Ladies and gentlemen, good day, and welcome to Sunteck Realty's earning conference call for Q3 FY 2021. We have with us today, Mr. Kamal Khetan, Chairman and Managing Director of the company, along with the senior management team of Sunteck comprising of Mr. Manoj Agarwal, Chief Financial Officer, Mr. Prashant Chaubey, Head of Corporate Finance, and Mr. Ronak Rathi, AVP, Investor Relations. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that 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. I now hand the conference over to Mr. Khetan, Chairman and Managing Director of the company. Thank you, and over to you, sir. Sir, please go ahead.
Can you hear me?
Yes, sir. We can hear you.
Good evening, everybody, and welcome to the earnings call for the third quarter of the financial year 2021. Thank you for joining us. I would like to begin our call with a few business updates. We are continuing to see strong momentum in residential demand in the third quarter as well. In MMR, owing to the combination of various favorable factors, especially the reduction in stamp duty and lower home loan rates, we witnessed significant growth on the presale front, driven by both our ready-to-move-in inventory as well as the newly launched projects in mid-income and aspirational segment.
We successfully launched Tower 2 at 4th Avenue, Sunteck City, with presales of over INR 120 crores within a few weeks of the launch. We are observing a trend of increased demand and renewed buyer interest for high-quality products of developers, especially those with strong balance sheet and high brand recall.
We believe demand will continue to funnel for large organized real estate developers as the pedigree of trusted brand drives preference for the new home buyers today. The sales collection trajectory has seen robust growth post the easing of the lockdown, and we remain confident of increasing our market share, driven by expanding our City and the World brand.
We expect this segment to be long-term growth drivers for the company. While the World brand currently contributes less than one-third of our revenue, we intend to increase the same towards 50% on a sustainable basis for a diversified and a balanced portfolio. Our recent acquisition of Vasai and Vasind are a step in this direction. Our continued focus on prudent cash flow management has enabled us to generate strong operating cash flows, which has aided in the further reduction of our already negligible debt.
It is the financial discipline that enables financial flexibility to grow our business. All our construction sites, namely 2nd and 4th Avenue at Sunteck City, ODC, Sunteck WestWorld, and Sunteck MaxX World, Naigaon, commercial projects at BKC Junction, Sunteck Icon, and Sunteck BKC51, as well as Sunteck Crest at Andheri East, are operating at pre-lockdown execution levels. Our project, [Sunteck Gilbird] and Sunteck City Avenue One, has also received OC in quarter gone by. Our focus on construction progress has led to strong operating cash flows, and we foresee this momentum to continue.
We continue to aggressively explore new opportunities and intend to capitalize on the same, setting the stage for the further sustainable growth and attractive ROEs. We remain confident as emerging one of the biggest beneficiary of the ongoing consolidation in the industry basis our balance sheet strength, established track record, and operational cash flow visibility.
Thank you, and over to you, Manoj.
Yeah, Mr. Manoj, please go ahead.
Yeah. Thank you, sir. Good evening, everyone, and thank you once again for joining us today. I would like to run you through the finances and business performance numbers for the third quarter and nine months of FY 2021. Pre-sales in Q3 FY 2021 stood at INR 349 crores as against INR 200 crores in Q2 FY 2021. That is an increase of 75% on QoQ basis. I would like to highlight that we have achieved INR 660 crores of pre-sales for nine months FY 2021 as against INR 613 crores for last financial year, FY 2020, which is an increase of 8% year-on-year. Distribution mix of quarterly pre-sales remain balanced and are as follows: 54% in ODC, 18% in Naigaon, and balanced 28% in other projects comprising of [Sunteck Gilbird], Signia Waterfront, and Signia High.
On collections front, we achieved our highest ever collections in this quarter as a function of healthy pre-sales, a reserved park, as well as increase in home loan disbursements. We recorded collections of INR 253 crores in Q3 FY 2021. That is a 79% increase on quarter-on-quarter as against INR 141 crores in Q2 FY 2021. In terms of financial highlights, we reported a consolidated revenue of INR 205 crores in Q3 FY 2021 as against INR 143 crores in Q2 FY 2021, a 43% growth from quarter-on-quarter basis, and 20% growth on year-on-year basis against INR 171 crores in Q3 FY 2020. Revenue stood at INR 401 crores for nine months FY 2021 as against INR 477 crores in nine months FY 2020 last year, impacted due to pre-COVID quarter one in FY 2021.
Consolidated EBITA for Q3 FY 2021 is INR 45 crores as against INR 31 crores in Q2 FY 2021, 44% growth on QoQ basis. EBITA for nine months FY 2021 was INR 89 crores as against INR 159 crores for nine months of previous financial year.
