Please note that this conference is being recorded. I now hand the conference over to Mr. Biplab Debbarma from Antique Stock Broking. Thank you, and over to you, sir.
Thank you, Muskan. Good morning, everyone, and welcome to Q3 FY 2024 earnings call of Macrotech Developers Limited, hosted by Antique Stock Broking. Today, we have with us the management of the company, represented by Mr. Abhishek Lodha, Managing Director and CEO, Mr. Sushil Kumar Modi, CFO, Mr. Rajendra Joshi, CEO, Bengaluru, and Mr. Anand Kumar, Head IR. Without further ado, let me hand over the call to Mr. Lodha. Over to you, sir.
Thank you, Biplab, and good morning, everyone. Thank you for joining us for our earnings call. Hope the new year has started well for all of you and you've been well. Today, on the call, we also have Mr. Rajendra Joshi, who heads our Bengaluru business, to share his thoughts on our recent start and successful launch in Bangalore, as well as the strategy and plan going forward. Let me first begin with sharing our perspective on the overall macroeconomic and industry situation. Global growth seems to have come out rather reasonably from the various crises of the last year, including the geopolitical issues in the Middle East and Ukraine-Russia, as well as the global inflation scare.
With the U.S. Fed indicating that the peaking of interest rates and subsequent fund rate cuts during the course of the coming year, we believe that we are past the hump of interest rates for now. Containment of geopolitical skirmishes is another silver lining in an otherwise unfortunate scenario in the Middle East. Stable energy and commodity prices, despite these conflicts, have insulated global economies to a significant extent. Global growth, while steady, remains slower than pre-COVID levels, largely led by slowing China and Europe. Within this slowing world, India remains a beacon of hope and is punching above its historic weight. The IMF estimates that India will contribute about 16% of the global growth this year, which is only going to come up, to go up in the years to come.
The recent advanced GDP estimates by NSO of approximately 7.3% for FY 2024 are very encouraging. We have seen most agencies, including the RBI, upgrade GDP growth forecast for the country. Slowly but steadily, India is emerging as a key spoke in the global supply chain and thus likely to attract stronger investment flows. The revival of manufacturing in the country in the fields of defense, electronics, manufacturing of semiconductors, et cetera, we believe will create a much deeper formal job market and lead to further formalization of the economy. The equity raising by Indian corporates in the last couple of years also suggests that the general optimism of domestic companies in the economy.
Another positive development has been the inclusion of India in the JP Morgan EM Bond Index, and it is likely that India will also get included in some of the other prestigious bond indexes, example, the Bloomberg EM Index. Such inclusions will boost foreign capital flows and bring down cost of capital for Indian borrowers, as well as enhance currency stability. Coupled with reduction in rates by global central banks, we hope to start seeing policy rates being brought down by RBI in the next 12 months. This will help bring down mortgage rates and boost housing demand, especially in the entry-level segments. In addition, we hope that the government will support first-time home buyers and provide a further fillip for demand in the mid-income housing segments.
We believe that the industry in India is in the right place at the right time, where the political and economic environment are moving in the right direction. As we have mentioned several times in the past, we are in year three or four of a long cycle, perhaps 15 years long, for the housing industry in India, as India transitions from a low-income to a mid-income country. As we have seen in many instances where such transitions happen, the housing cycle tends to be much longer than the normal cyclicality that we see otherwise in development.
As long as developers play it well, which means keeping price rises moderate and ensuring that home prices remain affordable for genuine home buyers and annual rises do not exceed salary rises, something that we have been saying for quite some time and are definitely practicing the same, and are making every possible effort to avoid investor and speculative demand in our market. With as long as the job creation cycle, combined with reasonable price growth holds, we believe that our industry is set for a sustained period of growth. Within this, Mumbai infrastructure upgrades are now coming to fruition as several of the transformational infrastructure projects are starting to get commissioned. We saw the commissioning of the Mumbai Trans Harbour Link, also known as Atal Setu, earlier this month.
Similarly, we are likely to see the coastal road being started to be operationalized over the next few months. Of course, several metro lines, the Navi Mumbai Airport, and other road connectivity projects such as the Airoli, the Airoli-Katai Freeway, the Thane-Dombivli Link Road, are also starting to get delivered this year and will be substantially all delivered over the next 24 months. Some of the game-changing projects, such as the Ahmedabad-Mumbai bullet train, are progressing at rapid speed and is expected to be operational towards before the end of this decade. This will greatly enhance the capacity of the city, continue to keep Mumbai the most active city in the country, and aid household formation, thus enhancing housing demand. As the country heads towards general elections, an outcome towards policy continuity is likely to keep India on the growth path that it has embarked upon.
