Ladies and gentlemen, good day and welcome to Godrej Properties Limited's Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing star then zero on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anup Pujari of CDR India. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and thank you for joining us on Godrej Properties Q1 FY23 results conference call. We have with us Mr. Pirojsha Godrej, Executive Chairman, Mr. Mohit Malhotra, Managing Director and CEO, and Mr. Rajendra Khetawat, CFO of the company. We would like to begin the call with opening remarks from the management, following which we'll have the forum open for an interactive Q&A session. Before we start, I would like to point out that some statements made in today's call is forward-looking in nature and a disclaimer to this effect has been included in the results presentation shared with you earlier. I would now request Pirojsha to make his opening remarks.
Good afternoon, everyone. Thank you for joining us for Godrej Properties' first quarter FY23 conference call. I'll begin by discussing the highlights of the quarter, and we then look forward to taking your questions and suggestions. I'm happy to report that Godrej Properties started the year with its highest ever first quarter sales. We sold 2,300 homes during the quarter with an area of about 2.8 million sq ft, and in value terms, sold about INR 2,520 crore worth of inventory, which represented a YoY value growth of 407%. Of course, the base was the delta wave last year, so it's not really a reasonable base to look at.
We were especially pleased to have crossed INR 1,000 crore of sales in Mumbai through the successful launch of two new projects, Godrej Horizons, when we sold more than INR 500 crore of real estate, and Godrej Ascend in Thane, where we sold 379 homes with a booking value of about INR 415 crore. We believe this puts us on track to our objective of achieving sales in excess of INR 10,000 crore in the current financial year. On the operations front, while we had no deliveries in the first quarter, we remain on track to deliver a large number of projects during the rest of the year. As a result of no deliveries in the first quarter, our revenues were relatively muted at INR 375 crore, a YoY growth of 61%.
Our Adjusted EBITDA grew by 58% to INR 132 crore, while our net profit grew by 168% to INR 46 crore. Our residential collections for the quarter stood at INR 1,538 crore, leading to positive net operating cash flow. From a business development perspective, we recently added a new luxury project near Carmichael Road in Mumbai with a total saleable area of about 1.2 lakh sq ft and an expected revenue potential of approximately INR 1,200 crore. While our new business development announcements during the quarter were only these two or three projects, one in Carmichael Road, a plotted development project in Nagpur, and in addition, additional phase to one of our projects in Mumbai, we do have a very exciting set of projects under discussion, and our business development pipeline is exceptionally strong.
We expect to have several new projects announcements in the months ahead. While commodity cost inflation has impacted margins on under construction inventory, the price hikes taken to mitigate the same for new projects have been well absorbed. Strong housing demand despite price increases and interest rate hikes gives us confidence that the housing cycle upturn is sustainable. We remain confident of leveraging the opportunity to grow our market share aggressively with a sharp focus on business development and project execution, which will set us up for significant earnings growth in the years ahead. I would also like to update you on an important change to our leadership team that will take effect from January 1, 2023. Mohit Malhotra, our Managing Director and Chief Executive Officer, has tendered his resignation from the company to seek entrepreneurial opportunities outside Godrej Properties.
I'm deeply grateful to Mohit for the essential role he has played in transforming Godrej Properties over the past 12 years he's been with the company and over the past 5.5 years that he's been CEO. I wish Mohit much success for the future and for his new venture. Gaurav Pandey, who is currently the Chief Executive Officer of the North Zone of Godrej Properties, will take over from Mohit as Managing Director and Chief Executive Officer effective January first. Gaurav has over 17 years of experience in the real estate sector. As CEO of our North Zone, he has transformed the P&L of the business and built a high-performing team.
In the five years of his leadership, the zone grew by six times in booking value, four times in collections, and the imputed return on capital employed increased very significantly to about 27%. In fiscal year 2022, the profit after tax for the North Zone was the largest contributor to Godrej Properties' P&L. I'm quite confident that Gaurav's thorough knowledge of the industry, the company, and his delivery track record will help ensure he has a very successful tenure as CEO of Godrej Properties. On that note, I conclude my remarks. I'd like to thank you all for joining us on the call. We'd now be very happy to discuss any questions, comments, or suggestions you may have.
Thank you. Ladies and gentlemen, we will now begin the Q&A session. Anyone who wishes to ask a question may enter star and one on your touchtone telephone. If your questions have been answered and you wish to withdraw yourself from the queue, you may enter star and two. Participants are requested to use a handset while asking a question. Ladies and gentlemen, please wait for a moment while the question queue assembles. To ask a question, you may enter star and one. We have the first question from the line of Kunal Lakhan from CLSA. Please go ahead.
Yeah. Hi, good evening. Firstly on the operating cash flows, you know, it was quite low this quarter. I mean, although it was positive, but, you know, as a percentage of collection, it was a bit lower. What is the reason for that?
