Q1 21/22

Aug 2, 2021

Ladies and gentlemen, good day, and welcome to Suntec Realty's earnings conference call for Q1 FY 'twenty two. We have with us today Mr. Kamal Khitan, the Chairman and Managing Director of the company Mr. Manoj Agarwal, the Chief Finance Officer and Mr. Prashant Jobbe, SVP, Corporate Finance. Please note this call will be for sixty minutes. And for the duration of this conference, all participant lines will be in a 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. 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. I would now like to hand the conference over to Mr. Ketan, the Chairman and Managing Director of the company. Thank you, and over to you, sir. Thank you for joining SunTek Reality first quarter FY twenty twenty two earnings call. I'm excited to share with you our continued progress on the next phase of our development as a business. In our last call, we introduced the guiding principle of the new Suntec, what we are calling Suntec three point zero. Suntec three point zero is focused on three key priorities: first, an asset light approach second, a flywheel of high velocity growth third, an exceptional and incentivized team. Over the years, as SunTek worked to establish its brand and track record, we acquired large landholdings on our balance sheet. In certain cases, we also held on to finished apartments that could increase in value, while these decisions were strategic and created enormous shareholder value. Currently, we have over INR1700 crore of finished inventory, although this is only approximately 15% of the total inventory of respective projects. I am focused to exhaust this inventory in next few years. Slide six of our presentation shows our finished inventory and the progress we have made in last fifteen months, including the sell down of the almost our entire inventory at our Gurivoli East project, namely Signia High and Gilbert Hill project. We also do not want to add new finished inventory to our balance sheet. Our priority is high sales velocity. This has been the hallmark of our recent launches and will continue to be our motives of branding moving forward. Suntec City and Suntec World are the exits of this approach. I think of Suntec as an efficient factory that takes input just in time and manufactures widgets, which happen to be highly desirable apartments. Our trusted brand and reputation allow us to operate this factory through JVs and JDAs that require little, very little capital upfront and yield high returns on our invested capital. Suntec spends approximately just rupees, less than INR100 crores a year on overheads. Our near term engine, if you see Slide eight of our presentation, alone have a potential to generate INR700 crore of profit after tax for next six to seven years. With more scale, our cash flow engine will grow stronger. The key is to expand and strengthen our factory, our senior team and execution capability so that we can do six to eight or even more sizable projects simultaneously. Our project level operating margins are trending higher from 25% towards an average of 35% per project. As our brand and operating growth grows stronger, our price realizations are improving. This, coupled with the greater economies of scale, is improving the profitability. Sustainable expense controls we implemented during COVID are helping our margins further. In 2021, the state of Maharashtra is cutting various developer fees by 50% to incentivize developers. These fees are significant and amount almost 30% of the price we realize. We are taking full advantage of this opportunity and pass on the benefit to our customers. We plan to prepay almost INR250 crores of these fees in 2021. The 50% saving means that we will also be saving INR250 crores, which is wonderful. This should further improve our project level IRRs and leave us with more capital for growth. The benefit will come over the next few years. I'm very proud of the team we have built at Suntec. In recent weeks, Suntec has begun to roll out a new employee incentive program tied up to form an employee level objective. I am excited about this development. Incentives can be very powerful in influencing and rewarding outcomes, and we intend to put a lot of our attention on our employees' development in this regard. SunTek three point zero is off to the races. It is still early days for us, but we are well positioned and focused on what we need to achieve. The runway is long, but Mumbai housing stock has significant room for continued growth and redevelopment and the demand we are witnessing for homes today and has a structural tailwind that we expect will continue for a very long time. I'm excited for what the future has in store for SunTek and excited to continue to share it with all of you. Thank you. I will now hand over the call to our CFO, Mr. Manoj Chagarwal, for his