Ladies and gentlemen, good day, and welcome to the Q4 and FY 2022 earnings conference call of DLF Limited. We have with us today on the call Mr. Ashok Kumar Tyagi, CEO, DLF Limited; Mr. Vivek Anand, Group CFO; Mr. Sriram Khattar, MD, Rental Business; and Mr. Aakash Ohri, Chief Business Officer and Group Executive Director.
At this moment, all participant lines are in the listen-only mode. Later, we will conduct a Q&A session. At that time, you may click on the Q&A tab to write your question or raise hand to ask a live question. Please note that this conference is being recorded. I now hand the conference over to Mr. Vivek Anand. Thank you, and over to you, sir.
Yeah, thank you, Steven. A very good evening and welcome to DLF Limited quarter four and financial year 2022 earnings webcast. I would like to thank all of you for joining us today. Hope you and your family are keeping healthy and safe. Our business exhibited a strong performance during the fiscal. Strong delivery in line with our guidance across all parameters. We remain committed to achieve consistent delivery of our business goals.
With this, I'll start with the financial highlights for quarter four financial year 2022 DLF Limited consolidated results. Consolidated revenue stood at INR 1,652 crores, which is down by 13% year-on-year, primarily due to lower possession letters issued during the fiscal. EBITDA stood at INR 472 crores, reflecting a year-on-year drop of 27% due to higher operating expenses and lower other income as compared to the corresponding period. Net profit at INR 414 crore, reflecting year-on-year drop of 13%.
I'll now move on to the financial highlights for financial year 2022, DLF Limited consolidated. Consolidated revenue stood at INR 6,138 crore, reflecting year-on-year growth of 3%. EBITDA stood at INR 2,163 crore, reflecting year-on-year increase of 11%, largely explained by margin improvement of 200 basis points due to better product mix. Net profit at INR 1,513 crore, reflecting year-on-year growth of 38%, primarily driven by better product mix, lower finance cost, and lower effective tax rates. I'm also happy to share that the board has recommended a dividend of INR 3 per share for the approval of the shareholders, which is 150% as compared to last year.
Housing demand continues to exhibit a structural upswing across segments and geographies. Residential business exhibited a record performance in the fiscal and the new sales bookings of INR 7,273 crore, reflecting a year-on-year growth of 136%. We witnessed strong growth across all our segments, and luxury segment leading the trend. Our super luxury offerings, The Camellias, continues to evince strong customer interest and delivered healthy sales bookings of INR 2,550 crore during the fiscal.
Our new product launches across New Delhi, Gurugram, and Chennai continues to receive encouraging response from the market, vindicating demand for quality products in strategic locations. The continued momentum further demonstrate rising customer preference towards larger and credible brands with proven track record. New product sales bookings stood at INR 4,683 crore during the fiscal. We continue to place enhanced focus on surplus cash generation from our operations. Strong collections along with phase ramp-up led to one of the highest levels of surplus cash generation of INR 2,205 crores during the fiscal.
In line with our business goal of de-risking our balance sheet, we continue to de-leverage, and consequently, our net debt at the end of fiscal stood at INR 2,680 crores, which is the lowest ever, a 46% year-on-year reduction. Sustained momentum and strong tailwinds are expected to support the structural upswing in housing demand over the medium term, and consequently we continue to strive in scaling up our new product offerings across segments and geographies.
I'll now move on to the rental business. The financial highlights for financial year 2022, DLF Cyberc ity Developers Limited consolidated results. The rental business continues its steady path to recovery. Office occupancy is gradually recovering and stood at 88% at the fiscal end. Retail business continued a strong rebound during the fiscal. Rental income grew 10% year-on-year, supported by 67% rebound in retail income. Consolidated revenue at INR 4,533 crores as compared to INR 4,385 crores last year, reflecting a 3% year-on-year growth. EBITDA stood at INR 3,488 crores as compared to INR 3,417 crores last year, a year-on-year growth of 2%. Net profit at INR 1,002 crores, reflecting a year-on-year growth of 10%.
The office business delivered strong collections at 100%. We continue to witness a gradual ramp up in return of occupiers to their workplace and expect these trends to further improve in the next few months. The development of our next generation workspaces, which is DLF Downtown at Gurugram and Chennai and Data Center at Noida, remains on track. The retail business exhibited strong rebound despite temporary dislocations due to the pandemic in the fourth quarter, especially in the month of January, February.
Footfalls and consumption trends continue to support the healthy growth in this segment. Consequently, we have initiated development plans to build our new retail destinations across certain geographies. Inflationary pressure and reversal of interest rate cycle may pose a marginal risk to the momentum in the industry. However, our strong balance sheet, well-diversified portfolio, and a strong pipeline of new product offerings with differentiated experience should withstand such dislocations. We are comfortably poised to deliver consistent and profitable growth backed by strong brand equity, robust operating model, and healthy cash flows.
With this, I end my brief results update. Before we open the floor for Q&A session, we want to clarify that questions pertaining to financial year 2023 with regard to sales guidance, new launches and future outlook will be addressed during the event that we are hosting next week. We would request you to defer your questions on these topics. Today we shall focus on the reported numbers and any queries that you may have related to the business performance. Right. Thank you very much. We can now open the floor for Q&A session.