Kunal, you know, so obviously, you know, the collections will improve in the coming quarters. You know, since it's the beginning of the quarter, there are a lot of, you know, construction milestone payments, which will keep coming. Since the launches also, three launches we have done. Those are initial, you know, collection which we have received. Going forward, you will see this collection and operating cash flow trajectory improving in the coming quarter.
I think, Kunal, we remain very confident both of strong, overall collections as well as operating cash flow growth for the full year. We agree this quarter was a little bit low.
Sure. Secondly, on status of your Ashok Vihar launch, if you can give some indication on when the launch will be and where are we in terms of approvals?
Yeah. I think we've been making steady progress on the approvals. There are one or two issues that are still outstanding, so we're hoping for a Q3 launch on that.
Q3, okay. Okay. Lastly, in terms of new launch, new launches for the rest of the year, right? I can see only one launch in the Mumbai market, which is the Matunga launch. Besides that, we don't have anything else lined up for the rest of the year.
Well, we do have a few projects that, you know, we haven't put in the official guidance that we'd hope to launch by the end of the year. You know, including our Worli development, perhaps even this Carmichael Road development, if we can turn it around fast enough. You're right that I think some of the Mumbai launches will be second half of next year as well. We have, of course, launched two significant projects in Q1, so we expect continued momentum and inventory sales from those projects as well. Mohit, you wanna add anything?
Yeah. As Tushar highlighted, I think there are a couple of projects which we are looking to launch, but you know, at advanced stages of approval, we haven't taken them into our guidance. We also have potential to launch the next phase for our Wadala project, which has done phenomenally well. You know, looking at quite exciting opportunities in Mumbai this year.
Sure. Lastly, status on your Bandra project?
Mohit, you wanna take that?
Not much progress on Bandra project. As you know, you know, it's stuck because of our joint venture partners', you know, reasons. I think that project, where things are going slower than what we would have liked it to.
Okay. I have a few questions. I'll come back in the queue. Thanks.
Thank you.
Thank you. We have the next question from the line of Puneet from HSBC. Please go ahead.
Yeah, hi. Thank you so much for the opportunity. My first question is with respect to your investments in the joint ventures and other financial assets. That seems to have gone down on a QoQ basis. Can you elaborate on why that would have happened?
Rajendra?
Puneet, you know, those investments keep going up and down depending on the share of profit and loss which keeps adding and, you know, reducing. That is a function of those, you know, investment. Plus obviously, when you recognize profit, it's the share of investment goes up, and when you recognize loss, the share of investment into JV goes down.
There would have been a recognition of loss in these projects?
Yeah. Because that usually is a one-line item. That, you know, gets into investment. When the JV reaches revenue recognition, obviously it will, you know, go up again.
I think it's important to understand that for joint ventures, until they reach project completion when the earnings are recognized, the rest is just marketing expense and the other things which are expensed out.
Yeah. Yeah. No, I get it. My second question is, you know, how should one think about the pipeline? You've been quite, you know, bullish on the pipeline, but we haven't seen, you know, large projects getting added, you know, compared to the scale and the balance sheet size that you have. What is really, you know, resulting in a bit of slowdown on the project acquisition?
Yeah. I think, you know, again, the visibility internally is quite good. We have, as I said, also shifted out our announcement of deals till usually a greater set of precedent conditions are completed. But yes, you know, it's fair to say I think last two, three quarters we haven't had any big bang new business development announcements. We're quite confident we'll have a few during the upcoming quarters.
All right. Great. That's all from my side. Thank you and all the best.
Thank you.
Thank you. We have the next question from the line of Ritesh Jain from Motilal Oswal. Please go ahead.
Hi, sir. Thanks for the opportunity. Just one question on, again, on business development. Firstly, congrats to Mohit on a successful tenure. I think Mohit and his and the team overall were obviously, you know, working very closely to materialize transactions in Mumbai, Bangalore, where you were very much focused in last couple of years. Now with new CEO obviously coming from north. How those things, you know, those dynamics change, particularly with respect to our business development target in Mumbai and Bangalore.
Yeah, I don't think we should, you know, assume any change. I think, of course, we are a professionally managed company, I think largely thanks to all the good work Mohit has done over the last few years. We also have a very strong team. We have zonal CEOs who are responsible for delivering the P&L. We have a strong independent business development team, I think for business development. Of course, I can personally be involved in some of the important transactions. I think as we've indicated, you know, I think Mohit moving on, we've agreed in a very amicable manner between me and Mohit. I think he's gonna do his best to ensure a very smooth transition. We have another five or six months before Mohit moves on.
I really am quite confident that the business development pipeline won't be affected. In fact, you will see, I think a considerable pickup in business development momentum over these next couple of quarters.
