Ladies and gentlemen, good day, and welcome to the Q3 FY23 earnings conference call of Brigade Enterprises Limited. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. If you need assistance during the conference call, please signal an operator by pressing star then 0 on your touchtone phone. Please note that the conference is being recorded. I now hand the conference over to Mr. M R Jaishankar, Executive Chairman, Brigade Enterprises Limited. Thank you. Over to you, sir.
Good, good afternoon. Welcome you all to the Brigade Enterprises Q3 of financial year 23 earnings call. I'm joined by our Managing Director, Ms. Pavitra Shankar, and Joint Managing Director, Ms. Nirupa Shankar. Our Executive Directors, Mr. Roshin Mathew and Mr. Amar Mysore. Our senior management team, Mr. Atul Goyal, CFO, Mr. Vineet Verma, CEO Hospitality, Mr. Om Prakash, Company Secretary, Mr. Pradyumna Krishna Kumar, Chief Business Development Officer, Ravi Ahuja, COO Office and Logistics, and Chidambar, CHRO of the group. Despite the market volatility and softness in the global economy, I'm happy to report that Brigade has shown good operational results last quarter with all our business verticals contributing towards our growth.
We expect to sustain and grow the momentum in the coming quarters with a good pipeline of new residential projects, leasing business, and continued growth in the hospitality business to finish the year strong. Coming to the residential SBU, Q3 has been the best quarter for the financial year with net new bookings of 1.455 million sq ft with a value of INR 939 crores. The collection trend is also encouraging with INR 884 crores for the first three quarters. Over the first three quarters, we have clocked a net sale of 3.74 million sq ft and sale value of INR 2,444 crores. Our year-to-date collections have also moved up to INR 2,737 crores, which is 30% higher than the same period last year.
In Q3, we had launched and sold out the first phase of Brigade Versas, our first exclusive plotted development. We launched 2.5 million sq ft in the first nine months of the financial year and are working to launch another 2.5 million sq ft in Q4 in Bengaluru. Customer demand on ground seems strong despite the increase in mortgage rates across the portfolio of ready to move in, under construction, as well as new launch inventory. Construction activity continues to be consistent and collections are also on track. Coming to the office SBU, the leasing touched 1 million sq ft for the nine months of FY23. There were 455,000 sq ft of fresh leases done for this quarter. Net leasing was 350,000 sq ft in Q3 FY23. Collections remain stable at 99%.
Conversion on two major hard options at Brigade Tech Garden, Bangalore and World Trade Center, Kochi built confidence in implementation of our clients' planned growth. 94% of the leasing tenants are from automobile technology sector. To be precise, 52% from automobile and 42% from technology. Flexible co-working business, our BuzzWorks has 99% occupancy in its six operational centers and foresees a 35% addition for its current capacity in the coming six months in Bangalore. In quarter four financial year 2023, we aim to focus on leasing major vacant spaces in Brigade Tech Gardens and WTC Chennai. We'll be looking to close out our stock in BIFC, Brigade International Finance Centre, in GIFT City and Brigade Opus, Bangalore.
As regards retail SBU, during Q3 FY23, there was a 27% growth on like-to-like sales consumption over pre-COVID Q3 FY20 across our malls. With the addition of Orion uptown mall, there has been an overall 40% growth in retail consumption for Q3 FY23 over Q3 FY20, which is pre-COVID. Retail categories like fashion and food and beverages have grown 18% and 13% over previous quarter of FY23. Other retail categories which had more than 30% growth are electronics, watches, eyewear, spa and salon. The leasing of malls had a good traction in terms of vanilla stores, wherein there has been an expansion in retail growth plans for categories like fashion and footwear. We have leased approximately 131,000 sq ft in the past nine months.
INR 1.07 lakh sq ft are under fit-out across three malls. We are looking forward to seeing them operate early FY 2024. Coming to hospitality, our hospitality business has continued its growth story in Q3 as well. There has been an all-round improvement in our numbers, with both our top line and bottom line registering higher than pre-COVID Q3 levels. Our occupancies reached 105% of the pre-COVID performance. Our revenues touched 118%, and our AGOP reached 138% of the pre-COVID levels for the same period. Even ARRs, average room rates, an upward growth of 6% over pre-COVID levels. There was an encouraging growth in our primary demand segments like the F&B revenues, banquet events, and MICE activity taking place.
