Ladies and gentlemen, good day and welcome to Sunteck Realty's earnings conference call for H1 FY 2023 and Q2 FY 2023. We have with us today Mr. Kamal Khetan, the Chairman and Managing Director of the company, and Mr. Prashant Chaubey, the Chief Financial Officer. Please note this call will be for 45 minutes, and for the duration of the conference call, all participant lines will be in the listen-only mode. This conference is being recorded and the transcript for the same may be put up on the website of the company. After the management discussion, there will be an opportunity for you to ask questions. During the Q&A session, we request to restrict questions to two per participant. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note this conference is being recorded.
Before I hand the conference over to the management, I would like to remind you that certain statements made during the course of this call may not be based on historical information or facts and may be forward-looking statements, including those related to general business statements, plans and strategy of the company, its future financial condition and growth prospects. These forward-looking statements are based on the expectations and projections and may involve a number of risks, uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by such statements. Now I'd like to turn the conference over to Mr. Khetan, the Chairman and Managing Director of the company. Thank you, and over to you, sir.
Thank you for joining Sunteck Realty's second quarter and first half earnings call for financial year 2023. Hope each one of you and your family are safe and healthy. In the first half of 2023, we have achieved a strong growth in both pre-sales and collections. This continued strong operational performance has enabled us to generate close to INR 225 crore of operating cash flow surplus, which further makes the balance sheet stronger, taking the negligible net debt equity ratio from 0.18 to 0.15. On a cumulative basis, since financial year 2021, we have generated close to INR 750 crore of operating cash flow surplus.
I'm happy to inform that all our existing growth engines, namely Sunteck City at ODC Goregaon West, Sunteck World at Naigaon and Sunteck Beach Residences at Vasai West, are throwing positive cash flows on a sustained basis. Now on the execution front, construction is in full swing at all our ongoing projects. In the second quarter, we have leveraged one of our core strengths of business development by acquiring approximately 7.25 acres of land parcel in the posh location at Beverly Park, Mira Road in western suburbs of MMR. We intend to develop this close to 2.5 million sq ft of luxurious residences along with premium retail in this location.
Now since past two and a half years, we have acquired approximately 25.5 million sq ft across micro market of MMR, and this is our company's best ever performance. Our endeavor is to maintain this momentum going forward. I'm very proud of the team that we have built at Sunteck in the last 15 years, and we are laser-focused on strengthening it further. I will now hand over the call to our CFO, Mr. Prashant Chaubey, for his comments. Thereafter, I will be happy to answer your questions if any. Over to you, Prashant.
Thank you, sir. Good evening, everyone, and thank you once again for joining us today and taking out your valuable time for this conference call. The financial and operational numbers have already been published on the stock exchanges. I believe all of you must have gone through the same. Now I would like to highlight the key financial and business performance numbers. Our pre-sales grew by 24% year-on-year in quarter two FY 2023 to INR 337 crore compared to INR 272 crore in quarter two of FY 2022. Collections grew by 60% year-on-year to INR 331 crore in quarter two FY 2023 compared to INR 207 crore in quarter two FY 2022. For the first half, similarly, the pre-sales grew by 49% and the collections grew by 63%. With respect to the financial highlights, we have reported a consolidated revenue of INR 224 crores in the first half of FY 2023, and our operating cash flow surplus stands at INR 225 crores for H1 FY 2023. We can now open the forum for questions from the participants. Thank you very much.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question, press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star- two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we request you to limit to two questions per participant. If you have more questions, please join the queue afresh. We will wait for a moment while the question queue assembles. We have a first question from the line of Adhidev Chattopadhyay with ICICI Securities. Please go ahead.
Good evening, everyone. Thank you for the opportunity. I've got a couple of questions. I'll ask them together. First, can you just tell us about what is the approval status of the upcoming project, especially Borivali and Kalyan and the new Mira Road project we've acquired. If you could give us some contours on when we could see the launches over there. Secondly, is a more longer-term strategy question. In your slide I reference, I think 28 or 29 of your presentation. You have given a proposed launch pipeline of 7.5 million sq ft over the next 18 months. I think it is worth well over INR 6,000 crores, the potential sale value of that inventory. Plus, I think we have got over INR 2,000 crores of unsold inventory across our ongoing projects. That gives us almost INR 8,000 crore plus of inventory to sell. Considering that, where do you see the company's overall annual sales bookings growing in the next two to three years and the visibility for this year for the INR 1,800 crore sales guidance? Yeah, that's it from my side, and thank you.
