Ladies and gentlemen, good day and welcome to the earnings conference call of Godrej Properties Limited. As a reminder, all participants' lines will be in a listen-only mode, and anyone who wishes to ask a question may enter star and one on their touchtone telephone. To remove yourself from the question queue, you may enter star and two. Should you need assistance during the conference call, please press star and zero to signal for an operator. Please note this conference is being recorded. I now hand the conference over to Mr. Kshitij Jain of Godrej Properties. Thank you, and over to you, Mr. Jain.
Yeah, thank you. Hello, and good afternoon, everyone, and thank you for joining for the Godrej Properties Q4 FY 2023 results conference call. We have with us Mr. Pirojsha Godrej, Executive Chairperson, Mr. Gaurav Pandey, Managing Director and CEO, and Mr. Rajendra Khetawat, CFO of the company. Before we begin this call, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation. I would now like to invite Mr. Godrej to make his opening remarks. Over to you, sir.
Good afternoon, everyone. Thank you for joining us for Godrej Properties' fourth quarter financial year 2023 conference call. I hope you and your families are all well. I'll begin by discussing the highlights of the quarter. We look forward to taking your questions and suggestions. I'm happy to report that from an operational perspective, the fourth quarter was Godrej Properties' best ever quarter on multiple parameters. On the sales front, GPL had its best ever quarter in terms of the volume and value of real estate sold. We achieved sales volume of 5.25 million sq ft in the quarter and a sales value of just over INR 4,000 crore, representing a quarter-on-quarter and year-on-year value growth of 25% over what was our previous best ever quarter.
This is our sixth consecutive year of record annual sales, to INR 12,232 crore, representing a growth of 56% over what was our previous best ever year and 22% more than our full year guidance. This achievement was on the back of both an improving project mix as well as strong volume growth of 40%. We launched 12 new projects or phases during the fourth quarter alone across six cities and received a strong response to all of them. Three of our projects, Godrej Orchard Estate in Nagpur, Godrej Splendour in Bangalore, and Godrej Hill Retreat in Pune, delivered sales of over INR 350 crore each in the fourth quarter. Our robust sales performance has translated into our highest ever collections.
We achieved collections of INR 3,822 crore during the fourth quarter, representing a quarter-on-quarter growth of 127% and a year-on-year growth of 52%. For financial year 2023 as a whole, we recorded cash collections of INR 8,991 crore, representing a growth of 41% over what was our previous best ever year. This was backed by strong project completions of eight million sq ft across five cities for the quarter, taking our financial year 2023 deliveries totals to 10.5 million sq ft. These collections led to our highest ever net operating cash flow of INR 2,245 crore for the fourth quarter and INR 3,533 crore for the full year.
With a large number of project completions in the last quarter, GPL also recorded its highest ever profit after tax numbers on a quarterly and annual basis. Our total income for the fourth quarter increased by 31% and stood at INR 1,930 crore. Our EBITDA increased by 56% to INR 630 crore, and net profit increased by 58% to INR 412 crore. For financial year 2023, our total income increased by 25% to just under INR 3,000 crore. EBITDA increased by 41% to just under INR 1,000 crore, and net profit increased by 62% to INR 571 crore.
In addition to the robust sales and delivery performance, I'm happy to report that we closed financial year 23 as our best ever year for business development, with the addition of 18 new projects with an expected combined revenue potential of over INR 32,000 crore, more than double the guidance of INR 15,000 crore given at the start of the year and growing by more than 250% from the previous year's actuals. This included five new projects with an expected booking value of INR 5,750 crore added in the fourth quarter. We believe these projects are strategically located and will support our efforts to maintain rapid top-line growth rates while substantially improving the margin profile of our company.
In addition to the new projects we have already announced, we have a robust pipeline of new development opportunities, and we are confident project additions will continue in financial year 2024. Despite the increase in interest rates and housing prices, affordability of residential real estate in India remains attractive by almost any historical standard. We expect the momentum in the real estate sector to continue as India remains the fastest growing large economy in a challenging global environment. We are optimistic that the financial year ahead will be a strong year for Godrej Properties. We hope to grow residential bookings to over INR 14,000 crore this year through the launch of a large number of exciting new projects, combined with strong sustenance sales.
This, combined with strong project deliveries, should allow us to maintain rapid growth in operating cash flows, and we expect collections to register at over INR 10,000 crore this year. On that note, I conclude my remarks. Thank you all for joining us on the call. We'd now be happy to discuss any questions, comments or suggestions you may have.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets for asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask a question please press star one now. We take our first question from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.
Yeah. Hi, Pirojsha Godrej, congrats to the team for a great year on all counts. My first question is on, you know, the launch pipeline that you have indicated. I think last year we started with around 21 odd million sq ft of, you know, pipeline and eventually launched around 15 million sq ft. How confident are we in terms of, you know, launching, you know, 20 million sq ft this year? How close, how much visibility we have in terms of launches?
I think we have pretty good visibility, Pritesh, but I think it's also fair to say that, you know, as we put in on the headline of that slide in our investor presentation, these are dependent on regulatory approvals. Historically, we have seen that the start of year list does tend to look a bit different than the end of year list, both with some projects being delayed and with some new projects being added. We are certainly confident, which is why we are putting the guidance there. I think it's reasonable to expect, given past experience, that some delays will happen and some new projects not currently planned will be added.