Our focus now has been to improve our average room rate across all hotels. In addition, with a view to maintaining a healthy bottom line, we have continued to maintain a strict control on expenses, including leaner staff-to-room ratios. That brings me to the end of our business highlights. Thank you all for listening. I now request our CFO, Mr. Atul Goyal, to take you through the financial highlights. Take care and stay safe. Thank you.
Thank you, sir. Good afternoon, all. On behalf of the company, we welcome you to the earning call for Q3 FY 2023. At the outset, we are glad to inform you that our rating outlook has been upgraded to A+ positive from A+ stable by both ICRA and CRISIL. We start with consolidated financial performance for Q3 FY 23. The consolidated revenue for Q3 FY 23 stood at INR 859 crore versus INR 933 crore for the same quarter last financial year. The consolidated EBITDA for Q3 FY 23 stood at INR 246 crore versus INR 269 crore in Q3 FY 22. EBITDA margin have been maintained in Q3 at around 59%. Consolidated tax stood at INR 43 crore compared to INR 46 crore for the same quarter. Consolidated debt after MI stood at INR 57 crore compared to INR 78 crore in Q3 FY 22.
Real estate segment clocked a turnover of INR 559 crores and EBITDA of 16% in Q3 FY23. Real estate collections for Q3 was INR 936 crores versus INR 837 crores in the same quarter last financial year, increase of 12%. The leasing segment clocked a turnover of INR 200 crores in Q3 FY23 versus INR 167 crores in the same quarter last financial year, and EBITDA of 69% in Q3 FY23. The hospitality segment clocked a turnover of INR 101 crores in Q3 FY23 versus INR 63 crores in the same quarter last of 21% in Q3 FY23. Overall collections for Q3 FY23 was INR 1,328 crores versus INR 1,095 crores in Q3 FY22, an increase of 21%.
Coming to consolidated financial performance for nine months FY 2023, the consolidated revenue for nine months FY 2023 stood at INR 2,691 crores versus INR 2,100 crores in the same period last financial year, up by 28%. The real estate segment clocked a turnover of INR 1,835 crores versus INR 1,561 crores during the same last period, last financial, an increase of 18% and EBITDA of 14% in nine months FY 2023. The leasing segment clocked a turnover of INR 564 crores versus INR 415 crores during the same period last financial year, increase of 36% and EBITDA of 73% in nine months FY 2023.
The hospitality segment clocked a turnover of INR 282 crores versus INR 124 crores during the same period, an increase of 127% and EBITDA of 28% in nine months FY23. The consolidated EBITDA for nine months stood at INR 7.6 crores versus INR 60.0 crores during the same period last financial year, an increase of 23%. EBITDA margin stood at 28%. Consolidated profit before tax for nine months is INR 213 crores versus a loss of INR 23 crores during the same financial year. Overall collections for nine months FY23 was INR 3,962 crores versus INR 2,749 crores within the same period, an up by 44%.
Everywhere in nine months we have our performance has been good and everywhere our numbers have gone up as compared to last financial year nine months. Coming to debt position and its breakup. Gross debt of the company stood at INR 3,915 crores. There was an overall reduction of INR 101 crores in gross debt and INR 77 crores reduction in real estate debt, which has driven by higher sales and collection during Q3 FY23. The cash and cash equivalents stood at INR 1,923 crores as on December 31, 2022. Consequently, the company's net debt outstanding as on December 31 is INR 1,992 crores, out of which we have shared is INR 1,294 crores.
I would also like to highlight that 70% of the gross debt contains a commercial portion which is backed by rental income. Debt stood at 8.46%. That is an upside 71 basis points as against 2 basis points now in the increase in repo rate. Net debt to equity is reduced to 0.53 in 2022 from 0.6 as on September 2022. Thanks all. Quarter results are concluded. Thanks.
Should we open now for questions?
Sure.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone wishing to ask a question, please press star and one on your touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Please mute your question queue handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is on the line of Karan Khanna from Ambit Capital. Please go ahead.
Yeah. Hi. Thanks for the opportunity. My first question is on your residential portfolio. You know, given your current tracks in terms of the pre-sales that you've seen during this quarter, you're on track to achieve sales in excess of 5.4 million sq ft this year. With a couple of new launches in fourth quarter, do we expect to see an upside to the estimate? With the, you know, Brigade moving from 8 million sq ft launches in this year to possibly 13 million sq ft next year, do you target sales number to be in excess of 7 million sq ft-8 million sq ft for FY24?
