Ladies and gentlemen, good day, and welcome to DLF Limited Q3 FY 2023 earnings conference call. We have with us on the call Mr. Ashok Kumar Tyagi, CEO, DLF Limited, Mr. Vivek Anand, Group CFO, and Mr. Sriram Khattar, MD, Rental Business. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. 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.
Thank you very much. Good afternoon to all of you, and welcome to DLF Limited Q3 FY 2023 earnings webcast. Let me start by wishing you all and your families a very happy New Year, and thank you for joining us today. We continue to witness strong business momentum across all business parameters. I'll start with financial highlights for Q3 FY 2023, DLF Limited consolidated results. Consolidated revenue stood at INR 1,560 crores. Gross margins improved at 59%, supported by a higher contribution of Camellias. EBITDA stood at INR 542 crores, with margins at 35%. Net profit at INR 515 crores, reflecting year-on-year increase of 35%. This was primarily due to higher JV profit and a continued reduction in the finance cost.
Our residential business delivered a strong performance and clocked one of the highest quarterly new sales booking of INR 2,507 crores, reflecting year-on-year growth of 24%. Cumulated new sales for 9 months FY 2023 stands at INR 6,599 crores, reflecting a year-on-year growth of 45%. We continue to see a well-diversified sales mix. Happy to share that 89% of our quarterly sales was contributed by new products. We expect this trend to continue as we scale up our new launches. Our luxury offerings, The Grove at DLF Phase 5, Gurugram, stands completely sold out, reaffirming demand for quality offerings at established locations. Sales booking during the quarter for the product stood at INR 1,570 crores.
The second phase of our recently launched product, The Valley Gardens in Panchkula, echoed customers' confidence towards our product offerings in that geography, clocking in sales booking of INR 540 crores during the quarter. We remain enthusiastic about the housing industry intrinsic growth potential, which continues to be supported by a resilient economy. Our focus remains on creating customer-centric products that provide a distinctive living experience with best-in-class amenities across our established ecosystems. I'll move to cash now. Operating cash flow for the quarter stood at INR 633 crores. In light of the Hyderabad asset development being pushed back, we have repaid the outstanding CapEx advance of INR 582 crores to DCCDL Group out of these surplus cash flows during the quarter. The transaction was largely cash neutral at the group level.
Consequently, our net debt decreased to INR 2,091 crores at the end of the quarter, a reduction of INR 51 crores from the previous quarter. I'll now move to the financial highlights for Quarter Three FY 2023, DLF Cyber City Developers Limited consolidated results. The office portfolio continued its gradual path to recovery. Strong momentum across the retail business continues. Rental income grew to INR 1,003 crores, year-on-year growth of 15%. Consolidated revenue at INR 1,363 crores as compared to INR 1,176 crores last year, reflecting a 16% year-on-year growth. EBITDA stood at INR 1,061 crores, year-on-year growth of 16%. Net profit at INR 358 crores, reflecting a year-on-year growth of 27%. Occupier attendance across the portfolio continues to inch upwards, with gradual recovery across the office segment.
While global headwind continues to persist, leading to a challenging environment, we expect demand for quality office assets at established locations should continue to garner interest of larger occupiers. New developments across DLF Downtown, Gurugram and Chennai remains on track. Planning for our upcoming retail destination, Mall of India at Gurugram, is in advanced stages. The retail business continues to exhibit healthy growth. Consumption trends continue to reflect sustained momentum, with sales delivering consistent growth leading to a healthy retail business output. We remain well-positioned to achieve our business objectives, which are strongly supported by continued housing demand, quality offerings, and a healthy balance sheet. Right. Thank you for listening to me, and we can now open the floor for the Q&A session. Thank you.
Thank you very much. We will now begin the question-and-answer session. To ask an interactive question, you may click on the toolbar on the bottom of the screen and click on Raise Hand, or you may click on the Q&A tab on the left-hand side of the panel and click Raise Hand. Accept the pop-up prompt on your screen when your name is announced to proceed with your question. Please unmute yourself before you proceed with your question. To ask a test question, you may click on the Text tab available on the top on clicking the Q&A type and type your question. For participants connected via audio call, you may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
We have our first question from the line of Saurabh Kumar from JP Morgan. Please go ahead.
Hi, can you hear me? Hi. Am I audible?
Yeah. Hi, Saurabh. Yeah, we can hear you.
Yeah.
Let us-
Okay. Hi. Okay. Thank you. Thanks, guys. For the, for pre-sales in the quarter. I just had a few questions, sir. First is on this DCCDL settlement. Is there anything left, or are we now fully done on this? As a consequence of this, should the interest cost of the PNL now further come down? I can give all of them together, and you can respond.
Yeah, yeah. You can. Just, we'll answer all of them together. Yeah.
