Q3 20/21

Feb 17, 2021

Ladies and gentlemen, good day, and welcome to SunTek Realities Earnings Conference Call for Q3 FY twenty twenty one. We have with us today Mr. Kamal Khetan, Chairman and Managing Director of the company, along with the senior management team of Santek comprising of Mr. Manoj Aggarwal, Chief Financial Officer Mr. Prashant Chawbhay, Head of Corporate Finance and Mr. Ronak Rathi, AVP, Investor Relations. As a reminder, all participant lines will be in a listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. 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. Ketan, 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. Yeah. So good evening everybody, and welcome to the earning call for the third quarter of the financial year twenty twenty one. Thank you for the join 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 NMR, 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 Fourth Avenue, Suntec City with presales of over rupees 120 crores within a few week of the launch. We are 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 developer as the pedigree 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's rank currency 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 Wassail and Vasend are a step in this direction. Our continuous 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 Second And Fourth Avenue at Suntec City, ODC, Suntec Westworld and Maxwell, Nai Gao, commercial projects at VKC Junction, Suntec ICON, and Suntec VKC 51, as well as Suntec Crest at Andheri East are operating at pre lockdown execution levels. Our project, Gilbert Hill and Sanctuary City Avenue 1 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 of our emerging as one of 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. Mister Monarch, please go ahead. Yeah. Thank you, sir. Good evening, everyone, and thank you once again for joining us today. Now I would like to run you through the finances and business performance numbers for the third quarter and nine months of financial year 2021. Resales in Q3 FY 'twenty one stood at INR349 crores in against INR200 crores in Q2 FY 'twenty one. That is an increase of 75% on Q on Q basis. I I would like to highlight that we have achieved rupees 650 crore of previous for nine months FY '21 and against rupees 613 crore for last financial year, which is an increase of 8% year on year. Distribution mix of quarterly results remain balanced and are as follows. 54% in Odyssey, 18% in Naira, and then 28% in other projects comprising of Pilbara Hill, Sydney Auto Fund, and Sydney High. We recorded collections of bookings $2.53 crores in Q3 FY 'twenty one. That is a 79 increase on quarter on quarter as it has to be 141 crores in Q2 FY 'twenty one. In terms of financial highlights, we reported a consolidated revenue of INR205 crore in Q3 FY 'twenty one, Revenue stood at rupees 401 crore for nine months FY '21, as again rupees 477 crore in nine months FY '20 last year, impacted due to pre COVID virus one in FY '21. Revenue of rupees 31 crore in Q2 FY '21, 44% growth on Q o Q basis. EBITDA for nine months FY '21 was rupees 89 crore. Revenue of rupees 159 crore for nine months of previous financial year. Our consolidated EBITDA margin for nine months of FY '21 stands at 32%. With respect to PEST, we recorded INR 22 crore in Q3 of this financial year, INR 14 crore in Q2 FY '21, an increase of 59% on q on q basis, and rupees 33 crore for nine months 21 is applied to rupees 86 crore in nine months FY '20 last year. As always, we continue to focus on our cash flow management and financial discipline a must in this environment, and debt continues to reflect in our lower net debt equity ratio, which has been reduced to point two four due to our 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 and one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press and 2. 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 and 1. The first question is from the line of Kunal Lakhan from the CLSA. Please go ahead. Hi. Good evening, community and team. So this call my first question was on the new launch site. If you can give us some direction in terms of, you know, how we plan how and when we plan to bring in Andheri West, what's the reason for the market and also, like, for the sales of our ongoing projects, mainly Nighthawk also? Right, Kunal. Thanks for the question. Kunal, we are targeting the launch of both Versailles and Vaseem before the first half of FY 2022. So before the half yearly of FY twenty twenty two. And in fact, the significant effort and approvals on planning and design is currently being undertaken and to ensure that we continue our sales momentum. And as far as Nygao is also concerned, we are looking to do a phase three launch very soon. And, Andri, where, sir? So, Andri, So so we are already in fact project. There are some concerns. There are impact of going on with our JV partner. Whatever will be the outcome, we will keep you all informed accordingly, Kuna. Okay. If if you can, can you share what are the concerns? Like I think I can't do this on this. So we try it will come into the public domain, for for sure. Okay. We'll wait for that. And so my second question, Ramesh, is on the reduction in the in the in the approval cost by the state government. How does that impact our cost estimates for for and even the future phases of NileDAU? So there are definitely, there will be the the the the various Obviously, it will be only beneficial, but the various project, the benefits will be much more where where it is, like, ODC and all where the entire benefit of the reduction in scan duty comes to the SunTech. Where it is in the scope of JV partner, the the benefit obviously goes to the JV partner. It depends how the structuring the JV 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 what it will be. And that, again, we will try to put it in the public domain. Once we have more clarity, and we will definitely share more perspective on that aspect. So, Kamalini, if I'm correct me if I'm wrong. So, typically, SSI and premium cost in in in joint development is