Good evening, Adhidev. Thanks for asking this question. Approval of obviously various projects, we have all acquired these projects, you know, recently in last one and half years. The three projects which you mainly said, Borivali, Sahar in Kalyan, Panvel. The third one, I think Mira Road, which we recently acquired just few months back. Obviously we are aggressively, our licensing team is working towards getting the approval along with the landlords, because in all of these three projects, getting approvals is the responsibility as per the agreement is the landlord's responsibility. These are all three JDA projects. However, our team is putting the best effort in partnership with our landlords to get these approvals ASAP.
Although whatever target we have set for this year, we are quite confident that we will achieve our pre-sales target. Going forward in future years, obviously, with the new launches and all this coming up, I think we will be taking, the sales exponential growth we will see in the sales. That's what we have been seeing quarter-over-quarter, if you look at it. Coming to the infrastructure, what you have mentioned in the presentation, the 7.5 million sq ft of launches, I think Prashant can introduce.
Thank you, sir. Hi Adhidev, Prashant Chaubey. Adhidev, as you have seen in the presentation, the target for the pre-sales target for the company for FY 2023 is INR 1,800 crore. The overall target of the company right now is to double our pre-sales every two to two and half years. If you consider that by FY 2024, we want to reach pre-sales of close to INR 2,500 crore. That is the target for the company. Now, in order to achieve that target, in the next 18 months, we are looking at these launches. Kalyan and Vasai, we are looking at 2 million sq ft of launches. We are looking at in Borivali, around 5 lakh sq ft of launches.
In Mira Road, 5 lakh sq ft of launches. Vasai, Naigaon and ODC, Goregaon West, these are projects which are already running, which are already the existing growth engines. In these projects you will see, you will keep on seeing new launches happening on a yearly or a one and half year basis. That's why this gives us the confidence that we can launch around 7.5 lakh sq ft by the end of FY 2024. That should help us or enable us, so to speak, to achieve that target of INR 2,500 crores of pre-sales that we have in our goal. That is how this number has come, Adhidev.
Okay. Just to our last follow-up to that, this Goregaon ODC or other Naigaon, can we expect to see new phases being launched in second half of this year? Considering that the other projects may take some time to get launched.
No. We are pushing simultaneously everything, Adhidev. ODC, we are launching. We are recently planning to launch, in fact, in a couple of weeks, not even months, in maybe one or two weeks you will see. The higher floors of Fourth Avenue, what we have passed on. The new inventory will come in the market for both the towers. We'll do something, a new tower launch in Vasai. Prashant already tried telling you that all these new launches, again, those existing projects from where we are already getting the sustenance sales. There you see new towers or new floors or new inventory coming up in the same projects. Those launches will continue to happen for sure in the next six months.
We are very confident at least out of these three projects which you are saying, Borivali, Vasai and, the Mira Road, at least one new project also we are planning to launch in next four to five months. We are pretty much there what we expect our targets to achieve. Well, we are pretty much confident about achieving these targets because of all of them.
Okay. Fine. Fine, sir. Okay, sir. Thank you and all the best.
Thank you. Thanks.
Thank you. We have next question from the line of Pritesh Sheth with Motilal Oswal. Please go ahead.
Hi, Kamal sir. Hi, Prashant. Thanks for taking my question.
Please go and ask your question.
Am I audible?
Yes, you are.
Hi. Firstly on, you know, launches, I'll just ask it other way around. Your, you know, FY 2023 pre-sales target is around INR 1,800 crore, and we have achieved one third of that probably in first half. Obviously we would need launches to come up. In terms of, you know, your expectation, how much launches we would need in terms of GDV potential to achieve that pre-sales target?
Pritesh, very frankly, even if we don't do any new launch out of these three, we are pretty much there for INR 1,800 crore looking at our existing portfolio itself. If you see, if we do some new launches of higher floors of Fourth Avenue in Oshiwara, existing project of Sunteck City, and some new towers in Vasai that the SBR project, Sunteck Beach Residences at Vasai. Again, the Naigaon Sunteck OneWorld, there is four to five towers which are to be launched, the new towers. Plus there are four to five towers which we are coming up in the Sunteck MaxXWorld as well.