Sure. Just if you can elaborate since, you know, the pipeline visibility is very strong. Obviously, we'll take your comments with a pinch of salt since nothing has been firmed up. What sort of pipeline you are looking at in Mumbai specifically, with regards to SRA redevelopment that you are seeking to sign off with DB earlier. What's the visibility there and overall in general, the pipeline that you're looking at in Mumbai?
I think, you know, we have good visibility in Mumbai. Again, it's very hard to comment on this till these deals are public and we can speak about them freely. There are several different projects that we're looking at, including individual projects that have an INR 5,000 crore kind of booking value addition to the company. We're quite hopeful of closing a few of these. Nothing specific on the slum redevelopment side. As we mentioned, we had dropped that earlier proposal, but we're seeing several interesting opportunities for new projects both in Mumbai and Bengaluru, in addition, of course, to the good business development that's in any case been going on in NCR and Pune.
Sure. Thanks. That's helpful. All the best.
Thank you.
Thank you. We have the next question from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Hi. Thank you so much. Best wishes to you, Mohit, for future. My first question is on the price increase, Piyush. What's been the sequential increase, Q4 to Q1?
Mohit, you wanna take that?
Sure. Thanks, Sameer, first for your good wishes. We had, as we mentioned in the last call, we took a, you know, almost 5%-6% price hike in Q4 to hedge for the inflation. This quarter, again, you know, we have taken a price hike of 3%-4% across projects. Now, some projects we have been able to take a higher number. Some projects we couldn't take as much as we would have liked. On an average, you know, QoQ, we have been targeting 4%-5% price hike across markets. You know, markets like NCR, where prices are already going up significantly, we could take a higher number.
In some markets which are still lagging behind, the number of price hikes is slightly lower.
Sir, what's the outlook for balance nine months of this year?
Yeah, I think we have been, you know, we have not seen any major, you know, drop in demand through these price hikes. We would like to, you know, continuously push, in a prudent way, the price hikes. Of course, we'll also have to be very careful about, you know, how consumers are responding to it, and we don't want volumes to drop. We'll just take it in a very calibrated way and, you know, accordingly decide. Very difficult to give a guidance on this.
Okay. No, that's fine. Anything you can talk about the two new project acquisitions, which is Carmichael and Nagpur and the plotted development in Nagpur. What kind of gross margins can we assume, which is backing out both land costs and construction costs?
See, Nagpur is a plotted development, so the margins in plotted developments are upwards of +40% . Rajendra, do you have exact margin for Carmichael? I'm sorry.
For Carmichael, you know, we should be, you know, Sameer, we've invested close to, you know, INR 300 crore, so that is the equivalent amount of profit which we are looking at over there.
Okay. No, that's great, Rajendra. When you say invested 300, that is only land or land plus construction, you're saying?
Only land. I'm saying on the land, generally we'll look to make 2x kind of a return. That is, you know, that is the margin we look to make from that kind of a project.
Okay. I mean, just so that we are clear. The sales potential is INR 1,200 crores and profit is INR 300 crores, you are saying?
Yeah, basically I'm just saying that is a ballpark because there will be a lot of, you know, construction. There will be a lot of approval and other stuff, you know. I'm just saying this is a ballpark.
Okay. Yeah, yeah.
These are both obviously, Sameer, quite high margin projects. I think the Carmichael one is a ultra-luxury project. The ultimate margin will of course depend on pricing, but it's a small project. I think, you know, we will go for a pretty high margins there.
Okay. The final question is, how does the site at Worli look like in terms of, is it how clear it is, you know?
Mohit?
See, the site is getting cleared. You know, the work had already started, and both the partners were already in the process of site vacation. But if you really ask, you know, I don't think you will see a very major change unless a significant number of people move out. Right now the progress is positive, but a real shift in site, you know, you would see in the next six months.
Okay. Okay, that's fine. Thank you so much.
Thank you. We have the next question from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.
First of all, I'd like to congratulate Mohit full journey. My question is to Pirojsha Godrej. Last year, northern market contributed about 40% of our pre-sales.
With Gaurav now, being in the role of the CEO. Are we looking to replace him, in North with someone else? How will we look at the Northern market now? If you can highlight, are we looking to deepen our presence there, because we have emphasized a lot on the Northern market, its profitability and our ROE of almost 27%. If you can just touch upon the Northern market, how will it shape up now?
Yes, I think we have continued to have strong ambitions for that market. I think of course, you know, we have a strong team in place there. We've actually appointed an existing P&L leader in our NCR team, who is number two to Gaurav, as Gaurav's successor. Geetika, who's been one of our star performers and been a key part of the reason NCR has performed so well. She will now take over as the P&L head for the NCR zone when Gaurav moves over, and we continue to have very ambitious plans for the growth in that zone.