Certainly I think visibility on both launches, overall sales, as well as most other operating metrics is stronger at this time of this year than it's been for any previous year, and we're pretty confident of a strong year ahead.
Sure, sure. Got it. In terms of, you know, your business development target for this year, again, which is INR 15,000 odd crores, you know, this year, we will still see most of that, you know, being outright and hence, there would be higher spends on, from our, you know, cash balances, or how is the mix that, you know, we are looking into depending upon, you know, the visibility that you have on the pipeline?
Yeah, I think last year ended up being a little more skewed towards outright purchases than we probably would have expected. We were discussing some large, you know, joint venture portfolios that ended up slipping out of the year. Hopefully some of those come in this year. You'll see a little bit more of a balanced number. Certainly we continue to think there is good value land acquisition opportunities available. Outright purchases will also continue. As you saw in the fourth quarter, we do think our operating cash flows are now getting to a stage where they will be a lot healthier. We expect strong collections growth in the current year as well. Hopefully the majority of these investments can from now on be funded through operating cash flow.
Certainly we also think we have some further room on the balance sheet. As you know, we've historically sort of guided that we'd be happy operating from a gearing ratio perspective, anywhere between 0.5:1 to 1:1. We're currently under that, suggesting we do have some room for further additions.
Sure. Just a follow-up on that. When we talk about large, you know, JV platforms, is it like something similar to Encore portfolio that we have in Pune and we are looking to sign something similar to that? You know, any guidance on what kind of JV platforms that we are looking at?
Yes, I think similar to that. There are, again, nothing concrete, so please don't, you know, count on this in any way. There are discussions underway where, you know, we can do multiple projects with a single partner similar to the Encore portfolio.
Got it. Got it. Just lastly on, you know, on the deliveries, 12.5 million sq ft, is it going to be, you know, lumpy like, this year or, you know, it could be, you know, gradually spread out across the year?
It might be a little bit lumpy, unfortunately, again. I think the good news is we did actually this time have a couple of things that we were hoping to have in Q4 spill out of the financial year last year. We already have a couple of OTs at the start of this year. We hopefully get things off to a good beginning. Yes, I think it will again be unfortunately a little bit skewed towards Q4 on an overall basis from a deliveries perspective.
Sure, sure. Perfect. That helps. All the best.
Thank you.
Thank you. We'll take the next question from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah. Thank you so much, and congratulations on good performance. My first question is, you know, if you can talk a bit about the EBITDA margin on a reported basis that seems to be slightly weaker on a Q on Q basis. How should one read that?
Sorry, Puneet. Can you just repeat the question?
I think the EBITDA margin on a Q on Q basis seems to be slightly weak despite, you know, significantly higher income. I thought most of the fixed costs should have been absorbed. On a reported basis, it still looks a little weaker compared to Q3, for example.
Yeah. you know, reported margin is, you know, 32% is what we reported and, because there were more launches which has happened in Q4. There were a lot of marketing expenses which got expensed out, you know, as compared to Q3. That has little bit, you know, as compared to Q3, depressed the EBITDA, a bit.
Okay. These launches are in your fully owned project. Otherwise, they could have all gone in the share of your JV.
Correct. Correct. Correct.
Okay. Understood. That's all good. Secondly, you know, you also acquired stake in projects like Godrej Aria, 101 Eternity from 25% to 75%. These all projects were launched back in 2015, 2016. What is the thought-
Yeah.
Behind acquisition at this point of time?
These were exits, you know, which, you know, the project has almost got over.
Yeah.
obviously there was a fund, APG fund. It was from our RECI platform, number one. you know, the project was almost over, so they need to be given. we gave an exit at a par value. There was nothing premium paid. In fact, in this project they didn't make the expected return, as desired. it was just a routine exit on completion of the project.
There was no, guaranteed return, for these projects.
It was a purely equity risk reward sharing deal. In fact, they made lesser return in this project.
Okay. Was this a lower return project for you also or?
We had some share of DM and all, compared to what their internals, what they thought they were lower. You know, we also didn't make the expected return because the markets at that time were a little different. Yes, we made better returns as compared to what they would have made.
Right. That's okay.
I think that in terms of kind of more mid-income projects with the kind of inflationary environment we've seen during deliveries.
Yeah.
The kind of muted pricing environment when these were selling most of their inventory, I think it's fair to say the projects as a whole.
Yeah.
delivered, you know, lower margins than we would have liked.
Right. My last question is on the, you know, the breakup of your sales, you know, within the four geographies and fifth one, others. Last two quarters, others have been trending up quite nicely. Is there a focused effort to move beyond the existing four or is it just more a function of mix and plot sales, et cetera?
Thanks for the question. I think our strategy is focused upon these four key geographies and I believe that we are just at the tip of the iceberg from an opportunity set point of view. Like we've explained even in the previous earnings call, we are evaluating, but still at a very initial level, opportunities in Hyderabad and plotted opportunities in other markets, but our core group housing markets will continue to be these four.
Okay. That's very good. Thank you so much and all the best.
Thank you.
Thank you.
Thank you. A reminder to participants, if you wish to ask a question, please press star followed by one on your touchtone phone now. We take our next question from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.
Yeah. Hi, Pirojsha and Gaurav. Congratulations on a good line-up on the GDV additions, especially in MMR. My first question is on the end market demand. If you can help us with how's the demand in the affordable mid-income and luxury portfolio and given the interest rate hike. If you can address that. That's my first question.