is borne by the by the partner, the landowner. Right? Yes. And in this in that case, like, you know, since the FSA premiums have been halved, so the benefit will accrue to the landowner? And if yes, then then how would we revisit the terms of of the revenue share in that case? So the FSS premium, which has been half, is only in m m it's which is in Mumbai, VMC, which is not, I think, in VBMC. So maybe the landlord partner might not get that benefit at all. So whereas the that benefit is in DNC, Morgan Municipal Corporation. It's not across the Maharashtra to my knowledge. I I and let me have a clarity. And if there is a substantial and we have to take into consideration the benefit of unified d DCR also. So it is very frankly, Kunal, it is too early for me to make exact benefit what who we want that. But as far as our MMR, especially Mumbai project, which is majorly now today, ODC, and our VKC other commercial projects, VKC 51, where the entire premiums are to our account, VKC 51, VKC icon, VKC icon and VKC 51 as well as VKC Crest, the all the premiums are to our account. So there, we save, I can save substantial cost. And whereas in which is what Vasily, Vasily and Nygao, I don't think that benefit is exactly there to them. And if there is I think if there is substantial anything, obviously, we'll try to take some benefit to our account as well. Thank you. Mr. Lakhan, request to join the question queue for any follow-up. Thank you. The next question is from the line of Pritesh Shet from Edelweiss Wealth. Please go ahead. Yeah. Thanks for your Yeah. First question is, so how much of the inventory is left now in ODT, both launched and the area which is not launched yet? Hi, Mitesh. As far as ODC is concerned, in in Fourth Avenue, we have close to around 1,000 crores of unsold potential inventory. And the total from entire ODC that we have launched till now, that is Avenue 1, Avenue 2, and Fourth Avenue, the total potential is in the range of 1,300 crores to 1,400 crores. So that is the total potential out of which Fourth Avenue is close to INR 1,000 crores. Okay. And no more residential launch will happen in ODT, 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 Sixth Avenue over and above the Fifth Avenue of the commercial ODC. So definitely, there will be many more launches you may see of the residential. We can't tell you right now. It's too early. But one can stop, Sanjay, if we want to convert part of the Fifth Avenue, which is commercial, into a residential as well because we can do Fifth we we can do it in fact, like, of the 3,000,000 square feet of the commercial which we are looking from the Fifth 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 those options whether we can do $1,000,000 residential or $2,000,000 commercial or entire $3,000,000 commercial or $1,500,000 commercial and $1,500,000 residential. We have a lot of flexibility Over and above the Sixth Avenue, which we are looking to do only residential. Okay. Got it. Got it. Thanks. And and similar question for, Naiga, I want to know what would be the inventory, right now? And how much can we see in terms of launches from here on? So, Pritesh, I mean, I would like to give you the numbers of the unsold potential value from our existing launches only, which is Westfield and Maxwell. So in Westfield and Maxwell, the total unsold potential value that we are sitting today at is close to around INR 500 crores. That is our unsold potential. And also, this is just the initial phases of the Nygon project. We have closed another 7,500,000 square feet, which is yet to be launched. So that I'm not considering in this 500 crores, which I've given you. Sure. Sure. Thanks. That is helpful. Thank you. I'll join the ITQ. Thank you. You. Reminded to our participants, please submit your questions to per participant. The next question is from the line of Prem Korana from Anand Raji. Please go ahead. Thank you for taking my questions. I have two questions from my end. One was that if you can help us understand how is the sales velocity being in q four because and why are this? I mean, they were in the reports and with with registration numbers and registration numbers in January were significantly lower than December. So if and the only change or anything between December and January was eventually the time that you were taken up by 1%. So is it does there any registration numbers have been low? Your end sales are still the same? Or I mean, sales velocity again has changed and and then the way the registration number has changed? And if you could share your thoughts on this, please. Hi, Prem. Kamal here. So I think since the biggest advantage, I think, CenterCache is we are across all the segments. And I see the demand for Middleton Group and Accretionary Luxury Group, which is affordable. I think 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 saw if you have seen in December, there was a big rush for the registration. Not necessarily the sales has happened in December. It made that the sales might have happened in October, November, or even sales before that. So people tend to do it towards the end of the towards the end of the date. So we we we look we kind of look the similar reason, similar way the registration will pick up towards the March March in the March month. So the sales happening in January as well as February, we will see the even the sales picking up and the registration picking up because of the sales which are accumulated and not registered in January, February as well. Sure, sir. And sir, my second question was, so there was this media article sometime back wherein I think that we've been there's been a favorable ruling in our favor. I mean, in that case, involving Google Theater. So possible to share more on this? What exactly where exactly is the property, and what what is the status? It was a small deal. Right? In fact, we have paid 2 and a half crores. And the term didn't work out, so I didn't we didn't go ahead in the deal. And they were supposed to refund the money, and they they were not refunding it. And I think we got the work in our favor. And I think we are we are expecting the refund of the money. Sure. So we're not and we're seeking the money that we're not planning to enough take that project. 