Karan, Pavitra here. I think Q4 is shaping up to be pretty good. We have a bunch of launches that have started coming out since January onwards, around 2.5 million sq ft of launches in Q4. I think the team is pushing aggressively to beat what they had originally indicated. As for how the launches we had planned for the next rolling four quarters. On Chennai, we may see some of it slip into the next financial year. We're still trying to caution through what can be done in terms of hitting first of all Q4 FY23 and then beyond that.
Sure. Thanks. Pavitra, in an interview earlier today, you mentioned that rented ASPs might go down due to property developments. What part of the stabilized launch and sales are you seeing coming from the development over the next one year and five years?
Actually, most of the, actually all the, well, we see the development projects, one of which launched last quarter, and subsequent phases are launching this quarter, plus a new plotted development in Mysore also launched this quarter. In total, the plotted development projects are approximately 1.2 million sq ft -1.3 million sq ft. We will be selling that as quickly as possible. There is some impact on Q3 realization itself. There may be some impact on Q4 and Q1 FY 2024 based on when the sales happen. Subsequent to that, we are still working and looking for plotted developments in our land bank. As and when that happens, there may be some impact on realization there as well.
Most of it you will see this first quarter, the current quarter Q4, and in the upcoming quarters.
Sure. Thanks. Secondly, on your leasing portfolio, we understand, you know, the vacancies currently are at the SEZ office spaces. Some of the other CRE peers have opted to denotify full buildings from SEZ to non-SEZ under current rules. Do you face to pursue something similar or you'll just follow the regulator changes?
Hi, Karan, this is Nirupa here. We're still seeing some good traction even in the SEZ projects. It's definitely going slower than what we had anticipated. But what we're doing is we're able to convince some of the occupiers who are not looking for SEZ space and get them into our properties by working with tax planners and consultants to help them understand how they can work out, you know, their taxation related issues. We've been able to get quite a number of clients to move into our projects regardless. We're not looking to change any such strategy like that, but we've been given to understand that the national has been presented in parliament, and we're yet to know whether it's been passed or not.
Once it is passed, that will be a huge impetus to the SEZ projects that we have.
Sure. Lastly, on your hospitality portfolio, from the hotel chains that have reported the numbers so far, we are seeing 20% sequential growth in revenue for them, versus 10% in your hotels. If you could elaborate more on the reasons for the same and, when do you expect any material upgrades which will bring in hotel monetization plans back on the table? That will be my last question. Thank you.
It is varying from the same quarter last year, there's been a significant increase in our performance. Quarter to quarter, they have very healthy occupancies. Most of our hotels are at 75%-80% plus occupancy. Maybe the overall portfolio is slightly down because one or two projects in GIFT City and Kochi. Otherwise, the hospitality portfolio is doing extremely well. There's a good traction in occupancy, but also the ARR and the AGOP. Like I said, it's been a good few quarters. The hospitality industry and our portfolio has bounced back really well post wave of COVID, and we expect this to continue. As I mentioned last time as well, it's a good time to sort of look at potential monetization of the portfolio.
We are, you know, very, you know, open discussions and, at the right time we will share if anything crops up.
Karan, I'd like to add that you cannot compare because all hospitality has a different portfolio in their, in their hotels, in their portfolio. Some have luxury, some have business. We are pure business hotels. There will be some difference between the RevPAR numbers which you'll compare with other hotel group companies within each and corners of theirs.
Sure. If I look at the market in which you are present, is it fair to say that, you know, the growth that you are seeing is in line with the industry or upper national market growth in the residential sector market?
So-
Hi, this is Sunith here. In fact, we are ahead of the curve in our respective market, I'm happy to say that. January, in fact, we have finished ahead of budget. February is looking good because of the Aero show and, you know, the energy which that went through. We have seen some historical ARRs in couple of our hotels. I think we are looking well.
Sure. That's it from my side. I'll come back in the queue. Thank you and all the best.
Thank you.
Thank you.
The next question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.
Yeah. Hi, team. Congratulations on a good quarter. My first question is on residential projects. We have launched 2.5 million sq ft and now we're planning to launch 2.5 in fourth quarter. Out of the total 5 million, how much will be the new projects and how much will be the subsequent phases of existing projects?
Predominantly all of it has been new projects. There has only been maybe, INR 0.5 million that was in the subsequent phases of a project called Eldorado. Apart from that, everything else is a fresh project. This quarter we will have actually a subsequent phase of our plotted development, but as part of the overall launch it is not a huge number.