Okay. The second one was, sir, essentially on this mortgage rate. we are now seeing a 9% trend and probably will go to 9.25. Have you seen any key trends of reduction in footfalls in terms of site visits? The third is essentially around this, you know, the Golf Course Extension project. I am seeing a value of INR 7,500 crore for this project. I just want to know what is the average price you are assuming, for, you know, through cycle, for this project. Lastly, on DCCDL, does the rental now include Midtown, the Downtown, sorry? At that INR 1,060 crore EBITDA through Downtown, and also if you can talk kind of years. Thank you. Thank you.
Okay. Yeah.
Thank you.
Saurabh, thanks for your questions. Let me take it one by one. This DCCDL settlement of INR 582 crores, which is a cash settlement during the quarter, this completes all settlements. There is no outstanding or CapEx advance in our books as on 31st December 2022. Right? I think that was the first question. That's right? I'll move on. On the mortgage rates, your question was.
The settlement now because you were paying some interest on this two DC-.
Yeah, yeah. We were paying some interest on that. We made this settlement in October. Post-October there is no interest on that. You will see that reduction thereafter. Yeah?
Okay. Right.
Okay? On mortgage rates, yes, they are now close to 9% and in some cases upwards of 9%. Your question is, are we seeing an impact on the footfalls? Right. At this point in time, if you really look at our sales numbers, I think the kind of response we've got in the last quarter, especially the two launches we had, right, we are not seeing any significant impact of that as of now. Right. The third one was the Sector 63 group housing. What we have indicated to you will be the launch value of INR 8,000 crore during this quarter. Right? That's coming largely from two projects. One is Sector 93 and 63.
At this point in time, I think we are still in the process of finalizing the launch, including the pricing. The total square feet I can give you, right, which is the launch is around 4.4 million sq ft for Sector 63. Yeah?
Right. Okay.
Right? Last part was DCCDL rental of INR 1,003 crores, does it include Downtown 2 and 3 rental? The answer is yes.
No, let me
Yeah, please. We received the occupation certificate for Downtown two and three end of June 2022, and thereafter the tenants took possession and started the fit-outs. The first rental started trickling in from November. What we have in the December quarter is a very small portion. This will be much higher in the March 2023 quarter and will then sort of stabilize in Q1 of next year to its completeness. For your information, the buildings are, building two and three are completely leased, and the rental will be for the entire 1.65 million, except to the extent of one or two floors which are on hard options with a multinational company.
Okay. I mean, you've already achieved your INR 4,200 crore exit NOI this year, I mean, pretty much.
Yes. I was, sort of going to, explain that by asking that we should be able to meet INR 4,200 this quarter.
Next year we should then hit that 45, 46 mark pretty easily, I'm guessing.
yes, I would tend to think.
Okay. Thank you, sir.
Thank you.
Saurabh, sorry, only one more clarification on the DCCDL advance. You are correct that advances as of today are completely settled. However, as you are aware.
The basic genesis of this advance was that DEL has, you know, has an ongoing arrangement for over 15 years with DLF, where DLF constructs the SEZ buildings and transfers to DEL. To ensure that DLF is not out of pocket, DEL traditionally advances that money to DLF. Right now, since Hyderabad was delayed, this outstanding advance has been refunded back completely. When a new building comes back on the anvil, maybe a fresh advance would be taken from BCC here.
Dhawal sir, just one thing. 6 million sq ft of DEL is still left to be delivered by DLF to DEL.
Yeah. I don't have the exact numbers, but yes, between Silokhera, between Hyderabad, yes, you're right. Approximately, yes.
Okay. Thank you.
Thank you.
Thank you. We have our next question from the line of Kunal from CLSA. Please go ahead.
Yeah. Hi. good evening. Thanks for the invitation. firstly on the leasing side, right, we've been seeing-
Your voice is breaking. Mr. Kunal?
Am I audible?
Yes. Please go ahead.
Yeah. My first question was on the pre-leasing that we have done in Phase 2 Gurugram, first to Downtown Gurugram of 0.7 million sq ft. Can you give us some color on the nature of the tenant and the demand here?
This is what we call block 4 in Downtown Gurgaon. This is a building of about little in excess of 2 million sq ft. 700,000 has been leased to I can give you a flavor to 2 large global capability centers in the banking, financial services, insurance. They are two of the bigger ones, and then there are 2, 3 smaller deals.
Sure. In the same breath, just wanted to check with you, Mr. Khattar, on how is the demand situation, considering the global layoffs and, you know, the bad news that is happening globally. What's the indication that your existing occupiers as well as, you know, the new occupiers that you would be in touch with, what's the indication that you're getting there?
The indications were getting to be quite strong in the month of October. Thereafter, with this U.S. recession and continuous hardening of interest rates has dampened the sentiment marginally. It has dampened the sentiment in terms of the decision makers wanting to defer their decision by a few weeks or months before the situation in the U.S. becomes clearer. However, India's cost competitiveness in terms of its highly qualified English-speaking engineers on one side, and global quality real estate at very competitive price will always be a compelling reason for international companies to keep coming to India. That trend continues.
