The stock price of Mumbai-based property developer Housing Development and Infrastructure Limited (HDIL) rose 5 per cent intraday.
This was on the back of an announcement that all the company’s promoters shares, that were pledged with IL&FS Trust, were revoked. Over 7.5 crore shares, which accounted for 51.89 per cent of the total shares pledged by promoter group, were released recently. Earlier, in July 2014, IL&FS had released the other 48.11 per cent of pledged shares. A total of 14.54 crore shares, which formed 96 per cent of promoter holdings, was pledged in 2012.
Promoters hold 36.16 per cent stake in the company. FIIs have been steadily increasing their holdings to 41.64 per cent in the recent June quarter, up from 28.69 per cent in the June quarter of 2013. This has helped the stock rally in the last six months; price has nearly doubled from the ₹45 levels in early March aided by stake purchases by institutional investors such as Kotak Securities (0.5 per cent stake), Nomura Singapore (1 per cent stake), Credit Suisse, Singapore (0.5 per cent stake) and Citigroup Global Markets Mauritus (0.95 per cent stake).
One possible reason for buyer interest is that the company has been reducing its debt, helped by cash flow generated from operation. Around ₹600 crore of debt or nearly 15 per cent of the outstanding debt was repaid in 2013-14. The company’s net debt as of March 2014 was ₹3,511 crore, against ₹4,004 crore in March 2013.This is a comfortable debt to equity ratio of 0.33 times. HDIL indicated that it plans to repay 20 per cent (₹600-800 crore) of debt in 2014-15.
HDIL expects that pick-up in the Mumbai market will aid its high margin FSI sales. In the recent June quarter, customer advances and collections more than doubled sequentially to Rs.448 crore, from Rs.221 crore in the March quarter. Revenue and profits tend to be bumpy on a quarterly basis since HDIL accounts for revenue when the project is completed rather than during the stages of progress.
The company divested its entire stake in HDIL entertainment for Rs 105 crore in the recent quarter, aiding debt reduction. The company has a sizeable land reserve of 245.03 million square feet as on June 2014, primarily in Mumbai.