Coming to the highlights of our performance for the quarter, we have continued to deliver on our KPIs, i.e., pre-sales, embedded EBITDA, with new business addition, and our reputation and ESG scores. We achieved our best ever third quarter pre-sales performance with INR 3,410 crore of sales, which is a 12% year-on-year growth. This was achieved in a quarter which had an adverse seasonality with the inauspicious Shradh period falling in October versus September in the last fiscal. Our nine-month FY 2024 pre-sales stand at approximately INR 10,300 crore, which is a growth of about 14% year-on-year, keeping us on track to deliver our pre-sales guidance of INR 14,500 crore for fiscal 2024. In terms of pricing, we have seen an overall price growth of about 4% year-to-date for the first nine months of the fiscal.
This is in line with our strategy to have price growth for the full year at about 200 basis points below the salary growth, and thus target a price growth level of between 5%-7% year-on-year, and therefore keep affordability strong and demand buoyant. The embedded EBITDA margin for this quarter stands at about 30% for our pre-sales. This level of embedded EBITDA was achieved with nearly 43% of our pre-sales coming from JDA projects in the nine months of the fiscal. On a steady state basis, we expect JDAs to contribute about 40% of our pre-sales, and therefore expect that our embedded EBITDA margins will remain at 30% and hopefully increase in the coming years.
Based on the embedded EBITDA of 30% on the pre-sales for Q3 FY 2024, our pro forma PAT for the quarter is well over INR 600 crore, implying a PAT margin of 17% for the pre-sales done during the quarter. We remain confident that an embedded EBITDA of approximately INR 4,300 crore and a pro forma PAT of approximately INR 2,600 crore will be delivered with our pre-sales of INR 14,500 crore for this fiscal. This is a true reflection of our business and its profitability in our view, and is tracking well with our objective of achieving approximately 20% ROEs. On the business development, we continue to track higher than our guidance. During the quarter, we added three projects having approximately 2 million sq ft of saleable area with a GDV of about INR 6,000 crore.
With this, we have added new projects of approximately INR 20,000+ crore, thus surpassing our full year guidance within the first nine months itself. As a reminder, our full year guidance was about INR 17,500 crore of new project additions. The substantial pace of new business development showcases the attractiveness of our company to landowners, leading to a burgeoning pipeline of attractive opportunities, which will enable us to ensure profitability being maintained and grown even as we scale up our business. Our net debt for the quarter was largely stable at about INR 6,750 crore, in line with the fact that we have front loaded the business development for the first nine months. We also paid our first dividend to shareholders during the quarter.
We remain on path to achieve our full year guidance of reduction of net debt to the lower of 0.5 times of equity and 1x of operating cash flow. Our average cost of funds during the quarter further came down and now stands at approximately 9.5%, which is a 10 basis points reduction from the previous quarter. We added another feather in our cap by getting included in the prestigious Dow Jones Sustainability Index or DJSI, by achieving Excellence score in corporate sustainability assessment. We were placed third globally amongst all real estate developers. Recently, we have become the first real estate company in the country to have our overall net zero targets validated by the SBTi. This underscores our unwavering commitment to setting new sustainability benchmarks within the space of real estate development, not just in India, but across the world.
For the quarter, our revenue from operations stood at about INR 2,931 crore, in line with the project completion seen during the quarter. These are the P&L numbers, taking into account the fact that we have moved to the percentage completion method of revenue recognition for new sales done from April 2023 onwards, whereas the sales done up to 31 March 2023 continue to be considered for revenue recognition under the project completion methodology. Our adjusted EBITDA for the quarter was approximately INR 1,075 crore. Our adjusted EBITDA margin was approximately 37%, and our adjusted PAT was INR 568 crore. Our reported PAT continues to ramp up going forward as revenue recognition starts matching operating performance.
I am also pleased to note that we have fully completed our exit from our U.K. investments in this quarter, in line with our earlier guidance, and the entire amount that we had said that would be recovered from the U.K., we had provided this information in September 2022, and this amount of INR 1,100 crore has now been fully recovered from the U.K., including approximately INR 550 crore, in the last two quarters. With this, our company has fully focused back on our growth and scaling up in India, and as we have mentioned before, we will have no investment outside, outside India whatsoever. I would like to take this opportunity to highlight the rapid advancement of the ecosystem in Palava.