We also see that the movement is to developers who are able to provide grade A plus plus spaces, not only grade A spaces, and provide spaces which are scalable for the potential tenants in the future. In addition, the international tenants, when they first come, they don't start with the, with the physical structure of the place or the financials, the commercials. They start with the areas of safety, sustainability, wellness, infrastructure, and what we have done to ensure that their employees are much more comfortable. The fifth and the last trend, which I personally find quite heartening, is this whole work from home is slowly coming to an end.
Whilst hybrid will happen, but this leverage which the at least in the IT/ITS sector, the employees had on working from home, is now being looked upon rather unfavorably by the large tenants, who are asking their employees to come back, albeit in the hybrid mode. This augurs well for our offices business going forward.
How has the physical attendance been in this quarter?
The attendance varied, between various IT parks. Just to give you a flavor, we are at about 60% attendance in Cyber City, Gurgaon, 60%, 62%, 65%. In Chennai we are at about 90%, and Hyderabad is around 30 odd percent.
Sure. Sure. Okay. My second question was on this quarter's sales, about INR 2,200 crores came from new products. If you can break it down between projects. I understand INR 1,500 crores would have come from The Grove. What would be the contribution from Panchkula and what came from the rest?
Hi, Kunal. You're right. Grove is INR 1,570 crores. Valley Gardens, Panchkula is INR 540 crores. There are others which are in the floors, which is INR 120 crores. That's broadly the construct.
Sure. Sure. That's helpful. Thank you so much.
Thank you. We have our next question from the line of Mohit Agrawal from IIFL. Please go ahead.
Thanks. Couple of questions. First is on cash flows. Your current construction spend annually is about INR 1,000-1,200 crores against a collection of about INR 5,000 crores run rate. I'm assuming next year we move up on the collections run rate, you know, considering over the last five, two years, we've been doing more than INR 5,000 crores. What kind of increase in construction cost do you see? Is it gonna be proportionate? Broadly, are your operating cash flow margins gonna be similar in the range of around 45%?
Okay. Yeah. Yeah. Thanks, Mohit. You're right. Let me just start with the collections first. In the first nine months, we've collected INR 3,722 crores. On a full year basis, you are right, we'll be collecting upwards of INR 5,000 crores, right? That's almost an increase of 20% versus last year. Now, moving on to the construction. First nine months, we've spent INR 974 crores to be precise, including CapEx. On a full year basis, we expect that this number will be close to INR 1,400 crores this year, right? The other part of your question was what is our estimate for next year.
Our collections, hopefully, I think by the time we exit, this year, our collections will be close to INR 1,500 crore a quarter. We should be able to sustain that next year. Our construction outflow for next year, as we are scaling up, will be somewhere close to INR 1,800 crore.
Okay. This includes the CapEx as well?
That's right. I give you-
On the digital assets as well. Yeah.
Right.
Yeah.
INR 1,400 this, going up to INR 1,800-INR 1,900 next year.
Okay. Sure. My second question is on getting a little bit clarity on the launches based on the data shared in the presentation. You're supposed to launch about 3 million sq ft in Q4 2023, which includes Sector 63, 2 million sq ft. Could you clarify what is the 0.8 million sq ft of premium value homes? Also if you could elaborate a bit on next year launches of premium value homes of about 4.4 million sq ft and also the luxury housing of 3 million. Does it include any of DLF Phase 5 launches?
Okay. Let me, let me start with quarter four. Quarter four, the first question was on 0.8 million sq ft, what we are planning to launch. This is Sector 93, Gardencity Enclave independent plots. That's something which we are planning to launch during this quarter. We are, we are in advanced stage of getting the approvals. What is there as 2 million sq ft in luxury housing, that's group housing, the 63, and that's a total of 4.4 million sq ft, of which we are considering 2 million sq ft to be launched this quarter and the balance hopefully next financial year. Right? That completes quarter four. Next year, yes, there are a lot of launches which we have planned across geographies and across segments.
At this point in time, I'll say that the number is INR 9 billion, but I can broadly indicate to you that, yes, we are looking at launching in one group housing in South, one in DLF Five. More details we will be able to share when we come back to you in May after the annual results.
Okay. Is there a phase five launch in 2024 plan?
That's what I said.
Like Crest 2.
All those details we'll be able to share, right, sometime in May. We are working on it. At this point in time, I think I can only say these are indicative numbers, but we'll be able to confirm you in May.
Okay, sure. I just have one more question. On the Midtown project, you know, what is the plan there? You know, we've not seen you releasing inventory for the last two quarters. If you could share your thoughts there.
Yeah, that's as per plan. As of now, what I can say is that structure is ready. Out of the total potential sales value of INR 4,500 crore, INR 2,600 crore has been sold. The structure is ready as we speak. Now we are in the stage of really, right, giving the finishing to the building, and that's expected. That's going to take some time. Possibly at this point in time, the way we see it is that we will be bringing that remaining inventory of close to INR 1,900 crore sometime in the market middle of next year.
Okay. done. Thanks a lot. That's all from my side.
Thank you, Mohit. Thanks.
Thank you. We have our next question from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Hi. Thank you very much, and good evening, everyone. Sir, what's holding back pre-leasing of 1 million sq ft at CyberCity and roughly 1.5 million sq ft of SEZ, excluding Silokhera?
