Page 35 - Kolte Patil AR 2019-20

Sheet. Besides, the cost of long-term debt declined by 160 bps to an average 10.5% during four years; net debt- to-equity ratio strengthened from 0.53x to 0.35x during this period.
Discipline
Over the years, the Company strengthened the integrity
of its Balance Sheet
through judicious capital allocation in profit-accretive business development
and differentiated deal structuring.
The Company focused on asset-light development where the land was provided by the real
estate partner; besides,
the Company resisted the temptation to increase proprietary ownership of land banks, selecting to focus on efficient property development instead. This approach enhanced the efficiency of the Company’s financial resources, kick- starting a virtuous cycle.
The Company focused on addressing the growth coming out of the fast- moving mid-priced real estate segment, increasing sales velocity.
The Company maintained its credit rating at CRISIL A+/Stable (Outlook revised from ‘Positive’ and rating reaffirmed), arguably
one of the highest in the sector, making it possible to mobilise debt at rates lower than what they were
available to the rest of the sector.
Partnerships
The Company maximised value through the prudent utilisation of net worth and declining deployment of debt. Instead of the conventional approach
of mobilising additional
net worth through equity dilution, the Company inducted financial partners for specific projects. This approach helped accelerate project construction and completion on the one hand while it enhanced value
on the Company’s Balance Sheet on the other – without equity dilution. Following project completion, the profits were shared in a prescribed ratio. This non- dilutive approach helped the Company protect overall shareholder interests while the accelerated project completion enhanced financial efficiency.
Over the years, the Company selected to partner global and Indian financial institutions that provided the Company with an immediate (and prospective) capital pipeline. The Company engaged financial partners of the pedigree
of Portman Holdings,
JP Morgan, KKR, ICICI Ventures, Motilal Oswal and ASK, among others. These partners possess deep financial resources and a knowledge network. As the Company enhanced
critical mass, it bought out the financial interests of its partners, resulting in a larger economic ownership of projects, strengthening surplus visibility.
A high ~75% equity ownership of the promoters in the Company indicates a high commitment that can make it possible to mobilise funds (equity or debt) should a situation warrant.
Post-Balance Sheet development
The Company emerged as the first Indian real estate Company to enter into an agreement with a global real estate developer during the coronavirus pandemic. The Company (through
its subsidiary Kolte-Patil I-Ven Townships (Pune) Limited) entered into an agreement with Planet Smart City, a UK-based real estate developer for the land monetisation of a portion of Sector R10 in its Pune township project Life Republic for C91 Crore.
The land parcel in Sector R10 will be jointly developed by KPIT and Planet Smart City with a profit-sharing approach; the project is likely to be launched in FY21. The agreement
will provide the Company with liquidity for land monetisation; it will enable the Company to engage with a global partner who can enhance the Company’s process discipline, practices and governance. Kolte-Patil
High collections
will infuse 10% in the land; the partner will infuse 90%; after a minor coupon, profits will be equally shared.
This judicious approach made it possible for the Company to outperform returns available through competing asset classes and the best benchmarks within those asset classes.
Big numbers
352
C Crore, aggregate net worth enhanced in the five years ending FY20
0.53x Gearing, FY17
0.35x Gearing, FY20
Perspective
“We have a protocol
of maintaining our debt-to-equity ratio at 0.5 times. Currently
we are at 0.35 times,
so we have a buffer in hand equivalent to C125 Crore. The result is that we have a mindset of managing our debt at C100-125 Crore plus/ minus during the year and that too within the limits of our 0.5 times debt-to-equity ratio, which should protect our competitiveness across all market cycles.” – Gopal Sarda, Group CEO
The coming together of culture and discipline
Quick Sales Low inventory Low gestation
Quick execution Stronger Low leverage technology
Annual Report 2019-20 | 33