Ladies and gentlemen, good day, and welcome to Sunteck Realty's earnings conference call for Q1 FY 2022. We have with us today Mr. Kamal Khetan, the Chairman and Managing Director of the company, Mr. Manoj Agarwal, the Chief Finance Officer, and Mr. Prashant Chaubey, SVP Corporate Finance. Please note this call will be for 60 minutes, and for the duration of this conference, 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. Should you need assistance during the conference, please signal an operator by pressing star then zero on your touch-tone telephone.
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. Khetan, the Chairman and Managing Director of the company. Thank you, and over to you, sir.
Thank you for joining Sunteck Realty first quarter FY 2022 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 Sunteck, what we are calling Sunteck 3.0. Sunteck 3.0 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 Sunteck worked to establish its brand and track record, we acquired large landholdings on our balance sheet. In certain cases, we also held onto finished apartments that would increase in value. While these decisions were strategic and created enormous shareholder value, currently, we have over INR 1,700 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 15 months, including the sell-down of almost our entire inventory at our Borivali East project, namely Signia High and our 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 modus operandi moving forward. Sunteck City and Sunteck World are the exhibits of this approach. I think of Sunteck 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 very little capital upfront and yield high returns on our invested capital. Sunteck spends approximately just less than INR 100 crores a year on overheads. Our near-term engine, if you see slide eight of our presentation, alone have a potential to generate approximately INR 700 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 offering grow 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 INR 250 crore of these fees in 2021. The 50% saving means that we will also be saving INR 250 crore, 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 Sunteck.
In recent weeks, Sunteck 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. Sunteck 3.0 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 Sunteck 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 Agarwal, for his comments, and thereafter, I'll be happy to answer your questions if any. Over to you, Manoj.
Yeah. Thank you. Good evening, everyone, and thank you once again for joining us today. Hope all of you are safe and well. The finances and operational numbers has been already uploaded on the investor relationships. 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 2022 stood at INR 176 crore as against INR 101 crore in Q1 FY 2021, an increase of 74% on year-to-year basis. On collection front, we achieved collection of INR 172 crore in Q1 FY 2022 as against INR 65 crore in same quarter last year. That is a 165% increase on year-on-year basis. Pre-sales to collection efficiency ratio is 98% in this quarter, which is the highest.
In terms of the financial highlights, we reported a consolidated revenue, INR 93 crore in Q1 FY 2022 as against INR 55 crore in same quarter last year, which is an increase of 69% on year-over-year basis. Consolidated EBITDA for Q1 FY 2022 is INR 21 crore as against INR 16 crore in Q1 FY 2021, which is also an increase of 32% on year-over-year basis. As always, we continue to focus on our cash flow management and financial discipline.
That is must in this environment, and that continues to reflect in our low adjusted net debt/equity ratio, that is excluding quasi equity, which has been reduced to 0.17 x due to our strong operating cash flows. In this quarter also, our gross operating cash flow was positive by INR 32 crore. The positive cash flow helped to reduce interest costs by 19% compared to the same period last year. We can now open the forum for questions from the participants. Thank you very much.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may enter star and one on your touchtone telephone. If your questions have been answered and you wish to withdraw yourself from the queue, you may enter star and two. 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. Please go ahead.
Yeah. Hi, good evening, team. I have three questions, actually. Firstly, on the Borivali project, can you update us on what is the status of the settlement of the club members by the landowner, and what is the status on the approvals and also the targeted timeline for the launch? That's my question one.
You said three questions or just?
Sure. I can say all of those together. Okay. Second question is on the BKC side. We haven't seen much of traction in the last five quarters. What is your strategy to monetize this in the next three to four years that we are targeting? The third question is a little generic. What is the sales target for FY 2022? 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. Borivali project, just to answer that query, the landlord, he has to settle this. Anyhow, the club is on other company. It's not with the company where the land is. We have done a JDA, and I don't think 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. As far as the approvals are concerned, 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. We are looking to launch this project by either the last quarter of 2021/2022 or the first quarter of 2022/2023 financial year. Coming to the BKC project, I think in last year, we did a sales of INR 90 crore in BKC.