Sorry, pre-leasing?
Pre-leasing.
I don't think we are doing any new projects in.
No, no. I meant leasing, sir. It's the vacant area that I'm talking about.
Sure.
1 million Cybercity and 1.5 SEZ.
Yeah. If you see the vacancy numbers have been consistently coming down since April.
What I have been given to understand that our vacancies are much lower than that of our competitors and peer group. The vacancies are a little higher in the SEZs for reason which you are well aware of, which is the DESH Bill or the amendment to the SEZ, which is taking a little more time than we had anticipated. I don't think we've now come down to single digits roughly in the Cyber City. Silokhera, there is a perennial problem which you're aware of in terms of a Supreme Court case, where the vacancy is about 30%-33%, giving an overall portfolio vacancy of about 10.2%.
If you recall, Sameer, the vacancy levels had risen to 15%+ at the peak of COVID, and they are declining gradually quarter on quarter, and now they are at about 10%, as Sriram said. Hopefully we'll continue seeing a decline in the future quarters, yeah.
Okay, great. Thanks. Guess what I'm also asking is, what's the walkthrough, you know, versus this year's exit rental and the exit rental in fiscal 2024? I can see Downtown Chennai as 1 driver. Are there any other important items that will drive this growth?
The rentals of FY24, the growth in rentals will be one based on the growth of the existing rentals, which is traditionally what it is for the existing portfolio. Plus a full income for the INR 1.7 million in Downtown 2 and 3 in Gurugram. A marginal inflow of the rentals of Downtown 1 and 2 in Chennai. Please recall, by the time we get the OC, which is likely to be later middle of this calendar year, and then the larger tenants who come and do their fit outs, and by the time they start paying rents, I don't think they will be before the first quarter of the next calendar year, which will be the last quarter.
In the following year, the rental for Chennai will come in full bloom.
Oh.
In the year after that, the rental for the 2 million in Downtown 4 will also commence.
Okay. Okay. Very clear, sir. Just on the borrowing costs for DCCDL, how much increase have you seen so far, and how much is left? If you can just talk about that.
Yeah. You know, I was also quite intrigued to see in this quarter that our interest cost has been constant compared to Q3 of last year, and the borrowings have been constant. When we went into a little bit of a deep dive, I realized that the interest cost was pretty high in the first 2 quarters of the last year, and then it started dipping, and then it started picking up. Our exit interest cost as of this quarter is 7.85%, 7.86%. I personally don't see the interest rates going up beyond maybe 25 basis points further, with the current control on inflation that we have. Thereafter stabilize and start probably looking at coming down later part of the later part of this year.
In my view, interest rates other than 25 basis points would have peaked. And I also say that we've done a reasonably good job in ensuring that we are very competitive when we borrow. And therefore, the interest rates and the hikes that have been taken in the repo rates, et cetera, the rate of increase of our interest rates is far lower than that.
Okay. No, that's good to hear, sir. If there's only 25 bits left, that would be a pretty good outcome. One final question. DLF has roughly 2.2 million sq ft of rental assets like Kolkata SEZ and The Chanakya, et cetera. What's the thinking over here? You want to keep all of this or you want to monetize some point in time in future?
Sameerji, obviously, I mean, there's no intent to monetize it on a standalone basis. At some stage, you know, as and when there is a eventual capital solution around this entire Cybercity piece, you know, if it makes sense, some of these assets could flow into that, into that. That's again, something for the future. Right now we are, you know, we are focusing on sort of... While it's being managed by a common platform, which is the Mr. Khattar's platform, the ownership is still separate between Cybercity and DLF. At some stage in the future-
Oh, very clear.
They could integrate, I think it's still speculative right now.
Okay, got it. Yeah. Thank you.
Thank you. We have our next question from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.
Hi, sir. Thanks for taking my question. First is on, again, on Midtown, just to follow up from previous participants. The release of, I think, the tower B will happen sometime in first half of this year, as you said. In that sense, do we think that the second phase of One Midtown, probably might not get launched in FY 2024?
Yeah, FY 2024, I don't think it will be launched in all fairness. Frankly, we have a fairly rich, you know, launch pipeline. I don't think we want to cloud it any further by having, I mean, the next phase of the Midtown project being launched. As was, as mentioned by Vivek, that sometime in the middle of this year, we should hopefully have the residual inventory of Midtown, you know, be released for launching. Yeah.
Sure. Got it. I mean, that launch was still reflected in presentation as FY 2024. Just wanted to clarify that please. Thanks for that clarification.
Yeah. Ritesh, you are right. That's the reason I didn't comment on the launches for 23, 24. What I clarified is when we come back to you with annual results, we will give you more details for our launches for next financial year. You are right, this 2 million of residential JV central Delhi will undergo a change.
Sure. Got it. One on Downtown Gurgaon, our, you know, occupancy has dropped from previous quarter to this one, from I think 98%, 99%- 93% right now. Even in place the rent that is reflected in our presentation, it was last quarter around INR 136 odd per sq ft, now it's showing INR 120. Just wanted a clarification on that. I mean, why we saw a drop in occupancy, I mean, drop in occupancy and a drop in rentals as well.