Thank you very much, sir. We will now begin the Q&A session. To ask a question, please click on the Raise Hand icon available on the toolbar, or you may click on the Q&A icon to raise hand or type your question. The operator will announce your name when it is your turn to ask a question. Please accept the prompt on your screen and unmute your microphone while proceeding with your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is a chat question from the line of Parikshit Khandpal from HDFC Securities. The question is, first, what are the key product launches during FY 2023, as we have new launches contributing majorly to the FY 2022 presale? Second question, please share the new malls retail pipeline over next two, three years, and what is likely incremental rental from the same? The third question is what are likely plotted launches during FY 2023? Thank you.
Yeah. Parikshit, let me take the first question, which is with regard to the key product launches in the financial year 2023. As I said that we'll be happy to take on this question next week when we are meeting face-to-face. Just let me give you a headline. Let me start by saying that while we entered this financial year, we have entered with the total complete inventory of INR 7,500 crores, which includes 2,500 crores of unsold inventory of DLF ONE Midtown, right? That's the start at which we've entered the financial year.
Next year, just to give you a headline, we are really looking at launching 7 million sq ft, right? Which will be primarily residential developments across different markets of Gurgaon, New Gurgaon, DLF Phase V , Chennai and Goa, right. That's broadly the plan.
Panchkula and-
And in North Panchkula, the Tricity. That's broadly the plan, and you will hear more of it when we meet next week.
Take on the retail.
Thank you.
The question on retail in terms of the pipeline for development, I'll preface by saying that the comeback of demand for retail after the two, three waves of COVID that have been there is pretty strong. We continue to believe that organized retail will continue to grow faster than the growth of retail. We have programmed to do about 5 million-odd sq ft of retail developments.
The biggest of this will be DLF Mall of India, Gurgaon, which I would say will not happen in the next three years, but it will take a longer period because of its sheer size and the intricacy of planning that goes into it. The details of this, as Vivek said, we'll share it in the next week meeting. Suffice to say that it will more than double our size today over the next five-six-year period.
Thank you. Can we move to the next question? The next question is from the line of Saurabh Kumar from JP Morgan. Please go ahead.
Yeah. Hi, sir. Sir, a few questions. The first is your other expenses in this quarter have gone up, you know, quite sharply. Could you explain why that is? It's INR 320 crores versus last quarter was INR 202 crores. And the question related to that is that basically we still have a lot of recognition coming from Camellias, yet, you know, the margin is not moving to that, you know, to the 35%-36%, at least on a quarterly basis, what we're used to. That's the first one.
The second is essentially on the interest cost. You are showing a 130-odd crore interest cost, you know, on your cash flow. Your gross is INR 4,700 crores, that's 7%. You know, it should be lower. Why is this interest cost both on the P&L and cash flow higher?
The third, sir, is essentially on the rental income. On this retail income, what is the run rate right now? We had Omicron, which maybe impacted in Q4, but should we think about this INR 160 crore as a number? What I'm really trying to get to is what is the run rate for DCCDL on your rental income? Thank you, sir.
Take the last one.
Saurabh, good to hear you and good to have you on the call. The retail run rate is about 170-175. That's the run rate, exit run rate. I think in Q3, Q4 we should, if there is no further COVID, we should do better than that.
Sir, the DCCDL would have now gone to basically 740 plus 170, that's INR 910 crore office, I mean, re-rental run rate. That's what we should say.
At 170, if you sort of multiply it by four, you are at 680, 690. We should cross 700.
Okay. Understood.
Okay, Saurabh. You have asked me three questions. Let me start with the margins first. I'll come to the quarter clarification later on, but I first want to really talk about how is my full year margin looking like. Let me start by talking about the product margin first. This full year, financial year 2022, our product margins stand at 52%, which is an improvement of 460 basis points compared to last year. The first message to you is our margins are improving, and they are improving year-on-year. Right. That's one.
Within the quarters also, if I really look at my quarter four margin exit is 51.5%, which is very much in line with the yearly average. When you compare my margin quarter four versus quarter three, there is a slight drop, 100 basis points, which is because of product mix. Broadly, yes, within the quarters there will be some variation. Overall, if you really look at, we are moving in that direction of consistently maintaining and improving our margins upwards of 50%. That's the first me-first message I want to give you.
Second thing, you asked me about other expenses. Like, again, I'll start, if you really look at our other expenses on an annualized basis, they've grown by 5%, right? I'll say that's largely because of two reasons. One is other expenses has a significant part of scaling up expenses. When your business scales up, right, you end up paying more brokerage and marketing expenses, right? Compared to last year, our business has more than doubled. Therefore there is an impact of that. Plus there is a small impact of inflation.
On a overall full year basis, our other expenses are grown by 5%. You are absolutely right. When you compare quarter four with quarter three, that is showing an increase of 58%. That's largely because of two reasons. One is the scale-up cost, and one is some year-end provisions which we make every year. When you compare my quarter four with quarter four of last year, you will see that the numbers are almost in line. Even the last year, quarter four was high at INR 302 crore, right?