Okay. Just on the business development, what has been the addition during the first nine months in terms of million square feet added and also in terms of development value if you can highlight that?
Yeah. In the past quarter we added one property. It is in southwest or basically West Bangalore. It will be a commercial property. It's around 3.3 lakh square feet. The GDP would be around INR 200 crores. In the previous two quarters, we have actually indicated those launches before. We added a residential property in East Bangalore. It is around 2 million sq ft. In Q1 we had added a 75 acre property that was a land allotment by the KIADB. Projects that we added in nine months of 2023.
What is the total development value of the INR 2 million and the 75 acres KIADB?
It is still work in progress. The design development is going to happen. It is a mixed-use development, so it is bit premature to say what is the overall, you know, the potential for revenue because part of it could be sale, part of it could be only lease, etcetera. It is maybe it will take another quarter or two for us to firm up.
On the residential property it could be around INR 1,500 crore.
That's 2 million sq ft.
Sorry?
That's 2 million sq ft, ma'am, which you said you have added. 2 million sq ft.
2 million sq ft. These are conservative numbers, of course. We'll look at how that pans out.
Just on the pending land payments about INR 956 crores. How is it split year-wise? Have you made the payments for property so we can hear something how it will be split?
Most of our land bank is a visibility of developing within the next three to five years. Predominantly a lot of it, if you look at the numbers, we've already paid around 35% of payments towards that. And more or less, since we are talking about the launches also happening within the next say four to eight quarters, we expect a lot of this will happen in the next two financial years itself.
Okay. Just the last question on the, not actually this FBB manifestation, but it will be actually the, creation of the network effect. What is the timing? Why it has been done? Can you just-
Your voice is not clear actually.
You're talking about the pre-tax?
No, yeah, sir. I was talking about the pre-tax creation. At the creation, not availing the benefit of anybody. Just wanted a reason why we take that.
You see, yes, it is a strategic call which we have taken because, we have a residential also in Non-SEZ and lot of profits are coming there. We think, because of the slow leasing which had happened because of the COVID. We will able by next 2-5 years. We thought, since residential launch will be there and that will be a good profit, this will help us to, not to take, SEZ benefits. That's why we have created pre-tax this time and depreciation on theoretical as well.
Okay. Okay, sir. Thank you.
Thank you.
Thank you. The next question is on the line of Pritesh Sheth from Motilal Oswal. Please go ahead.
Yeah, thanks for the opportunity and congrats on this official comments. First question is on hospitality, margins. So this quarter we had an EBITDA margin of 31%, while, you know, occupancy remains stable quarter-on-quarter, and there was a growth in ARR as well. Margins were down by at least 1 percentage. I mean, last quarter it was 31%. Right now it is 21%. 8% decline in margin. Any reasons for that?
There was one-time expenses which have come into hospitality. That is the reason that it has gone down a bit, but next quarter we'll see that it will return to 21%-25% again.
Okay. Okay, got it. Maybe on business development, I mean, while we have a good chunk of cash with us, what's the sort of pipeline we are looking at in terms of business development which are in advanced stage of discussion right now?
We are looking across Bengaluru and Chennai predominantly, while we are looking at Hyderabad also. A lot of the traction seems to be happening in Bengaluru and Chennai. It's a mix of outright as well as JD. Requirements will be adjusted accordingly.
You know, any, say, guidelines or guidance or pipeline, number you want to provide in terms of focus there in terms of advanced discussion which probably can close out in next 6-12 months?
Actually, I wouldn't like to give guidance on that because it's, you know, sometimes things can be very difficult to predict. We are in advanced stages in quite a few of these properties, and we are hoping to disclose that in the coming quarters.
Sure, sure. lastly on your logistics business. What sort of, you know, investment quantum we are right now planning to, you know, invest in next maybe three years or five years time period? Considering we have already acquired 1 project in that business. What sort of investments in that land parcel and, you know, land parcels which we might plan to acquire? What's the total investment in that business?
Hi, this is Aamar here. Basically we have invested into the land for a 25 acre development and which is of course for under INR 100 crores. We have this new allotment also, which is a mixed use with 75 acres, out of which largely the majority of it will be industrial and it will be mixed use with residential and office. Based on FSI achievement, we'll come out with specific numbers a little later. The land cost on the 75 acres will be close to around INR 200 crores.