Those two launches, plus one or two of our commercial projects which are already in construction in full swing, Sunteck Crest, then Sunteck Pinnacle, and then the Sunteck Icon and Sunteck BKC51 . Out of these four projects, even if we launch, relaunch one more project once again, I think we'll be pretty much achieving INR 1,800 crore or maybe more than INR 1,800 crore of the sales, pre-sales, for this financial year FY 2023.
Okay, perfect. That sounds good. Secondly, obviously we don't track it on quarter-on-quarter basis, but the P&L revenue decline, so where did we have a lower recognition this quarter, in terms of any particular projects you want to highlight?
Hi, Pritesh. Prashant this side.
Hi, Prashant.
Hi. Pritesh, if, as I have elaborated in the opening remarks also that the company follows Project Completion Method of accounting. Because of that, currently if you see, currently the majority of the revenue is coming from Sunteck City and Sunteck WestWorld in Naigaon. These are the only two projects which are currently coming into the revenue side, which you'll see of INR 81 crore for the quarter. Now, what is happening is on the expenses side. On the expenses side, all your revenue expenditure which you incur, like sales, marketing, those or brokerage, those cannot be deferred. Those have to be amortized immediately in the quarter in which you incur them. What happens, your expenses are for projects for whose revenue is not coming, their expenses are also getting booked into the P&L. However, revenue is only getting booked in the P&L of the projects which are completed. Because of this misnomer, you are seeing the EBITDA margin to be slightly lower, and the PAT also coming significantly lower b ecause of the expenditures which are taken ahead of even the booking of the revenues of the other projects, due to the consolidation.
Sure. Yeah . Fair enough. In terms of margins, I understand. Just wanted to, you know, understand on why there was a lower revenue recognition. I mean understood that part that Sunteck City and Naigaon had a, you know, comparatively slower sales in this quarter, that might have led to this lower recognition. Is it fair to assume?
Yes. Pritesh, just to give you one more data point. If you look at our operating cash flow surplus, okay? For the first half that has come at INR 225 crore. Okay. Now, this number is coming in the cash flow statement, but it is not coming into the P&L. It is not getting amortized as of now. This shows that going forward in the coming 18 months, you will see our P&L also performing in line with the cash flow statement. As more and more projects get launched and executed, this anomaly will get corrected. It's only a matter of 18 months, Pritesh, that you have to take it, that you have to live with. After that, things will be much more stable.
Sure. Thanks. I'll have couple of more questions. I'll join back in queue. Thank you.
Thanks.
Thank you. We have next question from the line of Rahul Jain from Dolat Capital. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. So two questions. First one, if you can give us a breakup of sales between ODC and Vasai for the quarter?
Rahul, I'll give you the number in terms of the breakdown of sales, Rahul, from Fourth Avenue, we have done close to INR 200 crore and the balance from SBR we have done close to INR 75 crore in the current quarter. If we look at the first half, in the first half we have done from Sunteck City close to INR 230 crore and from the Sunteck Beach Residences in Vasai, we have done close to INR 300 crore. That's the number for the quarter as well as first half, and I will be sharing this Excel sheet also with you, sir.
Okay. Thanks a lot. Second one, sir, just I think the urban projects generally in the market have been taking off well. I just wanna know what's your sales strategy. Are you planning to relook at your sales strategy in BKC? I mean, that is still, you know, not that it's not taking off that well as of now.
Yeah. Rahul, it's Kamal Khetan. Yeah. Well, appreciate your question. We are definitely, Rahul, looking at our sales strategy at BKC. We are looking and we are quite optimistic. Let's hope the coming quarters you will see some numbers coming there as well.
Okay, sir. Thanks.
Thanks, Rahul.
Thank you. A reminder to participants, if you wish to ask a question, please press star followed by one on your touchtone phone now. We have a next question from the line of Parvez Qazi with Edelweiss Securities. Please go ahead.
Hi, Kamal sir. Good evening. Thanks for taking my question. First question from my side is would be great if we can get an update on the construction status for the various commercial projects that we have in BKC, ODC, and Andheri. Second question for Prashant, what would be our unsold inventory currently in ODC, Naigaon and Vasai? Thank you.