To mention the fact that in Palava and Upper Thane, the two large townships on the outskirts of Navi Mumbai and Thane respectively, your company owns approximately 600 million sq ft of development potential, by far the largest and most valuable landholding of any real estate developer in the country. In line with some of the infrastructure projects that I mentioned earlier, we are already seeing that the corporate land market is moving up quite rapidly. In the last quarter, we saw two transactions which have set benchmarks in terms of land values. We saw NewCold, which is a cold storage company, and Panama Petrochem, which is a petrochemicals company, buying land from us to set up their facilities.
The transaction with NewCold happened at about INR 5.5 crore an acre, and the transaction with Panama Petrochem happened at about INR 6.5 crore an acre. Thus, we can see that the trajectory from three years ago, where land was transacting below INR 3 crore an acre, we are now at already at INR 6.5 thousand crore an acre, and we expect that over the next 12-24 months, we are now going to start seeing the magic number of INR 10 crore of an acre being exceeded. And this is only for the land which is being used for industrial and warehousing purposes.
As the infrastructure projects start getting completed, particularly the Airoli-Katai Freeway, which should be operational in 2024, and then ending on the other side of the infrastructure upgrades with the bullet train, which will have its first station after BKC, very almost adjacent to Palava, which will become operational in 2028. We see that Palava will be transformationally changed and upgraded in terms of its desirability as well as its connectivity. In 2024, you will see Airoli being just 20 minutes away from Palava, and by 2028-2029, you will see BKC being only 20 minutes away from Palava.
The overall development potential of this 600 million sq ft of land option is of an immense value, probably between $75 billion-$100 billion, just taking into account the present rates, and obviously this will grow over time. And therefore, we can see long-term sustainability of significant growth coming from our township projects in Palava and Upper Thane over the next few years. I would like to move forward in stating that in addition to, of course, the existing significant land that we own, the way the environment has shaped and the sector has consolidated, the number of opportunities coming to the strongest brands like Lodha are only continuing to grow.
It is a complete market at the discretion of the graded developers on the land side, where we have the choice to tie up or buy the best available opportunities that provide the right return for our stakeholders. What I can tell you is that so many of these opportunities have come across our table over the last few months. Especially in the last six months, we have seen various opportunities which may have required larger investment from our side, but as we have always mentioned in the past, in the past, our focus on continued lowering on debt is the highest priority, and in no manner will we breach the guidelines of 0.5 times of equity and 1x of operating cash that we have set for ourselves, because we believe that low leverage is essential for sustainable value creation in our industry.
So, almost three years after listing, I am pleased to tell you that the stability and the strength of the balance sheet are not only something which are numerical terms, but provide great internal strength to the organization and allow us to focus on value creation in a sustainable and long-term manner. We expect that the current cash flow generation from the business and the strength of the balance sheet are sufficient to allow us to grow at approximately 20% per annum for the foreseeable future. We have been, and we hope to keep achieving this while keeping the balance sheet in a very robust position.
Having said that, when we come across inorganic or organic opportunities, which are likely to lead to a long-term improvement in the sustainability and predictability of our pre-sales growth, we always want to look at those opportunities very carefully. In such instances, given the discipline we want to maintain on the balance sheet, it may be prudent to raise an appropriate amount of capital only when required for such very, very attractive opportunities. In view of that, and in discussion with the board, we are taking - we have sought an enabling resolution from our shareholders to raise a modest amount of equity, if and as required, for some highly attractive opportunities. I would like to reemphasize that this is only an enabling resolution, and we will raise capital only if and when the right opportunities are presented before us.
Overall, I would summarize that it has been a satisfying quarter, and we are on track to achieve the our full year guidance, and continue to play a meaningful role in scaling up the housing industry and making it a significant contributor and engine of India's growth. With that, I'll now pause and hand over to Mr. Rajendra Joshi, our CEO from Bangalore, to talk about how the Bangalore market is evolving for our company. Thank you.
Good morning, everyone. This is Rajendra Joshi, CEO for the Bangalore operations. Before I talk about what we have done in the Bangalore market, I want to give you a preview of the Bangalore market and how it has grown in the last few years. Currently, it is estimated that the residential market in Bangalore is about INR 60,000-65,000 crore, growing at about 18% over the last 4 years. The market size has doubled in the last 4 to 5 years. Of this 18% growth, volume growth has been about 10%, and the price growth has been about 8%. The prices have also increased substantially in the last few years, increasing by about 40% over the last 5-year period, compared to about 10% in the previous 5 years.
The inventory overhang is at its lowest at about 9 months, which is the lowest in the last 15 years. This demand has been driven largely by the IT-ITeS industries and also the startup ecosystem, which is extremely strong in the Bangalore market. This increased purchasing power from these sectors and other business sectors has led to preference for premium housing with better amenities in the Bangalore market. The share of units which are priced over INR 1.5 crore is today at about 25%, compared to about 10% a few years back. With this background, I would now talk about how we have entered the market and beginning to grow in this market. For us at Lodha, any entry into the new market is a two-step journey.
