Stock surges with the news of Orbit Corporation's debt restructuring
Mayuresh Deshmukh / 04 Jan 2016
Orbit Corporation is in the process of restructuring dues of around Rs 528 crores. This includes an amount of Rs 87 crore due to LIC Housing Finance since 2013.
According to a media report, Orbit Corporation is in the process of restructuring dues of around Rs 528 crores. This includes an amount of Rs 87 crore due to LIC Housing Finance since 2013. Orbit Corporation is a real estate development company, which operates primarily in the luxury segment. The company had already defaulted in repaying some of its lenders.
Major lenders to the company include State Bank of India (SBI), Union Bank of India (UBI), LIC, Axis Bank, LIC Housing Finance and Edelweiss. Barring Axis Bank, which must be repaid next year, the company has defaulted on payments to all other lenders bringing to light the financial crisis at the firm.
According to ratings agency Moody, property developers will continue to face challenging operating environment over the next 12 months — including weak cash flows, flat sales and stagnant prices. A report published by CRISIL noted that the combined debt of 25 real estate companies of Rs 30,000 crore faces a refinancing risk over the term.
Orbit focuses on redevelopment projects in Mumbai, including developing, designing high-end residential, and built to suit commercial properties and also developing projects in the Mumbai Metropolitan Region (MMR). The Company’s customers include corporate houses and High Net Worth individuals.
On the financial front the company has been badly hit by the slump in the luxury residential segment. In the past six months, the company has managed to report barely Rs 5 crore in sales; its best performance in the last two years was in Q2FY15 when it recorded sales of Rs 40 crore, translating into sales of fewer than 10 apartments. Orbit's operating revenue increased by 273 per cent to Rs 135 crores in FY15 from Rs 36.20 crores in FY14 whereas the firm’s total debt for FY15 was Rs 950 crore. The company later faced a loss of Rs 102 crores in FY15. Having borrowed too much, Orbit’s overdue interest bill at the end of March was Rs 262 crore.
With the outlook for the property sector still negative, chances of the firm’s prospects recovering soon appear. The restructuring will help the company reduce the heavy debt and interest burden. Further it will also help the company improve financials and goodwill in the market.
The share price of the company is trading at Rs 8.15, an increase of 3.95 per cent from the previous close.
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