Parvez, Kamal here. Parvez, construction status for four commercial projects which are ongoing. Sunteck Crest, I can say it's almost more than 90% complete. I think we will be looking to give the possessions or get the occupation certificate in this quarter or maybe early next quarter. We are looking to book that into the balance sheet. That means, take the revenue into the balance sheet, P&L. Second is the project at ODC Pinnacle, Sunteck Pinnacle, where we already sold lower floors to DMart. Other sales are going as we are talking, in sustenance mode.
We are planning to launch in a big way, although in this next one or one and a half months even that inventory that we are expecting to complete the project in the next financial year, FY 2022. Coming to the BKC51, Sunteck BKC51 at BKC and Sunteck Icon on the junction of BKC. Both the projects are again almost more than 85% complete. All the slabs are cast, the RCC structure is fully complete. The façade and the MEP work is going on. Even that we are looking to complete the project and get the occupation certificate in next quarter itself. Three out of at least four commercial projects we are hopeful to get the occupation certificate in this financial year of FY 2023.
Great.
Parvez, coming to your second question, in terms of sales inventory in Naigaon, we have close to around INR 375 crores worth of inventory, which is pending to be sold from the existing launches. This does not factor in receivables, just to clarify. In ODC, we have close to around INR 675 crores of inventory pending to be sold. That's the situation. Again, I'm clarifying this does not include receivables.
What would be this number for Vasai?
Parvez Qazi, in Vasai right now we have launched whatever we have launched, we have already sold. I can give you a broad number of what our intention is of launching. If I keep that in mind, I have close to around INR 850 crores worth of inventory, which is pending to be sold from my target launches, which is not currently launched.
When can we see these launches in Vasai?
In one month.
Okay. Sure. That's it from my side and all the best for future.
Thank you. We have next question from the line of Abhinav Sinha with Jefferies. Please go ahead.
Hi. Sir, couple of questions. One on the projects. Have you seen any impact of the rising mortgage rates on demand? I mean, is demand holding up well for the affordable segment? Y ou know, there's some impact there right now? That's first. Secondly, also if you can talk a bit about pricing of the various segments in projects.
Abhinav, regarding the sales, I think there is a good demand momentum. We all know that there is a sales residential demand has been quite robust in last two years. We see the momentum is strong even now across all the segment, whether it is affordable, whether it's in mid-income, as well as the luxury segment. We are not worried about any of the sales demands. We feel that residential sales demand will continue to remain very strong. Your next question, Abhinav, was ?
Sir, it was on pricing, but before that, can you give me an idea about what percentage of your customers take a loan, home loan?
I can tell you approximately w hat percent right now. Obviously when it comes to luxury, super luxury, which is the product which is above INR 30 crore- INR40 crore, there I feel only one-third or less than 25% of the customer takes loans, what we have seen in the past, what we have experienced. In the mid-income segment, I can say this goes up to, let's say 35%, 40% or 50%, which goes up. When it comes to affordable, I think it goes to even 65%, 70% of the customers, they take loans. I think that is what we are seeing in the three segments.
Okay. That's very helpful, sir. My second question was on pricing. If you can talk a bit about that. Have you taken up your pricing this quarter etc.?
Pricing, very frankly, if you ask me this quarter, obviously we have not raised much pricing. If I talk to you about pricing in the last one and a half years, I think across all the projects, maybe in an affordable or mid-income or luxury segment, with the luxury segment, the pricing has gone up. We have taken the pricing up by at least, let's say 10%-15%, the prices have gone up.
Thanks for that, and I will join the queue, yeah.
Yes. Okay. Thanks, Abhinav.
Thank you. We have next question from the line of Abhishek Lodhiya with Yes Securities. Please go ahead.
Good evening, sir. My questions, I mean, is about the Pen- Khopoli project which we have acquired. Did you start selling over there o r what is the status of that project exactly? The plotted development.
Abhishek, that project is obviously the land parcel of the Pen- Khopoli, what you're talking for the, which we have to do a plotted development mainly, and maybe some construction of villas and row houses and all those things. That's now at a very initial stage, I would say. I cannot comment when and what about, especially if you ask me specifically about this project. We are not very optimistic that when in next one or two quarters, we are not looking at doing anything on that.
Okay, sir. Secondly also, you have given some color on the commissioning of commercial asset. Have you taken a call on whether we are, I mean, selling it or leasing it out?
