Ladies and gentlemen, good day, and welcome to the Oberoi Realty H1 FY 2024 and Q2 FY 2024 earnings conference call. We have Mr. Oberoi, the Chairman and Managing Director of the company, and Mr. Saumil Daru, Director of Finance of the company, with us for the call. Please note that this call will be for 30 minutes, and for the duration of the conference call, all participant lines will be in the listen-only mode. And this conference call is being recorded, and the transcript for the same may be put up on the website of the company. After the management's discussion, there will be an opportunity for you to ask questions. Should you need assistance during the conference call, you may signal the operator by pressing star then zero on your touchtone telephone.
Before I hand the conference over to the management, I would like to remind you that certain statements made during the course of this call may not be based on historical information or facts and may be forward-looking statements, including those relating to general business statements, planned strategy of the company, the future financial condition and growth prospects. The forward-looking statements are based on expectations and projections, and may involve a number of risks and uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by such statements. I now hand the conference over to Mr. Oberoi, the Chairman and Managing Director of the company. Q1 over to you, sir.
Thank you. Good morning, good afternoon, good evening, from wherever you have dialed in from. Thank you for taking time to take this call. I just want to tell Saumil that I'm unable to open the,
Sir, we have sent it to you again.
No, it's not opening, Saumil. So I think what you do is you take over and you do the introduction-
Sure.
Then I will get in the Q&A. Thanks.
Okay. Okay. So very good afternoon, everybody. Thank you all for taking out the time for this call. As you know, we have even put out in our press release, India has sustained its growth momentum and emerged as the fastest growing major economy in this fiscal year. The macroeconomic outlook is optimistic and firmly bolstered by the strong domestic fundamentals. We believe that the real estate market will continue its upward trajectory through consistently surging demand for established brands, spacious apartments, and a desire for homeownership. We expect a strong demand in retail, driven by the festive season and the increased consumer confidence.
As one of India's largest real estate brands, we are also very excited about our much awaited foray into Thane, as we launch our first residential project that follows the tenets of New Urbanism and offers aesthetically designed homes and a positive lifestyle update. With this, we open the floor for question and answer. Both Mr. Oberoi and I will be very happy to take your questions. Thank you.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question, may please press star and one on your touchtone telephone. If you wish to remove yourself from the 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 the question queue assembles. The first question is from the line of Murtuza Arsiwalla from Kotak Securities. Please go ahead.
Hi, sir. Just some simple questions from my end. Can you give us the revised timeline for commissioning of Commerz III? Last check you did highlight March 2024. As well as for Sky City Mall, and any status on the pre-leasing for these two assets, and also the completion timeline for the Ritz-Carlton hotel.
So Commerz III continues to remain as March 2024. We are absolutely on schedule. We are hoping to complete the mall by probably between January and March of this year again, as in coming year. And we should be, I mean, we should be operational probably around June. And we are hoping to, you know, see a bumper Diwali, and post that, we will go into the market for leasing. We strongly believe that it will probably take us anywhere between a month and month and a half to pretty much lease the entire mall, because we have a mall operational and it's very successful. So that's there. And what was your third question? Sorry, if I can ask.
Also on Commerz III, what's the status of pre-lease, if you could, and on Ritz-Carlton?
You know, Morgan Stanley continues to expand its original area, and we will be again shortly opening this up for lease. We are, you know, we are talking to people larger players, but we will be opening it up soon there as well.
Okay. On Ritz-Carlton, the hotel?
Ritz-Carlton interior work is in progress, hopefully by end of next year.
Thank you.
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star and one, on the line of Saurabh Kumar from JP Morgan. Please go ahead.
Hi, I just have two questions. One is, you know, just on your margin profile, so your, your residential business seem to have reset to a high margin. Do you think this is sustainable medium term, you know, given that Thane launch is coming up, but it also has an offset in terms of better realization at three sixty? So how should we think about this 45% on margin that you seem to have reset versus the 37-38 you used to operate earlier? So that's question one. And the second is, you know, just in terms of this whole pollution impact, do you think there's a chance that, BMC, given the directions that come with BMC, the construction activity kind of slows down, both for you and for the broader industry over the next four months?