In the initial few years, we would like to have fewer projects, focus on building an empowered local team, build the brand through superior product and the customer experience delivery, build a strong ecosystem of channel partners, suppliers, contractors, et cetera, so that we grow the market, we understand the market, we understand the ecosystem, we have the customer preferences, et cetera. In phase two, which is after about 3-4 years, we intend to accelerate in this market the way we have done in Pune. We currently have 2 projects in Bengaluru, one in North Bengaluru, next to Manyata Tech Park, a well-known tech park built by Embassy, and another one in South Bengaluru off the Bannerghatta Road. Between these two projects, we expect a GDV of over INR 3,000 crores.
We launched our first project next to Manyata Tech Park in Manyata, in North Bangalore, in November of last year, and saw a very, very successful launch. In the first weekend itself, we were able to sell about INR 600 crore in pre-sales, almost about over 80% of the inventory. This success, we believe, is due to the strength that Lodha has built over the last few years. The superior product and customer experience that delivered, we delivered at our clubhouse that we have built. The strong channel partner network, the distribution network that we have built over the years, helped us in delivering this kind of launch, which is probably the first of its kind for a brand entering the Bangalore market. In the short term, we intend to focus on the premium and the luxury segments, where Lodha, we believe, has a significant strength.
We believe that in the Bangalore market, we intend to build a strong organization with local capabilities in the areas of sales, construction, marketing, customer service, et cetera, so that we can build up this business in Bangalore to about INR 3,000 crore run rate in the next three to four years. This we believe is possible because at Lodha, we have built a specialist organization with deep capabilities in every part of the business, starting with land procurement, design, construction, sales and marketing, and customer experience.
... We will leverage this strength to build a thriving organization, an organization which is known for its customer experience and superior product delivery, which today we believe the Bangalore market is ready for. Thank you very much.
Thank you very much. We will now begin the question and answer session. Anyone who wish to ask question may press star and one on the touchtone telephone. If you wish to remove yourself from question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while question queue assembles. The first question is from the line of Kunal from Bank of America. Please go ahead.
Great, thank you. You know, my first question is on the enabling clause of raising capital. Abhishek, is it fair to characterize it as, you know, this capital could be needed, in case you saw growth opportunities to exceed your 20% benchmark, and less of it to, you know, sustain or achieve part of that?
Hi, Kunal, good morning. As I mentioned earlier, our internal cash flows and state of the balance sheet are sufficient to support our planned growth of approximately 20% for several years. The enabling clause is just the enabling resolution is just that, an enabling resolution. In case we were to see organic or inorganic opportunities which allow us to either raise our growth rate beyond that number or give us longer visibility and sustainability of growth, i.e., a project which may be longer in its gestation but has the right right ROEs. So that would be the, you know, core reasons if we were to raise the capital at all.
Understood. The next question is on the Palava, Upper Thane land bank. You know, given the slew of infrastructure upgrades you cited, I was just wondering if, you know, that sort of changes the monetization plan for it a little bit. Would you think that, you know, you might want to go for faster monetization of the land bank that you have there in terms of more projects? Or maybe even change it in favor of residential versus logistics industrial parks?
Kunal, clearly, I think logistics and industrial parks is only a small part of our larger strategy in Palava and Upper Thane. It is largely a strategy which is focused around residential and link development, like retail and, and office. We do believe that with these infrastructure upgrades now making locations much closer than they used to be in terms of traveling time, we will see a larger number of projects and different kinds of segments that we will be developing in these locations. So, for example, Palava and Upper Thane have historically been a mid-income housing, whereas we think now that some elements of premium housing will start getting launched in these locations. Because the locations are now ready for that, given their proximity that I said.
You know, 20 minutes to Airoli, from Palava in 2024, less than 20 minutes to Thane from Upper Thane in 2025, once the Nashik highway is complete. And I would say, you know, really, really amazing that 20 minutes to BKC by 2028, 2029. You can really see how fundamentally the geography of these locations is changing. And within that, you know, the high quality of development, the high quality of maintenance and upkeep, and the strength of our brand, will allow us to have a much broader set of segments, consumer segments, wanting to buy and live at Palava, and consequently scale up the pace of our development.
You may have sort of read an interview in the Economic Times a few days ago, where we expect that over the next few years, the annual run rate for sales from Palava and Upper Thane could be reaching $1 billion of annual sales, from approximately $300 million-ish that we will be doing now. So it's clearly something that we expect a significant amount of growth to come. You know, a significant amount through volume and some amount through price.