comments. And thereafter, I'll be happy to answer your questions if I need. Over to you, Manoj. Yes. Thank you, sir. Good evening, everyone, and thank you once again for joining us today. Hope all of you are safe and well. The financials and operational numbers have been already uploaded on the store exchanges. I hope you all must have gone through the same. Now I would like to run you through the key financials and business performance numbers. Pre sales in Q1 FY 'twenty two stood at INR176 crore and against INR101 crore in Q1 FY 'twenty one, an increase of 74% on year to year basis. On collection front, we achieved collection of INR172 crore in Q1 FY 'twenty two as against INR65 crore in same quarter last year. That is a 165 increase on year on year basis. These sales to collection efficiency ratio is 98% in this quarter, which is highest. In terms of the financial highlights, we reported a consolidated revenue of INR93 crore in Q1 FY 'twenty two, as against INR55 crore in same quarter last year, which is an increase of 69% on year on year basis. Consolidated EBITDA for Q1 FY 'twenty two is INR 21 crore, as announced, INR 16 crore in Q1 FY 'twenty one, which is also an increase of 32% on year on year basis. As always, we continue to focus on our cash flow management and financial discipline that is must in this environment, and debt continues to reflect in our low adjusted net debt equity ratio that is excluding Kvaerla equity, which has been reduced 2.17x due to our strong operating cash flows. In this quarter also, our gross operating cash flow was positive by INR32 crore. The positive cash flow helped to reduce interest cost by 19% compared to the same period last year. We can now open the phone for questions from the participants. Thank you very much. Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Participants are requested to use handsets while asking a question. Participants are also requested to restrict their questions to two during the initial round. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have the first question from the line of Kunal Lakhan from CLSA. So I have three questions, actually. So firstly, on the Borodli project, Right? So just can you update us on what is the status of the settlement of the club members by the landowner? And what are the status on the approvals and also the targeted timeline for the launch? That's my question, ma'am. So that that you you said three questions? This Sure. Sure. So I can I can I can say all of this together? Okay. So second question is on the BKC side. You know, we haven't seen much of traction in the last five quarters. But what is your strategy to monetize this in the next, three to four years that that we are targeting? And the third question is, let me generate, you know, or, like, what is the sales target for FY twenty two? And in general, over the next three years, what kind of sales level do we plan to achieve? Those are my three questions. Thank you. Thank you, Kunal. Bodhivi project, just to answer that, but if that it has to be it is the developed the landlord, he has to settle this. And anyhow, that the club is on other company. It's not with the company where the land is. We have done a DDA. And I don't think that, that should be a problem. I think they are simultaneously settling the members. But that should not stall or that should not stop the project from going. And as far as the approvals are concerned, it's a again, the landlord has to get the approval. We are monitoring it definitely, and we are seeing that it should happen in next six to nine months. And we are looking to launch this project by the end of either the last quarter of 'twenty one, 'twenty two or the first quarter of 'twenty two, 'twenty three financial year. Coming to the VKC project, I think in last year, we did a sales of INR90 crores in VKC. That was in one quarter. Definitely, this quarter, we have not been able to do some any sales. But we are very we are pushing and we are doing I think now with the lockdown opening up and slowly the things are getting to the normal, we are seeing good traction, which we are expecting from BKC projects also. Coming to the sales level, your third question, Punal, that is that sales, definitely, we are looking to double our sales every two to three years. That's we have been giving this on all our calls, and we maintain that. And looking at the current momentum and the current sales velocity, we are very confident of achieving that. Thank you. We have the next question from the line of Raj Rishi, an investor. Please go ahead. Yes. Hi. Just want to ask you what would be your aspirational sales in, say, three years compared to what it think we told you we just I answered this question Raj, I believe. We are looking at least minimum double the sales in next two to three years. Okay. And like compared