Right. You see, we have the main focus largely in the mid-premium and premium plus to some luxury segment. You know, we are seeing a sort of a secular trend of strong demand, largely emanating from end users. In fact, internally, we also tend to track the funnel of sales, essentially the quality of profile of people that visit our sites during launches. It's very encouraging to see that consistently in every quarter. You know, we are seeing families kind of coming. It's a very characteristic of a strong end user demand. What was the Sorry, what was the second part of your question?
I was asking segment-wise, how is the demand, given that the interest rates and, I mean, we are almost near peak? This is the most asked question is how it's impact on. Typically, it's understood that affordable will be the worst impacted, but we continue to see strong momentum in luxury side. Now most of your portfolio or GDV additions last year is more aligned towards luxury, especially in MMR. South Bombay we have seen, and even the launches which you have planned this year, Worli is there, Mahalakshmi is there. Just wanted to gauge your sense on the demand in luxury, mid-income, luxury and luxury. That is, that was my question. Thank you.
Well, we do have a very robust pipeline of mid to luxury segment for FY 2024 launches. But that aside, right now if you see from a interest rate hike cycle and its impact on demand, it's frankly till now been kind of nonexistent. In fact, if you see, most listed developers are kind of breaking records. You know, if you see GP specific performance for the year, and at a time of quarter three and quarter four when there was a lot of talk about impact on interest rates, we've seen both price growth and demand growth. At the moment, we don't see it, and we'll have to also see from a context of historical interest rate cycle. You know, India has seen a very inflated environment from a interest rate cycle point of view.
Just couple of years back, we were operating at a base case of 11-12%. Right now what is impacting demand is the probability and longevity of income growth of people. If you see, generally, post-COVID, the trend from investing in other asset classes to actually buying a home is a significant shift. You know, contrary to some of this theory of its negative impact, at the moment we've not really seen. In fact, we've seen quite the opposite.
Okay. Just three large launches, Gaurav. Ashok Vihar, Worli and Mahalakshmi. This Ashok Vihar and Mahalakshmi have been touch and go even last year. How do you see these two, these three launches planning out? It'll be more like how it'll be timed? Will it be first half or more towards second half?
Our endeavor is to try our best to bring these launches into first half itself. I think you would appreciate that, you know, some of these are tricky in terms of stage of approval. You know, it's a bit tricky to really be very, very certain. Purely from what we see on the ground right now, the file movement of these projects, at the moment, it's fair to have cautious optimism, and we are gunning towards that.
Okay. This is my last question on the debt, and if I link it to the GDV addition. Last year we had the 32,000 odd crores of GDV addition. My question is for Rajendra. On the total inventory which we have in the pipeline, what will be the residual unpaid land cost? Given that we have already going with 15,000 crores of GDV addition next year from 32,000 crores now, we did in FY 2023. Do you think that securely our debt will not, may not increase, and we can meet these payments with the internal cash flow generation?
On the residual land, we don't have much. Most of the land payments has been paid for. We have just, you know, around INR 500 crore of land payment balance to be paid, which will get paid out very soon because those are milestone links, you know. Most of the land is paid. As far as the new BD opportunity is concerned, you know, like Pirojsha mentioned, we have been generating a lot of operating cash flow, that would first, you know, can be utilized towards the new BD opportunities. At the same time, our net debt gearing is also 0.39. We have a quite a bit of a headroom to fund our new purchases through that.
Only the interest.
It's a factor of what we're seeing in the market also, right? If we see the right deals and we think the value is there, we're happy to go well above this INR 15,000 crore of new additions. I think this is a reasonable assumption at the start of the year. I think of all operating parameters, this is also the one with the greatest uncertainty because it's dependent on what we see the market doing, what kind of opportunities are available. We feel very comfortable that, you know, both our balance sheet space as well as higher operating cash flows will comfortably allow us to, you know, fund our growth from here on.
Okay. Great to know that, sir. Rajendra, you said that INR 500 is only pending. For the entire GDV, even last year and this year, INR 32,000 crore. Everything is taken care with the INR 500, right?
Yeah. For the last year.
I was talking about this year, INR 32,000 crores. What will be the pending amount for that?
For INR 32,000 crore, that's what I said. For INR 32,000 crore, only INR 500 crore is pending. What we have tied up last year for the entire INR 32,000 crore, only INR 500 crore is pending, land paid.
Nothing is pending for FY 2021 or 2022. That's all done, right?
There may be some like, you know, Ashok Vihar is there. Those are like a long extension, like eight years payment cycle. Those are like, you know, typical, you know, JV kind of a project, you know. Those would be there. Whatever acquisitions we made for last financial year in financial year 2023, out of that only INR 500 crores is pending.
Okay. Okay. Thank you. Those were my questions and all the best.
Thank you.
Thank you.
Thank you. We'll take the next question from the line of Parvez Kazi from Nuvama Group. Please go ahead.
Yeah. Thanks for taking my question. Congratulations to the management team for a great set of numbers. My question is this, when we look at the cash flow statement that you gave, historically the proportion of the net operating cash flow to the overall cash flow used to be somewhere around 20%-22%. There was a significant improvement this year. In fact, specifically for Q4, the number is pretty high at almost about 52%. Was there any kind of one-off that was there in Q4? What is the kind of trajectory that we see going ahead for this number? Thank you.