What I want to give you a comfort is that on a full year basis, I think the costs are very much within control and have grown by 5% despite business growing by more than 100%. The third part of your question was interest cost, P&L and cash. Yes, there is a gap, and that gap is largely to do with Ind AS accounting standards. There are some adjustments which you see we have to make in P&L, which are not there in cash flow, and that's what is broadly the difference.
Moving forward, we expect this interest cost, what you see in P&L, to be close to half, right? I think despite the rate increase, we are committed to really bringing it down to less than half for next year.
Thank you. The next question is from the line of Kunal Lakhan from CLSA. Please go ahead.
Yeah. Hi. Good evening. My first question is on our free cash flows. If you look at last three quarters, we have been generating free cash flows of INR 500 crores-INR 700 crores a quarter. Now, I mean, going by our current debt levels, and we should be debt free in the next few quarters. Just on a broader sense and on, you know, over a medium term, like, how would you look at utilizing this cash? Would we look at land acquisitions, particularly outside of NCR market or, you know, any thoughts there?
You're absolutely right. I think we had a good year when it comes to generation of free cash flow. We are confident of sustaining this performance as we get into 2022, 2023. Now, while our collections are likely to improve this year, at the same time, I'll say our construction outflow, which is coming both from the launch projects and the CapEx plans we have, we are expecting a significant increase in our construction outflow during the current financial year. Large part of the cash will get utilized there. That's something which is very important because the more you spend, the faster you construct, the earlier you are able to realize. All our new product launches, the collections are linked to the construction time plans. That's one.
Secondly, there is a lot of cash we'll be putting in terms of getting the approvals for the projects which we are going to launch in the current year and also getting ready for the next year. There will be a significant outflow for that, right? In terms of, are we really looking at deploying capital for buying land at this point in time, right? I think we have enough land bank to really manage our product pipeline for the next five years, right? Yes, there could be some capital deployment to buy small portions of land, right?
To make the existing land bank more contiguous, which will be used for our launches, right? I think that's broadly what we are really looking at in terms of broad utilization of our cash. Of course, as you know, we've also really this time the board has recommended to the shareholders for an increase in dividend, and that will also result in some outflow, additional outflow in 2022, 2023.
Sure. That's helpful. My second question was on, again, on the new launches. If I look at your launch pipeline, you have about 7.5 million sq ft planned for the next year. You know, beyond this, would you look at like new launches in the luxury segment in Gurgaon, you know, besides the independent floors' projects? Because you've been doing that, but besides independent floors project, would you look at like, say, a Crest category kind of project, particularly in Phase V? Just any thoughts there.
Yeah, Kunal. Hi. Aakash here. We'll be looking at launches in the luxury category. We'll be looking at launches in the premium. As Vivek mentioned that some of this hopefully, we'll be able to discuss when we see you all next week in person. For sure, DLF Phase V has got a lot of, I'd say right now square footage to monetize. We've got, the whole story of DLF Phase V today is now hovering around.
The Camellias is hovering around 50,000 INR a sq ft. The Crest is hovering around 25,000 INR a sq ft. And these are second sales I'm talking about. They've been further ratified, validated, and not one increase. They've been, I'd say. I can safely tell you they've been almost 100-odd transactions now in price points nearing what I just mentioned to you.
Yes, obviously how DLF Phase V was conceived earlier and how it is built and the kind of infrastructure, both points of view, hard infrastructure and social, that we've kind of worked hard to put together, now is the time to monetize. You will see a lot of that happening.
Plus, as Vivek mentioned, pan-India, there's going to be developments all across, in Goa and elsewhere. Those are also luxury, they will fall under the luxury pipeline. Right now we are going to be embarking on a reasonably aggressive launch plan this year. And of course, whatever residual that we have, we'll sell that too. Thank you.
Thanks, Aakash. My last question is to Mr. Khattar. Khattar, I mean, if we look at the occupancy levels, they've clearly improved this quarter, so that's great. Firstly, like, what's the physical occupancy in your parks, and what's the outlook there? Say, you know, where do you see it going in the first half or second half of FY 2023? Again, your comments on physical occupancies, you know, outlook going ahead.
First of all, we don't have a park. We are blessed with a number of parks. Let me go one by one. Cyberc ity, the occupancy is now, the physical occupancy is around 35%-36%, and we are seeing a growth in this week-on-week. I believe this being our largest IT park, by Q2 the occupancy levels should exceed about 70%-75%, which would be more near normal, because at no time is there a 100% occupancy with, you know, people falling sick and people traveling, et cetera, et cetera. That's one.
Chennai has been a very pleasant surprise where the occupancy is in excess of 80% today. It has picked up in the last two and a half months. It is coming to. It is now normal there, and it is coming to pre-COVID levels very, very quickly, and I think it should be another few weeks before it comes to that level.
Hyderabad, unfortunately, the occupancy is still at about 20-odd%, and so is it in Calcutta between 20%-25%. I believe it has more to do with the industries in the U.S. and they're coming back to office, which for some odd reason has a little bit of a rub-off effect on those companies in India also. By Q2, I believe that occupancies will be fairly healthy to normal.
