Realty firm Supertech Ltd plans to divest some of its shopping malls and hotels in smaller Tier-II cities and raise around Rs1,000 crore, which will be used to generate liquidity for the business and to reduce debt, a top company executive said.
Separately, the firm expects to deliver 17,000 residential units, which will generate receivables of around Rs1,000 crore from its customers by end of December 2018. It will use the capital to repay debt and complete projects.
From its mall and hotel portfolio, the National Capital Region-based developer plans to monetise two malls in Haridwar and Meerut, and its Radisson Blu hotel in Rudrapur and Country Inn & Suites in Meerut.
“We have hired consultants for the monetization of these assets. Along with the cash flows that are expected by handing over the homes to customers, we can use the capital to reduce our debt as well resolve liquidity issues,” Supertech chairman R.K. Arora said in a telephone interview.
In December, Supertech said it raised Rs430 crore from Altico Capital India Pvt. Ltd, a non-banking financial company (NBFC), for its Capetown project in Sector-74, Noida, and partly to refinance an existing lender.
“We have fast-tracked our operations and are determined to deliver all our projects on time. We have well-maintained escrow accounts for all projects and are committed to comply with RERA (Real Estate Regulatory Authority) norms,” Arora said.
A number of residential project developers, who ventured into retail mall and hotel development, have been divesting portfolios to focus on their core business of building homes. Monetization of non-core businesses has been adopted at a time when they are reeling under liquidity crunch and residential sales remain tepid.
Significant consolidation has already taken place in the mall development, office and hotel segments, leading to the emergence of a few strong firms backed by large global investors.
For instance, Alpha Corp. Development Pvt. Ltd sold its mall portfolio in Amritsar and Ahmedabad to Blackstone Group Lp for a little less than Rs1,000 crore.
Developers such as Phoenix Mills Ltd, backed by Canada Pension Plan Investment Board (CPPIB), APG Asset Management NV-backed Virtuous Retail South Asia Pte Ltd and Blackstone Group LP’s India subsidiary Nexus Malls, have been actively looking at buying under-construction and operational malls from developers in Tier-II cities.
“Developers are re-looking at their project portfolios and identifying their core competence. Every asset class requires capability and financial strength. Because cash flows in residential projects are weak and customers are getting anxious, there is a lot of pressure on developers to make these decisions where they need to divest certain properties and businesses to ensure that their core business runs smoothly,” said Shashank Jain, partner, transaction services, PwC India.