Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Achieved best-ever quarterly and annual pre-sales performance with Q4 sales growing by 40% to over INR4,200 crore and annual pre-sales of INR14,500 crore, a 20% growth from last year.
- Embedded EBITDA margin for the business was at about 31%, despite a higher contribution from JDA projects, indicating strong operational efficiency.
- Net debt stands at about INR3,000 crore, well within the limit of 0.5x equity, showcasing strong balance sheet management.
- Achieved net zero goal on scope one and scope two emissions by March '24, reflecting strong ESG commitment.
- Guiding to additional pre-sale growth of over 20% with a target of INR17,500 crore for fiscal '25, indicating continued confidence in market demand.
Negative Points
- Global geopolitical tensions and macroeconomic challenges pose risks to overall sentiment and economic indicators.
- Higher contribution from JDA projects, which tend to have lower EBITDA margins, could impact overall profitability.
- Debt levels, although within limits, are expected to be close to INR5,000 crore by the end of the fiscal year, indicating potential leverage concerns.
- Affordable housing segment has been hit by increased interest rates, affecting first-time homebuyers.
- Ramp-up in the warehouse and industrial platform with Bain and Ivanhoe Cambridge has been slower than expected, indicating potential delays in project execution.
Q & A Highlights
Q: My first question is on your slide 6, which is the guidance for FY25. Now when we look at the FY25 guidance of 0.5 times debt to equity cap, I'm just trying to understand the spend that we're targeting for next year, considering our current liquidity of about INR3,000 crore-odd from the fundraise and OCF generation expectation of about INR6,500 crore for next year. So where do we see firstly, two parts to my question. Where do we see the debt levels in absolute terms by March '25? And secondly, how much do we plan to spend on business development in FY25?
A: Kunal, hi. The question that you've raised obviously, we have articulated debt ceiling of 0.5 times equity and that is what we stated as our guidance that we will consistently remain below that. It doesn't mean that we will get up to that it's a ceiling it is not a target. In terms of where we expect debt to be at the end of the fiscal obviously, it will be dependent on growth opportunities. But given the cash on hand that we have plus the operating cash flow of the business, we suspect it will be close to INR5,000 crore of net debt at the end of the fiscal. And we expect to invest in the range of about INR4,000 crore-odd for new business development plus continue to support the existing projects in terms of business development spend also.
Q: So INR4,000 crore will include both new as well as supporting the existing?
A: No, INR3,500 crore to INR4,000 crore will probably be purely new. The balance -- the incrementally, it will be existing because if you look at the free cash, the operating cash flow of about INR65 billion after interest and taxes, that number will be close to INR50 billion. So that INR50 billion plus the increase in debt of let's say, INR20 billion is INR70 billion. So we are looking at spending about half of that on new projects and the balance to be available for other uses, including supporting existing projects.
Q: So close to INR70 billion will be the total spend on new business development?
A: New business development about INR35 billion to INR40 billion.
Q: And my last question is on the guidance for FY25 for pre-sales of INR175 billion, how much would you expect from Pune and since we don't have any Bangalore projects, how should we look at Bangalore in FY25?
A: So between Bangalore and Pune, we would conservatively be aiming to do about INR40 billion, and we'll see if we can further exceed that.
Q: The first one is about margin would you be able to share the margin in Bangalore from the pre-sales of INR12 billion? And the reason I'm asking this question is to understand in the early stage, maybe the margin is lower than the overall company level. So just to understand how much business development cost went in and when would we get back to similar margin as we have like 30%, 31%.
A: In terms of the margin in Bangalore, we were at about 28% for the sales that we have done so far. So slightly lower than our overall blend at 30%, 31% but are not significantly lower. And we expect, -- we do our underwriting in order to work from a towards that blend of margin that we target. And therefore, obviously, while early stages sometimes you will have gaps, especially in the early stages of any project because the pricing at the early stage is lower and margin goes up as the project progresses. But generally we try not to have too much significant deviation from the overall blend. Obviously, owned land and JDA projects have different margin profiles, but we try to maintain consistency across different cities, 200 basis points here or there but broadly, we try to maintain consistency.
Q: You mentioned that there is no speculative activity in most of the markets. So Mumbai and Pune sounds about right, but some of the data that we saw suggested that Bangalore property prices have gone up by a meaningful number, that definitely not 5.5%, again based on some data that I saw. So would love to get your sense of 5.5% versus maybe 15% that we have seen in Bangalore and how are you seeing that affordability in Bangalore?
A: In terms of the price growth number of 5.5% the way we measure price growth is for like projects for the project ought to have existed in the last year as well as in this year for us to be able to do a price comparison on what the price growth has been. For any project, which is launched in this year that becomes the starting point of the data from a measurement of price growth perspective. So in terms of your point that whether price growth in Bangalore has been stronger than 5.5%, I'm sure it is or has been. However, I do believe that Bangalore in general has good supply, demand has been very solid. And at least in the sales that we've done in the first two projects we've seen that most of the sales that happened to end users, people are buying for themselves. They are not buying -- there's nobody's buying bulk units to trade later. So that's really our sense of what happened in the Bangalore market, but obviously, we're only two projects in Bangalore. So our understanding of the Bangalore market is definitely not as robust as some other people.
Q: Look Palava land is clearly very valuable as time progresses and you have spent some time in explaining that. I just wanted to ask (inaudible) I understand the big picture long-term potential, but in the near term, if I were to think about how much land you're planning to sell every year or even contract sales from Palava, let's say, FY25, FY26, would you have some guidance for us?
A: In terms of land sales, we are targeting about $50 million, about INR400 crore to INR500 crore a year of money from land sales, some years will be stronger and some years will be weaker. But that kind of is sort of the level at which we are sort of transacting line and as therefore, as land values go up, the quantum of land that we will transact or sell will sort of probably become lesser. In terms of our sales expectation from Palava as well as Upper Thane, the two large land holdings that we have and we measure that data together. We did about INR2,200 crore of pre-sales for fiscal '24. We definitely expect that to grow much faster than the rest of the company because the infrastructure related upgrades are now largely in place so we will be looking for at least a 30% growth, if not more in this fiscal. I don't have an outlook for fiscal '26, but I would not be surprised if the growth in fiscal '26
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
