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Vidya Bala

BL Research Bureau Orbit Corporation’s results for the quarter ended September 2008 reflect the strain witnessed in the property market currently. Slower revenue booking as well as burdening interest rates were the conspicuous concerns thrown up by the financial numbers. However, Orbit’s burgeoning inventory and work-in-progress suggest the following: One, the company may be selective in offering deep discounts on property and instead may be following a wait and watch approach; Two, a good number of projects are still under way and the revenue booking is yet to happen.

For the second quarter of 2008-09, Orbit’s consolidated revenues declined by 24 per cent, while operating profits too declined by 28 per cent. Stretched by a four-fold increase in interest costs (compared with a year ago), net profits declined 65 per cent to Rs 13.7 crore. Interest costs could, however, see a respite once a part of debt is repaid this year. However, the silver lining appeared to be the strength in operating profit margins, which climbed 200 basis points to 48 per cent, superior to a number of other players in the industry. similar to what it sold in the January to March quarter. Such prices could, however, be at a discount to the current market prices. This could be the reason for the company managing to hold margins at a time when it has clocked lower revenues. The volume of area sold has declined significantly from 14,000 sq ft in the first quarter to 9,600 sq ft for the September quarter. The company currently has Rs 530 crore of projects on hand. The management has stated that 65 per cent of this is expected to be booked over the next year.

Orbit appears to be rationing funds available, amid tight liquidity. The advances received add up to Rs 140 crore and commitments on this count, providing some comfort for the near-term commitments. The company would need about Rs 100 crore towards construction costs and about Rs 150 crore for repayment of debt over the next six months. Orbit has not made any commitment for land acquisitions and no fresh investment in projects (other than those planned) which are in the pipeline. Such a strategy could be a means to ration funds as well as wait for the property scenario to pick up.

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