That's very helpful. Thank you so much, and all the very best. I look forward to see you next week.
Thank you, Kunal.
Thank you. We have the next text question from the line of Manish Agrawal from JM Financial. The question is, first, what are our plans for DLF Phase V once The Camellias sell out? Second, any particular reason why the area and rent per square feet has been restated for all DCCDL assets? Third, what would be the gross leasing number this quarter in DCCDL reflecting the 2 percentage points rise in occupancy to 88%? Thank you.
What is the company question?
Basically on launches.
Phase V launches.
Phase V launches.
Yeah. Phase V launches, we just covered that in the last question, and we will, as I said, the potential in Phase V is honestly infinite and we've displayed a lot of strength in terms of realizing some values today, which I just mentioned in the previous question as well, in both luxury and super luxury.
There you can be rest assured of what we are doing and how we are going to be planning those particular launches and monetizing the price points in DLF Phase V. Once The Camellias is done, there will be both in the luxury and super luxury space. You will have to watch this space, but there will be launches going forward. Rest, Mr. Khattar can take. Yeah.
If you could, please, repeat your question. My apologies. I did not get it the first time.
Sir, the second question.
Yes, please.
Any particular reason why the area and rent per square foot has been restated for all DCCDL assets? The third question is What would be the gross leasing number this quarter in DCCDL reflecting the 2 percentage points rise in occupancy to 88%?
The first question first. About a year back we did a market survey and found out and realized that the factor which we were doing on so-called occupied area, the factors that we were using were far different from what the industry had moved on to. While we were the pioneers in starting that factor about 15, 20 years ago, but the industry had moved to factors which were different. Just as an example, if we were doing a factor of 80%, the industry had moved to 70%-72%.
What we were feeling is that ultimately when the market was trying to compare our rental rates with the other rental rates, we were at a handicap because we were doing it at a factor which was very different from which the industry was doing. We spoke to the IPCs, we spoke to some of the large tenants.
I must say I spoke to some of our friends on this call today. We decided to move to what the industry norms were. We decided to start moving on it slowly. What we did is that the new developments that we are having in our portfolio will be on the new factor norms and the older ones, as the tenancies keep terminating or the expiries keep coming, we keep moving to the new factors.
We have done it quite successfully in the last about, six months to eight months. We have not had any issues with the tenants who have realized fairly well that the total outflow they have on of the rental remains the same. It is just that the factors have changed. Therefore, we believe that in the next, say, 12 months-18 months, we would have predominantly and substantially moved to the new factors that we have. From April 1st onwards, our reporting will be on the new factors.
In terms of the new leasing that is there, while next week when we meet, I'll be happy to share with you what the plans for the next full year are. They are pretty ambitious and probably equal to or higher than what we have in the pre-COVID times because we have developments going on in Gurgaon, we have developments going on in Chennai, we have development going on in Noida, and each is a separate geographic market, which gives me a fair amount of mitigation in my geographic risk on the portfolio.
What it is for this quarter, this quarter will not be our total for the year divided by four because typically the first quarter is slower, and then it starts picking up. My experience is that the quarter three and four roughly are 60%-65% of the total annual business that is there.
Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Hi, thank you so much, and good evening, everyone. Vivek, just trying to come back to your earlier answer on capital allocation for fiscal 2023. It's good to see money going back into construction, into business, into growth. Will that leave any surplus cash, free cash flow for deleverage?
Sameer. Hi, Sameer. Yes. The answer is yes. Yeah. Right. We will have hopefully enough headroom to continue to deleverage.
May I intervene? Vivek, I think.
Yeah, yeah, please.
I mean, Sameer, I think while Vivek's answer is correct, that obviously the surplus cash flow will be used for deleveraging. With due respect, at INR 2,600 crores net debt, you know, deleveraging questions almost seem like yesterday's story.
Yeah.
No, sir, while that may be true, but you know, it's a low level of leverage. To get to no leverage or cash positive is also a good thing. The idea behind asking this question is just how should we think about this balance sheet, you know, going forward. That was the whole idea. Vivek, coming back, you know, this fiscal 2022 was quite phenomenal in terms of INR 22 billion odd sort of free cash flow. Is it going to be a meaningful number or a small number when we think of fiscal 2023?
See, I'll not like to give any number, Sameer, but what I would like to tell you very clearly that our collections last year were INR 4,500 crore. As we scale up, my collection numbers are likely to improve, right? Quarter- on- quarter. That's the first thing I would like to say.
Secondly, if you really look at my cost base, I'm not expecting my fixed cost to really move significantly up. Yes, there will be some movement because we are scaling up, plus inflation. But whereas if you really look at my interest cost, that's likely to significantly come down. That's a bit on cost.
Third is my construction outflow, which is directly linked to scale up. I have already talked about. Like this year, FY 2022, our construction outflow was INR 600 crore. We expect that to double next year. There will be a significant outflow there, which is again linked to scale up.
Plus there will be an approval outflow because there will be approval costs incurred for getting ready for the current year and for the next year. Plus there will be some outflow, net outflow because of the dividend, what we have really proposed, right? Net-net, I think it's difficult for me to really at this point in time give you a number, but directionally, I think we are looking good is what I'll say.