Vivek?
I don't, but I don't think there is a drop.
I don't think there is a drop, but we will come back to you with this. We will answer it on Monday for you.
Yeah. We noted this, Ritesh.
Sure. Sure, no problem. Thanks. That's it from my side. All the best.
Thank you.
Thank you, Ritesh.
A reminder to participants, to ask an interactive question, you may click on the toolbar on the bottom of the screen and click on Raise Hand, or you may click on the Q&A tab on the left-hand side of the panel and click Raise Hand. Accept the pop-up prompt on your screen when your name is announced to proceed with your question. Please unmute yourself before you proceed with your question. We have our next question from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah, thank you for the opportunity. My first question is on Panchkula. You know, that seems to be, you know, doing quite well. You're selling 500 crores each quarter now for the last 2 quarters. What kind of potential do you see there? And, you know, how deep is that market?
Puneet, I mean, it's a leading question in a sense that we ourselves have been frankly very pleasantly surprised by the depth that Panchkula has, you know, demonstrated. Really, I mean. As you may or may not be aware, some of this inventory was actually a slow-moving, I mean, plotted inventory with us for a very long time. Frankly-
Yeah.
The bounce back has been fairly spectacular. You know, we obviously have some further inventory, am I right?
Yeah.
In Panchkula, which we'll hopefully continue selling. Eventual market size, I think is still... I think it'll take some time for us to fully fathom that.
Yeah. Correct. Just to give you.
But can you-
Puneet, right, the total project size is 2.2 million sq ft in Panchkula, what we've done. Of which the inventory, what we've released in phase I and phase II is 1.4 million sq ft. I can share with you, we got a very good response, of which out of 1.4, 1.3 million sq ft has been sold. At a sales value of almost close to INR 1,100 crores, and we've realized INR 8,400 rupees a sq ft. The balance inventory-
Mm-hmm.
Right? Hopefully should get released in early part of next financial year and hopefully should get sold.
Yeah. Can you give some color on who are what kind of buyers are these? Are they investors, end users? This, you know, and the realization also seems to be quite, you know, good and surprisingly high as well.
Yeah, yeah.
Yeah.
The realization is good. It's about INR 8,000+ per square feet, you know, in that sense. The ticket size is also almost running to INR 3 crores+.
Correct.
A lot of them are people who belong to that place. I mean.
Yes.
You know, this question about investor and end user is a very confusing one always because obviously for many of them who are buying, it may be a second house that they are buying, not necessarily their first house. They're not, I'm sure they're not buying it only for speculative purposes. There are a lot of retired government officers, retired military officers who belong to that area, who are looking at, you know, a nice sort of, you know, enclave to eventually settle down. I think it's a mix of all of those. To your first point, the depth has surprised us on the positive.
It's also not main Panchkula, as I understand. It's slightly off Panchkula as well in some sense, isn't it?
Panchkula is a city of small distances.
No, this is right on the river.
Yeah, yeah.
Actually, locationally, this is actually better than the main Panchkula.
Exactly. What you would normally call the main Panchkula area.
Okay.
Yeah. It's on the river. It has a great view of the Kasauli hills.
Sure.
You know, it's actually very nice.
Understood. Got it. Got it. My second is if you can give some, you know, comment on when should we see the timeline of completion for phase two, balance CapEx left and the Downtown Chennai balance CapEx?
Downtown Gurgaon is a huge development. It's about 12 million sq ft. Out of which 1.7, which is Downtown 2 and 3 is already completed, leased out, and it is now behind us, capitalized in the books.
Yeah.
Downtown 4 of 2 million is under construction. That takes us to 3.7 million, leaving about 8 odd million, of which 3 million is most likely the, uh, retail, uh, destination mall. The balance, about 5 odd million, will be offices. Our planning for the retail-
No, no. For the 2 million square feet. Yeah. Sorry.
Our planning for the mall is at a very advanced stage. Whether it ultimately comes out to be INR 2.7 million, INR 2.5 million, INR 3 million, is really what the architects come out with. Since this is a multi-use integrated development, the planning is much more intricate and has taken a little longer than what we anticipated, but we are coming to the end of the cycle for the planning of this.
Yeah. Okay. for the 2 million sq ft, Phase 2 for Downtown, the fourth block, what is the balance CapEx and timeline for completion?
There we are planning to be have the OC readiness by the quarter 2 of FY 2024. FY 2025.
Balance sheets. FY 2025. Okay. CapEx to complete?
CapEx is a standard. It's about, I think about 700, 750 odd INR crores. Balance CapEx.
Right. Also for Chennai-
Puri, sorry. I mean, in the Cybercity business, unlike DLF business, you know, CapEx is a continuous running stream, you know, in that sense. Actually, the day CapEx stops, it's really death, you know, frankly.
Right.
I mean, you know, Downtown. I mean, this term Downtown will end. By that time, hopefully the malls would have begun. By that time, the first.
