Sobha Developers to raise Rs 750 cr to reduce debt burden

Sobha Developers, the Bangalore-based real estate developer, said it plans to raise Rs 750 crore through a combination of preferential share sale, land sale and bringing in strategic investors in some projects in an attempt to reduce debt.

The company, which has a debt of Rs 1,846 crore, or 1.6 times of its equity, plans to sell a part of the 3,000-acre land bank it owns. “The basic intention is to bring the debt equity ratio to 1:1. This will enable us to stave off the downturn to an extent,” a senior official of the company noted.

The company, which has Infosys as one of its major clients, plans to get into project development by forming various special purpose vehicles to raise majority of the Rs 750-crore.

Replying to a question whether the current downturn in the real estate sector is a good time to offload land bank, the company official maintained that there are still buyers for worthwhile land and they are hopeful of striking the deal at good prices.

Chief Financial Officer S Baaskaran said with these steps the company intends to raise around Rs 500 crore. “In addition to this, we are looking at preferential allotment of shares to an investor, which could rake in Rs 250 crore,” he noted.

These steps are being considered after the proposed rights issue has been deferred by the company, owing to bad market conditions. “We will consider the rights issue at an appropriate time and we are targeting another Rs 250 crore,” he added, declining to put a time frame for these steps.

Sobha Developers over the past weekend reported a 88 per cent drop in its Q3 net profit to Rs 7.5 crore compared with Rs 61 crore in the year-ago period. The top line, too, declined 48 per cent to Rs 183 crore as against Rs 355 crore.

Managing Director J C Sharma said, “The present quarter in these trying times have seen demand shrinking, resulting in liquidity crunch, which is further impacted by the banks taking a conservative approach in lending to the realty sector.”

“We have been taking exceptional steps in de-risking the company from slowdown by introducing several measures like cost-reduction, reduction of the prices of our products, aggressive marketing, introducing attractive payment terms, ensuring that the customer gets the maximum value,” Sharma said.

He said the present realty prices have come to a realistic level, where potential customers can look for value-buying.