Q2 20/21

Nov 17, 2020

Ladies and gentlemen, good day, and welcome to SunTek Realty's Earnings Conference Call for Q2 FY 'twenty one. We have with us today Mr. Kamal Sethan, the chairman and managing director of the company along with the senior management team of Centec comprising of mister Manoj Agrawal, chief financial officer mister Prashant Chobe, head of corporate finance and mister Ronak Karate, AVP, investor relations. Please note this call will be for sixty minutes. And for the duration of this conference call, all participants' lines will be in listen only mode. The conference is being recorded and a transcript for the same may be put 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 call, please signal an operator by pressing star then 0 on your touch tone telephone. Before I hand the conference over to the management, I'd like to remind you that certain statements made during the course of the 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 and uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by such statements. I'd now like to hand the conference over to mister Ketan, chairman and managing director of the company. Thank you, and over to you, sir. Good evening, everybody, and welcome to the earning calls for the second quarter and first financial first first half of first half of the financial year 2021. Thank you for joining us. Before I share a few updates, I wish you all a very happy Diwali and a very happy New Year. As you all may be aware, we are now seeing a revival in residential demand, especially in MMR owing to the combination of various favorable factors such as reduction in stand duty and lower home loan rates. At SunTech, we are witnessing an expedited turnaround cycle for purchasing decisions by prospective customers. There is a slight customer bias towards organized developer, which we see for ready to move in inventory and nearing completion projects. Our luxury projects are also seeing a spike in inquiries, especially on account of we feel lower stamp duty. Post lockdown as well, our digital platform, SunTek Air, continues to garner customer interest and add to our sales momentum. It continues to be agile to adapt to the disruptive changes brought about by the ongoing pandemic and are utilizing this space to strengthen our systems and processes, including onboarding of Grand Frontal, Appellate, Walker, Chandiuk and Company as our company auditor. All our under construction sites are now approaching pre lockdown activity levels, and finishing work is in full swing at few of our projects, which are like Signia, namely Signia Waterfront at Ayuli, Gilbert Hill at Handbury West, Suntec Westworld in Ngauga. It is also important that we continue to focus on construction progress, which in turn will lead to generate strong cash flows in coming quarters and revenue recognition at regular intervals. The second, the affirmation of AA minus credit rating with a stable outlook by Ikra highlights our continued focus on prudent cash flow management. The sales and connection trajectory has been growing post the easing of the lockdown, and we remain confident of increasing our market share. Our recent project additions are the perfect example of our philosophy of making research based asset light value added acquisitions. These projects will largely cater to the mid income to affordable segment, especially post COVID-nineteen scenario. We continue to aggressively explore new opportunities and intend to capitalize on these opportunities at hand, setting the stage for further sustainable growth and attractive ROE. On that note, now I would like to hand over the call to our CFO, Mr. Manu Jagarwaz, who will take you through the operational and the financial numbers for this quarter. As always, I will be happy to answer any of your questions that you may have during the conference call. Thank you, Mahmud. Thank you, sir. Good evening, everyone, and thank you once again for joining us today. Before I begin, I would like to take this opportunity to wish everyone a happy Diwali and a happy New Year. I'll start with update on the revenue recognition method in the financial statements. During this quarter, looking into the current COVID nineteen infected environment, we have moved revenue recognition to project completion method from percentage completion method for all the new as well as upcoming projects. And, accordingly, comparative numbers have been also been taken. But they were also conquered by new incoming auditors, such as Grant Thornton affiliate, Walker Chandra, and company LLP. Its project completion at heart for revenue recognition is more than the city. Please note, while cash flow of the project and complete events as it is, it is near timing difference of revenue accounting. Now I would like I I would like to run you through the financial and business performance numbers for the second quarter and half year of financial year 2021. P sales in Q2 FY 'twenty one stood at INR 200 crore and INR 300 crore for half actual FY 'twenty one. Distribution mix of quarterly pieces remained healthy and are as follows: 56% in Sydney high quality, 27% in OTC, 15% in Naida and the related in other projects. On collection front, momentum picked up in this quarter is function of healthy pre sales of decent past as well as increasing home loan