Right. And then the final one, I know you don't necessarily give this number, but, you know, any color or way to think about what might be the investment component, you know, of demand in your current sales, and what that number could have been, in Mumbai, let's say, 7, 8 years back? Thank you.
Kunal, as I mentioned in my opening remarks, our focus is on having sustainable, and when we say sustainable, price growth, we mean price growth which is below wage growth. I think we've said that for the last three years, and you've seen in the numbers that we've worked hard to make sure that that's what happens. We actively do not like having investor or speculative interest in our developments. As a consequence, we focus largely on end users. Our sense now is that the end user percentage is in the high 80s to 90% of the units that we are selling, and therefore, you know, people buying for either long-term investment or renting is, you know, low, you know, around the 10% mark.
Helpful. All right. Thank you so much.
Thank you.
Thank you. The next question is from the line of Saurav Kumar from JP Morgan. Please go ahead.
Hi, team. Good morning. So two questions. One is, you know, on your operating cash flow, you think the guidance for fiscal 2024 will be met, you know, and next net debt to operating cash flow? So that's the first one, and what would underline that? The second is essentially on this price growth at Palava. So effectively, if the infrastructure comes in and, you know, you see Palava get better connected with city center, and then if you look at comparable locations like Thane, Goregaon, or even, you know, Airoli, the price differential to Palava will be like, you know, very high. So you think with infrastructure, we should see now better price growth coming through in Palava, or you would still want to grow price at, like, 3%-4%, so that's the second one.
One small one is essentially on construction cost. Can you just highlight what will be your incremental construction cost, let's say, in Palava and, let's say, high-end developments in South Bombay? Thank you.
Thanks, Saurav. So Saurav, on debt as being less than equal to 1x of operating cash flow, we do believe that we will meet that guidance by the end of the current fiscal. We expect our net debt number to be just around or slightly below the INR 6,000 crore mark, and that will be at or below our operating cash flow for the year. We're happy to take you through the details if you'd like to do that. In terms of price growth at Palava, it's a nuanced answer, but I'm sure you will bear with me for a couple of minutes. We look at price growth for the like product remaining below wage growth.
I think that is, I would say, almost fundamental to us. However, the overall price growth at Palava and Upper Thane will be higher because new product categories are coming in. So, you know, if you take mid-income housing, we will want to keep price growth at below wage growth, so that is, you know, at this 5, 7, 8% number. However, when you get in, you know, the upper end of the mid-income, then you start getting in premium, et cetera. Obviously, the prices of those products are higher, and consequently, the overall price growth for locations like Palava and Upper Thane will be, you know, higher.
So, I would say like to like, below wage growth, but overall higher than, you know, higher in a significant manner, alluding to some of the locations like Thane, Navi Mumbai, Airoli, Goregaon, et cetera, that you mentioned, and the pricing differential between those and Palava. And therefore, you can see why even if we were to take, you know, price growth, which is higher than wage growth, but still we will be very, very attractive compared to these locations from a pricing perspective, and that's the reason why we think that volume growth will be a meaningful contribution to our overall growth plans over the next few years at these two township locations.
In terms of, of construction cost and, those, I'm not quite sure what metric you'd like me to mention, but yeah, I mean, I think, typically our mid-income housing, construction costs, on a per square feet of saleable area, tend to be between INR 3,000-INR 3,500 a sq ft. You, you tend to be in premium housing about 20%-25% higher than that. And of course, luxury housing is, you know, double of that.
Okay, got it. And got in Palava, we should see price appreciation more than construction cost, so your gross margin should keep expanding.
Significantly, right? I think that means that I think sort of the jaws widening as both the pricing as well as the volumes pick up in Palava and the consequent value creation of, like I said, you know, a land bank which is by far the most valuable of any developer in the country, you definitely, you know, start seeing that happen. I'm not saying that this will happen or play out fully in just FY 25, but if you take a 3-5-year view, absolutely.
Okay, and what's the FAR you can do at Palava max? I mean, what's the permitted FAR?
The permitted FAR at Palava is, you know, we, we're taking the, I would say, the conservative viewpoint, it's at 1.7.
1.7. Okay, thank you.
Thank you. The next question is from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah, thank you so much for the opportunity, and congrats on good numbers. Just continuing with Palava, how soon do you expect the momentum there to pick up? Should it be next year, or do you still expect to wait for a couple of years before you reach a new rent, higher rent?
