Anxious about the distressed financial state of real estate players, banks are working overtime to recover their dues. However, bankers say borrowers are taking their time to repay loans. In one instance, following a default to LIC Housing Finance, lenders to Mumbai-based real estate firm Orbit Corporation have asked it to make a one-time repayment on loans due to a consortium led by State Bank of India (SBI), sources told FE. However, Orbit CEO and managing director Pujit Aggarwal told FE he was “open to clearing his dues as a one-time payment with SBI, United Bank of India (UBI) and LIC HF provided there was a clear offer from the lenders on the table”. Aggarwal said the company had submitted the proposal to SBI but did not disclose its details. He was also tight-lipped about his negotiations with LIC HF, which has put the firm’s Andheri project on the block.
In FY15, Orbit posted a net loss of R102.3 crore on net sales of R135 crore, paying R178 crore as interest. Bloomberg data peg Orbit’s total debt as of September 2014 at R584.3 crore. A scrutiny of documents reveals Orbit is paying very high interest rates on some loans — it is servicing some bank loans at 16% and a couple of corporate loans at as high a rate as 24%. Among its main lenders are LIC, Edelweiss, Canara Bank, Axis Bank, Parshwanath Buildcon, Capri Global Advisory and Sukumar Properties. In FY14, Orbit’s total liabilities mounted to R1,409.5 crore and its borrowings stood at R598 crore; it posted a loss of R160.5 crore.
Disclosures made by Orbit to the government in 2009 show the SBI-led consortium had given the company a project loan of R140 crore for its developments in Mumbai’s Lower Parel area.
While FE could not ascertain the exact amount unpaid to SBI, Orbit has defaulted on loans worth R56 crore to UBI, as confirmed by Aggarwal.
That Orbit was in a financial crisis first came to light in August 2013 when LIC HF made a public announcement that it was taking possession of the Andheri project in lieu of the loans. Orbit was unable to pay Rs 96 crore of a total loan amount of Rs 250 crore. By March 2013, Orbit had missed many more payment deadlines. A March 2014 ministry of corporate affairs filing revealed Orbit defaulted on the redemption of non-convertible debentures and repayment of term loans worth Rs 374 crore, some due for over a year. FE could not verify the updated status of these amounts.
The company has two luxury residential projects in Lower Parel — Orbit Terraces and Orbit Grand — among the worst hit micro markets. Samantak Das, national director, research, Knight Frank, said there have been no new luxury launches — Rs 5 crore and above — in Mumbai in the last six months. “The south Mumbai market is the worst hit and it could take five years for inventory to get cleared,” Das added.
Orbit’s best performance in recent times was sales of Rs 40 crore in Q2FY15; this indicates the company is unable to sell more than six or seven apartments in a quarter, assuming the average price is Rs 8 crore.
While Aggarwal attributes the financial landslide to the slowdown in the real estate industry, experts point out that most developers have acquired land at very high prices. Orbit’s Kilachand deal, valued at Rs 550 crore, was touted as one of the most costly land transactions of 2011. The company had acquired 20% of the project but subsequently disagreements within the Kilachand family regarding ownership issues resulted in problems for Orbit. Aggarwal said he plans to sell some projects to be able to raise funds and complete others.
* Orbit defaults on NCDs, loans of R374 crore in FY14
* LIC HF puts Andheri property on block
* Total debt in September 2014 at R584.3 crore
* Net loss of R102 crore in FY15
* Luxury flats piling up in Mumbai, approx. 5,000 flats unsold