October 29, 2008 / 4:48 AM / 10 years ago

Nagarjuna Cons puts real estate projects on hold

MUMBAI (Reuters) - Nagarjuna Construction Co Ltd has clamped down on future real estate projects due to current slowdown in the sector and has tempered its capital expenditure plan for 2008/09, a top official said.

An Indian labourer works at a construction site in Lucknow in this February 7, 2006 file photo. Nagarjuna Construction Co Ltd has clamped down on future real estate projects due to current slowdown in the sector and has tempered its capital expenditure plan for 2008/09, a top official said. REUTERS/Pawan Kumar

The company is also planning to spin off its real estate operations by March 2009 to its subsidiary NCC Urban Infrastructure Ltd, Subba Raju, vice president-finance, told analysts after the company’s results late on Monday.

“We are not planning any investment in real estate projects. All our real estate projects are fully capitalized,” Raju said. “We have put all other projects on hold. We are not launching them because of adverse market conditions.”

NCC Urban, which builds residential and commercial projects, special economic zones and integrated townships, is working on a national games housing project in Jharkhand, one project in Hyderabad and 3-4 small projects in Bangalore, he said.

“After 6-9 months we may look at dilution of equity in some of our real estate projects,” he added.

Indian real estate firms have put projects on hold as decade-high interest rates and the global financial crisis led to a liquidity crunch and the central bank tightened rules on lending to the sector, deterring financial institutions.

Earlier this month, rivals Hindustan Construction Co and IRB Infrastructure also said they slow down their real estate forays, given the weak market situation.

Nagarjuna posted a 26 percent rise in net profit to 423 million rupees as revenue rose 57 percent to 10.46 billion rupees for the September-quarter as several projects came on stream and it secured some major building projects, Raju said.

CAPEX CUT

Hyderabad-based Nagarjuna Construction will cut its capital expenditure outlay for 2008/09 to 1 billion rupees from 1.36 billion, after reviewing construction machinery requirements, executive vice president-finance, Y.D. Murthy said.

For 2009/10, the capital expenditure plan is at 1.50 billion rupees, Raju added.

Nagarjuna also plans to invest up to 2.5 billion rupees over the next two years in its subsidiary, NCC Infrastructure Holdings Ltd, Raju said.

The unit is an investment vehicle, through which Nagarjuna Construction invests in build-operate-transfer or build-operate-own-transfer projects and joint venture projects.

The company’s investment plans will be funded through a combination of internal accruals, borrowings and by equity dilution in some of its projects, he added.

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