Okay. Yeah. Thanks a lot. That's very helpful. The second question is on DCCDL, sir. We had the exit office rental at INR 744 crores odd. You know, what are the levers for growth for fiscal 2023? What could be the, you know, exit rental, you know, in office DCCDL? Second part related to that is, how are you now thinking about your REIT plans, for this entity?
Okay. There are a number of questions. Let me take them one by one. Our exit rentals, as we have guided earlier, and this used to be Saurabh's pet question, which he hasn't asked today. Maybe he's convinced of it by now. Our exit rentals for FY 2022 are INR 3,900 crores, and our exit rentals for FY 2023 will be INR 4,400 crores-INR 4,500 crores. The growth in rentals is going to come from three buckets. The first bucket will be the organic growth that takes place in the existing portfolio in offices.
Two from retail, because retail, we believe that if there is no virus, this will be a full year of income earning compared to the previous two years where the retail earnings were hindered because of the malls being closed. The third bucket is the new assets where the rent commencement dates would commence in FY 2023, which is primarily DLF Downtown Tower 2 and 3.
Yeah. Thanks. On the REIT?
Yeah. On the REIT, we have guided on the preparation. The preparations are in an advanced stage. There's been a fair amount of discussions with the bankers, tax advisors, et cetera. Our preparation should be ready in the next couple of months. Thereafter, it is for the shareholders to decide when they would like to do it. Ashok, you may like to add to that.
I mean, to Sriram's point, yes, you're right. Most of the key decisions in terms of downstream, mergers and all have, I think by and large, in principle, been frozen. The asset perimeter has been frozen. We will at, I think in some time in the next four weeks, have a Cyberc ity board meeting, et cetera. I think those issues are now hopefully behind us. I think we should be, to Sriram's point, in the next few months, completely ready.
Then it's a question of frankly driven by, you know, multiplicity of factors, including the interest rate regime, the basic timing comfort of the two shareholders and the improving vacancy levels, which will drive the exact timing of the REIT. There, I think, you know, frankly, I would hate to conjecture on a speculative timeline, but as far as readiness is concerned, I think we are hopefully making good progress there.
Okay. Thank you very much, sir.
Thank you.
With your permission, one final question. Any you know update you can give us on the HSIIDC project, how it's looking like and what's the sort of, you know, completion timelines you're looking at?
Okay. That project now has a name, The Grove, it's called. You know, Sriram has christened it The Grove. In fact, the company is also, I think, going to be changed now. The construction contracts have been awarded. The principal contractor has been signed up. The financing is completely tied up. The building plans and all the requisite approvals, I think, have been obtained. You know, the excavation is at an advanced stage. I don't know, Sriram, but I think we are looking at a three-year completion timeline.
Ashok, there are those six towers that are there.
Yeah.
Four towers will start getting completed over the next 36-month period.
Yes, exactly.
Okay. Thank you so much.
Thank you.
Thank you. The next question is from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah, thanks for the opportunity. Sriram, my first question is on the, you know, area change which you talked about on DCCDL, which includes some factor changes. When you complete all those changes, what should the area be? It is already increased from 36- 37.9. What should it be post that?
That area change, let me put it in two buckets, offices and retail. First of all, retail, there is no change. In offices.
Yes
What we have decided is that all the areas in the north and the IT park in south will be at a factor of 70%, whereas the IT SEZ in Chennai and Hyderabad, and the IT SEZ in Kolkata will be at 75%. This is just in keeping with the market norms. That area of will go up in my view between 10%-12%. The question is that 37 is already at
Okay.
Yeah. What has been reported this time in the presentations is at the new sector, which the area now is about 37 million.
That's already captured in the factor changes Which you have to get agreement with the tenants.
Yes. Therefore, you know.
Understood.
Just to put it in perspective, if you see, say, the vacancy percentage will still be at 12%, but the volume of vacancy may look higher because the overall volume has gone up.
Right. The rentals have also been revised downwards in some places, I guess.
Absolutely. A tenant who was earlier say paying INR 10 lakhs a month as rental will continue to pay INR 10 lakhs rental per month. What we foresee is that as we go into the future, next four, five years, our flexibility to get better rental realization will be higher because we've just taken down the rentals by 12%-13%.
Right. This exercise is only for DCCDL, not for the DLF commercial assets? Or would you undertake those as well?
No, it is for the entire portfolio. For example, DLF is making an IT park in Noida, that also will be at the same factor as an IT park in DCCDL.
Okay. The existing DLF Centre, Gateway, the DLF Phase V, and R enew Plus Annex haven't changed, right? I see.
Yeah. The Gateway is a building which DLF has its group company, so it is neither here nor there.
Yes.
One Horizon Center which we had purchased was already at the 70% factor, so there was no need to change there.
Okay, great. That's useful. My second question is on your sales for ONE Midtown. Obviously there is some bit of rounding off if we can clear. Last quarter you sold 0.6 million sq ft for INR 700-odd crore. This quarter again you sold 0.6, but for INR 1,250 crore. How should one think about realization for these products?