Our consolidated EBITA margin for nine months FY 2021 stands at 32%. With respect to tax, we recorded INR 22 crores in Q3 of this financial year as against INR 14 crores in Q2 FY 2021, an increase of 59% on QoQ basis, and INR 33 crores for nine months FY 2021 as opposed to INR 86 crores in nine months FY 2020 last year. As always, we continue to focus on our cash flow management and financial discipline, a must in this environment, and that continues to reflect in our low net debt equity ratio, which has been reduced to 0.24 due to our strong operating cash flows.
We can now open the forum for questions from the participants. Thank you very much.
Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to limit their question to two per participant. If time permits, you may join the queue for any follow-up. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Anyone who wish to ask a question at this time, you may please press star and one. The first question is from the line of Kunal Lakhan from the CLSA. Please go ahead.
Hi, good evening, Kamalji and team. Just my first question was on the new launches side. If you can give us some direction in terms of how and when we plan to bring in Andheri West, Vasai, Vasind to the market, and also like further phases of our ongoing projects, mainly Naigaon also.
Hi, Kunal. Thanks for the question. Kunal, we are targeting the launch of both Vasai and Vasind before the first half of FY 2022. Before the half yearly of FY 2022. In fact, the significant effort and approvals on plannings and designs currently being undertaken and to ensure that we continue our sales momentum. As far as Naigaon is also concerned, we are looking to do a phase 3 launch very soon.
Andheri West?
Andheri, very fact, we are already in fact, the Andheri West project, there are some concerns. There are in fact talks going on with our JV partner. Whatever will be the outcome, we will keep you all informed accordingly, Kunal.
Okay. If you can you share what are the concerns like?
I think I can't do this on this. It will come into the public domain, for sure.
Okay. We'll wait for that. My second question, Kamalji, is on the reduction in the approval cost by the state government. How does that impact our cost estimates for Vasai, Vasind, and even the future phases of Naigaon?
Definitely there will be the various products or project. Obviously, it will be only beneficial. The various project, the benefits will be much more.
Where it is like ODC and all, where the entire benefit of the reduction in stamp duty comes to Sunteck. Where it is in the scope of JV partner, the benefit obviously goes to the JV partner. It depends how the JVA structure has happened. It is too early to very frankly comment, but definitely it is a very positive for the entire industry that we have to understand. For all our upcoming launches, as well as the under-construction projects, we are assessing what will be the potential cost saving and the opportunity cost to the exact, what it will be. That again, we will try to put it in the public domain. Once we have more clarity, we will definitely share more perspective on that aspect.
Kamalji, correct me if I'm wrong. Typically, SSI and premium cost in joint development is borne by the partner, the landowner, right?
Yes.
In our case, since the SSI premiums have been halved, the benefit will accrue to the landowner? If yes, then how would we revisit the terms of the revenue share in that?
The SSI premium which has been halved, is only which is in Mumbai, BMC. Which is not, I think, in BDMC. Maybe the landlord partner might not get that benefit at all. Whereas the benefit is in BMC, Mumbai Municipal Corporation. It's not across the Maharashtra, to my knowledge. Let me have a clarity. We have to take into consideration the benefit of unified DCR also. It is very frankly, Kunal, it is too early for me to make an exact benefit who will what get. As far as our MMR, especially Mumbai project, which is majorly now today ODC, and our BKC, other commercial projects, BKC51, where the entire premiums are to our account. Sunteck Icon and Sunteck BKC51, as well as Sunteck Crest, all the premiums are to our account.
There I can save substantial cost. Whereas which is Vasai, Vasind, and Naigaon, I don't think that benefit is exactly there to them. If there is substantial anything, obviously we'll try to take some benefit to our account as well.
Thank you. Mr. Lakha, request you to join the question queue for any follow-up. Thank you. The next question is from the line of Pritesh Sheth from Edelweiss Wealth. Please go ahead.
Yeah, sure. My first question is, how much of the inventory is left now in ODC, both launched and the area which is not launched yet?
Hi, Pritesh. As far as ODC is concerned, in 4th Avenue, we have close to around INR 1,000 crores of unsold potential inventory. The total from entire ODC that we have launched till now, that is Avenue One, Avenue Two, and 4th Avenue, the total potential is in the range of INR 1,300 crores-INR 1,400 crores. That is the total potential, out of which 4th Avenue is close to INR 1,000 crores.
Okay. No more residential launch will happen in ODC, right? I mean, that's the inventory we had overall.
