INTERVIEW-UPDATE 1-Orbit sees firm demand, plans township

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By Prashant Mehra

MUMBAI, June 17 (Reuters) - Real estate firm Orbit Corp Ltd (ORCP.BO) expects to add new projects worth 8-10 billion rupees in 2008/09, as it sees strong demand for redevelopment projects in south Mumbai, its main area of operation.

There has been concern in recent months that easing real estate prices in India's financial capital, and in other metros like New Delhi and Bangalore, could hit developers' operations, but Orbit sees more realistic pricing boosting long-term demand.

Orbit, focused on selling high-end apartments and offices in the city's affluent areas, sees revenue growing at least 25 percent this fiscal.

"Mumbai is one of the most stable markets in India, and if supply is made available, the demand is always there," finance head Ramashrya Yadav told Reuters in an interview on Tuesday.

With 40 percent of its projects in the premium category, the company's focus will remain in the segment it knows best.

"Given the rising number of millionaires in the city, we will expand in the premium segment. There is good demand stability. We are able to charge 30-40 percent premium over the market rate," Yadav said.

Orbit is also developing mid-level residential and office projects in central Mumbai, where prices have declined by 10-15 percent, but these constitute about a tenth of its portfolio.

The company, which has operating margins of at least 35 percent in all its projects, sees net profit this fiscal growing by 28-30 percent from 2.36 billion rupees the previous year. It reported revenue of 7.06 billion rupees in 2007/08.

EXPANSION PLANS

Given its smaller size compared to larger rivals Housing Development & Infrastructure (HDIL.BO), Indiabulls Real Estate (INRL.BO) and Unitech (UNTE.BO), Orbit is looking to gradually expand operations only within Mumbai and neighbouring areas.

The company expects to have 40 projects under construction by March-end, compared to 23 now. It also aims to expand the average size of each project three-fold to 150,000 sq ft, by acquiring larger parcels of contiguous land.

"We see a huge opportunity in cluster development projects, where we acquire a number of buildings and redevelop them together," Yadav said.

Last month, the state government announced incentives for such projects, allowing construction up to 4 times the original built-up space. Most of these are situated in south Mumbai.

Orbit is leveraging on strong demand to set up high-end beachfront projects further up along the Mumbai coastline, and is also acquiring land for a township at Mandwa, south of Mumbai.

"We are currently acquiring 200 acres land, where we will develop about 11 million sq ft over a seven-year period," Yadav said. "We will finalise the project in 4-6 months."

Orbit has already invested 1.3 bilion rupees in a subsidiary to develop these projects, and expects to put in another 3-4 billion rupees over the next 18 months.

It also raised 2 billion rupees in March from Cyprus-based Rodere Holdings, diluting its stake in the unit by 7-8 percent.

"We are looking at selling more stake in the unit through the private equity route, but nothing has been finalised," he said.

Orbit shares, which hit the day's high of 468 rupees on the news, ended at 462.70 rupees, up 3.35 percent in a firm Mumbai market. (Editing by Ramya Venugopal and Sunil Nair)