On the business development pipeline, I mean, some of the peers who give a guidance on annual guidance on such a number on the business development. Do you have any number for especially for MMR, especially on the premium side, where we don't have any significant presence as of now. You've been highlighting in earlier calls that you're looking to significantly ramp up and increase our market share, but of late we've been seeing that other players from other geographies coming up and taking that market share, and we have been, like, not really done a great job out there. If you can just touch upon still quantify some of that, especially on the premium side.
Yeah, I think in Mumbai, first of all, you know, as I mentioned, we actually last quarter had our best ever sales probably in Mumbai, certainly since our big Vikhroli launches, where we've crossed INR 1,000 crore in sales. The project, one of the major contributor to that was actually a business development project we added last year in a redevelopment project in Wadala. We're actually very happy that we've turned around that quite quickly. We've just announced this Carmichael Road project. As I did mention, there are a couple of very advanced stage large projects that we have in the pipeline. Of course, till we are in a place to announce them, I agree that there's no way that the investor community can really get a great sense of them, but we hope to be able to provide that in the near term.
You know, I think giving business development guidance I would take with a pinch of salt because there are a large number of unknowns in this. If you look at it, I'd say that, you know, the goal of the company is to do at least INR 10,000 crore bookings this year to grow at least 20%, YoY. I think steady state, that means for two years forward, we should be at a sort of INR 15,000 crore number at least. I think that's the kind of booking value we'd like to lock in through business development in the current year, and we think we're on track to do that.
Okay. Some of these large opportunities are typically, I mean, so what kind of opportunity we are seeing emerging now on the business development front? Do you think it's more like greenfield or still like you are doing redevelopment opportunities rather than right away, like greenfield opportunities by buying out large non-corporate. On your plate, so what kind of opportunities are emerging from these segments?
You know, I think we're seeing large opportunities in all of the above. I think from a balance sheet perspective, there are only a handful of developers in the country right now who have the capacity to cut large land acquisition purchase checks. I think we are well placed in with a gearing ratio of 0.1:1 to be in place to do that for large significant opportunities. I think given the Godrej brand and our track record on doing probably more joint ventures than any other developer over the last five, six years, we feel very confident in being able to do new partnership projects as well. I think you'll see a mix of those and also some redevelopment projects.
Okay. Okay. Thank you, Pirojsha Godrej, and all the best to you.
Thank you.
Thank you. We have the next question from the line of Abhinav Sinha from Jefferies. Please go ahead.
Hi. Congratulations to Mohit on your move ahead. Wishing you all the best. My first question is on the growth trajectory. You have talked about INR 10,000 crore of sales in the current year, but it's now only sort of implying, you know, flat numbers in the next nine months. Why is that so? I mean, is it like a launch issue or you can do better?
I think your INR 10,000 crore obviously is a we think pretty healthy number. It would imply annual growth of 27%. Of course, the endeavor will be to always do even better. I think that would be, we think, a pretty solid number for the year. We wanna first make sure we do get to that number, and obviously, if the opportunity presents itself, we will go for a much larger number. You know, I think we've been quite happy with the steady scale-up we've been seeing in the business from a booking value perspective. I think we're probably the only developer that's delivered consistent YoY growth each of the last 5 or 6 years. We want to continue to build on that.
I think INR 10,000 crore this year, if we can do a bit better, nothing like it. Again, I think a 27% growth for the year will be a healthy number.
Sure. On you know, on the cash flow part, you mentioned you're expecting it to be better, you know, in the next nine months. So where can we, you know, roughly expect the net debt to end the year? We had an uptick of close to INR 500 crores this year. Is that a fair pace to assume going forward?
Yeah, I think more than operating cash flow, which I think will be strongly positive for the year, I think the bigger determinant of where we end the year from a net debt perspective will be scale of business development. The hope would be to actually, you know, be investing even more than we have the last couple of quarters. Yes, I think at a minimum, we would expect the sort of, total net debt to go up by at least that if business development is firing the way we want to. A few big deals could make that happen at a faster pace.
You know, Sunil, the big deals that you talked about, you know, say the INR 5,000 crore out of that debt, these are land purchases or these are JV/JD?
Sure. Again, we're, you know, there's a large number of opportunities we're looking at. I think we're looking at, for example, one large joint venture project and one large outright purchase. The specific project that I said could be about INR 5,000 crore revenue opportunity is a outright purchase.
Okay. One question from the P&L perspective. On the current year, which are the project deliveries, you know, that you can guide us for, that we can expect in the next few quarters?
I think we have a large number of project deliveries. We expect, you know, over 10 million sq ft of deliveries this year. It'll be a long list of projects. Maybe Rajendra can take you through that offline.
Sure. I will connect for that. Yeah. Thanks and all the best. Yeah.
Thank you.
Thank you. We have the next question from the line of Girish Melkani from Stock Capitals. Please go ahead.