These are two questions. Thank you.
Hi. Hi, Saurabh. Firstly, you know, we have been very prudent in buying land. So, you know, we have consistently, you know, shown the industry that one can have these sort of, these sort of margins. So I don't think one needs to really worry going forward. All our land acquisition is really done very thoroughly. And with regards to pollution, you know, we all are mindful. We all internally need to ensure that, you know, we take precaution. So we, at least in our sites, we make sure that, you know, least amount of dust is, you know, accumulated or spread or whatever. So one has to be really, really conscious. And I don't think BMC will come out with a general order.
They will identify sites that are not following norms and probably will get stringent or strict about it, and I think it's high time they do that. We owe it to our environment.
Okay. Thank you. If I can just take one follow-up question, if that's allowed?
Go ahead.
Okay. Just in terms of, you know, the Bombay is basically going to see a lot of infrastructure investments over, you know, next two years especially. But a lot of it is, you know, concentrated on the eastern side in terms of the new airport, Trans-Harbor Link. Do you think that there's, like, a realistic change which happens in the Bombay axis along the western suburbs, now more towards the eastern, especially the Navi Mumbai belt? Or do you think, your north and west is still very attractive?
No, I think, I think the government is overall focused on increasing or improving the infrastructure of Mumbai. The most ambitious one is obviously the sea link, and they are planning to take it right up to Virar and all that. Second, you look at the bullet train, you know, it's BKC, starts there. So I'm just saying that I think as far as the, you know, government goes, they are, they are, ensuring that there is an overall development. We couldn't have had an airport without the Trans-Harbor Link, so obviously that part will open up. But so will, you know, the, so many other pockets where metro will start reaching and then this sea link, then this, Maharashta Samruddhi, you know, the road between Mumbai and Nagpur and so many.
I mean, you know, so infrastructure is, you know, like, they're doing it all throughout.
Okay. Thank you.
Thank you. The next question is on the line of Praveen Choudhary from Morgan Stanley. Please go ahead.
Thank you very much for taking my question. Hi, Vikas. Hi, Saumil. I have a couple of questions. The first one is about Three Sixty West. Could you just update us about the inventory? And I know you're not in hurry, but how long does it take before you dispose all of that units? And with that, you will get a lot of cash, and I'm just wondering what is the use of cash, considering your gearing is very low? So that is the first question. The second question I had was about pre-sales and operating cash flow. Again, operating cash flow has been very strong in the last couple of quarters, but historically it has been volatile. And then pre-sale year-over-year also is slightly down on a year-over-year basis on a four-quarter moving average basis.
Trying to understand if we're gonna see the momentum back from a pre-sale perspective, or maybe you don't see the business like that. Thank you.
Hi, Praveen. How are you?
Good. Thank you. Thank you.
Okay. So Praveen, first thing first, the Three Sixty West inventory continues to sell. We would have loved to have it done faster, but you also have to remember that we have a lag of our partner having sold 50% of, you know, his inventory at a relatively low price. So obviously, you know, now, of course, most of it is, you know, resold or whatever was to be resold is sold, so we don't have much pressure at our end. We have sold, I think, four or five apartments this quarter, and we've sold them at very good rates. So I'm not unduly worried about Three Sixty West. And, you know, almost 50 families have moved in, so even that kind of helps us. So that's as far as Three Sixty goes.
Obviously, the cash that we will generate will be deployed back into business. We would obviously love to buy new land, and we continue to look at land and, you know, very soon you will hear very interesting deals that we are in the process of doing.... Yeah. What else was your question? Sorry, Praveen, I forgot.
No problem. The second question was about pre-sale momentum. I was looking at the year-over-year number. If you take four-quarter moving average, it has been a little bit down. Not this quarter, but if you take an average. I also wanted to check the operating cash flow, which historically has been volatile. So I'm just trying to understand, are we getting into a point where we have much more smoother earnings, let's say, two years from now, three years from now? Or the nature of the business is that it will remain volatile.