disbursements. We recorded collection of INR 141 crores in Q2 of FY 'twenty one, a 117% increase on quarter on quarter basis as against INR 65 crores in Q1 FY 'twenty one. In terms of financial highlights, we reported a consolidated revenue of INR 143 crore in Q2 FY 'twenty one, rather than INR 53 crore in Q1 FY 'twenty one, a 120% crore on quarter on quarter basis. And it's against INR 132 crores in Q2 FY 'twenty, a 8% growth of year on year basis. Revenue stood at INR 196 crores for H1 FY 'twenty one as well as INR $3.00 5 crore in H1 FY 'twenty. On EBITDA front, the consolidated EBITDA for Q2 FY 'twenty one is INR 31 crore, as well as INR 13 crore in Q1 FY 'twenty one, 140% growth on quarter on quarter basis. EBITDA for H1 FY 'twenty one was INR 44 crore, as against INR 110 crore for H1 of previous financial year. Our consolidated EBITDA margin for H1 FY 'twenty one stands at 22%. With respect to PEC, we recorded INR 14 crore in Q2 of this financial year, INR 28 crore in Q2 of previous year FY 'twenty and INR 11 crore for H1 FY 'twenty one as compared to INR 61 crore in H1 FY 'twenty. Our consolidated net margin at H1 FY 'twenty one stood at 6%. 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 is 0.25, which excludes Quasi equity component. We can now open the call for questions from the participants. Thank you very much. Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question, press and one on your touch tone phone now. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets for asking a question. In the interest of time and fairness to all participants, ladies and gentlemen, please restrict questions to two per participant in the initial rounds. If you still have more questions, kindly join the CureFresh. We have a first question from the line of Sagar Chalkane from Motilal Oswal. Please go ahead. Yeah. Hi. Thanks. Am I audible? Yes. You're audible. Yes. Yeah. Thanks for this opportunity. Sir, my question was more broad based on these new integrated comprehensive development control regulations, these ICDCRs. What can be the potential upside for us in our, you know, lands in Nai Gao, Bastai and in Ashtanga if they are to be implemented the way the draft is right now? If you can highlight something on that. Sadar, it will be very frankly too early to comment what will be the advantage on that. So I would refrain from making any comment on that, very frankly. I don't because we have to get into detail of every projects versus that policy. So once everything is cleared, we will likely get on to that. Sure, sir. No problem. So I'll come back in the queue for more questions. So you can ask a second question if you want. Yes. No, my the next question was on the update on our Ushivara project only. If you can highlight what steps we are taking to improve the sales velocity in ODC, that would be helpful. I think Sadhir, just wanted to highlight, if you see the quarterly performance in SunTek City for the last two quarters have been very strong. We have been able to achieve significant sales, especially in Avenue 1, which is now ready. OC has been received. And even for Avenue 2, which is nearing completion. As Mr. Ketan had said, we are also seeing more and more demand in this category of projects. So SunTek City continues to see good momentum for the last few quarters, and we're very confident going forward also that I think they've sold. We sold 27 units in this quarter, 26 in First Avenue and one in Second Avenue, worth about 54 crores. In fact, Prashanth, the entire first half, we have some sales of close to around INR 90 crores in in ODT. So from that perspective, you know, our digital platform, which is the contact air platform, that has served us quite well, and it has enabled us to, you know, go ahead with the sales momentum plus the completion of Avenue 1. As Avenue 1 has received OC, so that is also now giving it another level of growth. So in that so that is something which will also help. Sure. Got that. And just one more thing, any update on the retail or commercial development in that plot? I think, Sadhguru, we updated in the last analyst call as well that looking at the current and this pandemic going on, it will be too early. We all know what is the state of retail, in fact, in this pandemic situation. So it will be stupid to start any retail project at this juncture. And the commercial that the clarity is still not there. So we would like to wait and watch that whether there is a demand which comes like residential, like that demand has picked up in residential, that certainly is not there in retail and commercial. If once that is clear, we will definitely look to start as on I would say as on yesterday basis. But nevertheless, if we see that demand is caused for quite a long time or there is some problem in the demand of retail or commercial, we can always launch looking at the residential demand, which has picked up. We can always launch a residential tower or a residential feed in that particular component of 3,000,000 square feet. Okay. So just one thing I wanted to understand. So it is possible that we may not do any retail development in ModiC also. Is that what you're saying? If the market does not allow, when should we do it? If market just for the heck of it, sir. So we'll do maybe the limited retail. The size of the retail may