Financial Performance of HDIL

The financial performance of HDIL for the first quarter ended 30th June 2008 is a perfect reflection of the tough times which the Indian realty is today going through. Or should we say that this is the correction which the sector is going through? After the realty prices touched the sky, this fall to reality was bound to happen. And naturally, this meant that the bottomlines of the companies would take a hit.

The profit margin of HDIL clearly indicates this rise and fall. For Q4FY08, when the boom was at its peak, the company had reported a OPM of an unbelievable 90.08% and NPM of 72.64%. A profit margin of 90%! And today, when demand has slackened, costs have gone up and rates have come down, for Q1FY09, the company’s NPM fell to 84.81% (which is still pretty high) and the fall in NPM was sharper at 55.77%.

Overall, QoQ, the company has reported a fall. Net sales itself was down 41.53%, EBIDTA was down 45%, PBT was down 58% and PAT fell 55%. Though, as has been the case with most of the companies, YoY, the picture looks good but for realty companies, it today makes more sense to compare QoQ.

All over India, demand has dipped but in Mumbai, which is the main area of the company’s business, there still exists a demand as supply is still not able to keep pace. Prices have dipped but not as much as it has all over India. But if demand continues to fall, the company says that there would be a correction of 10-15% in prices. Steel prices are expected to increase in August and another hike in interest rates is expected. This is sure to impact realty companies and HDIL is not insulated from such influxes.

Regarding the Vasi-Virar SEZ, the company has acquired 2300 acres of land and expects to approach the Central Government for final approval of the SEZ soon. (Assuming there is a Govt at the Centre!)