Hi, Puneet. It's an important question. I wish we could forecast that with the accuracy that you'd want us to. But yes, we will start launching the upper end of the mid-income segment, as well as the premium segment in fiscal 2025 itself. I think, you know, the journey is not a 1-year journey. I think it's a 3- to 5-year journey before all of the engines fire. Some fire, you know, as soon as they are launched, some take a little bit longer for people to, you know, see the proof of the pudding. But if I say, you know, we use this term inside the company, tunnel to tunnel.
So the first tunnel, which is going to get completed, is the Airoli -Katai tunnel, and the other tunnel, which is going to get completed, is the BKC bullet train tunnel. And from tunnel to tunnel, which is from 2024 to 2028, you will see a complete, I would say, re-reset of this location.
Okay, understood. Just on your pre-sales number of INR 34.1 billion, will it be possible to break down between how much of it is attributable to the projects which were launched and the sustainability?
Puneet, let me just come back to that. I think we should be able to either give it to you in this call or come back to you offline and give it to you, but we would definitely can give you that number.
Great. And lastly, on Bangalore, thanks so much for the color that you gave. If you can add more incremental color on the kind of pricing premium that you've been able to command?... in the location that you launched, compared to the peers, that'll be very helpful.
Sure. I'll request Mr. Joshi, since he was closest to the ground, to answer that question in terms of what premium we were able to do at the first launch of Lodha Mirabelle, compared to the existing projects in the vicinity.
Great. Thank you so much, and all the best. Yeah.
Mr. Joshi, would you like to comment, please?
Yeah. So, we launched Lodha Mirabelle at an average annual price of about close to INR 11,000. As some of you might know, this is a brownfield project, where the previous developer had completed about six towers. The last selling price, in about two years back, was close to about INR 6,500. The neighboring market is in the range of about INR 8,000-INR 9,000. So that's the kind of price premium we were able to get because of the location, the strength of brand Lodha, and the experience that we delivered at the clubhouse, which we modified, and we're delivering a great experience to the customers within the project and our prospective customers. All put together, I think we were able to get the kind of price premium what we expected.
Understood. And is that something that you expect for the next Bangalore project as well?
We do think that we would be able to command premium over the neighboring projects in our next few projects, because we intend to focus, as I had mentioned earlier, on the premium end of the market, which is where we see a great opportunity in the Bangalore market.
Understood. That's very helpful. Thank you so much.
Thanks.
Thank you. The next question is from the line of Abhinav Sinha from Jefferies. Please go ahead.
Hi, this is Abhinav here. So a few questions. So on the enabling resolution, bit again, can you give us some granularity on the sort of opportunities we have? Are they largely for buyouts in Mumbai, or there is, you know, something else in the mixture there?
Hi, Abhinav. The opportunities, obviously, you know, are confidential, but I can start giving you some flavor of those. In, you know, there are opportunities which are, mostly, you know, I would say capital light in Mumbai, except for, of course, very specific locations like, you're aware of the Juhu Centaur transaction, which, you know, we have been, we are the preferred bidder, and the process has advanced quite a bit. There are other opportunities for outright acquisition in Pune, where the market is now something that we are quite comfortable and believe that there is a, you know, much more scaling up to do there. And as Mr.
Joshi mentioned, while we have about INR 3,000 crore of GDV in Bangalore, you know, probably this year itself, we would be able to get to close to INR 1,000 crore sales in Bangalore, and then, our target over 3-4 years, that is to have an annual run rate of INR 3,000 crore of annual sales from Bangalore. So there would be a mix of JDA as well as, potentially some outright opportunities from landscape are across, all 3 states that we are operating in. And as we have said in the past, we want to keep that healthy mix of JDA versus outright, balancing the total profitability as well as the ROEs.
Thanks. That's helpful. So on pricing now, you know, even for some of your projects, like, you know, in South Bombay and at the higher end, we are generally seeing pricing in Mumbai to be rising much faster than, you know, the average that we are seeing. So any thoughts on that, or is that what is also, you are also observing right now?
I think, Abhinav, the price growth, anecdotes versus the, numbers, you know, the story I would say is in the numbers. I think anecdotally, yes, you hear a number of things. Sometimes we also witness that. The way we calculate, obviously, price growth is for the live project, so which was operating and selling in the previous fiscal, and what is the actual price growth in that project for the current fiscal on a YTD basis. Therefore, for nine months, we have 4%. Annualized rate, that is closer to about 6%. So that is really, you know, all our projects which were operating in the last fiscal and what the price growth in those has been for this fiscal.
Okay, great. And lastly, on the fourth quarter now, you know, to meet our guidance, we're looking at INR 4,200 crore plus sort of a number. So what are the key launches and, you know, how are you looking to, you know, how confident are you for achieving this high number?