Thanks, Parvez. There was not one-off, you know. You know, the cash flows are dependent on certain milestones. A lot of OCs has come in into this quarter. We have received, you know, say more than 10 million sq ft of OC, and most of the OCs were back-ended in Q4. That's why you will see a significant jump in collection and to that extent to the operating cash flow. To your second question, definitely going forward, we have guided that is 12.5 million sq ft of OC. You will see that uptick in that operating cash flow happening. As the launches are getting improved, construction milestones get hit, this operating cash flow also will keep improving going forward.
Sure. Thanks. All the best.
Thank you.
Thank you.
Thank you. Take the next question from the line of Mohit Agrawal from IIFL. Please go ahead.
Thanks for the opportunity. Pirojsha, now that, you know, we've seen a, you know, significant improvement in the P&L reported profitability, is it a good time to lay down an indicative timeline to the 20% medium-term ROE target that we had placed? Can you put a two, three-year timeline to it?
Yeah. You know, I think we want to obviously avoid giving sort of very clear urgency with that view. I think, you know, first what we can see directionally is that it's quite evident how much capital we raised during the pandemic through the two capital raises we did. Now, if you exclude that capital, because I think most of that capital, except for some that we may have deployed in project development, cannot yet be recognized in the P&L because, as you know, there's sort of a one-year to two-year BD cycle, another one-year regulatory approval cycle, and then another kind of two to three years for project delivery.
I think if you look at the base before the pandemic and our even in the last year, we're not very far off from the kind of 20% ROE aspiration. I think one of the hard parts of, you know, ensuring this happens on the larger capital base is obviously the capital deployment itself. We took giant strides towards achieving that part of it last financial year with the kind of business development additions we did. The important thing this year, in addition to of course further business development, is to actually make sure the vast majority of those projects we've added get launched in the current financial year.
If that happens, I think we're pretty confident now that our delivery engine, you know, can sort of prove out the projects, can deliver projects within two to three years. If we, you know, launch this year a lot of these, you'll see them in the PNL two or three years from now, by when you should see on the much larger capital base far improved return metrics. We certainly think directionally, you know, that visibility is already starting to be quite clear.
Okay, understood. My second question, are basically a couple of questions on the Vikhroli thing. One is we see in the launch pipeline, we see 6 lakh sq ft of launch. If you could kind of help us understand, is Vikhroli now back on track in terms of doing regular launches? Every year we'll see some launches. Some clarification on that. Connected to that is we've also received the OC for the Taj Hotel. If you could give some guidance on the on the revenue potential and what are the timelines that you're seeing on the opening of that?
Sure. On Vikhroli generally, I think, you know, we are quite confident of launching this residential project after a few years. I think we're obviously looking forward to that after what's been a gap of a couple of years. We are hopeful that, you know, we're able to deliver more consistency there. I'd say there's current visibility on two projects, one of which we're guiding will be launched this year. There's a second larger project that we're hopeful can come in quite quickly. After that, actually, there might be a little bit of time needed to get more land. When that land becomes available, I think it will be very large amounts of development and then would be, you know, a decade-long kind of development cycle for that size land.
I think there's reasonable near-term visibility. I think we still have some work to do on ensuring the medium-term visibility is consistently at the level we'd like to see. For the Taj, as you rightly pointed out, we got the occupation certificate at the end of March. Current estimate from the team is that the hotel will start operations around October of this year. I think we're still working on some finishing and, you know, getting things up and ready. I think that could probably be a more appropriate time to speak a little bit about the stage revenues involved. This is our first hotel project, I think we're still going through some of that.
I think it would be best if we save that for maybe an earnings call, the next one or the one after that, when we have a slightly better visibility on the launch.
Sure. My last one is just a clarification on the cash flow. Rajinder, this INR 1,100 crore JV adjustment, could you explain that? That's a pretty large number.
Yeah. So it is more of a timing difference, you know, in the cash collection from the customer, from in the respective project SPV, and it is pending transfer to GPL. You know, because like there are certain RERA restrictions, if you don't have RERA limits you can't withdraw. There may be certain restrictions into some of our JV agreements whereby, you know, you cannot withdraw or till a particular milestone or something is achieved. It is more of a tallying of my total cash flow to the net debt. Now, had I received this cash flow immediately I would have been able to utilize it either to repay my debt or to use it for any other purpose. That was the purpose of just giving adjustment for JV projects.
You know, that's fine. I'm just trying to understand the number is pretty large this time around. Is there like a one-off?
You know, a lot of launches we did in Q4, a lot of money has come in as a collection. That's why, you know, somebody asked in the earlier question, see your Q4 collection and operating cash flow has suddenly gone up. Obviously not immediate RERA limits are available. You know, there are RERA restrictions. You know, you need to have those withdrawable limits before you can actually freely utilize those cash. That's why you will see this number. In next one or two quarters this number will substantially come down.
Okay. Thanks a lot. That's all from my side.
Thank you.
Thank you.
Thank you. We take the next question from the line of Abhinav Sinha from Jefferies. Please go ahead.
Hi. Just congratulations on the strong numbers to the whole team. Firstly on the guidance front of INR 140 billion, how does that growth split? You know, we are at around 14%, 15% YOY growth on pre-sales. How does it split between the value and volume for next year? Do you see a mix change?