So not really. The nature of business can be managed in a way that it actually gives you a very even, at least year on year, even if it's not a quarter on quarter. Because you continue to have seasonal launches, and that probably gives you pre-sales, gives you cash, gives you all the numbers that the market really wants. So one can orchestrate in such a way that, you know, you see, you know, you see what you really, you know, plan for and all that. So I don't think that there is any, you know, reason for us to believe that that cannot be achieved. And again, you know, whenever one has launched a project, you see a spike, and then you don't have quarters where you don't, you obviously see a drop.
This quarter, significant contribution has come from our Mulund project, which has done really well. So yeah, I mean, you know, so you, you always have one or the other project playing out well.
Got it. Got it. One last... Sorry.
Sorry. Just to add to what Mr. Oberoi said, you know, on the operating cash flow, the other aspect that you need to keep in mind is, the moment we make out any payments for FSI or towards land or, you know, any of these premiums and all of that, and those are large and bulky and chunky. As far as the accounting bit goes, those payments are, you know, more or less, we almost always hold land towards current assets until and unless, you know, you are building something like Commerz III or, you know, what we can say, the Sky City Mall. So except for that, you know, this will always get categorized as an operating cash flow.
So what happens is, it ends up showing as a consumption of cash in operating cash flow. But, you know, that land, I'm going to kind of develop over the next few years, so it's genuinely not representative of a spend for that quarter. So that, at times, tends to kind of, you know, bring in some of that volatility. The other angle that comes in on the operating cash flow is also on account of, you know, the percentage completion method that we follow. So these two are a little bit of the accounting reasons why you see that, but the moment you take this bit out, then, you know, other than that, the cash flows are all along the kind of predictable lines, you know?
That is super helpful, Sonal. That is super helpful. Thank you for adding that. Just to wrap it up with last question, which is a follow-up on the first question, use of cash. I saw that you gave dividend of INR 2. I just wanted to understand, how do you think about it from a use of cash perspective? Is it just a minor amount that goes out as dividend, but majority of the money will go into business because it's growing so much? Or we should assume that, for example, this year, if we double it, then you have gone from INR 2 to INR 4 because business is growing. Just wanted to understand the dividend policy. Thank you. That's it.
So Praveen, if you look at our financials for March 2023, also when we announced the results and after we concluded our AGM, the proposal before the shareholders in that meeting was to declare a dividend of INR 4. So last year, our payout was at about INR 4, you know, per share. That consumed about INR 145 odd crores of you know, cash in terms of a payout. Compared to an overall annual you know, profit number, that was you know, a small percentage. Now, the other...
Based on that, what we are looking at, and you, as you rightly said, that, you know, if you have two rupees as an interim dividend, and if you declare another two rupees, you know, subsequently in the March quarter, that will still aggregate to four, which was equivalent to, you know, what we paid out last year. Even in the current quarter, I mean, if you look at it, you know, for the current half year, you know, where the profits stand at close to about INR 780 crore or INR 800 crore, this consumes about INR 72 crore or INR 73 crore of cash. In all fairness, you know, pre-COVID also, we were a consistently dividend-paying company for all years ever since we listed.
We intend to, you know, continue to down this line. For the present moment, you know, the way we are looking at is that instead of concentrating the entire dividend in one chunk at the end of the year, it also makes it easier from a cash flow management perspective to, you know, split this into two installments. And maybe later at some point of time, we could even consider it kind of making it quarterly, you know, quarter on quarter, which will kind of completely take out any kind of risk as far as operating cash flows are concerned. So, you know, you'll always continue to have enough cash that you require for the, you know, the growth capital and for reinvesting back in the business.
But at the same time, you know, and once we will have, for example, even Commerz III and the Sky City Mall operational, then we are looking at our gross rental going up from about INR 350 odd crores per annum today to, you know, into a four-figure digit. At that point of time, again, you know, you will have sufficient cash available. So the idea over a period of time is to kind of move away from an annual payout to, you know, a quarterly payout. And what you are seeing this time is just one step in that direction.
... Extremely helpful, Saumil. Thank you so much, and, congratulations for very good results.
