Sobha Developers set to restructure Rs 850-crore debt

Sobha Developers, the Bangalore-based real estate developer, is in the process of restructuring 45 per cent of its debt burden. The company has about Rs 1,900 crore of debt on its balance sheet.

The company, which has a land bank of 3,000 acres primarily in south India, is in discussions with around 12 banks and financial institutions to restructure around Rs 850 crore of debt.

Company officials detail that these debts are all on projects that are either underway or nearing completion or against inventory backlog. The average rate of interest is around 13.72 per cent.

Sobha expects to complete the process of debt restructuring by the end of first quarter of financial year year starting April 1. The company, which is among the top real estate developers in south India, is opting for debt restructuring as demand for real estate has slowed and firms are faced with a threat to return debt.

Sobha’s debt is more than 1.6 times its equity. Still, the company has to repay about Rs 400 crore worth of debt in the current calender year.

Sobha Developers is understood to have identified nearly 200 acres to be sold in Bangalore and Chennai in an attempt to repay its debt. The developer has also identified nearly 150 acres in Bangalore and Pune, on which it plans to develop projects and sell stake to investors to raise funds.

“These measures are expected to be rake in Rs 500 crore, which will be used to settle debt,” a company official detailed.

In addition to raising Rs 500 crore, the company is looking to bring in a financial investor through preferential allotment. An industry source indicated that there might be a move in which the promoters may also be willing to offload a majority stake in the company, a move the firm has denied categorically. Promoters hold a little over 87 per cent.

Public information also indicate that the promoters have pledged a little over 20 per cent in overseas markets and majority of debt against those shares that have been repaid.