Mr. Rohtas Goel, Chairman and Managing Director, Omaxe Group

“The Company needs to mandatorily bring the promoter stake down by approx. 14% from present 89.14% to 75% or less.”

Jun 13, 2011 11:06 IST India Infoline News Service

Mr. Rohtas Goel, Chairman and Managing Director, Omaxe Group and has nurtured it from a construction house to a renowned brand in today’s real estate industry in India. Since aegis, his dynamic leadership spirit and strong vision reflect his skills in driving business into a success. Rohtas Goel, a civil engineer, started his professional career with a private construction firm, but was quick to realize that his talents would be used best if he had his own identity. This motivating force drove him to launch his own business and, as said, the rest is history. The high growth in the number of projects over the last few years proves the increasing confidence of the people and the market in Omaxe. “I wish to make real estate a fine art. Each project for us is an individual piece of sculpture, where we satisfy each client’s individual criteria and build a piece of art by which everyone will remember us” adds Rohtas Goel. With his feet firmly on the ground, his eyes are already on the future. While riding the real estate boom, Rohtas Goel is now also expanding its wings into the infrastructure sector.
 
Omaxe Group was founded by Shri. Rohtas Goel, a first generation entrepreneur, a civil engineer by qualification and a visionary. To capture the opportunities offered by the growing real estate market in India, Omaxe entered the real estate development business in 2001. The company is currently working on 40 real estate projects - 17
Integrated Townships including a Hi-Tech Township, 14 Group Housing projects, 7 Shopping Malls & Commercial Complexes, and 2 Hotel projects. Besides, Omaxe has a diversified portfolio of infrastructure and construction contracting businesses. In this vertical, there are 15 ongoing projects that comprises of EPC Contracts, Roads & Bridges construction. Omaxe has progressed with leaps and bounds already
making its presence felt in 40 cities and 12 states across the country. The company posted consolidated net revenue of Rs 1522 cr and net profit of Rs 92.7 cr (on consolidated basis) in the Fiscal year 2010-11.
 
In an exclusive interview with Poonam Chopra of IIFL, Mr. Rohtas Goel says: “The Company needs to mandatorily bring the promoter stake down by approx. 14% from present 89.14% to 75% or less.”
 
What is your outlook on the real estate sector?
We believe that real estate presently is going through very challenging phase in NCR & markets like Mumbai attributing to oversupply and customers’ preference for ready for possession or close to completion projects when making decision for buying their home. However, there is good realty demand from Tier II and III cities as these destinations promise substantial growth opportunity. Besides this, the housing in the range of Rs. 15 – 25 lakh will continue to get maximum attention and will primarily drive the sector in years to come. Reforms in land acquisition, review of FDI policy for real estate and retail, single window clearance and streamlining of stamp duty laws are the need of hour to facilitate real estate developers to meet the demand and supply gap.
 
Omaxe plans to cut its debt by 25%, can you give us update on this?
Omaxe has scheduled debt repayment of Rs. 6.25 billion for the FY 2012. It is comfortable to repay this liability from its robust internal accruals. However, there are in all 7 new projects in pipeline to be launched during this year and there could be a need to raise fresh debt to the extent of Rs. 3 billion for these projects put together. By the end of fiscal 2012 we believe our gross debt will reduce from Rs. 15.52 billion to Rs. 12.3 billion approx.
 
What is the current order book?
Omaxe presently has access to more than 5,000 acres of land (including approx. 145 mn sq. ft. of saleable area and approx. 700 acres of land for future developments). However, part of it was completed in FY 2011(22.66 mn) and another 17 – 18 mn will be completed in FY 2012. The Company is gradually adding land in cities like Lucknow, Chandigarh & Allahabad, where it already has live projects. The infrastructure subsidiary company (Omaxe Infrastructure & Construction Ltd.) has order book of Rs. 14.4 billion as on date and is executing around 15 projects.
 
The company plans to raise up to Rs 6 billion for new projects, can you tell us by what routes do you plan to raise this money?
The Company has proposed to pass an enabling resolution to raise fresh capital to the extent of Rs. 6 billion from market. But the exact amount to be raised will totally depend upon market conditions prevalent at that time. We are in no dearth of capital and our business accruals are sufficient enough to maintain growth. The Company needs to mandatorily bring the promoter stake down by approx. 14% from present 89.14% to 75% or less. It will also explore possibilities for raising fresh debt for the new projects as and when required.
 
How many projects are you currently executing and what would come up for sale in FY12?
The Company is executing close to 40 projects spread over 33 cities in 9 States. This year some new launches are planned for Chandigarh, Lucknow, Faridabad, Yamuna Nagar, etc. At Chandigarh the Company owns close to 600 acres of land and have already launched and sold project on more than 150 acres. Gradually more area will be open for sale. Similarly for Lucknow, the Company has already delivered 2 projects successfully in past and is presently working on an Integrated Township of 102 acres and Hi – Tech Township of 2,700 acres.
 
What impact do you think rising interest rate will have on Realty sector?
For Omaxe the impact would not be significant for the only reason that our sales price are much within comfortable range of common man. Our average realization is approx. Rs. 1,700 – 1,800 per sq. ft. and a unit cost anywhere between Rs. 2 mn to Rs. 3 mn, which salaried class, professionals, traders and even agriculturist can easily afford to purchase. As far as Tier 1 cities are concerned, the hike in interest rate will definitely have impact on investor demand. But the end user will not get worried by hike of 50 – 100 bps as it is going to be a loan for 15 – 20 years and the benefits of that could be wide spread. The bigger problem for the end user is the prevalent prices in Tier 1, which makes their decision making difficult.
 
Do you see any correction in property prices?
For places like Mumbai there is absolute possibility that prices will correct by 15 – 20% for newly launched or under construction projects. However, for ready projects there is not much scope for reduction.  For NCR the issue is not about prices but huge supply both visible and planned may make the market vulnerable.
 
What strategy should an investor look at while investing in Real Estate sector?
For investors the safest bet could be plotted development but they may not generate recurring income like residential apartments. If someone is going for additional loan to purchase a second property for investment then ideally it should be ready project of good/commendable brand even if it comes at slight premium when compared to competition.
 
Which cities are you now targeting?
We are focused on only those places where we have significant presence already like Chandigarh, Lucknow, Allahabad, Indore and limited part of NCR. We are focused on execution of our on-going projects and would not like to venture into absolutely new geographies until and unless we can relate ourselves with that location and we find some value buy.
 
What kind of sales volume are you expecting in the coming quarters in Tier-I and Tier-II cities?
Our target for FY 2012 in terms of fresh sales is approx. 10 mn sq. ft. which is more or less similar to one we achieved in FY 2011 (9.76 mn sq. ft.). Most of this sale is expected from the above-mentioned cities only.
 
How do you see the pricing scenario in the coming fiscal?
Pricing is the key and there is limited scope for price hike. At the same time pressures on cost are visible and are putting stress on margins. Some sort of innovative pricing needs to be evolved which will safeguard developers and customers against inflationary pressures.
 
What is your land bank?
As mentioned earlier we have access to more than 5,000 acres of land which include 4,300 acres (approx. 145 mn sq. ft. saleable area) where the projects have been conceived and 700 acres for future developments.
 
Any message to the shareholders and investors of the company?
Omaxe is confident to reduce its debt to equity ratio to comfortable level of 0.7 times by the end of present fiscal. The monthly sales and recovery from customers are satisfactory and sufficient enough to enable the Company to fulfill its commitments towards lenders, construction commitments and addition of land in planned manner. The Company has remained very transparent in its disclosures and sharing of information with investors on frequent intervals.

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