That's the only two land parcels that we are, you know, looking to develop near-term or there is no further investment, you know, also planned in this segment. I'm overall looking at, you know, the quantum of investment you would have planned or set aside for, in this segment, for next three, five year.
Honestly, for now we want to keep it status quo, and we want to reduce these 2 land parcels, monetize these and then look at opportunities later on.
Sure, sure. Just lastly, if you can provide the collections break up between residential, leasing, hotel and others?
You want for Q3?
Yes, Q3. Yes.
Residential is INR 884 crores. Commercial sale is INR 52 crores. Commercial lease is INR 137 crores. Retail is INR 56 crores. Hospitality INR 126 crores. PMS, which is maintenance activity too, is around INR 74 crores. Total is INR 1,329 crores.
Sure. That's it. That's it from my side. Thanks for all this.
Thank you. The next question is from the line of Mohit Agarwal from IIFL. Please go ahead.
Yeah, thanks for the opportunity. My first question is on the demand, you know.
Mohit, there's a lot of disturbance from your line.
Yeah. Is this better?
Yes, sir. Please proceed.
Okay. Is this better?
Yes, sir. Please proceed.
Okay, thank you. So you know with interest rates, mortgage rates are at 9%. Have you seen any change in footfalls or change in conversions time for any part of your portfolio, let's say the affordable middle income portfolio? Any color on that? In that context, how do you? You've already said fourth quarter looks to be very good. How do you look at FY 24 growth numbers in pre-sales?
Hi, this is Pavitra. Yeah, interesting. Obviously, that is the big question for everyone, especially on the back of yesterday's increase. Up until yesterday, we had not really seen any major impact, definitely not on footfalls. I think the percentage of people going for home loan versus not doing mortgage is staying fairly consistent. I think so far it has not been too much of a change in the way people are looking at a real estate investment. In terms of what we're planning for the next quarter or so, as I mentioned earlier, we may not be able to give actual guidance.
The way the Q4 is panning out with the launches that we have already been doing in January and February so far and what is planned for the next four months on a rolling four-quarter basis, I think we will have a good showing. We will need to see of course with yesterday's repo rate increase and then the impending impact on home loan rates in the next two to three quarters, will it actually have an impact? Thus far, the reduction in interest rates has actually brought people to actually transact. The increases don't seem to have impacted the demand.
I will add to Pavitra. Home loan rate has generally 15, 20 years loan. Immediate impact may be there on the sentiment part, but they also know that there'll be a reduction cycle which will follow because RBI has indicated that this is one of the maybe which will be there. That doesn't jump in for the people to buy the house. Secondly, I would also like to highlight when there is an increase in interest rate, the adjustment is done in the duration of the loan, not in the EMI. Since EMI doesn't increase, it's good for the buyers. They continue to hold the property. Let's see. Yes, definitely increase in interest rate, as Pavitra said, may have some impact, but we have to see that.
Okay. Sir, my second question is, you know, looking at your projects over a medium term. Right now you have Twin Towers under construction. In your initial comments, you mentioned that the retail malls are doing very well. How are you looking beyond Twin Towers? How are you looking at investing in CapEx projects? Let's say 5 years out, how do you see the current portfolio both in terms of retail and office? If you could, you know, give some color on that.
See the business, office business, like any other business, is also quite cyclical. After, you know, Twin Towers, we also have another joint development project called Brigade Padmini Tech Valley, which is also about 1.25 million square feet. Whenever there is a crisis in the West, invariably the outsourcing increases. That way, whatever slowdown in decision-making by the tenant.
Ladies and gentlemen, some of the management has got disconnected. Please stay connected while we reconnect the management. Ladies and gentlemen, thank you for patiently holding. We now have the lines of the management reconnected. Over to you, sir.
To continue from where the line got disconnected. The decision-making delay currently is we anticipate it as a temporary phenomena. Maybe a quarter or two it may take for things to stall. Just because overall the sector, information technology sector, broadly speaking, with the huge amount of digitization taking place all over the world, the demand for office space, demand for talent, demand for work connected with software is only going to go up. As I say in many areas, India's share in the global software market is still less than 10%. That way the opportunities for us is huge and the things should settle down and whatever we see is a blip in the overall leasing scenario.
Sir, this second project, Padmani Tech Valley that you're talking about, is it for lease or for sale? It has a construction commenced?
