Parsvnath

Company Raises Rs 358 Cr In Six Months To Improve Debt-Equity Ratio, Boost Profits

DELHI-BASED builder Parsvnath Developers has been in the news after the company sold off a 50% stake in one of its premium residential projects in Gurgaon in Haryana. Private equity fund Sun Apollo has invested Rs 75 crore in the special purpose vehicle (SPV) executing the project. The stock did not react much after the sale announcement on Friday, as it had already gained around 15% that week. Due to a weak market on Tuesday, the scrip dropped 3.55%. The stock has gained around 160% year-to-date compared to the 74% gain in the Sensex. 

   Parsvnath has a major presence in North India with an area of over 193 million sq ft. Close to 80 million sq ft is now under construction, out of which about 85% is residential. Out of this, 35 million sq ft is already pre-booked and will generate revenues of Rs 6,500 crore. The company has already recovered half of this amount and the balance is expected over the next two years. It is yet to incur construction expenses of Rs 1,400 crore. The company is now looking at delivering approximately 30 million sq ft within 24 months. 

   The realty firm reported a 22% drop in revenue for the quarter ended September 30, 2009 at Rs 173.1 crore as compared to Rs 221.5 crore in the same quarter last year. However, net profit during the quarter rose 160% to Rs 55.4 crore

from Rs 21.2 crore a year ago. After four years of negative cash flow, the company was able to generate Rs 140 crore from its operating activities due to pre-sales in the residential segment. The company expects to increase its net margins significantly from the current 25% in the coming quarters. 

   With this deal, Parsvnath Developers has raised Rs 358 crore in the past six months through private placement of shares and stake sales at project level. The fund-raising exercise is meant to cut its debt-equity ratio of 0.8x as on March 31 to 0.6x. This will result in savings on interest outflow and thus improve profitability. 

   At a trailing 12-month (TTM) EPS of Rs 4.9 and the current price of Rs 120.7, the company is valued at 24.6 times its earnings. At an annualised EPS of Rs 10, the stock is trading at a 12.1x forward P/E for FY10. Though the company is getting its act together, it makes sense for new investors to wait and watch for the next few quarters. Promoters have pledged 10.36 crore shares representing 53.68% stake of the company as on November 13, 2009. Total promoter shareholding in the company is 80.33% as on September 30, 2009.