Delhi-based property developer Parsvnath’s balance sheet may remain under pressure in the current quarter and the next financial year due to a decline in execution, high receivables coupled with overall slowdown in the property market, said analysts tracking the sector.

The company’s consolidated third-quarter profit fell 95 per cent to Rs 5.42 crore and the sales dropped 80 per cent to Rs 90.52 crore. In the fourth quarter, on a year-on-year basis, analysts expect revenues and net profit to drop further.

“Developers can not launch new projects when sales are slow and cash is hard to come by,” said an analyst with a Mumbai-based brokerage firm.

The company is constructing around 81 million square feet. Nearly 43.62 million sq ft has been pre-sold, out of which nearly 32 million sq feet is recognised by the company. It is yet to recognise a space of 11.62 million sq ft in the books as realty companies follow percentage completion method.

“Given the current condition of the property market, developers will have to slow down their work next year. The company needs at least two years to book revenues for 11 million sq ft,” the analyst said.

Though the company does not have high debt obligations to be paid this quarter, which is around Rs 50 crore for the current financial year, the analysts say the company has a debt to equity ratio of 1:1, which is one of the highest in the industry after developers such as Unitech, Sobha, Orbit Corp among others. India’s largest realty firm DLF has one of the lowest net debt equity ratio at 0.6.

The company had a total debt of Rs 1,825 crore as on December 31, 2008. The company is also in talks with banks and financial institutions to restructure its debt, the company said earlier.

Fitch Ratings on Wednesday downgraded Delhi-based developer Parsvnath’s national long-term rating to ‘BB-’ from ‘A-’ earlier and downgraded ratings of Parsvnath’s Rs 200 crore long-term debt and Rs 900 crore term loan to ‘BB’ from ‘A-’ and its Rs 200 crore short-term debt to ‘F4’ from ‘F2+’.

Fitch noted that developers’ reluctance to reduce prices and customers opting to postpone their purchases, in anticipation of a fall in prices, has led to new home sales coming almost to a standstill.

The downgrades also reflect negative trends in Parsvnath’s operating performance and the expectation of a further deterioration of its credit metrics, it said.

The company chairman Pradeep Jain is hopeful that the company’s finances will improve in view of drop in home loan rates and government’s stimulus packages for the housing sector.

“December quarter was one of the worst quarters compared to all other quarters as both domestic and international economies were in bad shape. Compared to previous quarters, this quarter will be fine but on a year-on-year basis, there are concerns,’’ Jain said.

Jain is hopeful that compared to FY2009, FY2010 will be better as the measures of the government, RBI and the commercial banks to stimulate the housing sector will help the realty companies.

“Despite the concerns about liquidity, project execution, job losses, sentiments are improving. RBI’s move to allow realty companies to restructure their loans has helped developers,’’ Jain said.

But analysts think government measures will not prop up the demand in the near future. “Stimulus packages will not be able to create demand immediately for the realty companies to turn profitable.

Real estate prices are set to fall further 20 per cent from here and interest burden of realty companies will go up further,’’ said Amar Ambani, vice president and head of research, India Infoline.

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