Abhishek, when it comes to Sunteck Crest, I think we have already taken call and we are selling it. There we have sold quite a good inventory. If you must have seen in the pre-sales of last three quarters. When it come to Sunteck Pinnacle, the second project, there also we have already decided and we have taken a sale model because there we have already sold area worth almost INR 100 crores to DMart. Then further inventory we are selling slowly on a sustainment basis. Right now, I told in my call just two or three questions before that, we will be selling, we will be launching it in a proper manner in one and a half month.
Even the further inventory of higher floors in Sunteck Pinnacle, and that we will be selling it very aggressively. Now, coming to the other two projects, which are commercial projects, Sunteck BKC51 and Sunteck Icon. Sunteck BKC 51, we are already in talks, I can say, to lease out the entire building to one of the good corporates. In terms of Sunteck Icon, very frankly, we have not yet decided what we should be doing, whether we should lease out or whether we should be selling. Whatever gets the best value for the company, I think we'll take that call because neither we are worried about sales due to any cash flows, because cash flows are very strong. We don't mind leasing it also. We'll try to maximize the value. We are just holding on our decision for Sunteck Icon. I think that too, because the building will be ready in next three to four months with occupation certificate. Before that, we'll obviously take a call what to do with that.
Sure, sir. Thanks. My questions are done.
Thank you. We have our next question from the line of Prem Khurana from Anand Rathi Shares. Please go ahead.
Taking my question, sir. Sir, first one was, I mean, if you could share your thoughts on competition. Why I ask this is essentially when I look at residential real estate demand, especially in MMR, which has been fairly strong for last two years now. Would this make some of these people, I mean, who were earlier in the business but then went away because the markets were not doing good?
I mean, do you see them to come back or do you get to feel as if, I mean, there will be new entrants now, some of these large corporates because of the fragmented, when I look at them in terms of regulations, I mean, it's essentially seen that the loopholes which used to be there earlier may have been taken away, which is where it makes sense for some of these larger corporates to kind of come and participate in the real estate industry now.
Prem, good question. I think we are all seeing a very strong consolidation in the industry. Due to that consolidation, I think we did one of the best acquisitions in last two and a half years, and which has been, I think, best ever done by the company. I don't see any worrying factor about the competition. Competition, if it is healthy and which is only good, if good corporates are coming, it is only good for, I believe, for the Sunteck and everybody. I am not worried about it. There are N number of players which are compared to one or two players. Entering is always good, new players. I think not many has vanished away from the system, which is much better, I think. I think we are very pretty much confident with our strong balance sheet and a strong execution track record. We are not worried about any competition coming.
Sure. No. I wanna understand because eventually and what I've been made to understand is that what I've learned over the years is essentially the market or rather the cycle tends to go bad, not because the demand goes down substantially, but essentially because of the fact that you get to have oversupply situation and there'll be someone who would give in and then would start cutting prices, which comes to impact the demand. Because, I mean, as an end user, if I'm buying a property and then I get to read in the media that the price is supposed to go down, I mean, there could be a situation wherein I defer my purchase, I mean, I want to understand competition more from that side. I mean, wherein you do get to feel that there will be more launches and there could be an oversupply situation, or you don't get to see that situation, at least in the immediate future. That will be all from my side. Thank you.
Prem, I can only say that, obviously there may be a situation, maybe after two years, maybe after three years, maybe after four years, at one point of time, there may be an oversupply of something. But I don't think, Prem, we should be worried about that. I think Sunteck has grown in last 15 years with most of the headwinds or in the industry. We have grown the company when most of the companies have not been able to survive or could even manage to stay in these tough times with the headwinds in the sector. I think we have grown ourself in this segment, in this sector with the headwinds. I am pretty confident that going forward, if anything, any such situation comes, your company is strong enough, I think, to take that as a competition or anything as a challenge.
Awesome. Thank you and all the very best for future.
Thanks.
Thank you. Ladies and gentlemen, that was the last question. I'd like to turn the conference back over to the Chairman and Managing Director, Mr. Khetan, for closing remarks. Over to you, sir.
Thank you all for taking out the time from your busy schedule today. In case if any of your queries have been left unanswered, you can get in touch with me or my team. We look forward to your continued support. Thank you once again for joining us today, and please be safe. Thank you.
Thank you, sir. Ladies and gentlemen, on behalf of Sunteck Realty, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.