to, say, a quarter back, say, three months back in the, say, last con call or something, how would you give you how would you assess the present scenario in the geography you're serving? Are looking very there's a good traction in MMR region, and we are focusing, obviously, in MMR region. If you see, year on quarter on quarter year on year basis, this first quarter versus last, then the first COVID wave was there and the second COVID wave, we have done much, much more than the last corresponding quarter of the last year. So we see this momentum across all the quarters, and that's what we are confident. And you think this trend should continue for a long time? What's Yes. Your We see that housing demand, at least in the housing segment, we are very bullish, and we feel this will continue. So you think the cycle has turned for the positive finance? Yes. The cycle has turned, we believe, for positive. And already we are seeing the prices getting the prices are strengthening across all the organized developer. And we see to we also see that we will be one of the big beneficiary out of it. What would be your appreciation? Like how much price hike can you assess in the next one year in the projects you are Raj, I think I made this statement very clearly in my speech, in my commentary right now. We are here to first exhaust the inventory very fast, but that does not mean we will not rise the prices. We have already hiked up prices in certain projects where we are seeing a good velocity. We will definitely like to maximize the pricing without affecting the sales velocity. You. We have the next question from the line of Parvez Akhtar Kazzi from Alwy Securities. Please go ahead. Yes. Good afternoon, sir, and thanks for taking my question. Two questions from my side. First, what would be a target launch timeline for the Wafi and the Wafi project? And second, on the business development front, obviously, 2021 was a very good year for us. So what are our thoughts regarding FY 2021 going ahead? I mean, is there any internal target as to the number of projects or maybe a sales potential that you would like to add every year for project portfolio? Thank you. So thanks, Pravesh, for asking questions. So as far as Waseem and Waseem, we are pretty confident in current quarter, we'll at least launch one project out of the board. So we are looking at least to like we have acquired recently three projects, Vassai, Vassind and Boribali Eskaya Resort. So out of these three projects, we are very confident that at least two projects we will launch before the end of this financial year. And as far as at least this quarter, we are confident that at least one project we will launch in this quarter. So and coming to the BD development, acquiring more projects, we are aggressively looking out for the projects. And as we talk as I'm talking, we are already negotiating with one or two at a very forward I mean, very, very we would expect that something to close in near future. And coming to the sales, I have been maintaining that we will double our sales in less than two to three years. We have the next question from the line of Dipla Devpalma from Antique Stock Broking. Please go ahead. Good afternoon, sir. Good afternoon, everyone. Sir, my first question is on your your contract, I believe. I believe that you have around 3,000,000 square feet yet to be developed. Just wondering whether those the 3,000,000 square feet in terms of development, whether there is any flexibility. Is there a flexibility option where you can develop, enter, see, median residential or whatever you want to develop? Or is there some as far as the layout, you have to develop some amount of commercial, some amount of retail, some amount of residential. Vipulab. This is Prashant Desai. Vipulab, so as far as Suntak City is concerned, the 3,000,000 number is a conservative number. The actual development potential is much higher. And yes, as you rightly pointed out, there is flexibility in the development of the development. We can do commercial, we can do residential. So there is a lot of flexibility we can that is allowed in that land parcel. So yes, you are absolutely right. Depending on the market conditions, we will take a decision on that. Okay, okay. Sir, my my second question is on the price rise you mentioned. Sir, just wondering in the last three to six months, what kind of price rise can you give us some in insight on kind of, in terms of percentage or, in terms of project, some insight on the price hikes that, you did in the last two to six months in your project? So, Pitlab, we have done some price hikes in the and without affecting the velocity of the projects. And going forward also, without affecting the velocity of the projects, we will take a decision on the price rise. But as sir also pointed out in the previous question, the prime