That was in one quarter. Definitely this quarter, we have not been able to do any sales. 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, Kunal. Sales, definitely we are looking to double our sales every two to three years. We have been giving this on all our calls and we maintain that. Looking at the current momentum and the current sales velocity, we are very confident of achieving that.
Thank you so much, Kamal.
Thank you. We have the next question from the line of Raj Rishi, an investor. Please go ahead.
Hi. Just want to ask you, what would be your aspirational sales in, say, three years compared to what it is today?
I think we told you. I answered this question, Raj, I believe. We are looking at least minimum double the sales in next two to three years.
Okay. Compared to, say, a quarter back, say three months back in, let's say last con call or something.
Yeah
How would you assess the present scenario in the geography you're serving?
There's a good traction in MMR region, and we are focusing obviously MMR region. If you see year-over-year basis, this first quarter versus last, when the first COVID wave was there, and the second COVID wave, we have done much more than the corresponding quarter of the last year. We see this momentum across all the quarters, and that's what we are confident about.
You think this trend should continue for a long time? What's your assessment?
Yes. We see that at least in the housing segment, we are very bullish, and we feel this will continue.
You think the cycle has turned for the positive finally?
Yeah. The cycle has turned, we believe, for positive, and already we are seeing the prices are strengthening across all the organized developer. We also see that we will be one of the big beneficiary out of it.
What would be your appreciation? How much price hike can you assess in the next one year in the projects you are developing?
Raj, I think I made this statement very clearly in my commentary right now. We are here to first exhaust the inventory very fast, that does not mean we will not raise the prices. We have already hiked up our prices in certain projects where we are seeing a good velocity. We will definitely like to maximize the pricing without affecting the sales velocity.
Okay. Thank you.
Thanks, Raj.
Thank you. Before we move to the next question, we would like to remind participants to restrict their questions to two during the initial round. We have the next question from the line of Parvez Akhtar Qazi from Edelweiss Securities. Please go ahead.
Yeah. Good afternoon, sir, and thanks for taking my question. Two questions from my side. First, what would be a target launch timeline for the Vasai and the Vasind project? Second, on the business development front, obviously FY 2021 was a very good year for us. What are our thoughts regarding FY 2022 and going ahead? 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.
Thanks, Parvez, for asking questions. As far as Vasai and Vasind, we are pretty confident in current quarter we'll at least launch one project out of the both. We are looking at least two. We have acquired recently three projects, Vasai, Vasind, and Borivali Eskay Resorts. Out of these three projects, we are very confident that at least two projects we will launch before the end of this financial year. As far as at least this quarter, we are confident that at least one project we will launch in this quarter. Coming to the BD development, acquiring more projects, we are aggressively looking out for the projects. As I'm talking, we are already negotiating with one or two. We may expect that something to close in near future.
Coming to the sales, I have been maintaining that we will double our sales in less than two to three years.
Sure, sir. Thank you. I'll come again with few more questions.
Thanks, Parvez. Thanks.
Thank you. Ladies and gentlemen, if you have a question, you may enter star one. We have the next question from the line of Biplab Debbarma from Antique Stock Broking. Please go ahead.
Good afternoon, Sir. Good afternoon, everyone. Sir, my first question is on your Sunteck Avenue. I believe that you have around 3 million sq ft yet to be developed. Just wondering whether the 3 million sq ft in terms of development, whether there is any flexibility. Is there a flexibility option where you can develop entire 3 million residential or whatever you want to develop? Is there, as per the layout, you have to develop some amount of commercial, some amount of retail, some amount of residential?
Hi, Biplab. This is Prashant Chaubey. Biplab, as far as the Sunteck City is concerned, the 3 million number is a conservative number. The actual development potential is much higher. Yes, as you rightly pointed out, there is flexibility in the development of the development. We can do commercial, we can do residential. There is a lot of flexibility that is allowed in that land parcel. Yes, you are absolutely right. Depending on the market conditions, we will take a decision on that.