See it is about 1.2 million sq ft, 25 million sq ft, of which about 0.35 million square feet is nearing the completion. We are not talking about it much. The balance of work has just started. It is a combination of lease and strata sale. There are three blocks in it. We may sell one or two blocks and lease in the remaining. Depends on various factors, including the cash flow and the leasing rate, everything.
Okay. Sir, last one. On the twin towers, currently are we looking at doing 2 million or we are focusing on currently 1.2 million? What is the status on acquiring the GDR?
Currently it is INR 1.3 billion because we have the GDR. We need to acquire only a little bit more. It is the government policy which has held up for the past few years on our GDR.
Okay.
it should be about 1.3 million sq ft now. As and when the government allows the GDR or change in rules, their development control rules, we may relook at increasing the overall leasable area because the foundations, et cetera, are meant to take higher area and increase number of floors, and it has been designed that way.
Okay. Understood, sir. Thanks a lot.
Achieve. The next question is from the line of Biplab Debbarma from Antique Stock Broking. Please go ahead.
Thank you. Good afternoon and congratulations on a good quarter. My first question is on the cash flow. Residentially you are selling a lot and collection were also going up, and that is also very, very good. Sir, what kind of free cash flow are you seeing in residential, maybe or in a percentage? What kind of free cash flow should we see in residential?
See, the maximum of the amount in residential is stuck in RERA. If there is free cash flow, we'll have a free cash flow of around INR 300 crore-INR 400 crore, which is coming, which has come till now from the residential. I think that we may have around INR 700 crore or so, balances with RERA accounts. Whatever we can take out as a 30% as per the RERA requirement, we are taking out and keeping as a free cash flow. Whatever is required by RERA commitment, we keep in the RERA account.
Okay. Okay. I've asked this question again, but I'm repeating it. You know, so many competition entering in Bangalore, and Bangalore seems to have the capacity to absorb everyone. Do you see because you are deploying this risk strategy, you are looking for development in Bangalore? Do you see any change in, you know, expectation from the landowner or it is business as usual what you are saying or seeing in the last two, three years? It is the same now. All the expectation have gone up. All quality teams and the velocity has gone down. Are you seeing any change in terms of business development?
See, the competition can always be expected in any growing metropolitan city. It is something which nobody can stop. Bangalore is growing at a pace wherein, you know, the, the market is big enough for many players. In fact, in the recent post-COVID, the number of active and reliable players have come down drastically from the existing people. That way there is a scope for the new entrants also. As regards the landowner expectation, it is a very real problem. The expectations are always high. It is trying to bridge the gap and meeting their expectation at the same time, you know, you having the developer having a decent return for the efforts, is the challenge in the business. That is the specialty of challenge in real estate.
Each business will have its own challenges.
Okay. one final question, sir. on the leasing part, if you are once you are fully leased in Tech Garden and WTC Chennai, what kind of exit rental should we see in the written arms?
It's, it will be around INR 750 crore-INR 800 crore when the exit rental happens at the full lease of all the property.
Sorry, sir. INR 750 crore-INR 800 crore?
INR 750 crore-INR 800 crore.
Okay.
Yeah.
Thank you, sir.
Thank you.
Achieve.
Wait, hold on.
The next question is from the line of Rakesh Wadhwani from Monarch AIF. Please go ahead.
Hi. Hi, team. Thank you for the opportunity. I have a first question regarding the channel of leasing business. There is a excuse me. There is a drop in the EBITDA margin in this quarter. Can you please highlight the reason for the same?
It's not too clear. If you could just repeat that one again.
Okay. Okay. Okay. If we go through the individual channel account of the segment, in the leasing business, this quarter's EBITDA margin was very lesser compared to previous quarter. Any reason for that? Leasing business, Q3 margin was 69.4% EBITDA margin, whereas earlier quarters were 72%, 73%, and 75% also.
See the, if you see, there is a rental increase also. Stabilization of rental requires some time. That's why it is impacting the margin because your expenses get immediately absorbed while your leasing is still going into full swing. This is a temporary phenomenon. It will again come back to the original level, maybe the next quarter.
Okay. 74, 75% will be maintained, when at a full occupancy?
73, 74 is these rentals still being maintained. If you see the nine months numbers in the leasing segment.
Yes. Yes. Yes.