change. The size of the commercial might change. But if looking at the demand, we would like to see that what kind of demand is there. Accordingly, we can we have an advantage that we can shift from the commercial what we were looking to do, 3,000,000 square feet of commercial and retail. Maybe we do it $2,000,000 or $1,500,000 but we'll continue to explore. We don't say we'll not do retail or commercial. We'll continue to explore retail and commercial. We'll see what is more beneficial for the company. Obviously, we'll do that. Sure. Understood. I was just asking it from the perspective that it can improve the velocity of sales for our residential units. Think the if you look at that micro market, I think we feel we have done a decent without any launch, without any new activation like on a regular sustainable basis. I think this momentum, what we see over the past years, in fact, this has been better than the previous quarters, even pre COVID quarters, when there is there was not a launch. So I think this is quite decent, and we see this momentum continuing, and this will only pick up from here. Got it. Thanks for those inputs. Very helpful. Thank you and all the best. Thank you. Your next question from the line of from Kotak Securities. Please go ahead. Yeah. Hi, sir. Just two questions. First, one of them on the ODC commercial as you've answered. Just want a clarification on the percentage completion because, you know, the wording in the notes to account is says certain assets. So I just wanna be sure we've moved across the board to project completion or it's selective that some assets are on percentage completion and some on project. I mean, just want to clarify on that. So going forward, obviously, all the projects will be on the project completion method. And so the old which are almost nearing completion or projects which are completed or going to complete within next one quarter or two quarters, obviously, there is no point shifting because substantial amount of profit has been already booked. So we are trying to move conservative method, obviously. We want we Sure. Position. And just on the big, big projects, can you just say which are the ones which are still on percentage completion? So the like, revenue one and revenue two, which are almost near completion or almost completed, so they are on percentage completion. And the Westworld, which is completed, these are on percentage. But going forward, I said, like Maxwell is on project completion, So which has moved from percentage completion to project completion. Anything new we launch, obviously, that will go to into project completion. Okay. So what have I launched in existing inventory, given that it doesn't make much of a difference since the project's already, you know, in completion, you have not changed. But going forward, all the new projects will be on project. Thank you so much, sir. Thank you. Participants are requested to proceed their questions to per participant. Your next question from the line of Parviz Aksar from Edelweiss Securities. Please go ahead. Yeah. Good afternoon, sir. Couple of questions from my side. First, how do we see our on target to doing that? And this quarter, we have done pretty well with, like, Going ahead, what kind of projects can we expect to launch in the next one year? Second thing is, if you can do an update on the commercial project in the. Sorry, you're breaking your voice. I think you're taking a call from your mobile phone. The question is breaking. I said the first question was about our launch pipeline. Kind of project can we be getting launched in the next two to three, four quarters? And the second is an update on the TKC commercial projects time line. Okay. Great. So Parvit, the launch of obviously, the launch pipeline, obviously, we have a lot of projects right now in our hands to launch. We have a Phase III we can do for the Nygong project. Phase one and Phase two as we have already launched, and we have successfully got a good response. And so we have Phase three where we can launch. We have a Versailles project, which we are looking forward to launch. Then we have the Vaasin what we have taken recently, that is we are looking ahead to launch. So these are the few projects. And plus, maybe the second one more tower in ODC since we are almost now almost in the verge of almost exhausting quite a lot inventory, almost two BHK, we have almost exhausted in the Fourth Avenue, first Tower. So we are looking to launch even the second tower. So there are quite a few in pipeline, and we'll see these multiple launches happening very soon. So coming to the second question on the update of the project timeline completion of the BKC commercial projects, I think both are on track. We have already got CC about the plant level. There was obviously some delay of three to four months because the execution was stopped due to the pandemic COVID-nineteen. But now since the constructions are back to normal almost in effect across all our sites, they are also in the full speed. And we see them to get completed over the next twelve to fifteen months. If not twelve to fifteen, I would put it on a more conservative side, fifteen to eighteen months. Sure, sir. Thanks. That's it from my side. I'll come back in the queue for more questions. Thanks, Parveen. Thanks. Thank you. Your