Firstly on the Bengaluru market, if you look at the sales, they have been pretty soft for the last year or two. This quarter also, the bookings were around INR 200 crore. When do you expect a rebound in performance from this market? If you can give some concrete launches planned or BD in this market. That's the first question.
Yeah, I think we expect a fairly immediate rebound. We've also made some changes to the team there. We've got a new CEO there who's been on board for a couple of months, who I think has very aggressive plans for growth in the market. We're looking at some exciting large new opportunities, but we do have a few significant new projects that we'll be launching from deals we added last year. I certainly think that, you know, we've taken cognizance of the low sales in Bangalore over the past 12 months and should report a much higher number over this next remainder of the financial year. Mohit, do you wanna add anything?
Yeah. I concur with your view. I think there's a very interesting pipeline we're building in Bengaluru on BD side. Once that comes in, you know, we see a big turnaround in Bengaluru market.
If I have to ask you this other way around, of the INR 10,000 crore guidance, how much can one expect from this market? If you have any number, in your mind.
I think this year the contribution from Bangalore will be relatively less, but I think next year onwards it should, you know, significantly increase in contribution once the BD deal gets signed.
Secondly, last two years, again, deliveries were around 6.5 million sq ft, so around 6.4, 6.5 million sq ft. Any targets you can share for FY 2024 in terms of deliveries?
Sorry, for this year or for next year are you asking?
2023 and 2024, if you can share for both years.
Yeah, I think this year we'll see a large uptick, certainly north of 10 million. I think a lot of it will depend on the exact timings of OCs, but I think 10 million would be a base case number. You should see a strong number the following year as well. We're currently selling over the last couple of years about 11 million sq ft a year. Within a couple of years that should, in any case, be the minimum rate. As we scale up, obviously deliveries will keep pace. I think over the next couple of years you'll see at least 25 million sq ft of deliveries.
Okay. Got it. Thank you, and all the very best.
Thank you.
Thank you. We have the next question from the line of Nimish Maheshwari from RSPN Ventures. Please go ahead.
Congratulations on good set of numbers. How do you expect the demand of, with respect to increase in interest rate scenario? Like, in the course of the year 1%-1.5% may increase. How do you see the demand?
Honestly, I don't anticipate any major impact on demand. I think it's important to remember that the starting point for this increase was the lowest interest rates India has ever seen. Even, you know, today a mortgage costs 7%, if that, say, goes to 8% or 8.5%, that would be relatively low by any historical standard. The last time the sector was booming in 2011, 2012, interest rates were, you know, 10%, 11%. I'm not overly concerned with this. Obviously we'll have to keep a close eye and watch how things move.
My sense is affordability for real estate, while not quite as good as maybe a year or a year and a half ago, is still one of the best it's ever been because prices are still quite moderate if you consider that we went through an 8 year-9 year down cycle with very limited property price appreciation. The 10% or so it may have seen appreciation over the last 12 months-18 months is a relatively modest number in light of sort of the time correction and the kind of increases people have seen in their income over this 10-year period. Similarly, as I mentioned on interest rates, there is some increase over the recent past, but we're starting off from an extremely low base.
My sense is the Indian economy, and positivity around its performance is much better than it's been in a long time. I think if that holds, and if people's view is that, inflation is likely to make property more expensive, which I think is correct, then you will have homebuyers wanting to come into the market. I think sometimes the industry is as much about buyers' perception as it is about the underlying numbers. My expectation is that we're still in the relatively early stage of what will be a lasting upcycle in the sector.
Okay, thanks.
Thank you. We have the next question from the line of Aman Vij from Astute Investment Management. Please go ahead.
Good evening, sir. My first question is on the RoCs of different regions. Like, you've explained that over the last 4 years-5 years, NCR we have been able to get 27% kind of RoC. If you can talk similar number for the other regions, MMR, Pune and Bangalore.
Mohit, you wanna take this?
Yeah. I don't have number offhand, but maybe we can touch after the call and provide you with the details.
Rough thing you have, sir?
Honestly don't. I don't have this number off. We can share it after the call. Rajendra, if you can just share it after the call.
Sure, Mohit.
Yeah, sure. Second question is on the INR 10,000 crore booking target we have. If you can give rough split in terms of regions, which you think we can achieve.
Yeah, I think, you know, as Mohit was saying, Bengaluru might be, of the four regions, contribute the lowest amount to this year. I think NCR and Mumbai and what we call our East-West zone, which is mostly Pune, but also Kolkata and Ahmedabad, will all contribute relatively large numbers. I think the exact split will depend on, you know, which exact projects end up getting launched and how they perform. I think overall, we think INR 10,000 crore will require a strong performance from all our zones, and I think we've seen good growth over last year in all four zones.
Sure, sir. On the Pune and Bangalore market, so we have a very ambitious target for this year. Although Q1 there weren't any big launches, but Q2, are there any big launches or most of them are meant for the H2 only?