Sir, second question from my end. Regarding the launch pipeline, like in the previous con call we had highlighted that we'll be having a launch of INR 10 million and above in the next one year. If we look at this quarter, we see the launch pipeline is INR 9 million and out of that INR 1.4 million or INR 1.5 million is joint venture. Effectively the launch pipeline for Brigade will be less than INR 8 million, less than INR 8 million. Just want to understand why there's a delay in the. Why there's a lesser pipeline and the project got delayed?
Hi, this is Pavitra. So on the launch side, yes, a couple of the projects in Chennai we see it maybe getting delayed by a quarter or two. We're working to get that as soon as possible in the land bank. Also the area that we typically will be launching is 100% area. It includes the landowner share. That's, that's how most do report it, as a 100% number. The other change to our launch pipeline, we have actually looked at overall and and tried to, you know, actually predict what the launches would be in terms of RERA phasing. Last year when we communicated, in the past we've been communicating a 100% full project launch. Technically that's not how some of our projects get launched.
We may launch them in ttwo or three phases. We felt that this was more appropriate in terms of communicating how the launches would actually happen. When we enter the land bank, we would be talking about a 100% value. When it enters the launch pipeline, if there is a RERA phase, we would only be talking about the RERA area that is going to get launched on a rolling quarter basis.
If my understanding is correct, for the next four quarters as per RERA, we will be launching around 8 million sq ft. Is my understanding correct?
I communicated nine and, yeah, subject to approvals and already in that nine we have launched 2.5 this quarter.
Yes. You mentioned in your earlier questions also, question and answer that we are in discussion for a land acquisition in the Chennai and Bangalore market. Can you just highlight because we have a great amount of cash now. What is stopping for a land acquisition? Is it because lands are not coming at the price that you wanted or if the location is not? What is leading to delay or for the land acquisition?
See, the lands have been tied up. What is, you know, whatever is, we have spoken about 8-9 million sq ft new launches, they've all been tied up. In some cases there has been a delay in compliance by the landowners, which will also happen. Bit of delay in due diligence, in other words. Whereas the design development work is in substantial progress. It is only, Brigade is ready. Sometimes with the landowner site there will be some delays. That is what is holding up.
Okay. Okay. Thank you very much.
Thank you.
Thank you.
Next question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.
Yeah, thanks for the follow-up opportunity. Just one question on plotted. If you compare from last quarter to this quarter, potential as a plotted development project has declined a bit. I think last quarter it was 1.8 million sq ft, now 1.4 million sq ft, as highlighted in the land bank slide. Is it because 0.4 has already been launched and hence it has been removed, or what's the case? Just again a follow-up on that. Our share in that is only, you know, 0.6 million sq ft or that is 30% down. Plotted are anyways a very, you know, I mean, a comparatively low realization project. What's the strategy with, you know, such a low share in a plotted project?
Yeah. First of all, you're right. The reduction in 0.4 is because we launched part of the Brigade Oasis that we mentioned in opening remarks. We launched it last quarter and we also sold out of the entire phase last quarter. Hoping to launch the remaining this and next quarter. We also have another plotted project in Whitefield which we are launching this quarter and hope to inform you good results. Regarding the share, yes, we've communicated 100% share in terms of what would be launched. Typically the dynamics in a plotted development because of, since you're not doing built-up area, it tends to become a larger share to the landowner.
I think what we've done is fairly in terms of terms, to the landowner, we are pretty much at market or maybe slightly above market.
Oh, okay. Got it. Thank you so much.
Thank you.
Line of Biswadeep Sharma from Axis Stock Brokers. Please go ahead.
Sir, just one question. The increase in sales value that you are witnessing in the last few quarters. Where is this coming from? Is it increasing your market share in Bengaluru or Bengaluru is growing? The reason why I'm asking this question is going forward, from where you are seeing growth coming? Is it like Bengaluru itself is growing at a very fast rate in terms of real estate market or your share in the Bengaluru market is growing or maybe from geographic expansion such as Chennai and Hyderabad. How you think from where the growth will come going forward?
The realization increase that you've seen is mainly because we have been able to take up pricing across our entire portfolio. Not just in the last few quarters, but consistently maybe for the last 4 to 6 quarters itself. Also from the projects that we have already sold in Chennai and Hyderabad, realization has increased. In the coming quarter or so, we may have lesser contribution from Chennai and Hyderabad because we pretty much sold out our inventory in those two tmarkets and working on the new launches. You may see some stabilization of the APRs, or sorry, the ARRs that you're seeing today. Yeah. Going forward, as we have, As we launch new projects, we're actually able to say that we can drive pricing substantially even in period.