next question from the line of Dhruv Gulala from Aurum Capital. Please go ahead. Good morning, sir. Are you able to hear me? Yes. Yes, sir. Yes, So I have two questions. First one being, can you give us a figure for the total value of ready or almost ready inventory? Yes. Hello? Hi, Hello? Yeah. The ready across all our ready projects today stands close to INR2200 crores. Okay. Thank you, sir. Thank you for that. I just had another question as well about the total realization potential of the current and future projects in the Suntex pipeline. Dhruv, if I understand you correctly, I'm trying to understand what is the estimated future sales value potential of the company. Right? Exactly, sir. Yeah. So the truth see, the what what what we can share with you right right away is that as Ronak said that our our total estimated operating cash flow from the completed projects is close to 2,200 crores. Then from our ongoing projects, we are going to realize another 2,000 crores. And from our upcoming projects, we are we have the potential to realize another close to INR 4,000 crores. So all in all, you are looking at a total future operating surplus of close to around INR 8,800 to INR 9,000 crores. So that is the number basically that we have. It's an excluding, obviously, not the projects which are not launched. Are only the projects which we have launched. Yes, sir. That's it from my side. Thank you. Thank you, sir. We have next question from the line of Prem Kurana from Anand Rathi. Participants are restricted to participants are requested to ask questions to per participant. Mister Kurana, please go ahead. Thank you. Thank you for taking the questions. I have three questions from my side. So one more, I'm going share your thoughts on the afternoon in terms of any expected to Sorry. Remark it. Excuse me. Mister Kurana, you're not audible properly. Can you can you can you can you speak slow and Am I audible now? Yeah. Now you're better. Uh-huh. It's a bit better? Yeah. No. So my first question is with respect to our recent acquisition work and if you could share timeline in terms of why we expect to have approvals in place and then kick the market. And, also, I mean, I think when you give us a launch pipeline, I think there was no mention of the. Yes. So Prem, Banderi project, obviously, we have not got any approvals till now. So I don't want to comment on the where we are seeing any delay or any possibility of any due to any other reasons. So I think we want to hold to announce on that. But I would not like to say that it will be very soon or something. I think that you're asking about the vaccine, where we are quite we have moved fast on the approval side, I think. And you wanted to know the numbers on the Vatin side, I believe. Yeah. Yeah. I didn't say in terms of primarily expected to launch this next year or the year after that. Because the presentation saying, line owner is responsible licensing and approvals or not, I mean, since we are moving as per your expectation on. So, yes, Parvit. So where we are seeing the landlord is able to get, the most of the approval pass. We are talking only about the projects. When I said about the launch project, we are not talking about the launch, which can happen after fifteen months or eighteen months or two years. So we are talking only about the projects which we are going we will be able to launch in less than nine to twelve months. So eight to nine months or nine to twelve months, I would say. So if when talking by talking about vaccine, so we are talking vaccine also to launch in less than than nine to ten months. So all these projects, what we are talking, whether it is Vasin, Vasai, the Phase two of Phase three of Nidao and well as the tower for Tower 2 of the Fourth Avenue, the next tower of the Fourth Avenue, which we are very we are seeing that they are the approvals are going at a very advanced stage, and we are looking to launch all these four projects in less than twelve months In the current these are the new these are the pipeline which we can see we can launch next nine to twelve months. Prem, regarding the commercials of Vaseem, so we are expecting about INR 1,200 crores to be the top line of the project. Our share is about 80%, which translates to about INR950 crores. The project cost we estimated to be about INR550 crores. The gross surplus is expected to be INR400 crores, which we hope to realize over the project time cycle of about four audience. Total commercial store passing. Thank you, Prabhish. Happy insight. Thank you. We have next question from the line of Rohan Koshy from New Horizons. Please go ahead. Hi, Mr. Khitan. Just, I had one question. Could you give us some idea, on FY 'twenty two and 'twenty three, what sort of presales target you're setting up for yourself? Good evening, Ron. This will be Ron on my part to give you a forward looking with a forward looking statement, very, very frankly. But I can say that it will be, if in spite of this pandemic, we and as we have seen, the sales are picking up in real estate, especially in residential. We I can only say that you will see a good results. You'll see a good number. You'll see good numbers. Okay, sir. And second question really was on the debt. Where do you see it going from this level over the next couple of years? And what's the