Mohit, you wanna take this?
We have a big launch coming up in Pune in Q2, which is at the last stage of approval, so that could be a very big launch. Apart from that, you know, the launch pipeline looks healthy. There is good launches in NCR which is planned. Bengaluru also we have a big launch already underway. We are, I think, looking at a strong number for Q2 also.
Yeah. Sure, sir. Final question is on this, the cash we had raised. We have talked about trying to deploy most of it this year itself. Is there a chance some of this can happen in Q2 also, or it will be again backended in, say, Q3 or Q4 maybe? Do you find like?
Yeah, I think, you know, we should have deals getting added every quarter, so certainly some of them should be in Q2 as well.
No, no, I'm talking about the big ones because, you know, we have spent INR 300 crores for one or two projects, but compared to the cash.
Yes, I think some are at a stage where hopefully they can be announced in Q2. You know, obviously the reason they've not yet been announced is that they're not ready. I think these things are not, you know, always completely predictable from a timing perspective. Yes, we'd hope on the next call to have some significant updates in place.
Sure, sir. That is it from my side. Thank you.
Thank you.
Thank you. We have the next question from the line of Kunal Lakhan from CLSA. Please go ahead.
Yeah. Hi. Thanks for the follow-up. So again, just valuation on the Bangalore contributions. I see last year also we didn't have much contribution from Bangalore, and we also saw some cancellations in Q3. Just wanted to understand, like how are we approaching this market because we've been in the market for some time now. Any change in the strategy, or you know, besides what we've been doing so far?
Yeah, I think we're very clear on what our expectations in Bangalore are, and that over the last 12 months we've missed them. I think in some years we've been in the top three players by booking value in Bangalore. I don't think that we've not achieved any scale there. Also, it's not an issue that any of the projects we've launched haven't done well, so I think it's a pure question of needing to secure more business development, which we've already made some progress on over the past 12 months and have some very interesting opportunities that we hope to lock in over the next few months.
I also mentioned we've made a recent change in our leadership in Bangalore, and the clear mandate to the team is to you know make sure the scale moves up very considerably. We have no concerns on the fact that it will happen. We agree you know we haven't done as well as we could have from a scale perspective in Bangalore over the last 18 months, and we're fully committed to ensuring that's rectified, and very confident that it will be.
Sure. Just a data point that I must have missed in the past. The cancellations that we had seen in Q3 of INR 100-odd crore in Bangalore, this was for which project?
This was a project, Godrej Reflections, which had an issue with this NGT order, which we're in the process of appealing in the Supreme Court. For any customers who had wanted to withdraw from the project, given the uncertainty, we provided refunds there.
Sure. Sure. Thanks so much, and all the best.
Thank you.
Thank you. We have the next question from the line of Dhruv Jain and Himanshu Zaveri. Please go ahead.
Yeah, hi. I just wanted to ask a question on the Vikhroli front. Is there anything happening over there? Because it's been long time since it's been approvals problem or some other problem?
Yeah, no, as we've mentioned in the past, I think we'll now announce it as and when something is ready to launch there. There are a couple of parcels that are being worked on, but there is a continued regulatory uncertainty. Of course, a large part of the land is still used for other purposes. The couple of pieces of land that we hope to launch soon, we'll certainly, you know, announce as soon as we're confident that it can be launched very quickly.
The same one which you have mentioned in the the deal, right?
Yes. Yes.
Correct.
Yeah. The Ashok Vihar one you said you are launching in the third quarter, right?
Yes. Again, obviously subject to all approvals being in place by then, but that's our current best estimate of the timing. I think the good news in Ashok Vihar is the NCR market has been really doing very well, both from a volume and pricing perspective. While obviously we are frustrated with the delay and eagerly looking forward to kicking off that project, from a pure financial returns perspective, I think the project only looks better now than it did a year or two ago.
Whenever we get the approvals and all, you're pretty confident of the project doing very well because of the NCR market, right?
Yes, absolutely. I think one is the NCR market. Two, I think this is a very unique land parcel and quality of location. The kind of scale of the land gives us an opportunity to create a very high quality product. Yes, I think this is certainly a big priority and extremely confident that when it kicks off, we'll get off with a bang there.
Okay. Hinjewadi One we are launching this quarter? Is there any chance?
Mohit?
That's correct. That's the project which we mentioned is what we are looking to launch in this quarter.
The Okhla one also, right?
Yes.
Okay. Thank you.
Thank you.
Thank you. We have the next question from the line of Manish Gandhi from K PM K Investments. Please go ahead.
Yeah, hi. Congratulations on a great start, and especially surprised by the numbers of Thane. My first question will be in NCR, after Ashok Vihar. We don't have any greenfield project, and we have done exceedingly well. Given the current land price situation in NCR, how do you look for the next two, three years? How do you build a land bank or any. First question is on that.