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. So we while doing the due diligence, we we we we get extra cautious and whatever we find. That was the initial discount sheet level. So that's why. So we were very clear that we want to back it out. So we backed up. The next question is from the line of Sagar Kalpani from Motilal Oswal. Please go ahead. Yes. Hi. Thanks for this opportunity. I'm audible. Yes. You are, sir. Yeah. So I just wanted to understand that in the opening remarks, Kamil, sir, you mentioned about we are actively looking at new opportunities for new ventures. So is this going to be only through, like, a joint development model, or are you open to paying for land also to look at new projects right now? So good question, Sadhguru. Obviously, we will not refrain from not taking the projects by paying the money and acquiring fully. But 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? And if your ROEs are improving and your momentum, say, your growth is not compromised and in fact, there is so much of opportunities in the market. So our preference will always be keeping it as satellite, but that does not mean that we will not acquire if there is something which is available and we we can buy. There is there is enough opportunity in the market for you in that, but the preference will be always for the asset light. Got it. And just one follow-up on this. Will this be only in the Myanmar 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 NMR region. So there is no reason why we should try and go and venture outside Unless and until we we see that there is that the opportunities are reduced, then only it makes sense that we should go out of MMR and try to expedite by stretch up and we we can use the same bandwidth in a more optimal manner to get a 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, we can there are there are a number of private equity players who are ready to fund and put pure, pure equity with SunTek. Are already shown their inclination that if you want to buy, we are ready to fund that, and you can still make some tech and buy the land and make it a satellite by involving a private equity player. So that is another one reason that we are very clear that we will maintain a satellite, but not leave the opportunity to even buy the land parcel that we are available at a nice at good price point. Makes sense, sir. Thanks a lot for the details, clarifications and best wishes. Thank you, Sadar. Thanks. Thank you. The next question is from the line of Parvesh Akharkasi from Edelweiss Securities. Please go ahead. Hi. Good evening, sir, and congratulations for a good share of numbers. Couple of questions from my side. First, with respect to OBC five, when do we expect we can finalize upon the plan? I mean, how much commercial already, etcetera, have to do? Second, the status of BKC commercial project, when do we expect to complete them? And thirdly, our thought process regarding liquidation of inventory into BKC project? Thank you. So, Praveen, OBC is a revenue, which is a commercial project. Definitely, we want to launch it ASAP. But since this 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. So we don't want to put too much of CapEx and then we'll end 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. So we are waiting for that clarity. I think in the next few months, we should have that clarity, and we we will definitely start constructing at least part of, like, one tower or start with one tower of commercial in that Fifth Avenue. So as far as your Fifth Avenue is concerned, that is the answer. And coming to the BKC commercial projects, I think in BKC icon, contact icon project, we are already at the third level of slab, I believe, close to, and we are looking to complete this project over a period of next twelve to fifteen months. Coming to VKC Gateway VKC 51, That is we are looking to complete over a period of eighteen months. So that's and due to your third question, the residential VKC residential sales, We have to accept that, unfortunately, in last two quarters, we have not been able to move the BKC inventory. But there is definitely now the spike in inquiry in BKC large ticket size. And in the large ticket size, sometimes the deals take longer time for a turnaround. Hopefully, this quarter, you we will be able to see some positive outcome of our efforts. Okay. Thanks. All the best, Shubhrant. Thank you. Thank you, Parvish. Thanks, Deepak. Thank you. The next question is from the line of Sandeep Nayak from AlphaAcurig. Please go ahead. Yeah. Hi, sir. I had two questions. One, with respect to Avenue 4, so what are the time lines that you are seeing in terms of completion of this project? And I'll ask my second question later. Thank you. So Sandeep, project, although the RADAR time line is twenty four, twenty five. But definitely, we are looking to complete it much before that. Right, sir. Sir, essentially, you know, why I ask is because I believe revenue one was started back in 2011 or '12, and you're now the OC has been received. So construction, is it taking so much time, or or, you know, from where does the confidence to complete in three, four years comes? So that confidence for completing in three, four years comes from our in fact, our Nygong project. We completed, I think, almost like 20 towers in less than eighteen months. If the COVID would have not been there, we would have by now delivered the projects. Now coming why that project took so much time, that was not the delay was not due to the execution. ODC was the first, like, VKC was established first by SunTek, like, for the residential. ODC, there was no one who took the MMRDA scheme forward. That's why we got the plan so cheap. In fact, we were the first people to, in fact, develop under the MMRDA scheme in ODC, in the new CBD policy. So there was lot of clarity which was not there. So for them, the approvals took a lot of time. It was