Could you repeat that? Realization for?
Last year when you reported sales of ONE Midtown, it was around INR 700 crore for 0.6 million sq ft. Right? This time you reported sales of some INR 1,250 crore again for 0.6 million sq ft. Has the realization gone up by 70%+ or is it some bit of rounding off with them?
No, I think, Puneet, you have picked up some wrong numbers for the last quarter because the numbers you are talking yields a realization of INR 12,000 per sq ft, and this was actually launched at INR 18,000+ If I'm not mistaken, Aakash. I think the numbers that you have for last quarter may need to be reconciled offline with our team.
Yeah.
Sure. I'll do that.
Last quarter should have been 0.4% and below. Absolutely. Yeah.
Yeah. Not 0.7.
Okay.
To what Mr. Tyagi just mentioned, we launched it at INR 18. We are about INR 21.5 right now.
Okay.
Yeah, that's where we are.
Right.
We're happy to discuss it offline with you or when you are here, because we've arranged those visits as well.
Understood. Lastly, you also shared this number of money to be spent, right? Between your products which have been launched. Can you divide it between the products which are finished, which are largely Camellias or some, where you still have to do some bit of handing off, but are getting recognized and everything, and the new products which are just launched.
Sorry, you will have to possibly repeat this question, please. Sorry for that.
Yeah. No, no worries. There is INR 2,077 crore of residual construction costs. Can you divide it between new products and the older products?
Out of 2,000+ crore of construction costs, old projects will be INR 400 crore all put together, and balance is all new projects.
Okay. Understood. What used to be INR 1,000 crore number seven-eight quarters back is now only INR 400 crores.
Yeah. That's right. We are mostly toward the last phase of the project. These are all retentions and all, which hopefully will get cleared in the next six months to 12 months.
Got it. My last question is on the land bank monetization. In your presentation, you talk about 20% of land bank monetization can be done through scale-ups, which is almost as much as 35 million sq ft. Should one think that's what you can monetize beyond the existing 35 in next five years to six years?
I think, Puneet, I think it will be good we keep this forward-looking questions for the next week. I think we've given a guidance for the next five years. Of course, we can continue to monetize beyond five years, but I think we'll be able to share more details when we meet next week.
Understood. That's all then. Thank you so much and all the best.
Thank you.
Thanks.
Thank you. We have the next text question from the line of Saurabh Patwa from Quest Investment Advisors. The question is: How do we see the impact of rising interest rates on a commercial real estate business in the context of re-rental yield expectation? Thank you.
Mr. Khattar?
If I may, you know, the rising interest rate will have two implications. One, as Vivek's presentation has clearly shown, is the impact from the interest rate of DCCDL, which has been, if I'm not mistaken, Vivek mentioned about INR 150 crores or INR 170 crores on a post-tax basis as the worst case scenario for that.
I think the point that you are asking is more on the impact this will have on the yields, you know, or which in terms of the monetization value of Cyberc ity, and there I'll obviously defer to Sriram. Frankly, you know, we have seen in the past also that interest rate increases and decreases don't necessarily translate in a linear fashion to the yields. In fact, if you see the pricing of the three listed REITs before the 40 basis point increase and after the increase, actually there hasn't been a dilution in their valuations.
Yes, on a sustained basis, I am sure there will be an impact, but I think it will be difficult to speculate whether that impact will be like if the interest rates go up by 200 basis points, you know, does it mean that the cap rate moves from 8%-10%? Maybe not. I mean, that is something which obviously the market forces determine. All I say that it will not necessarily be a linear, you know, correspondence. Sriram.
To what Ashok said was on the yield side. On the bank interest side, the experience has been that in any interest rate cycle, the banks do not necessarily pass on the increase in the CRR and other treasury rates on a one-to-one proportion to the borrowers.
To the good borrowers, where we believe that the banking sector is awash with money and quality credit is still limited, we neither got the benefit of the complete reduction in rates, and I don't think going forward, we will be saddled with the increases as we go ahead. My personal feeling is that the total impact by proper negotiations and the relationships that we have with the lenders, our impact should not be in more than double digits.
Thank you. The next question is from the line of Saurabh Kumar from JP Morgan. Please go ahead.
Thanks for this follow-up. Just two questions. One is, you know, what percentage of buyers would be taking a mortgage, you know, as a percentage of your last year's sales? The second is, you know, in terms of like-for-like price increases, Aakash, what has been the like-for-like price increase in some of your key projects, including Midtown, Camellias, you know, even the low-rise developments? These are the two ones.
Lastly, just as a follow-up to, you know, Sameer's question, point is that you have done INR 2,400 crore. All our costs are going up. It should not be seen as a flash in the pan. The point is, can we generate a $2,000 crore run rate? Because your collections will also move up along with your outflows and everything. Do you think that INR 1,800 crore-INR 2,000 crore cash flow at DLF level is possible?
Saurabh, I'll first one, where you said like to like increase, what are you comparing that with?
At this, you know, last year at this time, what was like, say, the price in Camellias versus where it is today or where you launched Midtown, where it is today, where you launched your plotted development versus where it is today. We just want to get a generalized sense of price appreciation, because it seems that the price appreciation in your portfolio is far ahead of the market. I just want to, you know, kind of get the reasons why is that happening.