Yeah.
part of the next 5 million square feet will begin. Downtown will continue to be hopefully a significant consumer of CapEx for the next 5- 6 years.
I understand that. For the Chennai Downtown, 3.3, which is under development, what is the timeline there?
Yeah. There we should be ready for the OC in the next quarter.
Okay. Substantial money is spent already, I presume, right?
Yes. I would tend to think that typically in a project like this, what happens is that the last 6 months you spend about 40%-45% of the funds. About 60%-65% would have been spent, and the balance 35% would be there in terms of the cash flow.
Sir, if you can quantify the balance amount as well, the 40% which is left.
about INR 300-350 crores.
Okay, that's very helpful. Thank you so much. Lastly, if you can comment on, you know, the competitive intensity in the Gurugram market. The commentary seems to be a lot of new players are rising. The old ones who once we thought were dead are also rising back. What do you see there in the market?
See, this is a typical market cycle where when the rentals tend to stabilize and move, you will find a few more entrants coming into the market. The people who are coming into the market are putting up buildings which are less than 1 million sq ft each. These buildings are unlikely to give scale to the larger tenants who want to take up spaces. Yes, they will have a market, but the market will be for smaller corporate offices and not for the larger global companies and the group capability centers, who will still look at much larger developments for their needs, which are in terms of size, much bigger than these smaller ones.
While this competition will be there, I think we are quite confident of sort of facing them and continuing our journey of growth as we have given the guidance or as what we plan.
Similarly, if you can comment on the competitiveness on the residential side.
Frankly, on the residential side, the market actually is right now in expansion... I mean in expanding mode. I mean the... From a scale standpoint, the fact is that, I mean, there's possibly one major, you know, player in Gurugram apart from us who is, you know, sort of growing at a strong pace, you know? It is we don't foresee... We are not seeing any influx of any bigger players of size and scale coming in. There are obviously one-off projects by a number of players, both original Gurugram players as well as players coming in from Mumbai and other places. I mean, that's the way it is.
Right now the market is still in a zone where it can expand and can sort of absorb more supply.
If I were to add, I think demand continues to grow in Gurugram market. I think the supply is all-time low, right? At this point in time, in fact, NCR continued to be the highest holding inventory almost five years back. Today, if you look at the supply in Gurugram in particular, it's close to 10-15 months. I think that's one shift which has happened. If we, if you look at DLF market share by value in Gurugram amongst the top 10 players, we've actually grown our share to almost double, and the last reported share is 30%.
On the pricing we are seeing, especially again in NCR market, in the last one year we've seen a healthy pricing growth of upwards of 20% versus a national average of close to 10%.
Yeah, if I may please add to that. See, in the renting business, we don't look at a market. We always study our competition in a micro market. Honestly, the market in which we operate, say, New Gurgaon or Sohna Road doesn't fall into this market segment at all.
Okay. That's helpful. Thank you so much and all the best.
Yeah. Thanks.
Thank you. We have our next question from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Thanks for the follow-up, my question has been asked. Just a quick one. Any thoughts on The Camellias, and also broadly INR 3,000 crores of finished good inventory. What's the visibility of selling this down? Thank you.
Camellias inventory out of INR 3,000 crore as of now, as of end December, is INR 1,700 crore, and that's almost, to be precise, these are 46 units. During the December quarter, we have sold four units. If I look at the average run rate of last one year, it's close to 8- 10 units every quarter. We expect with the price increase we've taken, right, the pace at which we've been selling will certainly now stabilize at five to six. This will take at least two years for us to really liquidate. That's one.
In terms of the other inventory, which is around INR 1,200-1,300 crore, I think a large part of it is in National Devco, which is sitting across almost 20 projects in Tri-city, in Delhi, in South, and this is residual inventory. Just to give you some numbers, 3 years back, this inventory was close to INR 2,500 crore, which now has been, in the last 3 years, through our focused efforts, we've been able to bring it down to close to INR 1,200 crore as of end December. Our estimate is that this will take another 2-3 years before we'll be able to liquidate this.
Yeah. Very clear. Thank you.
Thanks.
Thank you. We have our next question from the line of Saurabh Kumar from JP Morgan. Please go ahead.
Yeah. Thank you for this follow-up, sir. The first question is, you know, specific to your asset, Saket. I notice that your rental is, you know, close to that INR 160 odd mark. What will be the real reason why the differential versus Select would exist in your view? Select is like near INR 500. That's the first one and that's important. Sure you know why. The second, sir, is essentially on this Gurugram, you know, your pricing has gone up quite a lot. When I look at your disclosures, the gross margin is coming to about 45% odd. Because we always targeted a gross margin of over 50%. I was wondering why.
Is there some, like, low value sales you have done to kind of liquidate old moving stock? That's the second one. And the third is on DCCDL again. Sir, the accounting would have allowed you to straight line the rentals in this quarter, right? Was it a straight lining impact which would have flown through in this quarter? Maybe not from a cash perspective, but from a reported EBITDA perspective, it would have happened.