not the delay was not due to the execution, unfortunately, due to the delay in the approvals. So all those clarity and clarifications and the approvals now are in place, which unfortunately, SunTek had to go through because that was not nonclarity in SunTek Avenue 1 and SunTek 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 two to three years, Syntex City's Fourth Avenue. Thank you, Mr. Naik. Request to join the queue for any follow-up. The next question is from the line of Vikram Devarma from Antique. Please go ahead. Good evening, sir. Good evening, everyone. My first question is on the new launches you are signed. In these two projects, what would be the typical ticket size and the parts per ticket rate? So 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 these projects in the aspirational luxury category and a mid income group segment, both combination of both, especially in and the combination of both and Vasant 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 team up ticket mainly in the amongst the a little of a slight queue. Do you see any change in, you know, expectations from the landowners while negotiating on JDA, JVD? I mean, has their expects have their expectations increased in terms of negotiation? Like, they want more now post this, you know, the uptick in residential sales in MMR, especially in MMR? Unfortunately, I don't see that happening because that is I think that benefit will go to the definitely for organized, clear and strong clear with a strong financial balance sheet. The reason is very clear. Only, I think, after this problem of NBFC crisis and then the initial crisis of COVID, I think only not more than twenty percent, twenty five percent of the developers will survive. So the landlord will now get the only he in fact, landlord will have only very few choices. And the developer 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, and good afternoon, everyone. Sir, one question is on the upcoming website launch. Is it in this more or less same catchment areas, Ngauga, and therefore, they'll be competing at some level? So, Sami, I definitely don't see because the is totally a different market, Sami. And Naidao in fact, Naidao, there was no market. Naidong, I think all developers put together before SunTek entered was, in fact, less than fifteen, twenty apartments per month. If you see the and SunTek went into now the numbers have gone from that to another level. And we have created altogether a new market. I think I took we took over a market, which was two, three stations ahead, which people used to go and buy in Virar and in Nala Sopara. Vatai is like a posh market of that micro market. And being this into more luxury category, I think this will, in fact, complement each other and not compete with each other. And it is having a total see, this is this is like in Andheri. There is Andheri. There are lots of properties, but Lukanwala or Varkua is the premium location. Again, in and around Pavai, there are, like, so many properties very near to Pavail, have Panto, Naho, any anything and everything, but Pavail commands a premium. So this is being on the beach and then on the sea, I think, and being in the very best market, but and Naidao is is our property is in Naidao East. So this location is the most very posh location, and I think this will complement that site. Not not complete. Okay. Great. And second is, you know, the current, you know, interest rates are so low. I mean, why not lever up a bit more? And maybe I don't know what's seven point percent, 8%, and then, you know, take advantage of the low interest rate and then, you know, be a bit more aggressive in buying new projects, new land parcels. Yeah. Definitely, Swami. So I agree. I clearly said that in my last conversation also that it's it's it's 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 will we may revisit the balance sheet. But we want to be very cautious. At the same time, aggressive, but very, very cautious. We are very clear. So 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 satellite model. In the time that continues, we continue to explore that. And you can we we we may we we may end up maybe in not we will not not compromise on the group, I will obviously say that. We will take the maximum till now. I think we have done the maximum acquisition even in this lockdown period. We been the one of the biggest beneficiary of the acquisition. So there is no compromise on acquisition or business development. Great. So there is a question. One final question. Is there any do it because the the capital is not involved. We are aggressively negotiating quite a few things. We will be stupid to listen any number. And since now we are confident about our capability and whether it is acquisition, sales and execution, I don't think it will stop at it. Okay. Great. Thank you very much. Thank you so much. Thank you. Yes. From line of from VK Capital. Please go ahead. Hi. Sir, I wanted to inquire what is your opinion on how much the residential space in Mumbai can increase on a percentage basis this year, maybe calendar 2001 or FY '22? See, I think, normally, last year was some 90,000 crores or 1 lakh crores. So situation and the way the things are happening, we look that market should grow at least by 1015%. This is my personal view. That's what I see. Right. No. I don't think that the situation will never come out. No. I want to be more cautious. Even if that, wherever, which you have to understand, even if that increases by 10 to 15%, the number of developers which were doing in 02/2011, 1 lakh 50,000 crore. Well, let's say 100. Today, even that even if that comes to that becomes 120 1 lakh 20,000 crore, the number of developers would be only 25% of that 100. So each developer will 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's much I can say. Thank you. Ladies and gentlemen, I would like to hand the conference over to 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 and 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 SunTek Realities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.