Sorry, Abhinav. You said, INR 14,000. How do you see value what? Sorry, your voice was-
Volume.
Volume.
I think, you know, it is value number from now. It depends obviously on which set of projects finally get launched. Our sense is you will see some pricing growth. you know, we obviously also though have a larger number of plotted projects which bring the average price down.
There's a few different effects to keep in mind, but I think the overall value number we think is a relevant one to pay attention to. Of course, you know, like we did last year, the aspiration would be to hopefully go past this.
Okay. Secondly again, pricing, how is it behaving now? Is it still strong heading into March and April, like you were seeing earlier?
How the market is behaving? I think the market remains very strong. As Gaurav was saying, you know, we've had our two consecutive best ever quarters from a sales perspective. I think these are all projects that are selling at good prices. I think the quality of project portfolio this year is significantly higher than even last year in terms of locations and things. I think market's holding up well, and we feel good about our portfolio.
Okay. Lastly on, with the land acquisition, sort of winding down, when do we become SCS positive? Is that on radar for FY 2024 sometime, or it's, you know, we should wait another year out for that?
Yeah. No, I don't think that's, you know, particularly likely in FY 2024. Again, it's a question of how much business development we end up doing. You know, if we do a little bit less than what we've guided for, it could well happen in FY 2024. If we end up doing as much as we did in FY 2023, which also is a possibility, it certainly won't happen in FY 2024. Honestly, I think, again, from our perspective, it's not a terribly important metric. I think to us, what's important is operating cash flows and then are we getting the right quality and quantity of deals to ensure that we're able to grow, and is our overall balance sheet in a healthy position.
I think if the answer to all of those is yes, we honestly are not too concerned whether, post PD and CF is going up or down in the short term.
Thanks and all the best.
Thank you.
Thank you. We take the next question from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Hi. Thanks so much and congrats on a great year. The first question is, a quick clarification on Vikhroli. Pirojsha, all these new launches would be same under DM arrangement, 10%?
That's right.
Okay. The second question is, now as you are scaling up, can you talk a bit about the on the construction side, execution side? I understand they are all third-party contractors. How are things panning out on that side?
Thanks for the question. Essentially what we've done is, you know, we've got a series of, we've divided our contracts into buckets. For some of these, we've now got pan-India contracts, you know, which is, say, for, you know, items which are high value and, high impact, let's say, you know, the typical faucet, the commodes. Now we're going up to the extent of doing zonal tie-ups. For every zone we'll have, say, two or three large contracting firms doing all the painting work. With scale, one, we're getting a sort of a benefit of creating economies out of it. On the second side, you know, we've created a model where every project is run as a PNL itself. Meaning there is a project director and a core leadership team.
Basically from a bottom-up point of view, you know, it's about getting unit level economics right through multiple smaller packages. From a top-down point of view, all high value and high critical contracts, being either centralized at a zonal level or at HQ level. This has been working very well for us. It's a sort of a strategic pivot we did some time back, and which is why you're seeing consistent, you know, upscale of deliveries already in our, in our results.
Okay. No, this is very helpful, Gaurav. Just on the civil construction side, which is the structure, are you using just, you know, few contractors or how are you doing this?
Essentially, you know, thanks to excuse my bad throat. I'm so sorry. Thanks to the amazing, you know, relationships we've built over the last eight-10 years in practically every zone, we now have identified, you know, contractors who can deliver at scale for us at the required speed and quality. What we're essentially trying to do is doing sort of tie-ups with them for a project level. Having said that, let's say you have a very big multi-phase project. There we tend to bring two, three contractors from that group who have great track record of performance with us.
Okay, great. Just finally, Pirojsha, any thoughts or plans on any further equity raise? We are done for now?
We're very much done for now. I mean, I think, you know, as we've said, I think the gearing level we want to operate in, where we feel we'd be sort of getting that right balance of prudence and taking full advantage of the opportunity is, 0.5: 1 to 1: 1. We're, you know, we're not even in that range now. We're still under it, despite, you know, strong additions this year. No, I don't think it's something that would at all be on the table, certainly for the next couple of years.
Okay, great. Thank you, sir.
Thank you.
Thank you.
Thank you. We take the next question from the line of Ritwik Sheth from One Up Financial Consultants. Please go ahead.
Yeah. Hi. Good evening, sir. I just had one question, on the business development side. We've guided for about INR 15,000 crores, worth of GDV. Can you Give a ballpark figure, what could be the cash outflow for this in FY 2024?
Yeah, again, it, you know, it varies a lot depending on structure and whether this 15,000 remains 15,000. You know, I think broadly speaking, you'd need 10%-15%, if we look at FY 2023 numbers, 10%-15% of the booking value as upfront cash flow. On INR 15,000 crore, you can assume a number around INR 2,000 crore would be required. Again, there are a lot of moving parts here, including whether INR 15,000 crore goes up or down, whether the structure is outright or joint venture, and, you know, also things like payment terms and whether it happens in a year or not. Broadly speaking, I'd say it's roughly INR 2,000 crore.
Right. Absolutely. The mix should be largely similar to FY 2023, right? Like, we have gone out for majority is 100% owned. Largely the mix should be on similar.