No, no. Definitely, we have. I think we have already said there is even a 6th Avenue over and above the 5th Avenue of the commercial ODC. Definitely there will be many more launches you may see of the residential. We can't tell you right now, it's too early.
Okay.
No one can stop Sunteck if we want to convert part of the 5th Avenue, which is commercial, into a residential as well. We can do, in fact, out of the 3 million square feet of the commercial which we are looking from the 5th Avenue, we can easily do if we want to change the mix, looking at the demand and supply, what is the demand in commercial versus what is the demand in residential. We have both the options, whether we can do 1 million residential or 2 million commercial, or entire 3 million commercial, or 1.5 million commercial and 1.5 million residential. We have lot of flexibility. Over and above the 6th Avenue, which we are looking to do only residential.
Okay, got it. Thanks. Similar question for Naigaon, if I want to know what would be the inventory right now, and how much can we see in terms of launches from here on?
Pritesh, again, I would like to give you the numbers of the unsold potential value from our existing launches only, which is Sunteck WestWorld and Sunteck MaxXWorld. In Sunteck WestWorld and Sunteck MaxXWorld, the total unsold potential value that we are sitting today at is close to around INR 500 crore. That is the unsold potential. This is just the initial phases of the Naigaon project. We have close to another 7.5 million sq ft, which is yet to be launched. That I'm not considering in this INR 500 crore which I've given you.
Sure. Thanks. That is helpful. Thank you. I'll join back the queue. Thank you.
Thank you. The line is now participants. Please limit your questions to per participant. The next question is from the line of Prem Khurana from Anand Rathi. Please go ahead.
Thank you for taking my questions. I've got two questions from my end. One was, if you could help us understand how the sales velocity been in Q4, because why I ask this is because there were these media reports with registration numbers, and registration numbers in January were significantly lower than December. The only change I could think between December and January was essentially the stamp duty was taken up by 1%. Does that mean the registration numbers have been low, your end sales are still the same, or sales velocity again has changed in the way the registration numbers have changed? If you could share your thoughts on this, please.
Hi, Prem. Kamal here. Since the biggest advantage Sunteck has is we are across all the segments, I see the demand for mid-income group and the aspirational luxury group, which is affordable. The demand continues to be very strong. If you talk about the registration numbers, a lot of time, obviously, people do the bookings. If you have seen in December, there was a big rush for the registration. Not necessarily the sales has happened in December. It might meant that the sales might have happened in October, November, or even sales before that. People tend to do it towards the end of the date. We look the similar way the registration will pick up towards in the March month.
The sales happening in January as well as February, we will see even the sales picking up and the registration picking up because of the sales which have accumulated and not registered in January, February as well.
Sure. Sir, my second question was, there was this media article sometime back, wherein I think there's been a favorable ruling in our favor, in that case involving Goodwill Theatres. Possible to share more on this, where exactly is the property and what is the status?
It was a small deal. In fact, we have paid INR 2.5 crores. The terms didn't work out. I think we didn't go ahead in the deal. They were supposed to refund the money. Which they were not refunding it. I think we got the verdict in our favor. I think we are expecting the refund of the money.
Sure. We're not planning on taking the money back. We're not planning to take that project up.
No, we're not interested. I don't think so. For us, very frankly, everything is more important, not only the commercial, the partner and everything. While doing the due diligence, we get extra cautious and whatever we find. That was the initial just term sheet level. That's why we were very clear that we want to back it out. We backed out.
Thank you. Mr. Khurana, I request you to join the queue for any follow-up. Any participants who wish to ask a question at this time, then at least press star and one. The next question is from the line of [Sagar Kalpani] from Motilal Oswal. Please go ahead.
Yeah. Hi. Thanks for this opportunity. Am I audible?
Yes, you are, sir.
Yeah. I just wanted to understand that in the opening remarks, Kamal sir, you mentioned about we are actively looking at new opportunities for new ventures. Is this going to be only through a joint investment model, or are you open to paying for land also to look at new projects right now?
Good question, Sagar. Obviously, we will not refrain from not taking the projects by paying the money and acquiring fully. If there are so much of opportunity and you can continue to grow without putting the capital and you can maintain asset light, why should you try to stretch the balance sheet? If your ROE are improving and your growth is not compromised, and in fact, there is so much of opportunities in the market. Our preference will always be keeping it asset light. That does not mean that we will not acquire if there is something which is available and we can buy. There is enough opportunity in the market for even that, but the preference will be always for the asset light.
Got it. Just one follow-up on this. Will this be only in the MMR region, in the outskirts, or are you now considering looking at projects away as well?