Yeah. Manish, you know, our practice has never been to try to create large land banks, but to continue to do ongoing business development. In NCR, you know, we have some plotted projects, we have some remaining phases of existing projects. Ashok Vihar itself is like a +INR 8,000 crore booking value opportunity. You know. Of course, it is one of the focus markets for new capital deployment as well. I think that combination, you know, we've. Of course, looking at this for the next couple of years, we're very confident of delivering strong growth in NCR on a significant base. Obviously for sustained long-term growth, I think we have to continue to fire from the BD side as well.
Yeah. No, it's a wrong choice of word. It's not a land bank. I was just saying on the BD because our aspiration to grow high and then given the current.
No, it's a fair point, and it's certainly one of the markets where we're looking at some very interesting opportunities. We've seen, you know, almost anything we have launched there, including recently, a project in Sector 43 in Noida, which became our best-selling ever project in terms of, 12 months sales. I think, we are looking to add similar high impact projects.
Do you see opportunities, Pirojsha, or it is very difficult to do business now in India?
No, we are seeing opportunities. I think, you know, there always, of course, being some level of competition. I would say the opportunities actually remain considerable, though, while a lot of news goes on the, you know, five or six of us developers who are active in the market and are closing deals. I think there's still a long tail in the sector of liquidity issues and other problems. We see, you know, decent opportunities to add significantly to the portfolio and are looking at some interesting things in NCR as well.
Yeah, that's wonderful. The last small one, any updates on Taloja? It's a big project, INR 7.5 million, but so are we seeing to getting approvals for next year or something like that?
Mohit?
Yeah. You know, there is a critical CP which is pending in Taloja, which is you know the road access, which we are working on with JNPT. Unless that is done, you know, we don't want to launch the project because that is the critical thing from a sales and marketing perspective.
Right. Do you expect to solve that problem in next year or more just?
Yeah, I think work is on, but you know, acquiring land is not easy, so difficult to give a guidance, Manish, frankly, on this one.
No worries. Mohit, all the best for your journey, and thank you so much. You have added a great value to Godrej Properties, and we would miss you definitely. All the best.
Thank you. Thank you, Manish.
Thank you. We have the next question from the line of Ankit Patel from L&T Mutual Fund. Please go ahead.
Yeah, good evening to everyone, and thank you for taking my question. My question is around the debt, you know, the borrowing for projects for the company right now. What we can see is around INR 5,000 crore of gross debt and around 4,500 odd crore of cash. Could you throw some light in terms of how the borrowing program as you scale up now in terms of more fund deployment, say INR 500 crores of run rate every quarter. You know, how do you plan to you know, space out the borrowings between different instruments? How do you look at the borrowings side, yeah.
Rajendra?
Yeah, sure. The borrowing, you know, so like we have borrowing across, you know, various instruments like NCD, you know, CP, commercial papers, bank borrowings. You know, so these are the, you know, borrowing instruments we have, and borrowing program we keep running. Just to give you know, one thing is that, you know, ICRA has recently upgraded our borrowing program from double A long-term to double A plus, you know, so that is on our borrowing part. We think that the borrowing should be in the ballpark in this range only, unless, you know, there is some, you know, good BD opportunity. Like now we are having, you know, QIP money to be deployed. Post that deployment, we may see a little bit uptick on the borrowing.
Otherwise, you know, for a normal working capital, you know, we don't require because the projects are self-funded. The borrowing should stay in this ballpark, other than any BD requirement.
Okay. In terms of your outlook, in terms of the pricing, so your funding cost gone up by about 10 basis points.
It has to be because I think the repo rate has gone up by 90 basis points and obviously, you know, the interest rates are on the rise. You know, you will also see a slight uptake on our borrowing cost. Obviously, you know, it will not be in line with the repo rate. Yes, there will be you know impact on the borrowing costs, you know, in the coming quarters, you know.
Okay. In terms of the repricing that would have happened, what kind of impact would already have come in and what do you expect is still-
Impact is already there. You know, like, you know, we were at, you know, 5.95%, you know, and now for the quarter we were at 6.04%. That impact of nine basis points has already been there. Obviously, going forward, there will be, you know, some impact. Obviously, the CP markets and the bank borrowings, you know, as the bank increases their rate, you will see those impacts. But how much is that impact will be, you know, known in the coming days because there are certain instruments which we have locked in for some more time, for a longer period. That impact would not be immediate. But yes, gradually over the period of time there will be some impact. But we would be.
I would be saying that we, like always, we would be the best in the market.
Okay. Thank you. Those are my questions.
Thank you.
Thank you.
We have the next question from the line of Manish Jain from Gorman One LLP. Please go ahead.
