Sobha near nod for Rs 5000 cr project

Real estate major Sobha Developers Ltd is expected to receive final approval for its Rs 5,000 crore Sobha Hi-tech City in Kochi from the Kerala government very soon.

A state cabinet committee to clear large projects with large investments led by chief minister V S Achutanandan was to clear the 450 acre proposal for the largest township project in the country at a meeting on Thursday. If the meeting does not happen on Thursday, it will on Monday, said sources.

The company signed a memorandum of understanding (MoU) with the Kerala government to set up the proposed township way back in 2007. The project would see 38 million sq ft development in Kochi comprising a 7 million sq ft knowledge park, commercial space, hospitality and leisure projects, entertainment and amusement facilities, a marina of international standards, and residential complexes.

J C Sharma, managing director of Sobha Developers, refused to comment. According to an analyst from a multinational consultancy, who did not wish to be named, Sobha has already acquired the land and expects to complete the project in seven to eight years.

“If the sanction comes through, the project would be the first of its kind in the country. The firm is expected to float special purpose vehicles for its large integrated township projects at Kochi,” the analyst said.

After a forgettable year, the company is seeing projects finding customers. Amit Bagaria, chairman of Asipac, a real estate consultancy, based in Bangalore said Sobha’s projects have already started doing well in terms of sales in the last 2-3 months. “The Kochi deal can only improve the cash flows,” he said.

Sobha is also in the process of restructuring its Rs 1,900 crore debt. It plans to raise about Rs 900 crore through preferential equity, special purpose vehicle-level equity and also by selling portions of its 3,000 acre landbank. Sobha is looking to bring down debt-equity ratio to 0.5 in this financial year from 0.85 currently.

The company hopes to raise Rs 1,200-1,400 crore by selling land. Sobha recently raised around Rs 530 crore by diluting close to 22.5% equity through a qualified institutional placement. The company had revenues of Rs 974.74 crore and net profit of Rs 109.67 crore for the financial year ended March 31, 2009.