motive is to exhaust the inventory. Yes. I just wanted to look one, Amit, can you give us number like 5% price rise, 10% across the board? I'm just to understand what kind of because this has been observed in in other, you know, in other other developers also. So I'm just trying to understand what kind of price size that you have done in the past three to six months. Mr. Prabhup, if you can see already our EBITDA margin is growing. That means, obviously, we have done some increase of minimum 5% to 10% in our existing prices what we have done. So and that we will continue to see in our results whatever the outcome comes. So I'm we are pretty confident, but at the same time, we don't want to lose on the velocity at the we but we'll not leave any opportunity looking at that. We'll try to maximize our brand value. I can tell you that. Okay, sir. Thank you, sir. I'll come back in with you, sir. Thank you. Thank you, Prashanth. Thank you, sir. Thank you. We have the next question from the line of Rahul Jain from NQ Global. Please go ahead. Hi, sir. Sir, just wanted to know the breakup of sales between April, May and June. And how has the run rate been in July so far? Any color on that side? Rahul, Prashant, side, often we don't have that data. I can share it to you offline. However, we are seeing we are getting back to track post the second wave, and that is getting reflected in our numbers. So after, again, obviously, April was the weakest, May was better than that, and June is better than the May. Obviously, exact numbers, we don't have right now at the moment, but you can take the split from Prashant offline. Okay. Thanks, sir. Sir. Thank you. We have the next question from the line of Sahat Soni and A Student. Please go ahead. Hello? Yes. Yeah. Hi, Amandu. Yeah. Yeah, Amirut. Please go ahead. Yeah. Actually, I just had a single question. On on the PPT investor presentation, there was a thing, where it was written as a collection efficiency for presales. So it was the 98%. I just wanted to know, like, it was 98% for the wholesale, the whole presales, like the, whole presales amount? So yes, it includes the past it includes the collection, includes the collections from the past presales as well. However, when we calculate the number, the number is calculated on collections for the quarter divided by the presales for the quarter. So like it would the presale for this quarter would have been 98%, right? Or it would be collect it would be from previous quarter as well included? Yes. Yes. Yes. Okay. Okay. Thank you. Thank you. For the future, like This is the option. We would be seeing this percentage Mister Sondi? Of the collection efficiency. This this will be good only. Don't worry about that. I I think this this is a very simple thing. I think this is I think it is very very nicely explained in the presentation, mister Sondi. Okay. Okay. I'll just send it back in the queue. Thank you. Thank you. We have the next question from the line of Anirudh from ZM Investments. Please go ahead. Yes. Hi. Good evening, sir, and thanks for the opportunity. Great to see you have a new spirit in our company after the pandemic. So so just need a clarification from your end. And in your opening remarks, you mentioned that we could do a 700 crores of VAT in next few years years. So do we need that or operating profits? So this is definitely, one second, this is PBT, what we are talking about INR700 crores. Because if you divide, I'm dividing over the period of five to six years only from the existing projects in whatever portfolio we have right now. We are not talking about any further new acquisitions. From the existing acquisitions, whatever we have done and the existing portfolio, we are talking about so the receivables is obviously, if you see the presentation, it will almost come to INR 13,000 crores. This is INR 700 crore of you can consider almost your PAT also. You can almost consider a PAT. You can almost consider a PAT. Not PBT is almost a PAT. Okay. And sir, just one more question. May I know what is the cumulative booking till date and cumulative revenue recognized in Avenue 2 project? Anirud, so if you see Slide seven, in Slide seven, we have in City, we have sold 64% of the inventory that we have launched. And in SunTek City, Avenue 1 and Avenue 2, we have almost sold 80% of our inventory, 80% of our inventory. So so, you know, apart from this, whatever remaining data that you require, I can provide to you offline. Oh, okay. That will that will also work. And, sir, just one more question. So Naigong, we launched it around INR 7,500 per square foot, right? And what are the current realizations right now? Current realization is close to INR 8,500 to INR 9,000. So the higher flows must be going for the higher prices around at INR10000 crores per square foot also, right? Due to also extending of the