Yeah, hi. I wanted to know about the Pune market, given that in the current quarter, despite any new launches, we have done sustaining sales of more than INR 300 crore. I see that seven new phases planned for the current year. What is our plan for BD in Pune, given the kind of dominance we have acquired in such a short period of time?
Yeah, we've got again, you know, some interesting. We've partnered with, you know, as we did, as you know, we did six projects in partnership with Solitaire in Pune. We've built a solid partnership. We're looking at possibly scaling up that partnership. We have a deal in Pune also at a relatively advanced stage that we're hopeful of announcing this quarter. I think clearly we have scaled up well in Pune. I think it's been a strong journey there over the last few years, and we want to build on that momentum. You know, across all four of these zones, I think business development is a significant focus. We have the appetite, we have the capital. I think there are interesting opportunities, so we hope to have good announcements across all of these four zones.
Perfect. Thanks. I'll join back with you.
Thank you.
Thank you. We have the next question from the line of Alpesh Thakkar from Antique Stock Broking. Please go ahead.
Thank you for taking up my question, and congrats on the set of numbers. First of all, best wishes to Mohit for his future endeavors. My question is pertaining to, you know, FY23 launches. If you look at our target launch, almost 34% of launches are expected in Bangalore. However, we don't see Bangalore contributing much this year. Are we seeing any, some major spillover in terms of launches to next year, especially in Bangalore market?
Again, I think the relative scale of each of these projects would also have to be looked at. We do expect Bangalore to show very strong growth over last year. It's not that we're not expecting good numbers from Bangalore. If you divide this INR 10,000 crore into sort of four parts, we think zones like NCR and Mumbai are likely to do more than INR 2,500 crore, and Bangalore probably would do a little bit less than that. We certainly do expect a solid performance in Bangalore this year.
Okay. Great. Thanks a lot for the clarification.
Thank you.
Thank you. We have the next question from the line of Manish Agrawal from JM Financial. Please go ahead.
My question would be if you could throw some light regarding your strategy of tier two cities. You have entered Nashik, Nagpur. Are there more BD pipelines in these other cities?
No, I think a couple of projects you mentioned are plotted developments. We see interesting plotted development opportunities. We do think that's an interesting way to have a presence in these smaller markets. From a group housing perspective, we largely remain focused on these top four markets and might opportunistically look at one or two other markets that we have a presence in. The vast majority of the focus will continue to be on Mumbai, Bangalore, NCR and Pune.
Could Hyderabad be a consideration?
Yes, I think we've been open to the Hyderabad market, but provided we get the right sort of scale of opportunity to make a large entry. I don't think we'd want to enter with a single project and slowly build up there. Really from a priority perspective, we think there's more than enough opportunity in these four markets to deliver even very rapid growth over the next few years. That remains the number one priority. We will experiment with plotted in some of the tier two cities and are open if we get the right portfolio of projects to looking at a Hyderabad entry.
Sure. One question related to the P&L. Which would be the projects which were recognized this quarter since the gross margin seems to be on the higher side?
In this quarter, there was no OC which has received. You know, it was more of our existing projects like Faridabad, Agrovet. You know, all those new sales which has happened post OC, those are contributed.
Sure. Thank you. That's all from my side. All the best.
Thank you.
Thank you. We have the next question from the line of Abhinav Sinha from Jefferies. Please go ahead.
Hi. Quick, two questions on projects. One on Ashok Vihar. How much have we paid now to the government, and what is the deal there? That's one. Second one, if you can also answer, is what's the status of Godrej Two in terms of leasing and operational data such as that?
Yeah. We have paid two installments, you know, around INR 450-INR 500 crore to the government. Obviously the payment plan is over the eight years horizon. Two years installment has gone. Balance payment has to be made over 5 years-6 years, Abhinav. In Godrej Two, you know, we have done around 35%, leasing, and obviously it will get leased in the coming quarters. You know, there is a healthy pipeline which we are talking to. As of now we have done around 35% leasing.
This is earning rent now?
Sorry?
This is earning the rent as of now?
Yes. Yes.
What's the rent? What's the average here?
Around 160.
160. Total area is how much? 1.1 million, is it?
Yes.
Okay. Sorry, on Ashok Vihar, just going back, it was not very clear. You said you have paid already INR 450-INR 500.
Yeah, two installments, because the installments were spread across eight years. Two installments we have paid, and balance installment we'll pay in the coming years. Every year there is an installment to be payable, so that's how it is. It's for the spread payment over an eight-year period.
Right. Thank you.
Thank you. Ladies and gentlemen, that was the last question, and we will now close the question queue. I now hand the conference over to the management for closing comments. Please go ahead.
I hope we've been able to answer all your questions. If you have any further questions or would like any additional information, we'd be happy to be of assistance. On behalf of the management, I once again thank you for taking the time to join us today. Thanks, everyone. Bye.
Thank you, members of the management. Ladies and gentlemen, on behalf of Godrej Properties Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.