Yeah. No, thanks for saying that. I hope the luminaries here, including Mr. Tyagi, take note of that. Thanks, Saurabh, but I'll answer that question for you. Camellias last year, around the same time was hovering around INR 37,500 a sq ft. In fact, I just announced yesterday we have gone up in Camellias, in just the BSP price by INR 5,000 a sq ft. We've reduced the special discounts, if you've noticed, by another 5%, which is another INR 2,500. We've reduced the special rebates by another INR 2,500. In less than a year, we have been able to take the Camellias price points up by almost INR 10,000 a sq ft, if not more.
We have demonstrated sales every time that we have done that, including a second sale kind of a transaction, which I'm happy to report to you, where an understanding has been reached, but obviously it'll have to be transferred to us right now. The Camellias today has just transacted at INR 50,000 plus PLC, which is 20%, which is INR 60,000 a sq ft, just three days back. This is not a transaction that is done through us. The market has validated this now and of course, the new price points are for everybody to see.
Similarly, in ONE Midtown, we launched at about INR 18,000, about that much, and we are about anything between INR 21,500 sq ft-INR 22,000 a sq ft we are selling. The only thing is that, you know, there are times that we have to take these calls, wherein there is some amount of velocity that is obviously compromised, but we have to show strength in the product and in the region. Unless we do that, nobody else will. A lot of my competitors, I see how they price their products. It's a volume game. I don't know how they meet their margins. I don't know what their business plans are, but I mean, obviously that is for them to tell.
As far as we are concerned, I think our hurdle rates, our margins, take precedence over sales or the velocity of it. While we have to continue to make sure that we sell, but we also have to sell well, you know, in terms of the market price point. We've done that also. In fact, there are two more things that I'll tell you in floors from last time, this time, I'll give you an apples-to-apples comparison. There is a place in Phase III, which we will take you to when you guys are here next week. We sold that just last year at INR 10,500 sq ft-INR 11,000 per sq ft.
A similar launch in the same geography that we did, on the February 28th, we did it at INR 16,000. Again, we sold almost 70% in that project again. I just came back from New Chandigarh, and I just informed the board yesterday about we launched 15 months or maybe 16 months back, there were some residual plots that we sold there. When it came to me, we started to sell them at about INR 38,000 or max INR 40,000 a sq yard. Just about a month back or month and a half back, we exited that project, or whatever residual stock that we had at INR 65,000 a sq yard.
In Chennai, the plots that we just launched, we had budgeted at about INR 2,900. We, when we got into the market, we projected it to be about INR 3,200 a sq ft because Chennai sells plots also like that. You'll all be happy to know that the price points that have been achieved are upwards of 3,750. Wherever one has seen opportunity, wherever one has seen how we can kind of increase it without disrupting the market, we have taken that punt. You know, having said that, obviously the situation has been where when it increases, there is that fear of, I'd say, a little bit of a pushback, but that also we've kind of circumvented by the brand name and the quality.
I think overall across price points, across product lines, we have demonstrated not only this year, Saurabh. You've been tracking us for the last three years to four years, wherever, even in residual stocks, we have gone ahead and sold at premiums and have not even discounted those projects which were delivered five years to seven years back. I think that is something that we take very seriously in this organization.
Saurabh, on your point of mortgage, I think just I'll give you some data points. You see, in the segments and in the markets we operate, overall if you really look at the percentage of buyers who take mortgage is less than 50%, right? I can just talk about ONE Midtown, because that's what we very recently looked at, right? If you really look at the profile of buyers who have bought apartments in ONE Midtown Delhi, they are by and large businessmen stroke professionals, which is doctors, CAs, lawyers, right?
There is very less percentage of customers who are salaried, right? We've actually looked at the profile. They are normally in terms of how many of them have taken mortgage will be somewhere between 35%-45%. That's broadly the range people who have really gone for mortgage, right? When it comes to super luxury, right, the numbers are insignificant. Possibly I don't have the numbers, but they will be less than 10%. Right, so.
No, also, I'll just give you one more data point here on ONE Midtown. If you've seen that area and you've seen the history of how that area has transacted business and bought real estate over decades, we've even gone and I'm not saying we are going to, you know, change things around like this, but we've attempted to do. We've done a lot of clean business. They are not used to spending this kind of a money, clean money on real estate.
You know, this particular thing to change that whole trend, change the way people are buying, you know, all this is extremely critical for you all also to know, because those price points that we have also achieved there are demonstrating that, you know, there is a certain way that we do our business. Again, it's the service and the quality. It's just not about the brick and mortar. To Vivek's point, when I met Citibank, they mentioned to me that 38% of their books come from West Delhi, and they kind of do all that.
A lot of bank interest, a lot of loans and everything organized, but their people kind of work mostly on internal accruals, and they kind of work around all that. As far as ONE Midtown is also concerned, we are way ahead of that price curve there in terms of the numbers achieved also. I think that is also something that we continue to, I'd say, fight on a daily basis.