prices, which I already said that we are increasing the prices at that. Okay, okay, okay. Thank you, sir. All the best. Thank you. Thank you. We have the next question from the line of Viplav Debharma from Antique Stock Broker. Please go ahead. Sir, just two questions. One is out of in your presentation, mentioned receivable from sole inventory of 14,000,000,000 1,400 crore. Out out of this 1,400 crore, how much is from the non big project? So is is my question again here. The non VKC projects will be will be will be more than around six will be closer to sixty sixty to 65%, sir. Okay. Non VKC. And for this nonbigacity So sorry. So sorry. It will be close to around 70%. I'm so sorry. So sorry. That's okay. That's That's okay. No issue. No issue. 65, 70 per 7070%. And on on this nonbigacity project, the project that is ongoing, total, how much cost to be incurred? So the so the cost the cost to be incurred can be completely taken care of from the receivables which is yet to come. So any new sales that you're seeing in slide number 70, that will be additional cash flow. The cost can be completely taken care of from the that will come from the non BKC projects. Hello? Sir, this is the operator. The audio is slightly fluctuating from your line, sir. No. It's not it okay? If you could adjust it a bit more, sir. Is it okay now? Yes. It's better, sir. Hello? Hello? Yes. I just wanted to understand the cost that you propose to be incurred for this ongoing projects overall. I just yeah. I understand that receivables would cover, but just wanted to understand if you have some ballpark number for this cost of income. Hello? Yes. Prashant is just giving you the number. So, Vikram, the cost the balance cost to be incurred majorly will go towards Suntec City, Fourth Avenue and Suntec Maxwell, Nai Gao. And the other project, the cost remaining is very minimal. The total cost will be closer to around INR800 crores to INR900 crores, and that can be easily covered from the balance receivables that I will be adding of close to INR plus INR 1,000 crores from this non EKP projects. So basically, without any incremental sales, you have support cash flow, right? Absolutely, sir. Excellent, excellent, sir. Excellent. Thank you, sir. Thank you. Thank you. We have the next question from the line of Parvez Abdul Ghazi from Edelweiss Securities. Please go ahead. Yes. Good afternoon, sir. Thanks for taking my follow-up question. So two questions again. First is what would be the completion time line for the BTC commercial project? And second, as far as the OBC is concerned, when do we expect to get OC for OBC, the second phase? And any plans of further launch in ODC and maybe at hour of this year? Praveen, as far as PKC projects, both the commercial projects, are looking to complete in next twelve to eighteen months from now. They are in construction within full swing, and we are quite confident to complete in less than eighteen months or maximum, let's say, eighteen to twenty months. Coming to the ODG project, the second phase, we are expecting to give possession in this current quarter itself. So Phase two, Avenue 2, which is SunTech City Avenue 2, we are looking to give possession in the current quarter itself. So as of September, we are confident to give the possession. Looking to launch ODC1 more tower, yes, we looking at the demand, we will definitely we are definitely planning to do some one more maybe new launch very We have the next question from the line of Anirudh from ZM Investments. Thanks for the follow-up again, sir. Sir, just a follow-up on the previous participant's question. So Niagara project, Niagara Westworld, we will be when will we expecting the OC? Yes. It's also we are looking to get the OC in the next quarter. In the next quarter. Okay. Thank you, sir. Thank you. Ladies and gentlemen, we will take one last question from the line of Bajarang Bafna from Suniti Securities. Please go ahead. Okay. So sir, what could be the demand drivers for this structural change or the shift that is happening in the real estate sector? If you could slightly outline on that will be really helpful, sir. So we are all seeing the demand is busy, and we are seeing this demand across the globe, not only in India. And we are seeing this demand is definitely in India and as well as the demand in MMR region is, in fact, more stronger. So we continue to see this demand over the next, at least minimum, to three years. So ladies and gentlemen, that is the last question. I would like to hand the floor back to Mr. Ketan, the chairman and managing director, for closing comments. Thank you all for taking out the time from your busy schedule today. In case 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 once again. Thank you. Ladies and gentlemen, on behalf of Suntec Realty, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.