Yeah. I'll start with the Saket Mall versus this. I think what you may be referring to is the. You're comparing the figures that have come in the draft DRHP.
Yeah.
First of all, in my reckoning, those figures are for FY 2024 or FY 2025. They are projections. Whereas what you're comparing it with is what you have for the current quarter for FY 2023. That's one sort of gap that you have. Secondly, as you know that as a commercial loading, we have a 100% loading. I am given to understand that Select's loading is much, much less. That's number 2. Number 3 is that for us, it includes the back block, which is basically the cinema and a few restaurants. Whereas to my understanding, Select Citywalk sold its back block completely, and therefore the lower rentals that you get for the back block do not come here.
Okay.
There could be other reasons, but I think these three should suffice for the time being. As we, you know, we've not had a year to stabilize in Saket because the moment we rejuvenated the mall and enhanced it and opened it, COVID hit us. I think it's been a rather, you know, how would I say, challenging journey on this till now. In the coming year, we've already seen an uptick in the last quarter in the earnings and the footfalls and the trading densities, et cetera. I believe that we'll continuously witness it. It is our experience that a mall comes to full glory of proper sustainable income after one or two proper seasons that it has seen through.
Got it, sir. Okay. Your incremental rentals will be similar, right, like on incremental leasing it will be?
Yeah. Our incremental rentals in Saket would be quite decent. I don't know whether they will be similar to the Select because I do not know what their incremental rental is.
I think you know, but fine. Okay. Second is, sir, basically on this, on this DCCDL accounting. Was it a straight line item there in total?
Yeah. On straight lining, Saurabh, as usual, your questions are quite incisive. On a pure cash rental basis to an accrual in the P&L, the difference is about INR 100-150 crores in the year, which is basically because of the straight lining.
No, no, I'm saying for this quarter, your, Downtown would have got straight lined into the EBITDA.
INR 40 crores is what it is for this quarter.
Okay. Got it. Sir, lastly on this, Vivek, on this gross margin.
Yeah, yeah, I'll take that. gross margin, yeah, you're right. it's of the 12.5 million products what we've launched in the last two years, yeah, our margins are somewhere close to 45%. it is because of course, the mix, right? let me start with the 2.8 million sq ft, which we've launched in DLF City and, in DLF Phase 5, right? that's, that is 2.8 million, where our average price realization is upwards of INR 17,000 per sq ft, and our margins are close to 50%, right? That's one.
Now, we've launched again, low-rise floors, which is close to 5.7 million sq ft we've launched in New Gurgaon and Panchkula put together. There our average realization relatively is low at INR 5,300 a sq ft, and our margins are around 35%. One Midtown phase one, what we've launched is 2 million sq ft. There our margins are around 42%. If you take a weighted average of this, right, you will get close to the number what you have. Broadly, that's what the construct is. To answer your question, it's a mix of the different products we've launched across segments and across geographies.
Mr. Saurabh Kumar?
Yeah, sir.
Saurabh Kumar.
Just to continue this train of thought, so as your pre-sales stabilize on your PNL in terms of revenues, your, in terms of the operating leverage, because I'm guessing you're spending a lot of overheads on your brokerage marketing, which is hitting PNL today, which will probably not happen as these sales stabilize. We should expect margins to kind of move to that 35% plus mark over the next two years as your revenues catch to up to pre-sales?
Yes, that's right. See, today, if you really look at my revenues, what I'm booking is INR 1,400-INR 1,500 crores a quarter, and what I'm selling is INR 2,000 crores a quarter. There is a gap of almost 25%. I think this will take some time before what I'm booking and what I'm reporting as my revenue catches up, right?
Yeah.
Once incremental rate, right, you will see the EBITDA margins really inching upwards to 35%+ levels.
Yeah. The incremental revenue will come at 45% margin. The fixed costs don't go up because.
Yeah.
brokerage is most of that stuff. Understood. Thank you.
Thanks, Saurabh.
Thank you. We have our next question from the line of Abhinav Sinha from Jefferies. Please go ahead.
Thanks. My margin question has been answered. Second question which I had was on the independent valuer number which has been booked for DCCDL and NAV. This seems to have moved up by 10% QOQ, both for offices as well as retail, and whilst, you know, the rentals seem to be roughly stable. Any comment on where this could have come from, the increase in valuation?
Well, these are numbers which are given by independent valuers, and they are taken from the report and then mentioned. I don't think I would like to comment on what valuation has come from credible third parties. To some degree, I think the reduction in the, in the vacancy levels, I mean, the vacancy levels and, you know, I mean, the gradual completion cycle of the townhomes, et cetera, starts having a bearing.
Okay.
A lot to do also with the overhang and now from COVID-
Yeah. Well, it was that they had not factored in in this quarter. Now they have taken that. Gradually the values are, have now begun sort of, you know, reducing the overhang of the COVID that was there for the last two or three years.
Okay. Okay. Thanks. Secondly, any thoughts and updates that you can provide us on the plans on, you know, entering the Noida or Mumbai markets, you know, which may have made some progress during the last few months?
