Like a kidney stone, we will pass through difficult times, says Sarang Wadhawan, HDIL

HDIL had a tough last eight years after spending most of its IPO and QIP proceeds in slum rehabilitation projects. In an interview, Sarang Wadhawan, vice chairman & managing director, HDIL, tells Ateeq Shaikh of DNA Money that the company's immediate target is to reduce debt by Rs 1,000 crore over the next 6 months to one year.

Why are HDIL's various projects delayed or stalled?

The company would like to state that certain projects of HDIL have been delayed due to various approvals and other banking related issues. However, construction mobilisation is under process and work on all the projects shall be initiated soon. HDIL is looking at all the avenues for completing its delayed projects and shall complete its projects as per the Rera guidelines. All the proceeds from the project funding and customer advances have been utilised for construction and approvals. HDIL is also actively deleveraging its balance sheet. The current economic scenario and the stress in the real estate sector are expected to come down over the next year.

By how much you are looking to bring down the debt level?

We should be comfortable with a debt of about Rs 1,000 crore, which will be a self-sustaining debt through our projects. Our immediate target is to reduce debt by another Rs 1,000 crore over the next 6 months to one year.

Where did your business go wrong?

The debt was taken primarily for the airport project. The company spent a lot of money between 2008 to 2010 to ensure that the airport slum rehabilitation project goes through. Land parcels were bought at that time from the proceeds of IPO and QIP. The debt was raised for construction of those tenements. However, with the airport scheme not going through due to government-related issues or eligibility, we were unable to complete the project in due time. This along with the change in government and approval processes and regulations derailed the entire process of construction and delivery. Amendments in the Development Control Rules in 2012, subsequent amendments in the DCR in 2015-2016 have been a big stumbling block for us and the industry. The advent of fungible FSI was a big factor which stopped all approval processes for a year and a half. Now, the new DCR and development plan also derailed the approval process. Now, I don't foresee any big changes coming in.

How would the company grow in these difficult times?

We have enough land bank and material for another 10 years. At the moment, the focus is on debt reduction and getting out of all the issues related to the Indian banking system. It has been a tough last eight years for us. But like a kidney stone, even this will pass.

How are you trying to control the existing situation?

The entire industry is trying to come to terms to the new reality of real estate. What is happening is with the advent of Insolvency and Bankruptcy Code coupled with the stress in the banking system and current housing finance scenario, the industry is also going through a tough time. If we continue with the guidance of about 20%, as shared earlier this year, we have already achieved 15% in the first half. If we look at the kind of transactions and work we are currently doing, we should be able to achieve at least 30% debt reduction this fiscal.

How much you have repaid the banks?

About Rs 215 crore has been repaid to banks including J&K Bank and others in the first half of this year through cash flows and asset monetisation. We would continue to pay through one-time settlement.

How much land bank does HDIL hold?

We have 222 million square feet, and a part of this would be offloaded.

Would you still continue with SRA projects?

I think SRA is undergoing a change with regulations. Things are becoming better and simpler. The company will develop fewer SRA projects.