have seen distress sales and purchases being delayed.
We have been maintained prices but we expect volumes to drop. There is an opportunity where developers can bring clear titles in the market. Those with liquidity will have good purchasing power.
Are you scaling back some of your projects?
We are not. We are going full steam ahead. We do believe that by the time we complete all our projects, the markets would rebound. If we slow down our project, we will be headed into a cash crunch, which the company does not want to be in.
We are raising debt at a comfortable level. The firm has started the airport project, which will take care of the company's cash flow for the next two years. We do not see a slowdown in sales because we are a developers' developer.
We are the largest slum rehabilitation company in the country. All these factors give us ample liquidity.
In Mumbai, TDR prices have fallen from 25 to 30 per cent after the government increased the FSI. How this fall in TDR prices impacted your company's revenues?
It does not have an impact on us, primarily for two reasons: First, TDR prices were at Rs 4,000 at that given point of time when the Sensex was hovering close to 22,000. It was difficult to sustain but true value has come out over a period of time.
Having said that, TDR prices are today at 2,800 to 3,000. In fact, we do not sell TDR but utilise at our own projects. The company has bought quite few sites where the TDR from our Mumbai airport can be utilised.
Are you launching new projects as well?
Yes, very much. We are launching the Kochi projects and other projects, too. We are going to launch three to four projects this year itself.
What is your vision for the company in the next five years?
We are entering into different sectors with a clear vision. We are not a pan India player and do not want to be one. We want to focus on five to six cities. That is our policy in life.
You have invested in media and entertainment in a big way.
We are focussing on entertainment and media right now. We entered the multiplex business as it was an integration for us into the retail component, our malls. Thus, entering into broadcast, media and other areas of entertainment is a natural course of action for us.
For instance, studio development is also a real estate activity and not something out of the blue that the company has to entered into. It is like a real estate company entering into cement manufacturing. It is backward integration for us.
But you have entered into many unrelated areas.
You have to understand that the real estate sector has its natural course of highs and lows. Real estate activity and earnings can be lumpy at times.
To make sure that our shareholders derive the best value, the company is looking at entering into sectors where the company has execution capabilities. Our foray into the power arena was triggered by the dearth in the availablity of power.
For our sites also, there is always a fight to get power. It makes natural sense for us to get into that arena and transmit the power to our sites. It might seem diversified but if you look at holistically, it is all integration with real estate.
Are you looking at exiting some of the new businesses you have entered?
If the exit opportunity comes up in the next five to seven years, we may look at it. Right now, we want to concentrate on diversification. If the value that we are planning to create is created over the next few years, then the company can look at exiting some sectors.
