Shares of Delhi-based property developer Anant Raj are up today on board approval for complete stake sale of its fully owned subsidiary Greatway Estates for Rs 304.12 crore. The move is expected to reduce debt and also to be used for funding its ongoing development projects.

While lower debt is a positive, Anant Raj’s debt situation is not alarming. The company had a total debt of Rs 1,384 crore as on March 2014, which is a comfortable debt to equity ratio of 0.36 times. Its debt levels have remained at around Rs 1,300 crore levels in the last three years.

Also, unlike most realty developers who are primarily into residential real estate, Anant Raj’s core strength is developing commercial and township projects. These are capital intensive. It also has a strong presence in hospitality segment with 6 completed hotels and 5 hospitality projects under construction. However with the company wanting to focus on its core business of developing IT, SEZ, retail, commercial and township projects, it has been trying to exit hospitality projects over the last 2 years.

The company had, in a note filed with BSE in July 2014 indicated that it believes that exit from hospitality projects may be feasible now, on the strength of a stable government in Centre, overall improvement in the investors sentiment and 100 per cent FDI in hospitality sector. Sale of hospitality and other completed projects at good valuations will help the company to focus new developments. 

Anant Raj’s profit for 2013-14 was Rs 104 crore, about the same level as the year ago. The company’s cash flow from operations turned positive in 2013-14 and was Rs 339 crore after a small negative in the last two years. 

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