Okay. Thank you. Sir, my second question is on the price rise you mentioned. Sir, just wondering in the last three to six months, can you give us some insight in terms of percentage or in terms of projects, some insight on the price hike that you did in the last three to six months in your projects?
Biplab, we have done some price hikes and without affecting the velocity of the projects. Going forward also, without affecting the velocity of the projects, we will take a decision on the price rise. As sir also pointed out in the previous question, the prime motive is to exhaust the inventory.
Yes. I just wanted to look quantum. If you can give us some number, like 5% price hike, 10% across the board. I'm just trying to understand what kind, because this has been observed amongst other developers also. I was just trying to understand what kind of price hike that you have done in the past three to six months.
Biplab, if you can see already our EBITDA margin is going back. That means obviously we have done some increase of minimum 5%-10% in our existing prices, what we have done. That you'll continue to see in our results, whatever the outcome comes. We are pretty confident. At the same time, we don't want to lose on the velocity. We'll not leave any opportunity. Looking at up, 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, Prashant. Thank you, sir.
Thank you. We have the next question from the line of Rahul Jain from Emkay 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 front?
Hi, Rahul. Prashant this side. Often we don't have that data. I can share it to you offline. We are seeing we are getting back to track post the second wave, and that is getting reflected in our numbers.
Okay.
Sir, Rahul, obviously April was the weakest. May was better than that, June is better than the May. Obviously, exact numbers we don't have right now as at the moment, you can take the split from Prashant offline.
Okay. Thank you, sir.
Thank you. Ladies and gentlemen. We have the next question from the line of Sahad Sondi, a student. Please go ahead.
Hello.
Yeah.
Yeah. I'm audible?
Yeah. Anirudh, please go ahead.
Yeah. Actually, I just had a single question. On the PPT investor presentation, there was a thing where it was written as a collection efficiency for pre-sales. It was written 98%. I just wanted to know, it was 98% for the whole pre-sales, like the whole pre-sale amount?
Yeah, the collection includes the collections from the past pre-sales as well. However, when we calculate the number, the number is calculated on collections for the quarter divided by the pre-sales for the quarter.
Okay. The pre-sale for this quarter would have been 98%, right? It would be from previous quarter as well included?
Yes.
Okay.
Okay. Thank you.
So for the future-
This is the operator
where we would be seeing this percentage.
Mr. Sondi
of the collection efficiency?
This will be good only. Don't worry about that. I think this is a very simple thing. I think it is very nicely explained in the presentation, Mr. Sondi.
Okay. I'm back in the queue. Thank you.
Thank you. We have the next question from the line of Anirudh from ZM Investments. Please go ahead.
Yeah. Hi. Good evening, sir, and thanks for the opportunity, and great to see a new spirit in the company after the pandemic. Sir, just need a clarification from your end. In your opening remarks, you mentioned that we could do a INR 700 crores of PAT in next few years. Do we mean PAT or operating profits?
Definitely once again, this is PBIT, what we are talking about INR 700 crores. If you are 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. The receivables is, obviously, if you see the presentation, It's almost come to INR 13,000 crore. This is INR 700 crore of, you can consider almost your PAT also. You can almost consider a PAT.
Okay. Great.
Not pre-date, it's almost a PAT.
Okay. Sir, just one more question. May I know what is the cumulative booking till date and cumulative revenue recognized in Avenue 2 project?
Hi, Anirudh. Anirudh, if you see slide number seven, in slide number seven, in Sunteck City, we have sold 64% of the inventory that we have launched. In Sunteck City Avenue 1 and Avenue 2, we have almost sold 80% of our inventory. Apart from this, whatever remaining data that you require, I can provide to you offline.
Okay, that will also work. Sir, just one more question. Naigaon, we launched it around the INR 7,500 per square feet, right? What are the current realizations right now?