Again, my answer will be exactly same because there are so much of opportunity within MMR region. There is no reason why we should try and go and venture outside. Unless and until we see that the opportunities are reduced, then only it makes sense that we should go out of MMR and try to explore. Why stretch our bandwidth? We can use the same bandwidth in a more optimal manner to do more projects within MMR. Also, when it comes to making asset-light, you can always do asset-light too. This is a part answer to your last question again, just to give you more clarity on that question. It's that even if we buy, there are a number of private equity players who are ready to fund and put pure equity with Sunteck.
They have already shown their inclination that if you want to buy, we are ready to fund that, and you can still make Sunteck and buy the land and make it asset light by involving a private equity player. That is another one reason that we are very clear that we will maintain asset light but not leave the opportunity to even buy the land parcel if they are available at a good price point.
Makes sense, sir. Thanks a lot for the detailed clarifications and best wishes.
Thank you, Sagar. Thanks.
Thank you. The next question is from the line of Parvez Akhtar Qazi from Edelweiss Securities. Please go ahead.
Hi. Good evening, sir, and congratulations for a good set of numbers. A couple of questions from my side. First, with respect to ODC Five, when do we expect we can finalize upon the plan and how much commercial or REIT et cetera has to do? Second, the status of BKC commercial projects? When do we expect to complete them? Thirdly, your thought process regarding liquidation of inventory in the BKC project? Thank you.
Parvez, ODC 5th Avenue, which is a commercial project. Definitely, we want to launch it ASAP. Since COVID was there and we wanted to see the demand, how is the demand continuing in the commercial segment. We don't just want to block because commercial needs a lot of CapEx. We don't want to put too much of CapEx and then we land up in a situation where the balance sheet is stressed and the demand for commercial is not picked up or if there is a stress in the commercial. We are waiting for that clarity. I think in the next few months, we should have that clarity, and we will definitely start constructing at least part of one tower of commercial in that 5th Avenue. As far as your 5th Avenue is concerned, that is the answer.
Coming to the BKC commercial projects, I think in BKC Sunteck Icon project, we are already at the third level of slab, I believe, close to. We are looking to complete this project over a period of the next 12-15 months. To your third question, the BKC residential sales. We have to accept that unfortunately in the last two quarters, we have not been able to move the BKC inventory. There is definitely now the spike in inquiry in BKC large ticket size. In the large ticket size, sometimes the deals take longer time for a turnaround. Hopefully this quarter, we will be able to see some positive outcome of our efforts.
Sure, sir. Thanks. All the best to you, sir.
Thank you, Parvez. Thanks a lot.
Thank you. The next question is from the line of Sandeep Naik from General Atlantic. Please go ahead.
Yeah. Hi, sir. I had two questions. One with respect to Avenue Four. What are the timelines that you are seeing in terms of completion of this project? I'll ask my second question later. Thank you.
Sandeep, project, although the RERA timeline is 2024, 2025, definitely, we are looking to complete it much before that.
Right, sir. Essentially, why I ask is because I believe Avenue One was started back in 2011 or 2012, and now the OC has been received. Construction, is it taking so much time or from where does that confidence to complete in three, four years come?
That confidence for completing in three, four years comes from our Sunteck, our Naigaon project. We completed, I think almost 20 towers in less than 18 months. If the COVID would have not been there, we would have by now delivered the project. Now coming why that project took so much time. The delay was not due to the execution. ODC was the first. BKC was established first by Sunteck, like for the residential. ODC, there was no one who took the MMRDA scheme forward. That's why we got the land so cheap. In fact, we were the first people to, in fact, develop under the MMRDA scheme in ODC in the new CBD policy. There was lot of clarity which was not there. For that, the approvals took a lot of time.
The delay was not due to the execution, unfortunately, due to the delay in the approvals. All those clarity and clarifications and the approvals now are in place, which unfortunately Sunteck had to go through because that was non-clarity in Sunteck Avenue One and Sunteck City Avenue Two. Those now being that clarity being there, we are pretty confident about our execution capability, and I think there is no reason we should not be able to complete in two to three years Sunteck City 4th Avenue.
Thank you, Mr. Naik. Request to join the queue for any follow-up. The next question is from the line of Biplab Debbarma from Antique. Please go ahead.
Good evening, sir. Good evening, everyone. My first question is on the new launches, Vasai. In these two projects, what would be the typical ticket size and price per feet range?
I don't think we will be able to reveal what will be the ticket size and all. I think that we are definitely looking for both this project in the aspirational luxury category and a mid-income group segment, combination of both, especially in Vasai, and Vasai maybe only in the aspirational luxury side.