Not necessarily. I think, you know, I think FY 2023 was probably slightly more skewed towards outright purchases. We are. I mean, we continue to think the market is giving us opportunity to acquire significant stakes at what we think are good entry points. Outright certainly remains one of our priorities. We are also looking at a variety of projects where we'll be a sort of joint venture structure where we have a economic interest. I would expect to see some of those as well.
Right.
I would say last year, another thing, you know, Rajendra, of course, spoke about some of the exits we've given, long-term investors at the end of a project. There are also projects, and we may have a couple more this year, where we are increasing our stake at a relatively early stage of the project. For example, we had a large thing in Undri, in Pune, a large township project there, which was a profit-sharing project, but we've now made that a almost 100% owned project. Some of the cash flow we deployed was for that. That project we think is an 8 million sq ft project.
While we haven't added it to our business development for the year, in a way, the half of that, you know, we have acquired is new addition for the company. We have about INR 4,000 crores in that project that will accrue to our PNL that wouldn't have earlier.
Sure. Just one last question from my end. you know, we will probably be one of the largest land acquirers say in FY 2023, or at least organized. you know, what any sense on the pricing of land acquisition versus FY 2022 or pre-COVID, if you can give some color on that would be helpful, please.
I think it, again, varies a bit by geography. Somewhere like NCR probably seeing more land price appreciation than other places, just because we've seen more end property price appreciation. As I said, you know, the attractiveness remains, and I think we think strong returns can be generated at current values, which is why we did a lot of outright purchases. There's no question there was some upward movement, and we would expect further upward movement this year. I think the entire hypothesis of we had when we raised the significant equity we did during the pandemic was that the cycle was about to turn, that any investments done at that stage of the market would prove quite lucrative because they would likely be developed through an upswing in the cycle.
Far, I think that's playing out pretty much exactly as we'd expected. Obviously these things can change depending on macro and other factors.
Sure, sure. Okay. Thank you, and all the best, sir.
Thank you.
Thank you. Participant who wishes to ask a question at this time, press star and one on your touch-tone phone now. Take our next question from the line of Rakesh Vyas from HDFC AMC. Please go ahead.
Yeah, hi. Good afternoon. Congratulations, Pirojsha and Gaurav, on meeting most of the operating matrices. I have three quick questions, if I may. First one is on the GDV that we added of almost INR 32,000 odd crore, effectively pending INR 500 crore of land cost. I just want to understand, to bring this to the INR 32,000 GDV, what is the additional approval cost that is required? Because the number, when I look at it from the perspective of mostly 100% owned, large part in MMR, 15% as land cost to GDV seems very, very attractive. I'm just trying to figure out as to are there additional costs that we need to build in over and above this INR 5,000 odd crore that we have spent?
Yeah, certainly there will be other regulatory approval costs and obviously other development costs. I don't think we have the numbers with you offhand, but maybe we can sit separately.
Yeah.
Then the team can give you a more detailed breakdown. Yeah.
Yeah. This is the normal regulatory approval which we require, whether it is a outright project or a JV project. Because, you know, had we done a JV, those kind of an approval would be required in JV also. Those are normal construction-related approval, you know, staircase premium, you know, your FSI premium, all those. It will vary from project to project depending on the eligibility, what it is. You know, Like Pirojsha said, we don't have it, but maybe we can sit separately and, you know, take you through that.
Got it. Second question, Pirojsha Godrej, is essentially is on the MMR pipeline that we are projecting for FY 2024. Which seems very, very strong. Are there any projects where you see a risk of it getting slipped? Of course, Worli has been an issue, but I'm just trying to understand the readiness of the other projects in general. How does it look like as of today? I mean, you have put in in FY 2024, you're confident. Are there some projects where you think there is still a touch and go?
I think, you know, first, I'm quite happy with the progress we're making in the MMR market. As you know, we've discussed in previous calls, as we sort of took stock of our performance two years ago, I think we felt Mumbai and Bangalore were both regions where we were significantly underperforming the opportunity. Happy to see that last financial year we tripled sales in Bangalore and then doubled them in Mumbai. In Mumbai, added new projects with a booking value of 10,000 crore, which is the highest of any individual market for us. Overall, very happy with all of that. I think to your specific questions on are there any risks to these launches, I think the honest answer is yes. You know, certainly there are.
I think till we have final approvals on something like Worli, you know, it would be foolish to think that it's a certainty. We are hopeful and, you know, we're working towards hopefully somewhere around the Diwali launch there, even if it gets delayed a little bit, hopefully it sails within the year. I think given past experience, you know, we've seen that both for our own projects and for other large developers, the larger the project, typically the longer the approval process takes for one reason or the other. So I wouldn't call the Mumbai launches we hope to do risk-free. As of now, I think we're reasonably confident on all of them, and none of them are, as we stand today, planned for kind of end of Q4 or anything like that.
Got it. Last one very quickly. How do you see the construction outflow for this year, given that you have launches, you probably also have stepped up the guidance for the deliveries, et cetera? On almost 3,500-3,600 crore of construction cost incurred last year, how do you see this trajectory moving into 2024 and 2025 based on our budgets?
It will be in proportion, in a linear proportion to the kind of, you know, launches we are doing and the kind of construction, projects under construction, you know. As we have guided next year, we are planning to do a booking value of INR 14,000. We are planning to do deliveries of INR 12.5. Obviously that construction outflow will be also be linearly moving upwards towards that as progress happens, you know. One has to look into project by project, but it will move in linear to our delivery schedules and our booking values.
