Price surge has affected property demand in Mumbai: Pujit Aggarwal, Orbit Corp

In an interaction with ET Now, Pujit Aggarwal, managing director & CEO, Orbit Corporation, discusses their upcoming projects & analyses the current trends in Mumbai’s property scene. Excerpts:

Is indeed demand (for property) looking that robust at this point of time?

Pujit Aggarwal: Demand is very robust; there is no question about that. I am still sceptical about the prices at which deals are taking place. If we are talking about central Mumbai, we are seeing that there is a huge supply coming in over the next 3-4 years. Given the fact that there is such a large supply coming in, we are already seeing the prices more or less going a bit softer, which is the correct point that we are looking at.

So at one point of time we were seeing prices to the extent of Rs 32000-33000 in mid-Mumbai segment, central Mumbai, now we are seeing that the prices have corrected to about Rs 25000-26000, which is very good in these premium developments and as the supply keeps coming in, the prices may go softer. Having said that, the offtakes are also phenomenal, the demand is huge and people are just wanting to lap up the properties.

You have a couple of projects in Lower Parel, one in Sakinaka, Andheri as well, which would be central Mumbai and suburban Mumbai. Is demand in those projects also looking very nice?

Pujit Aggarwal: Last year the demand was phenomenal as we came out of the recession, but over the last 4-6 months, the demand has not been very good because of the surge in prices. All of a sudden the prices moved up by 30-40% and because of that the propensity to consume by the consumer really shrunk.

Therefore, what we are seeing now is that in the festive season, the offtake is beginning. We are seeing a trickle of purchases by actual users and over the next few months, I am confident if we keep the pricing market-friendly, we would see offtakes. I have seen a few other developers who have done some innovative market techniques and that’s doing very well.

What’s the update on the Kilachand House property?

Pujit Aggarwal: Broadly the understanding with our private equity investors has been reached. We would be getting into definitive documents very soon. So bear with me for a couple more weeks and we will come back to you with more definitive answers.

Even if the PE investors acquire the balance 50% that is still to be acquired by Orbit Corporation, the share of profits that Orbit would have would be substantially higher than the 50%?

Pujit Aggarwal: That’s right because we got into the property at an advanced level and we are giving the incoming private equity investors a particular stake on a platter literally. So therefore, the lion’s share of the receivables from sales would be to the account of Orbit.

The last declared debt obligation is Rs 150 crore odd. Are you consciously retiring more of this debt or you are comfortable at the current levels?

Pujit Aggarwal: Right now we are at 0.7 debt to equity, it is very comfortable. We are looking at retiring debt, but at the same time it is a very judicious kind of a mix, which you have to see is that moving forward there are certain opportunities which are very lucrative. So if we feel that if we get into capex and use that money for some capex where we can grow the company faster, we may be doing that and not retiring that debt but if we feel that the opportunities are not so juicy, we may then end up retiring the debt by another Rs 150 crore by the year-end.

I read a lot of brokerage reports. Almost everybody have target prices, which are substantially higher than the current market price and all of them speak about a 40% CAGR growth in top line, possibly bottom line and maintaining margins at 35%. Do you think a fair estimate?

Pujit Aggarwal: That’s absolutely what we have planned and I believe we will surpass these numbers.

You are talking about the margins or the top line growth?

Pujit Aggarwal: At least the top line growth is very much possible, margins are looking to be possible because our focus over the last 1.5-2 years has been real south Mumbai, which is south of Haji Ali. So Malabar Hills and what they call is the Golden Triangle.

That’s where our focus has been. Prices have moved up and we are getting a 20% pop over our peers. We are moving that to see that how we can get a further value increment over our peers and because of the fact that we have been able to deliver a superior product, we are confident of even achieving that in our EBITDA margins.