Current realization is close to INR 8,500-INR 9,000.
The higher floors must be going for the high prices around at INR 10,000 per sq ft also, right?
Due to also a strengthening of the prices, which I already said that we are increasing the prices as such.
Okay. Thank you, sir. All the best.
Thank you.
Thank you. Participants, if you have a question, you may enter star and one. We have the next question from the line of Biplab Debbarma from Antique Stock Broking. Please go ahead.
Sir, just two question. One is, in your presentation you mentioned receivable from sold inventory of INR 1,400 crore. Out of this INR 1,400 crore, how much is from the non-BKC projects?
Biplab, Prashant again here. Non-BKC projects will be closer to 60%-65%, sir.
Okay. Non-BKC. For this non-BKC-
Sorry. It will be close to around 70%. I'm so sorry.
That's okay. No issue. 70%. On this non-BKC project, the project that is ongoing, total how much cost to be incurred?
The cost to be incurred can be completely taken care of from the receivables which is yet to come. Any new sales that you are seeing in slide number seven, that will only be additional cash flow. The cost can be completely taken care of from the receivables that will come from the non-BKC projects. Hello?
Sir, this is the operator. The audio is slightly fluctuating from your line, sir.
Now it's okay?
If you could adjust it a bit more, sir.
Is it okay now?
Yes, it's better, sir.
Hello, Biplab? I think we lost Biplab. Hello? Biplab?
Yeah. I just wanted to understand the cost that you foresee to be incurred for these ongoing projects overall. I understand that receivables would cover, but just wanted to understand if you have some ballpark number for this cost to be incurred. Hello?
Yeah. Prashant is just giving you the number.
Biplab, the balance cost to be incurred majorly will go towards Sunteck City 4th Avenue and Sunteck MaxXWorld Naigaon. The other projects, the cost remaining is very minimal. The total cost will be closer to around INR 800 crores-INR 900 crores, and that can be easily covered from the balance receivables that I will be having of close plus INR 1,000 crores from this non-BKC projects.
Basically, without any incremental sales, you have surplus cash flow, right?
Absolutely, sir.
Excellent, sir. Excellent. Thank you, sir.
Thank you. We have the next question from the line of Parvez Akhtar Qazi from Edelweiss Securities. Please go ahead.
Yeah, good afternoon, sir. Thanks for taking my follow-up question. Two questions again. First is, what would be the completion timeline for the BKC commercial projects? Second, as far as ODC is concerned, when do we expect to get OC for ODC the second phase, and any plans of a further launch in ODC, maybe a tower this year? Thank you.
Parvez, as far as BKC projects, both the commercial projects, we are looking to complete in next 12-18 months from now. They are in construction, is in full swing, we are quite confident to complete in less than 18 months or maximum 18-20 months. Coming to the ODC project, the second phase, we are expecting to give possession in the current quarter itself. Phase 2, Avenue 2, which is Sunteck City Avenue 2, we are looking to give possession in the current quarter itself. August, September, we are confident to give the possession. Looking to launch ODC one more tower. Yes. Looking at the demand, we are definitely planning to do one more maybe new launch very soon.
Yes. Thank you.
Thanks, Parvez.
Thanks.
Thank you. We have the next question from the line of Anirudh from ZM Investments. Please go ahead.
Yeah, thanks for the approach. I'll follow up again, sir. Sir, just to follow up on the previous participant's question. Naigaon pr oject, Naigaon Westworld, when we'll be expecting to receive OC?
Yeah, this 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 Bajrang Bafna from Sunidhi Securities. Please go ahead.
Okay. 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.
We are all seeing the demand is crazy, and we are seeing this demand across the globe, not only in India. We are seeing this demand is definitely in India, as well as the demand in MMR region is in fact more stronger. We continue to see this demand over the next at least minimum two to three years.
Ladies and gentlemen, that was the last question. I would like to hand the floor back to Mr. Kamal Khetan, 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 Sunteck Realty, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.