To your last question, Saurabh, on cash, I think my response is not going to be any different from what I have already shared when Sameer asked the same question, right? All I want to say is we are committed to improving our cash flows year-o n- year.
Understood, sir. Thank you very much.
Thank you. The next question is a chat question from the line of Nikhil Kanodia from HDFC Securities Limited. The question is, "What are the price hikes taken at blended portfolio level, Camellias, ONE Midtown?" Thank you.
I think we just answered that twice already.
Yeah.
I hope that's okay.
Yeah.
Thank you. We take the next question from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Yeah. Thank you so much for the follow-on. Sir, quick question. I mean, on your slide number 10, I think you had earlier mentioned that 50 units of Camellias you would like to retain for rental purposes and not for sale. But here in your finished inventory, I think you are showing roughly INR 2,200 crores. So I just wanted to check whether you have excluded that from here or not, and are your plans to keep it for rental are intact?
No. The rental plan, yes, once we saw the kind of demand and all that, obviously, what we did was that we sold some rental leased transactions. What we did is that, I'm not sure how many of you know this, but The Camellias today is leasing at about INR 7 lakh a month, which is if I just do an ROI on that, it's about almost 3% on rental values at about, you know, INR 40,000, if I'm just averaging that number, because a lot of people had bought it at much lesser price points. There is a phenomenal return that this asset is giving people.
What you are seeing there is what we have done is while we will continue to rent, because that will be a very big, I'd say advantage for the NRIs, and I'll just make one quick example there. Yes, we will continue to do these, the balance of this. Maybe we'll split that into two, but we will rent them and then we will monetize them soon. We are not going to be holding this stock for a later date.
Our process and this particular thing, because our NRI transactions and sales kind of came to almost a halt because of COVID. May 15th onwards, we have just relaunched the NRI plan, which for products like Camellias entails a lot of tours and presentations, and therefore this particular thing happens.
I'll give you one quick example of an NRI from Singapore who bought the Camellias online, who we arranged for this gentleman a turnkey arrangement. We don't do it, but we arranged a turnkey arrangement for construction and everything else. He did that online over the last two and a half years, and we arranged a rental also for him online. The gentleman who lives in Singapore is for the first time going to come into India and actually see t he Camellias for himself and kind of experience.
He's already with his investments that he has made, he's already started to make about INR 7 lakh plus on rentals sitting in Singapore. To your point, this is a model that we will use, and we will try and pitch this. We already have in excess of over a hundred NRI interests across-
I think, Aakash, I got your point that you would rent it, but eventually DLF is to sell them down, you know. A reason to keep them in the inventory numbers, right?
Yeah, that's right.
Okay. Sir, one final. How do we see the future of New Gurgaon, in the sense, not for RESI, for the commercial bit, other than AMEX development that we're doing. Are you thinking anything big over there, you know, once Cyberc ity gets saturated, then you make a Cyberc ity 2.0 over there? Your thoughts on this please.
So-
May I take that question?
Yeah, of course.
New Gurgaon is developing extremely well. As we go forward, we do see a potential of creating a Cyber city in New Gurgaon. I won't say it will be in the very near future, but over the years, yes. Having said that, there are two very large occupiers like American Express who are talking to us to put up their campuses there. We are also looking at creating a high street shopping center there of roughly about 500,000 sq ft. This is on the commercial side.
Once the momentum catches up, we will definitely look at that as the future growth which will come in the event that we have sort of saturated our land banks in Cyberc ity and in Downtown. We will also look at it independently as an independent price point compared to what we do the rental at Cyberc ity and what we will do it in New Gurgaon. It's definitely in our horizon and in our focus area.
Okay. Thanks so much.
Thank you. Ladies and gentlemen, we take that as the last question for today. I would now like to hand the conference over to Mr. Ashok Kumar Tyagi for closing comments. Over to you, sir.
Yeah. Thank you once again, you know, for taking time off for attending our call. I think as Vivek and many of you mentioned, you know, this has been a pretty robust FY year on sales front, on finance front, and frankly, the resilience that our commercial leasing business has shown, you know. The market continues to be robust and, you know, that's the reason we are scaling up. The pace of scale-up should hopefully only catch even more momentum. You know, we should see a higher amount of sales. The free cash flow should continue at broadly similar trajectory as it was in the last fiscal.
Having said that, both the commodity inflation and the interest inflation and the general, you know, sort of, I'd say some headwinds that one can see in the Western markets and maybe in India also. You know, we should be slightly more cautious for at least the next two to four quarters, you know. You know, and while obviously I think there's no fundamental change and no fundamental shift, but I think one needs to be slightly more cautious.
You know, on the commercial leasing side, as I mentioned, you know, frankly, our offices business, despite some extremely tough times, you know, demonstrate phenomenal resilience in collections and in ensuring that the customer stickiness and our CapEx build-out continues. Frankly, I think hopefully we'll all get time to discuss all of these points in far greater detail next week when we hope to see most of you know, physically in Gurgaon. Thank you so much.
Thank you, sir. Ladies and gentlemen, on behalf of DLF Limited, that concludes today's session. Thank you for your participation. You may now click on the Exit Meeting icon to disconnect. Thank you.
Thank you.