Generally, we don't expect the earlier part of the year to have a major construction spike because you would appreciate that, you know, typically mid stage of the project is where outflows tend to be very heavy. During that time, the payment plan also tends to be more aggressive to make it kind of net positive. It's essentially going to be a sort of a linear curve from what you're seeing in FY 2023, but the booking value curve is going to be a little bit steeper.
Okay, got it. Thanks, Varun. That explains. Thank you.
Thank you. We take the next question from the line of Manish Jain from Gormal One LLP. Please go ahead.
Hi. Congratulations on really demonstrating the power of your scalable model across all the four key metros. Just trying to focus on key constraints that you all may face as a team, not for next one year, but next three to five years. Gaurav mentioned that you have construction pretty much taken care of based on the work that you have done for last eight to 10 years. You know, if you can just highlight key constraints or key challenges. One of them that Godrej has one of the best quality people and the sector is going through an upturn, may be the best place for other competitors to poach people. Have you seen higher than normal attrition?
Any other challenges that you may foresee in continuing to chug along on your scale?
Thanks, Manish. Yeah, I think, you know, it's a sector that throws up challenges all the time. I think we certainly have to be on the top of our game to be able to deliver the kind of growth we'd like to. You certainly highlighted one challenge, which is that, you know, the sector itself is growing. A lot of developers are now starting to expand into new geographies. And you're right that I think we are one of the companies that I think people would like to hire from. We have seen higher attrition. We've tried to respond to that and, you know, for our key talent, try to do what we can to retain them, and have seen positive results from that as well.
I think that will be an ongoing area of focus. If you look at the industry as a whole, it is a little bit talent-starved because I think, you know, you didn't have maybe 20 years ago a lot of people wanting to come into the sector. At the senior level today, there is a little bit of a dearth of talent. I think we feel given the brand, given the platform we've built, that we are able to attract and build talent from within. We're quite confident of being able to continue to do that. That is a continued area of focus. I think, you know, some of the challenge and risk remains around things like business development on an ongoing and consistent basis.
Regulatory approvals, I think is probably the biggest short-term disruption because, you know, whether a project like Ashok Vihar comes in in the year or not can make a very big difference to, you know, Both the bookings for the year as well as the P&L visibility for the year ahead. I think regulatory approvals is an area where we're very focused on, you know, improving our capabilities, making sure we understand the nuances of each individual market very well, and certainly one area of risk. Overall, I think we feel very fortunate to have the opportunity to be sort of in the right place at the right time. By what I mean...
What I mean by that is, you know, I think India's economy is by all expectations set for a very robust couple of decades, given, the global positioning, given kind of macro factors within India. I think if India is to grow in the way that is expected, obviously urbanization is something that's gonna happen at a much more rapid clip than has ever been witnessed in the country's history. We feel the real estate sector, and particularly residential real estate, could be set for quite explosive growth from a sector perspective. Certainly with our brand and the work we've done over the last decade to build strong capabilities and presence across 60 markets, we feel very well-placed to take advantage of that opportunity. Overall, very excited.
You know, it's not, we, as you know, my role in looking at some of the other group companies, I would say the real estate sector continues to be the most unpredictable. There are, you know, unforeseen challenges coming up all the time. I think maintaining a sense of agility and an ability to respond to those quickly, and a quick learning mindset, I think will be very important for the company.
Thank you so much, and all the best on tapping into this explosive growth.
Thanks very much, Manish.
Thank you. We take the next question from the line of Himanshu, an investor. Please go ahead.
Hi, my question is for Pirojsha Godrej. As everyone is congratulating you on your remarkable performance, I would also use this opportunity to congratulate you. I also understand that this call is for the investors and the research firms, who typically are interested in buying the stocks and recommending your company. I am a client who has purchased a Godrej Golf Links villa in Greater Noida, and also a client with Godrej Capital. I just want to address and I want to state here that we as a client and as an investor are in deep pain. The project has been delayed from last two years, and the Godrej top team are not discussing anything on the compensation or the delivery of the project.
They're just talking about the regulatory rules, which as an individual with the increasing cost of interest, which has increased by 50% and the increasing rental cost, what is your take on it, sir? I thought this could be the right opportunity to reach out to you. Otherwise, there is no way we as an individuals can reach out to you. Please, can you help us on this, two pieces here, how you compensate and how soon we can get our homes in Godrej Golf Links?
Yeah. Thanks for your question, Himanshu. You know, first let me start by apologizing on behalf of all of us. I think obviously we're disappointed to see that the delivery has been delayed. As you probably know, the project has been complete and ready for delivery for some time. We've been working with the Noida Authority to ensure NOC is received. We expect that quite shortly. I think there are government regulatory related reasons for the delay. We're quite confident those will be resolved. Certainly we will look at, you know, appropriate compensation if any is called for at the time of delivery. We of course, take great pride as a company on being able to deliver regularly on time.
I think unfortunately in such instances, factors beyond our control, such as have happened here, can create a delay. We are doing everything possible, please be assured, to ensure the project is delivered as soon as possible.
Thank you. We take the next question from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah. Thank you. Just one clarification. Pirojsha, you mentioned that taking over increased stake in Hinjewadi would likely add almost INR 4,000 crore to the business development side. Is that understanding correct? Is it included in the number that you disclosed?