Abhinav, you know, the fact is that we've done consistently about INR 3,300-INR 3,500 crore over the last three quarters, and therefore see, you know, no significant challenge in achieving our full year guidance of INR 14,500 crore. We do have launches. We do have some land sale transactions. So, you know, it's going to be a mix of all of those. In terms of new launches, you know, we have in almost 6 different markets, a total of about 11 launches, so of course, that helps. But I think, you know, our sustain this business, and I'll go back to the point that Puneet had raised earlier. Last quarter, our total sales, about 25% were from new launches and 75% were from sustainers.
So, you know, last quarter, of course, you know, we had a few launches, but not as many as we have this quarter. So just the upside from some of the new launches as well as the land sales, et cetera, should be healthy enough for us to meet our guidance.
... Great! Thanks and all the best.
Thank you.
Thank you. Before we take the next question, a reminder to all participants, you may press star and one to ask question. The next question is from the line of Praveen Choudhary . from Morgan Stanley. Please go ahead.
Hi, this is Praveen Choudhary. Thank you, Abhishek, Sushil, and Rajendra. I have two simple questions. The first one is, you've been very successful in Pune and now in Bangalore. I'm wondering, could you talk about next city that you want to go in, or it's too early? And then the second question I have is about pricing, where you got a few more questions. But when I look at the JLL data for last quarter, that's December quarter, they were saying that Bangalore pricing was up 13%, year-over-year. I know you mentioned that ASP rising above wage is an issue. I'm just wondering, are you concerned about that in Bangalore? We're also hearing similar stories in Gurgaon, or you don't think that matters because you mentioned about your specific projects, you raise very slowly.
Thank you so much.
Hi, Praveen. Good afternoon. In terms of the three cities, you know, our approach to most of our business, including geographical expansion, is a step-by-step conservative approach. We are pleased that Bangalore has started off well. In the next three months, we hope to have our second launch. And as that happens, you know, we'll start reviewing whether we start taking baby steps into, you know, a fourth city of operations. So probably something that we will, you know, think about and evaluate over the next three to six months, but don't have a definitive answer at this stage.
In terms of pricing growth, I would reiterate that for the long-term sustainability of the cycle, and this is not a cycle which should be seen through the lens of what happens in a quarter or even what happens in a fiscal year. The opportunity for us is to have this cycle run for 15 plus years, and in that context, it is absolutely imperative that price growth remains below wage growth. I think, you know, how some of the data on price growth is calculated, of course, you know, you all are best placed to look at.
But we say that if you take away mix changes, when you look at like-to-like product, you know, segmentally like-to-like product, so mid-income to mid-income, premium to premium, luxury to luxury, it's absolutely imperative for the long-term sustainability of the business, of the industry, that price growth remains at the most at, and in our preference, below wage growth. Because that's what India's opportunity is. It's a volume opportunity, and it only comes through, when affordability keeps... Yeah. Hello?
Yeah, hi. Can you hear me? Hello?
Am I on?
Yes, sir, you're connected.
Yeah. So, Praveen, just to close out my comment, I would say that in any market where there is excessive price growth after adjusting for this aspect of like-to-like versus mix change, it would be a matter of concern, because like I mentioned, the opportunity of scale up is a very long-term, 15-year cycle. We're only in year 4, and price growth remaining at or below wage growth is an essential condition for the sustainability of the cycle.
Very clear, Abhishek, and you have been very consistent on this point. And I don't have the data excluding the mix change, but I just wanted to get a feeling on the ground, maybe Rajendra can talk about it. That at this point in time, at least, we are not concerned about the pricing in Bangalore.
Uh, hello?
Yeah, please go ahead.
Yeah. So I think what has happened in Bangalore, I'd like to reiterate, and I did mention that, the price growth in the market was extremely muted about 2-3 years back. In fact, for the years before 2020, the prices used to be almost flat. So the growth in price in Bangalore has to be seen in that context. According to me and many experts in the market, it is a correction that is happening in the Bangalore market, which is why we are seeing the kind of price growth that we are seeing in Bangalore. I hope that answers the question.
Yes. Thank you very much. And, again, congratulations for having a very clear targets, hitting them, and, and being consistent in your messaging. Congratulations. Thank you.
Thank you.
Thank you. The next question is from the line of Mohit Agrawal from IIFL. Please go ahead.
Yeah, thanks. Most of my questions are answered. Just one question on your annuity and the office and the retail portfolio. So what is the vision here, say, by FY 30, what is the kind of rental income that you are targeting from office and retail? And what kind of investments do you plan to make from here on?