Thank you. Thank you so much.
Thank you. The next question is from the line of Parvez Qazi from Nuvama Group. Please go ahead.
Hi, good afternoon, and thanks for taking my question. So my first question is on the much-anticipated Thane launch. So just wanted to get your views on the two projects there.
So, as you all know, we've got two projects in Thane. One is in Kolshet, and the other one is in Pokhran. Pokhran happens to be the bigger one. We are launching Kolshet first. This will be done immediately after Diwali. You know, so that, that's the timeline. And, Pokhran could follow probably a quarter later. And, yeah, we are very excited. By the way, the work started on site. L&T has been given the contract. These are five towers in all, and, these are all 60-story towers. Experience center ready, show apartment ready. So yeah, we are really excited as well and looking forward, new market for us. And, yeah, excited, nervous, everything.
Sure. My second question is about some of our other potential projects in maybe Worli, Gurgaon, Peddar Road, et cetera. Any update there would be helpful. Thank you.
You know, we don't want to speak about something that's not there in the immediate term. All of them are work in progress. Once they happen, we will obviously let you know and let you know well in time.
Thank you, Vikas. All the best.
Thank you. Thank you, Parvez.
Thank you. The next question is from the line of Abhinav Sinha from Jefferies India. Please go ahead.
Hi, Vikas and Saumil. Hi. Sir, question on Thane. So, you know, I mean, can you let us know what has led to this change in Kolshet being upfronted as compared to Pokhran? And secondly, what is the product going to look like here?
So, you know, no real strategy, you know. Obviously, there's a huge price difference between Kolshet and Pokhran. We just thought that Kolshet had a, you know, like, nose ahead in terms of work having started physically, and hence, we thought we will launch that. We are coming up with three-bedroom apartments and we have a studio apartment next to the three-bedroom apartment. So that's the typical combination. It's very similar to what we did in Borivali. And we also believe that the micro market in Kolshet is not addressing this particular product. People are making product that is, you know, it's a combination of one-bedroom, two-bedroom, three-bedroom, and four-bedroom. Four-bedroom being probably, you know, maybe 2% or 5% of the entire product.
Three-bedroom being another 20%, but their majority is two-bedroom and one-bedroom. So we feel that a product of this sort will do well in this market, and that's what we are focusing on.
Sir, what would be the ticket size here, approx?
So, you know, we don't give away the rate. You know how it is. So we want to do a special reveal of the pricing, and that'll be very attractive. And, yeah, and you'll get very, very good value for money.
Got it. So secondly, and, you know, this is on the Tardeo, where, I think we have acquired another site, close to it. So can you also help us a little bit with, what to—how to think about that one in terms of timelines, and, how does the site look like currently? Do you have to, like, spend much more on the development part, et cetera?
Nothing. In fact, you know, it's a fantastic site. It is overlooking the Willingdon Club, and it's a beautiful site. We have 260 plus, you know, occupants, or rather original occupants, who will move out, and we will start development for them and for the three sail buildings. Between what we already have and this one, we will have a little over five lakh complete of carpet area to sell. I am told that the market there is anywhere between INR 60,000, give or take. We are looking at, you know, INR 3,000 crore revenue in there as well. It's a good site, very good site. Very excited about it.
Excellent, sir. One last, with your permission, on Elysian and Sky City. Any thoughts on the next phases of new launches?
No, within this year for sure, both of them.
Okay. Thanks, and all the best.
Thank you.
Thank you. The next question is from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah, thank you so much, and congrats on good numbers. Can you also comment a bit on the Mulund project? Although the pace was, you know, quite healthy this time, but you still have almost 800+ units to sell, and project is fully complete. If you can elaborate a bit on how you think you will monetize, and what is the pace that you expect from thereon?
Hi, Puneet. We've firstly, you know, Mulund's actually done way better than what we ourselves anticipated. I see this trend continue because, you know, now the product has come on its own. People have seen the product, and I, I feel that, it's very aspirational for the market.... We hope that we will be able to clear the entire inventory in the next two years.
Okay. Next two years. Great. Thank you. That's all from my side. Thank you so much.