plan? Rohan, we are very clear that we have been always very disciplined in terms of debt. In the context, it's $3.50 maximum. We have always tried to see this just our debt to not more than 0.3, 0.35. And they are compromising any acquisitions or further group story. So that is one thing very clear. So we don't see ourselves crossing the debt level of 0.335 like those. At the same time, we will continue to aggressively keep doing acquisitions. As you saw in last two quarters, we have done already two acquisitions with A and M, there are many more news, God willing, we will be going forward. We have next question from the line of Aditya Mehta from ZM Investments. Yeah. Thank you for the opportunity, sir. So my question in question is on the project. We have acquired 50 acres of land over here over there. Am I right? Yes. And this is around 50 acres of land was acquired in Bashay also, but the the local area in Bashay is quite less, approximately half of that in Bashay. So could you please explain how that works out? So Aditya, obviously, there is a FSI difference, obviously, the how much you can construct. In Wasai is obviously much more than the like, if the same 50 acres in Mumbai would construct much more than what we are constructing in Wasai. And like Versailles, we construct much more than what we will be constructing in Bhatia. So it's a local authority norms. Obviously, we can't construct more than what is allowed, what FSA is allowed. So it is because of that. That is considered because of that. Okay. Got you, sir. And then sir, next question is, you mentioned that you have a ready plus ongoing plus upcoming inventory of around INR 9,000 crores, excluding projects which are not launched. So upcoming will obviously obviously include the projects which are not launched by us. So how what do you mean to say about that that it doesn't include launch not launch project project? Like Prashant explained that. So, I think Prashant is right. From for upcoming projects, what you have to understand is that upcoming projects are projects where we believe all the approvals are in almost in place, and we can launch it. So upcoming and not and there is a difference between upcoming and planned projects. So in our upcoming projects, like we have projects like Maxwell Phase 2, we have the Tower 2 Of Post Avenue, ODC, We have the Watsai project. So these are projects which are which where the visibility is very, very high from our side. And Tower 1 like Tower 1 Of Fourth Avenue is already launched. So from that perspective, we talk about these projects. And even if you exclude the upcoming projects, still we are sitting on close to around INR 5,000 crores of operating surplus. So from that perspective, the company is sitting on a solid foundation. Thank you. Thank you, Aditya. Thank you. We have next question from the line of Yash Mundawiwala from Mundawiwala Family Trust. Please go ahead. Hi, thanks for taking my question. The first question is on the pricing. So have you taken any pricing action this quarter across any sort of properties? And if we can also provide some sort of outlook on prices going forward? So, Yash, there is pricing means, very frankly, we have not given any discount on we are selling at the similar same levels as we have been selling. So I don't see there is any problem of pricing. Since the velocity of the sales is good and decent, so we don't see any upward movement of price, whereas the downward revision of the price. But going forward, if this trend continues, we can only see that the prices will be firmer and firmer going forward. That's the trend which is going right now, the way the sales velocity is going, I feel the price is moving only towards north, nowhere else. Got it. So the sales we've done this quarter, they would be the realization would have been closer to what we did last year or last quarter? There's not been any decline this quarter? No, no. I don't see. So we have given the numbers, I think pre sales numbers in the starting also and the results also, and you can compare that obviously. In fact, from the last quarter, it has doubled this quarter. Got it. Got it. My next question is on BKT Residential. It's been a few quarters now since we saw a sale there. So any update on that? And what is the feedback that you're receiving there? Yes. For last, in fact, two quarters, unfortunately, we have not been able to do one deal. So one quarter, we did one deal, but again, that we had to so we had to write back one deal. So but we are seeing now because of, in fact, post this COVID-nineteen, we are seeing now very firm inquiries for the BKC project. Hopefully, we may see something good in coming quarters. Thank you very much, sir. Ladies and gentlemen, that was the last question. I'd now like to hand the conference over to the Chairman and Managing Director, Mr. Ketan, for closing comments. Over to you, sir. Thank you all for taking out the time from your busy schedule today. In case if any of your queries have been left unanswered, you can get in touch with me or my team. We look forward to your continued support. Thank you once again for joining us today, and please be safe. Thank you. Thank you once again. Thank you very much, sir. Ladies and gentlemen, on behalf of SunTek Realty, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.