Weak operating sales credit negative for Indiabulls; Moody’s

MUMBAI: Moody's Investors Service has said that Indiabulls Real Estate Limited's (Indiabulls, B1 stable) weak operating sales in the fourth quarter of 2014-15 is credit negative. Indiabulls reported operating sales of 0.66 million square feet for Rs 550 crore for the quarter ending March 31 and 1.77 million square feet, for Rs 2040 crore in 2014-15 against Moody's expectation of 3-4 million square feet, for Rs 2500-3000 crore.
The company recorded revenues of only Rs 590 crore during the fourth quarter of 2014-15 compared to Rs 650 crore for the same period the previous year. It, however, recorded revenues of Rs 2590 crore during 2014-15, an increase of 50% compared to the previous year.
"Indiabulls' high exposure to the oversupplied residential property market in Gurgaon means that sales will remain weak if demand does not pick up in the region in the coming months," Moody’s said. "Indiabulls' two projects at Gurgaon, One Indiabulls and Indiabulls Imperial, account for over 56% of the company's total unsold area of 23.35 million square feet," it said.
Operating sales at One Indiabulls have also remained extremely low with the company managing to sell only 0.04 million square feet out of the total saleable area of 6.15 million square feet at the end of March. Sales in Gurgaon have been impacted due to delay in approval of building plans and infrastructure developments.
Infrastructure development could however get a boost following a ruling by the High Court of Punjab and Haryana. The court vacated its stay on construction along a 2.5 km stretch of the 18km-long Northern Peripheral Road or Dwarka Expressway, connecting Dwarka with National Highway 8, which was stuck in litigation. Any progress on actual construction of the Expressway will provide positive momentum for sales in the region.
"Easing monetary policy along with improving economic growth will stimulate residential property demand in India but the timeframe for such an improvement remains uncertain," Moody’s stated. "If Indiabulls' sales performance continues to remain weak, credit metrics may weaken—and negatively pressure the company's ratings—such that EBITDA/ interest will fall below 1.5 times by 2015-16," the agency said.