It's not included in the numbers we disclosed. I think the math there, Puneet, is just that we expect roughly INR 8,000 crore top line from the project. We had 50% stake. We've acquired another 50% stake.
Correct.
That 50% stake, I was just saying you can roughly think of it from, or at least we think of it as sort of adding another INR 4,000 crore. That is not included in the INR 32,000 crore number, because that number is entirely focused on fresh business development. Any adjustments to the shares of existing projects is not reflected there.
Anything, similar numbers that one should add for Godrej Aria, Eternity, et cetera, or?
No, no, those were very minuscule, Puneet. You know, those were at the far end of the project life cycle. Bulk of the inventory has already been sold out, nothing that sort of on those projects.
Yeah, I think those projects for more are a.
Structure.
to give the investor an exit. You know, I think they're not acquiring-
Okay.
-for the future. This example of a project in Pune, again, we just launched that project, last financial year, so the vast majority of that project lies ahead of us, and we would acquire, the entire stake in that project.
Despite a reduction in saleable area, you're saying, you know, you will get additional 4,000 opportunity in terms of business development?
That is, Puneet, that is what he said was the total was 8,000. Earlier it was 50/50%.
Yes.
INR 4,000 would have been approved to us. Now the entire INR 8,000 will approve to us.
Puneet, I think the reduced area is a choice. We can maintain the existing area if we want to. Through one that it might make sense to do a small portion of it as plotted development to increase the kind of number of products we're able to offer and increase the pace of revenue recognition. Otherwise, it's quite a long-term project. It's not that there's any inherent drop in the FSI available. This is a choice that we have of having the higher area over a kind of longer time period, or doing a portion of it in a format that generates cash flow quicker.
Understood. That's helpful. Thank you so much. That's all from my side.
Thanks, Puneet.
Thank you. We take last question from line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Yeah, thanks. Just wanted to check on the pricing environment. You know, where I'm coming from is that in general, for the listed companies, the volumes have been pretty good, and competition is not that strong. If I relate to previous cycles under such conditions, developers would be very happy to take prices up and up meaningfully. This time around, there's a lot of restraint. Any thoughts on this?
I think, Sameer, you know, typically, actually, in a cycle what you see is the first couple of years are more focused on volume recovery, which has happened. We've already seen in some markets like NCR, quite sharp pricing growth. I think it'll be good if, you know, there is only moderate pricing increases. Honestly, I think any individual developer, you know, while obviously you can charge a premium for brand and quality and so on, overall market prices, I don't think are within the control of an individual developer. No developer has even a 10% market share in the country. If, you know, if you see in a market like NCR, prices going up, you will of course participate and price your projects at the level that clears the market. If you're not seeing that ability, you won't do that.
I don't think, you know, a developer is going to purposely sell at much lower than they can clear the market at. It'll be interesting to see how it plays out over the current year. It wouldn't surprise me if you saw a few other markets also seeing price increases the way we've seen in NCR. Again, very dependent on a variety of macro factors.
All this put together, Pirojsha, you think it'll be mid-single digit or a higher price increase portfolio wide for fiscal 2024 for you?
Sameer, it's a tough question also. I think, you know, what do I think? As you know, if you ask me, if my own personal sense is you probably have a lower ability to price increase. What are we building into the kind of guidance numbers we've given is exact today's kind of pricing. You know, what we... I personally think there will be some price inflation. We're not building that into kind of the plan we're, we've shared with you.
Okay. No, that's fine. That's very helpful. Just finally, are you seeing the smaller players coming back with the help of some financial support from, I don't know, private equities or NBFCs, et cetera? Or you think that's still missing at the moment?
I think the, you know, the long tail of the sector, a lot of it has actually just exited the market before COVID and during COVID. I think, you know, most of the data we've seen suggests that 40% to 50% of smaller developers that were in existence 10 years ago simply aren't around anymore. I think when you say smaller developers, you're probably talking more about the, you know, not the top 10, 20, but the next set of developers. I think there's no question that it should be expected that as the market improves, the health of the top 100, 200 developers in the country certainly should improve as well. I would expect that part of the market to strengthen.
I do think that, you know, we think the top three or four developers in each city now have very significant advantages in terms of their ability to access capital, whether equity or debt, their ability to attract customers at an early stage of a project, their ability to deliver larger scale projects, you know, deliver better volumes in sales, have a pricing power. I think the advantages for the bigger developers are considerable. Certainly, you know, I think the whole reason that the real estate cycle exists is that people under invest when things are tough. That gives, you know, supply, demand, the opportunity to see price increases and the volumes come back. That gives more people the ability to again invest, and you see the next leg of the cycle.
I think we're in, you know, this is probably year three of what's typically been a seven-nine year cycle. No reason to expect this time to be different from my perspective. We do think we'll see increasing competition. Again, that goes back to why we wanted to do a lot on kind of locking the business development pipeline at what we thought were very attractive stages of the market. We're quite happy to, you know, slow down a little bit on that front and focus more on selling if the market gets decisively stronger.
Yeah. Thanks so much, Pirojsha. Great to hear. Thank you.
Thank you, Sameer.
Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would now like to hand the conference back over to the management for closing comments. Over to you, sir.
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.
Thank you, sir. Ladies and gentlemen, on behalf of Godrej Properties Limited, that concludes this conference. Thank you for joining with us. You may now disconnect your lines.
Thank you.