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Mumbai-based real estate giant, Macrotech Developers has successfully raised Rs 650 crore in debt facilities from Standard Chartered Bank and Deutsche Bank. This financial boost aims to refinance high-cost debt, providing the company with significant capital for a three-year term.
Standard Chartered Bank contributed Rs 245 crore at an interest rate of 9% payable annually, while Deutsche Bank provided Rs 405 crore at 9.5% payable quarterly, in the form of non-convertible debentures (NCDs) with varying terms. The debentures offered to Standard Chartered are secured, whereas those issued by Deutsche Bank are unsecured.
The terms of the NCDs provided by Standard Chartered Bank include a clause where the bank could impose an additional 50 basis points for each rating downgrade of Lodha, while Deutsche Bank's NCDs carry an interest rate based on a 2.7% spread over the 90-day treasury bills issued by the Reserve Bank of India (RBI). According to the bond's offer document uploaded by the stock exchange, the spread on T-bills will decrease by 25 basis points from the December 2023 quarter.
The move to refinance high-cost debt reflects Macrotech Developers' strategic initiative to alleviate its overall debt burden despite adding several new projects during the current fiscal year. In the June quarter, the company introduced five projects with a potential gross development value (GDV) of Rs 12,000 crore in Mumbai's western suburbs, Bengaluru, and Alibaug. Furthermore, in the September quarter, Lodha incorporated two projects in the Mumbai Metropolitan Region (MMR) with a GDV of Rs 2,300 crore, contributing to its ongoing operational expansion.
Sushil Kumar Modi, CFO of Lodha, highlighted that the company's exit cost of debt as of June 2023 was 9.65%. The recently raised NCDs, between 9% and 9.5%, are expected to reduce the overall interest cost by 5-10 basis points. The company aims to reduce its net debt, which decreased to Rs 6,730 crore as of September 2023 from Rs 16,100 crore in March 2021, showcasing substantial progress through increased sales bookings and debt collection efforts.
Macrotech Developers is on track to meet its annual goal to decrease net debt while maintaining a strong financial position to manage upcoming repayments. Crisil, in its report dated September 15, upgraded the company's rating to CRISILA+ and expressed its intent to reduce gross debt to Rs 8,000 crore in fiscal 2024 from Rs 9,050 crore. The company holds unsold inventory worth approximately Rs 6,560 crore across completed, ongoing, and planned projects.
The successful debt refinancing stands as a strategic move for Macrotech Developers to optimize its financial structure, enhance liquidity, and reinforce its ongoing commitment to reducing debt, marking a positive trajectory in its financial management and growth strategy.
This story was earlier published in Economic Times and ET Realty
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