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14 March 2011

MD sees Orbit Corp missing FY11 growth aim by wide margin

Real estate developer Orbit Corp Ltd will miss its full-year profit and revenue guidance by a wide margin due to the slew of negative developments that have hit the sector over the last six months.

Real estate developer Orbit Corp Ltd will miss its full-year profit and revenue guidance by a wide margin due to the slew of negative developments that have hit the sector over the last six months, Managing Director and Chief Executive Officer Pujit Aggarwal said in an exclusive interview to NewsWire18.

"Things just slowed down and the environment vitiated because of various scams, change of governance, etc.," Aggarwal rued. "All of a sudden real estate purchasing dried up and velocity came down considerably. The company expects to end the current financial year with a profit and revenue growth of just 10% each as against 40% guided earlier."

Sentiment for the sector dampened after names of some major property developers came up in the bribe-for-loan scam. However, even with high steel, cement and labour costs, the company is not facing pressure on operating margins as realisations from sales remain strong. The next financial year will see the company back on its targeted growth track, driven by three-four project launches–85% of which will be residential.

In 2011-12 (Apr-Mar), Orbit Corp is confident of its revenue growing 40%. Aggarwal said revenue from the new launches will reflect in the company's cash flows next year. The Mumbai-based Orbit Corp also expects a 200-basis-point improvement in operating margins next financial.

On fund raising plans, Aggarwal said the company has tied up funding for most of its projects and hence, has no such plans in the near future.

The company, which focuses on niche projects, is looking to list on the New York Stock Exchange in three years. "I think it's a big dream to have a NYSE listing. By the time the American markets have picked up and we have performed to what we have been talking about, that's when we would want to get an international listing and what better than the Mecca of stock exchanges–the New York Stock Exchange."

Aggarwal expects property prices in Mumbai to remain at current levels or rise marginally as demand remains strong, but sees a correction in prices of some projects that may be completed over three-four years.


The first phase of Orbit Mandwa--the company's 200-acre gated project at Mandwa, near Mumbai--which will be spread over 1 mln sq ft, will be launched in January, 2012.

The Mandwa project will have a total development area of 11 mln sq ft, with only villas and bungalows.

The company has started soft sales of the project to family and friends at 10,000-10,500 rupees per sq ft, Aggarwal said. He sees the average rate for it at 12,000-15,000 rupees per sq ft.

"This is our dream project and things are going on in full swing. Revenues have already started trickling in, but they are miniscule; the significant chunk of revenues will start showing in terms of cash flows from January, 2012," he said.

Total investment in the project is seen around 20 bln rupees over the next six-seven years. In the first phase, the company is likely to invest about 2.5 bln rupees.

Orbit had sold 19% stake in the Mandwa project to Infrastructure Leasing & Financial Services Ltd for 1.65 bln rupees, of which it has already received 650 mln rupees. The company has also tied up debt for the project through four nationalised banks.

Debt on company's books is currently 7 bln rupees. Besides this, the company, which operates mainly in the redevelopment space, plans to launch three other projects in Mumbai–two in south Mumbai and one in Santacruz–in 2011-12.

The projects will be spread between 100,000 and 1 mln sq ft each. Currently, the company has 2-3 mln sq ft under development, with four-five projects in south Mumbai nearing completion.

Orbit Corp will continue to focus on the Mumbai market for now, but is looking at franchise models in other major cities such as Bangalore and Delhi.

"The opportunities in Mumbai are plenty; we would stick to this market for long. We are certainly looking at a franchise model in some other cities over the next two-three years... we are talking to a couple of people, but have not tied up with anyone," Aggarwal said.

Under a franchise model, Orbit will not own the property, but will develop it and take a cut of the revenues.

  • FY11 revenue growth seen 10% vs guidance of 40%
  • FY11 net profit growth seen 10% vs targeted 40%
  • FY12 revenue seen up 40% led by Mandwa project
  • To launch 1 mln sq ft of Mandwa Villa project Jan, 2012
  • EBITDA margin comfortable now on high realisation
  • Current area under development 2-3 mln sq ft
  • To launch 3-4 projects in FY12
  • Hopes to list on NYSE in 2-3 years

By Itika Sharma

Edited by Namrata Bhatia

NewsWire18, Monday, Mar 14, 2012

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