Thank you. Thank you, Puneet.
Thank you. The next question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.
Hi, thanks for the opportunity. Hope you guys are fine. Just one question. Since we are launching Kolshet now, you know, what's the status of Pokhran then? I mean, should we expect that to launch, you know, in Q4, or it can get spill over to Q1?
So, you know, Pokhran is also as ready. Our show apartment is ready, our experience center is ready. We have a small amendment on the plan that we want to make, because today I can't launch until and unless I have, you know, as-built drawings approved. Once the drawings are approved, it goes back to RERA. I already have RERA approval there as well, but I need to go back to RERA, get these amendments in place, and only then I can launch. I am probably three or four weeks behind what Kolshet is. Of course, the other factor is that we've not started work here, so, maybe, you know, we will be issuing contracts in the next two to three weeks, and we will start work, and we will launch within this year for sure.
Sorry, I didn't get the last part. You'll launch this year?
Financial year for sure. We will, launch-
Okay.
That project also.
Okay. Okay, fair enough. Got it. Elysian, the next tower, should be done in this quarter?
I mean, you know, within the next quarter, probably.
Okay. Okay, thanks.
We just want to ensure, you know, that you get the upside of the market also. So that's what we are looking at.
Yeah. Yeah. Got it. That's it from my side. Thank you. All the best.
Thank you. Thank you.
Thank you. The next question is from the line of Lester Poon from Pedder Street Investment Management Limited. Please go ahead.
Hi. Thank you for taking my call. I read that in general, property prices have gone up by over 10% in Mumbai, compared to the end of last year. Do you see the price level will continue to rise in the coming quarters? I understand you are usually more conservative, but the general demand and supply dynamics seems to be quite favorable to the housing market. This is my first question. The second one is about your land inventory. It seems that most of your projects, your unsold inventory is quite low. So other than Thane, do you have-- do you see other areas more interesting for you to... for your business development? Thank you. These are my two questions.
Thank you for your question, Lester. Firstly, the pricing is just about right, and I think there is, there is great demand, but there's a counter to that demand, being there is enough supply as well. So I think if developers don't get very greedy, then you know, you could see this, you know, the demand continue for a little longer. And we, we also hope that people do, and if they don't, we would certainly not be the ones rocking the boat unnecessarily to increase prices beyond the point. Unless and until input cost goes up, we pretty much don't push prices up, you know? And well, I mean, you know, we are a Mumbai-centric real estate developer.
We are happy looking at land within Mumbai, and we have also branched out in the NCR region. So we are looking at land there as well. So for us, I mean, you know, we are happy looking at doing projects wherever there is demand, wherever, you know, you know, the buyer can meet the price point that we are looking at, we're happy to indulge in that market. I hope that answers your question.
Yes, I understand. Would you be... To follow up on some of the other questions, would you be more aggressive, as since the market outlook seems to be quite favorable? And, so would you be more aggressive in buying land? Would you say revise up your price targets? It seems that if the end product prices are rising, you may need to pay more for land also. Would that be a right scenario?
So, you know, Lester, we have enough land bank that could easily take us through maybe not just one, but two cycles, you know, frankly. So we are not going to get overly aggressive. We will be prudent, and we've always been prudent, and that's why, you know, we are able to maintain a particular margin that we do. And, so we will be very prudent. I mean, you know, I personally don't want to mislead anybody by saying that we'll be aggressive because, you know, like I said, that we'd rather be prudent than be aggressive about what we buy. It should make money, that's about it, you know?
At current market price, it should make money, and if that's the case, then we would be happy looking at land.
Okay, yeah, I understand. Thank you.
Thank you.
That's all my questions.
Thank you, ladies and gentlemen. That was the last question. I now hand the conference over to Mr. Oberoi for his closing comments.
Thank you all for taking time out to attend this call. Your questions really are very thoughtful. They are thought-provoking. They lead us to thinking, you know, deeper into what we do. Like I always say, that we are always available, please reach out to us, and thank you once again. Happy Diwali to you and your family as well. Thank you.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Oberoi Realty, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.