That is what our teams are doing on the ground. They've demonstrated that across all the new launches that have happened in FY 23, and I think we can continue to do that. As we get our launches in Chennai, coming up over the next say four to six quarters, then also we will see an increase in the average realization.
Okay. Actually, I think I got it now. Basically what my question was, ma'am, from where do you see the growth coming? Would the growth come from Bengaluru growing itself or your share in Bengaluru market will grow or from geographic expansion such as you increasing your market share in Chennai and Hyderabad? That was actually my question. I mean, from going forward, how do you see this growth momentum?
The answer is both. Both our share also is growing and also the overall business in the city is also growing. Now it has, I think, crossed the pre-COVID level even in the residential, which was not the case in the last two years. The answer is, as I said, our share in the market is growing. Bangalore is also growing.
Okay. Thanks, sir.
Thank you. A reminder to participants, anyone wishing to ask a question, may please press star then one. The next question is from the line of Bishak Sankar from HDFC Securities. Please go ahead.
Hi. Hi, Keerthi. Just a question on commercial real estate link pipeline. Earlier in the call you did mention that, you know, you're focusing on leasing or BTT and BTT to rent. How big is the pipeline for this and how much leasing are you expecting in the first quarter?
We've been doing quite okay. In fact, this last quarter, we managed fresh leases of 425,000 square feet. In the coming quarter, we should look to be doing something similar or more. Like I said, there was some slowdown and slower uptake of SEZ areas, which is where the vacancy is. Otherwise, almost every other project, ours is almost completely leased out. We are trying to be as aggressive as we can given the market condition. It should take at least 2-3 more quarters it looks like.
Okay. Thank you, Nirupa, for your answer.
Thank you.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star then one. As there are no further questions, I now hand the conference over to Ms. Pavitra Shankar, Managing Director, for closing comments. Over to you, ma'am.
Thank you all for listening in. Before we end the investor call, we'd just like to take you through some non-financial highlights. As part of our thought leadership initiative through Brigade REAP, our tech accelerator, we hosted Propagate on the 29th of November to bring together industry thought leaders, key influencers and startups to inspire each other. We received over 500 registrations from leaders in the proptech ecosystem, including startups, VCs, developers, incubators, accelerators and academia. We witnessed a very engaging and thought-provoking discussion focused on the role that technology plays in enabling smart infrastructure for a better tomorrow. An important internal initiative called Sampoorna Parivartan 2.0 Catalyze is our digital transformation journey.
Through this program, we've simplified and further digitized processes which have focused on improving customer experience. We're very pleased to receive in December the Realty Plus Award for the Best Customer Connect Initiative of the Year for Brigade's Year to You customer feedback program. We also won the award for Best Digital Marketing Campaign for our flagship sales event, Brigade Showcase. Very quickly to touch upon the recently announced budget. We believe the infrastructure spending of INR 10 lakh crore is a step in the right direction, and it is likely to have a positive cascading effect on all sectors. With respect to real estate, the extension of tax benefits for redeveloping cities till 2025 will enhance business activities in the region.
Other support needed, such as industry status for our sector and a relook at the GST rates on cement and loss of input tax credits did not find a mention in the budget. Public-private partnership initiatives announced to promote tourism and to identify 50 projects for last mile connectivity improvements. The addition of 50 airports, heliports and water drones will also benefit the sector. Brigade's flagship CSR initiative in arts and culture, the Indian Music Experience Museum, or IME, recently organized the Rhythm Exchange Festival, the culmination of the year-long collaboration with Manchester Museum in the U.K. and supported by the British Council. The festival brought together Indo-U.K. musician mentors and mentees to explore rhythm as a shared language between East and West.
IME brings top quality knowledge and networks in the classical music space and showcases musical pop culture, including Bollywood, tribal and folk music, contemporary music and independent singer-songwriters, spanning a range of genres, even rock and hip-hop. IME is a fantastic place for all generations to visit together, so if business or pleasure brings you all to Bangalore, please take some time out for this unique experience. I'm also extremely happy to share that our Chairman, Mr. M R Jaishankar, was felicitated at the Thousand Indian Hotels and Restaurants Association Awards for his contribution to the hospitality sector. With that, we now wrap up our Q3 FY22 analyst call. Thank you all for taking the time to hear from us today.
Thank you. Ladies and gents, that's been on behalf of Brigade Enterprises Limited conclusion to this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.