Thank you, Mohit, for that important question. As we've articulated in previous discussions, as well as engagement with our investors, our strategy on rental income is to grow it, but do it in a manner which is not ROE dilutive. Therefore, we look at a mix of three strategies, which is our facilities management business, along with its digital app, which is, you know, very low investment and therefore high ROE. Our warehousing business, warehousing and industrial park business, which is moderate ROE in the mid-teens, and then selectively some office and retail, which we hold for duration. Still, we believe that the market is now paying its rightful and full price. That's our sort of, you know, way of looking at the streams from these businesses.
We expect that, you know, by the end of the decade, that is by March 31, we expect rental income to be close to INR 15 billion on an annualized basis from these three asset classes. Like I mentioned to you, the investment, you know, we overall expect a blended ROE sort of in the mid- to high teens from these assets, and therefore, you can, you know, sort of do an assessment of the level of investment which will go in over the next few years to build out this base.
Okay. Abhishek, is it possible to give a breakdown of this INR 15 billion into warehousing, office retail, and the facility management numbers?
We of course, you know, something which is 7 odd years out, very difficult to be precise with it, but if I can give you a broader sense of it, we expect about 25% from facilities management. We expect about 30% from the warehousing and industrial, and the balance from office and retail.
Okay, understood. And just one last clarification in your sales mix this quarter, there's been a dip. I see a dip in the South and Central sales. So, is it just a quarter thing, or you think, you know, this is the momentum going forward?
See, I think, Mohit, it's important to know that different segments will react very differently to seasonality. So this year, South Central. This quarter, South Central had two aberrations. One, Shradh, Pitru Paksha came in this quarter, and those 15 days, South Central has absolutely virtually no transactions. And then, the second half of December is also, for South Central, the poorest part of the. It is quite poor because almost everybody travels. So if you almost take out one month out of the transacting, you know, potential timeframe for South Central, you recognize that it's just seasonality, nothing beyond that.
Fourth quarter, this should be back, right?
Yes. I mean, I think overall, you look at any YTD, you know, I would request you to look at assessments, and we give this data every quarter, of course. So look at the trailing twelve months when you're looking at the strength or status of any market, because that takes most of the seasonality out of the picture.
Sure. That, that helps. Thanks a lot, and all the best.
Thank you.
Thank you. The next question is from the line of Kunal Lakhan from CLSA. Please go ahead.
Yeah. Hi, good morning, team. So, on your pro forma P&L, if you can share the, just wanted to understand, the 30% is your embedded EBITDA margin. What will be the breakup of the margin for JDA and own projects?
Hi, Kunal. We're just looking at the data. Give us a minute, please.
Sure.
While we dig that out, in case you have any other questions, please let us know.
Yeah. So my second question was on our collections run rate. You know, if you look at, if you exclude the UK repatriation, our collections to the sales run rate is somewhere around 67% for the nine months. And, if you look at the same run rate in FY 2023, it was around 81%. So anything to read there, or is it on account of higher sales from JDAs?
I don't think either JDA sales have anything to do with that ratio. The cash will flow through our P&L and our accounting. I think the run rate is partly a question of, you know, build up of sales having happened over the last 12-18 months, and therefore, it takes a little bit of time for the cash flows to come through, but nothing really to read into it. Historically, if you look at the last eight years, our collections to sales ratio is at approximately 99%-100%, and we pay very, very close attention to that ratio.
There'll be a mean reversion, kind of like sort of-
Of course.
Will revert to?
Of course. Absolutely. Absolutely.
Sure. And my last question was on, you said that, you know, your value unlocking or, or rather, appreciation at Palava would happen between, say, 2026-2028. Would that make you slow down on land sales until then, or would you continue to monetize land?
I think, you know, given the quantum of land that we have, we expect a modest amount of land sales, both for, you know, industrial warehousing as well as for the government infrastructure projects, given that the government is building infrastructure in that area to continue to happen. So we don't expect, the total realization. The quantum of land may start getting moderated as we keep more and more land towards our, higher value-added uses. But given the appreciation in land underlying value, and pricing, we expect the realizations from that to continue.
Okay. So in terms of value, it will remain, like, steady-
Yes.
But in terms of area, it may come off?
Yes.
Sure, those were my questions, if you can-
Yeah. So coming back to the margin point, the embedded EBITDA of our JDAs is at around 20%, and the JDAs are contributing just over 40% of our pre-sales.
Great. Okay, great. Thank you so much.
Thank you.
Thank you. That was the last question. I would like to hand the conference over to Mr. Anand Kumar from Macrotech Developers for closing comments.
Thank you everyone for joining the call. All insightful questions. In case you have any more queries, do reach out to me, I'm always available for you. Thank you.
On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us. You may now disconnect your lines.