Fair enough. Sir, my second question is on the business development. Sir, post-COVID, especially in the past few months, with the residential scene uptick mainly amongst reputed developers like you, do you see any change in expectations from the landowners while negotiating on JDA, JVs? I mean, have their expectations increased in terms of negotiation? Like they want more now post this uptick in residential sales, especially in MMR.
Fortunately, I don't see that happening because I think that benefit will go to definitely the organized player and a player with a strong financial balance sheet. The reason is very clear. I think after this problem of NBFC crisis and then the initial crisis of the COVID, I think only not more than 20%, 25% of the developers will survive. In fact, landlord will have only very few choices, and the good developer and organized developer will have many choices.
Okay. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Thank you so much. Good afternoon, everyone. Sir, one question is on the upcoming Vasai launch. Is it in this more or less same catchment area as Naigaon, and therefore can be competing at some level?
Sameer, I definitely don't think because Vasai is totally a different market, Sameer, and Naigaon, in fact, Naigaon there was no market. Naigaon, I think all developers put together before Sunteck entered, was in fact less than 15, 20 apartments per month. If you see, Sunteck when entered now the numbers have gone from that to another level. We've created altogether a new market. I think we took over a market which was two, three stations ahead, which people used to go and buy in Virar and in Nalasopara. Vasai is like a posh market of that micro-market. Being this into more luxury category, I think this will in fact complement each other and not compete with each other. It is having a total. See, this is like in Andheri.
There is Andheri, there are lots of properties, but Lokhandwala or Versova is the premium location. In and around Powai, there are so many properties very near to Powai. You have Bhandup, Nahur, anything and everything, but Powai commands a premium. This is being on the beach and bang on the sea, I think, and being in the Vasai West market, and our property is in Naigaon East. This location is the most very posh location, and I think this will complement that side, not compete it.
Okay, great. Second is, the current interest rates are so low. I mean, why not lever up a bit more, and maybe I don't know, what, 7.5%, 8%, and then take advantage of the low interest rate and then be a bit more aggressive in buying new projects, new land parcels?
Yeah, definitely, Sameer. I clearly said that in my last conversation also that it's not that we will not buy the property if the property is available, and we will not put the money, and we may revisit the balance sheet. We want to be very cautious. At the same time, aggressive, but very cautious. We are very clear. Don't want to be going overboard, and we have seen people burning their fingers badly. There is lot of opportunities which are available at the right model. Till the time that continues, we'll continue to explore that, and we will not compromise on the growth, I will always say that. We will take the maximum. Till now, I think we have done the maximum acquisition, even in this lockdown period.
We have been one of the biggest beneficiary of the acquisition, so there is no compromise on acquisition or business development.
Great. Sir, with your permission, one more question. Is there any target you can give us? In a year, you do maybe two Vasai kind of deals or something like that?
I think we don't want to fix any target. We want to do as much as we can do it. Where the capital is not involved, we are aggressively negotiating quite a few deals. We still keep those things under any number. Since now we are confident about our capability and whether it is acquisition, sale, and execution, I don't think it will stop happening, like when we move on.
Okay, great. Thank you very much.
Thank you so much.
Thank you. Next question is from [Praveen Prabakaratna] from VK Capital. Please go ahead.
Hi. I wanted your opinion on how much the residential rates in Mumbai can increase on a percentage basis this year, maybe calendar 2001 or FY 2022. I think normally last year was some INR 90,000 crores or INR 100,000 crores. What kind of increase can we research?
I think very frankly that it's a question which very frankly, answer which to my knowledge and what is my gut feel and what is our assessment of the market, this year the market should definitely grow by minimum at least 10%-15%. Given the current situation and the way, the things are happening, we look that market should grow at least by 10%-15%. This is my personal view. That's what I feel.
Right. As of now, we don't see the situation like 2011 where we had like 150,000 apartments, like almost double of what it is running now. That situation might take a lot of time to come, or it may never come.
No, I don't think that the situation will never come. I want to be more cautious. Even if that, Praveen, which you have to understand, even if that increases by 10%-15%, the number of developers which were doing in 2011 INR 150,000 crore were, let's say, 100. Today, even if that becomes INR 120,000 crore, the number of developers would be only 25% of that 100. The market share of the developer who will survive and are strong and organized will increase substantially over a period of next two to three years. That much I can say.
Thank you. Ladies and gentlemen, I would like to hand the conference over to the Chairman and Managing Director, Mr. Khetan, for closing comments. Thank you, and 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 please 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 very much. Ladies and gentlemen, on behalf of Sunteck Realty, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.