On Noida, the, I mean, the answer I have is that no, I mean, zero progress since we, since we spoke last. On Mumbai, you know, clearly, you know, we continue to try to work with the, with the concerned bank and our joint venture partners in trying to find a solution to the Mahalaxmi project that we have, Tulsiwadi. We still are struggling to get everybody on board, you know, in a manner that the project can take off. We are in conversations on potentially, you know, one more project in Mumbai, but as and when, you know, they sort of near a closure, we will hopefully make an announcement on that. As we speak right now, nothing further to report than what we had last quarter.
Thank you, sir, and all the best.
Thank you.
Thank you. We have our next question from Mr. Pritesh Sheth from Motilal Oswal. Please go ahead.
Thanks for the follow-up. Even I have a question on Noida, but just very specific. Recently, I think we have had, you know, a few auctions happening in Noida where we didn't participate. Just wanted to understand your thought process whether, you know, the margin that we are looking at, is it, you know, lower than what we are getting for or what's the thought process?
Two issues. One is obviously, you know, the price points at which those biddings had all started. You know, while obviously, you know, if one is desperate, one can obviously participate in those, but I don't think that we needed to be in those, with those price points. The Noida comes with its own set of conditionalities in these public auctions, including potentially, you know, a future unquantifiable liabilities around compensations and those sort of things, which frankly make participating in Noida public auctions, you know, a slightly dicey process. We want to be very careful, you know, before we participate in one. None of the auctions in the recent past were tempting enough for us to participate.
Got it. Got it. Just last, your deliveries for the floors that we have been launching, since, you know, last year, I mean FY 2022 onwards, will we see that start happening in the Q4 of FY 2023 or that will actually FY 2024?
Yeah. We are trying our best that we make a beginning this quarter, but for sure it will start from quarter one of next financial year.
Okay. On One Mid 2025?
Yeah, that's right.
2025. Okay. Okay. That's it from my side. Thank you.
Thank you. We have our next question from Mr. Kunal Lakhan from CLSA. Please go ahead.
Hi. Thanks for the follow-up again. Just wanted to understand with the Sector 63 launch and the kind of run rate we have clocked in the 9 months, are we revising our sales guidance, or how should we look at Solia now?
Kunal, we still have, I don't know, 65 odd days of the quarter to clock in. I mean, I think we are very confident that we should hopefully be able to meet and slightly exceed the guidance we had given, but we will not like to, you know, substitute the earlier number with a new number right now. Yeah. Absolutely.
Okay. Sure. Secondly, you know, with the Mr. Khattar said that now he expects like now another 25 is including the rates, and then it should peak out. With the, you know, peaking out of rates in sight now, like, you know, if you can, you know, give any update on the REIT plans or any of those, any of that sort.
Sorry, your question is not clear. Sorry.
REIT plans.
REIT plans.
REIT plans.
REIT plans, yeah. You're expecting the rates to peak out?
Yeah.
on the front end now.
Hopefully as the rates start peaking out and then hopefully begin declining, you know, at least the macroeconomic rate-linked uncertainty around the REITs should start gradually melting away. I mean, you've seen that at least, you know, some of the bigger REITs have had to take the hits, you know, because of the interest rate cycle, the way it's panned out. Honestly, that's just the nature of the animal, you know, frankly. Hopefully as things stabilize, you know, we will come back to you with what the plan is. I mean, as we've always maintained that our downstreaming wise, we are more or less ready now, you know. I think the last of the mergers should be filed in the next, whatever, couple of weeks, I'm told.
Let's just wait for, A, the macro and, B, what both the players, specifically GIC, feel about the entire process, and then we'll take a call.
Sure. Thank you so much and all the best.
Thank you.
Thank you. I now hand the conference over to Mr. Ashok Kumar Tyagi for closing comments. Over to you, sir.
Thank you so much. I mean, this has been, you know, a good quarter both on the development and on the rental business. Clearly, the development pipeline and the residential sales continues to be, you know, grow at a strong clip. I mean, the home mortgage rates have now gone up in excess of 200 basis points since we began this cycle. Hopefully, you know, it has had a very limited impact on the entire sales cycle and the sales optimism. As we begin, hopefully, you know, reaching the peak of the interest rate cycle, you know, we do look forward to a good few more years of the entire strength in the residential business.
We, because of our locations and our products that we have, are hopefully well placed to be able to, you know, take advantage of it. The rental side, I think also, I think the aftereffects of COVID are now gradually behind us in the retail sector completely, in the offices largely. The new CapEx build-out is now accelerating. Hopefully, you know, as we hit fiscal 2023, 2024, you know, we hit it with a confident stride in both the residential and the commercial side. Our free cash flows on both sides of the equation, Cybercity and DLF, are reasonably strong and which will continue to be, you know, deployed gainfully in terms of strategic CapExes and obviously return to the shareholders. Hopefully, you know, look back to reconnecting back with you in a few quarters. Thank you.
Thank you.
Thank you. On behalf of DLF Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.