Ladies and gentlemen, good day and welcome to the Oberoi Realty H1 FY23 and Q2 FY23 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. For the duration of this conference call, all participant lines will be in the listen-only mode. This conference call is being recorded, and the transcript for this, for the same may be put up on the website of the company. After the management discussion, there will be an opportunity for you to ask questions. Should anyone 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, plans, strategy of the company, the future financial condition and growth prospect. 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. Thank you, and over to you, sir.
Thank you. Good morning, good afternoon, good evening to all of you as per the time zones from which you have logged in. Welcome to the conference call Q2 FY 2023, our half year FY 2023 results and business updates. Thank you all for taking time out for this call. Before I begin, I would like to share with you a few quick business updates. I'm happy to share that we've had a very good quarter with Worli sales post the receipt of occupation certificate in June 2022. You have noted the substantial appreciation in realization compared to the earlier sales also. There is a healthy increase in the residential top line and bottom line compared to H1 last year. This is despite the challenging macro economy locally as well as globally.
Our residential business continues to outperform on account of robust demand and lack of credible suppliers. Consumption levels in the mall are more than back compared to pre-COVID levels. The annuity assets business is also witnessing a healthy margin. With this upcoming festive season and our planned launches, we are optimistic that the consumption trends in residential and retail will continue. You all know that we will open this up for question and answer and happy to take it from there. Thank you. Both Saumil and I are present and happy to answer any of your questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.
Yeah. Hi, hi, Vikas. Congratulations on a very strong quarter on Three Sixty West, especially in Three Sixty West. Eight units you have sold this quarter, so despite a huge 50% increase in pricing. Just wanted to understand how do you see the momentum for this project going ahead? Do you think for the rest of the year you can replicate similar success in this project?
Thanks. You know, I can only tell you that this project's time has come. Whoever has visited the project, the only reason he does not buy or will not buy is because he doesn't have the budget. Otherwise, it ticks all the boxes. And uh we have a fantastic pipeline and virtually no competition, you know, because there's nothing that is ready and available. You know, there would be people, uh you know, launching something which is probably two or three years away. Here you have an occupation certificate in place, lock and key, you move in instantly. And I wanna tell you that, uh you know, like if everything goes well with God's grace, you'll only be more and more pleasantly surprised going forward with every quarter.
Great. Just coming to the next question is on launches. Vikas, you have said that in Diwali you look forward to launch Thane. Not hearing anything on the ground there. If you can update what is stopping us from launching this project, and also if you can update on the opening of new towers in Borivali and Goregaon.
You know, as far as Thane is concerned, we actually have the show apartment ready. We are literally, you know, we've covered it and kept. I don't know how many of you know or remember having read an article about, you know, the new uh Eco-Sensitive Zone uh that had cropped up in uh August. Luckily, that died in the previous quarter itself. Supreme Court then again intervened and, you know, clarified. Mumbai, Maharashtra had already defined its zone. In another matter, you know, when the court was hearing, I think it was not brought to the notice of the honorable judge. They passed an order saying that all the properties within x kilometers or something, wherever there is a forest that, you know, work stops.
Literally, there was a lull. But luckily, you know, the government moved quickly. The courts realized that, you know, they were not apprised, and they reversed it. We are back in the saddle, and uh I hope within this quarter we should be in a position to uh get going. You know, the unfortunate issue was that uh nothing was happening when uh this court order was in place. That also is resolved. Hopefully, you know, again, fingers crossed, we should see within this quarter we start our launches both including Borivali. Even Borivali was the same issue again, but now all of that is back, and we are ready to go.
Kolshet, Pokhran, and Borivali, so all this may happen during this quarter?
Yeah, yeah. Hopefully, yes.
Okay, great. Just the last question, Vikas. On the business development, I think last year, 1Q FY 2022, you spoke about adding smaller projects of redevelopment of INR 2,000 crore plus non-MMR, some FAR happening. Still, now we are waiting to hear from you. Going ahead, if you can just highlight your strategy, how will you go about both the things? Because redevelopment is really picking up its time in Mumbai, and we are not there. Even MMR media reports do suggest you are looking out for something, but have anything just to like if you can touch upon these two points. That's my last question.
You know, again, like, see, as far as BD goes, we are very aggressive on BD, whether it's redevelopment or whether it's anything else. Like we are close to some redevelopment projects. In some of them, we have been awarded the contract as in like, as a preferred developer. But I don't want to talk about it right now 'cause honestly end up building pressure for my next quarter, what happened there. All I wanna say is that we are very committed, very aggressive when it comes to, you know, any sort of development, be it redevelopment or business development for new land parcels.
And one positive is that we took up a project next to our Borivali site, which was an SRA redevelopment. 95% of the site is now cleared, so this gives us a lot of heart that, you know, we being an organized developer were able to, you know, rather the SRA was able to see value. We don't have any intermediary. We have directly gone to the some developers . We've convinced them that we are a good option, and they vacated. Site is clean and we are, you know, starting construction soon. This is next to Sky City, actually adjacent to Sky City. You know, some more development potential we are getting unlocked now.
This is residential or commercial? Because I think you were doing commercial. You were planning to do 1 million sq ft of commercial.
Correct. This is exactly commercial right now.
Okay. Okay, Vikas. Thank you. Those were my questions. I'm done. Thank you.
I stay on it.
Thank you. The next question is from the line of Puneet from HSBC. Please go ahead.
Yeah, thank you so much and congratulations on good sales. Can you also talk about what is the update on the GlaxoSmithKline land parcel and how's the leasing for the balance, Commerz III, turning out to be?
Again, thanks, Puneet. Firstly, on the Glaxo land parcel, now internally, we have two choices. One is, you know, either we do residential or we do commercial and a mall. We need to take a call, and it's high time we do that. Both numbers look equally good. And uh it's a, you know, it's a choice one needs to make, what uh we need to go ahead with. We hope to now decide within this quarter and move on with that. As far as uh our uh Commerz III, we are looking at topping up our construction by March and then one more year for the, you know, finish and operation. We are talking to large occupiers, and there is a very, very good steady flow of demand.
I mean, you know, people who want it. Again, we were amongst the only few who probably built something post-COVID. You know, we were anyway committed, so we went ahead. You know, all this, we defied this work from home concept. I mean, we didn't have a choice, frankly, because we had committed. We went ahead and built that. In hindsight today, we feel that we are lucky we went ahead and made this development. We literally have a few years of what you call lead from anybody who would want to start today. Yeah, again, no doubt of demand. We are now getting ready with some of the mock-ups, and we've done visits. IPCs have come.
They've loved the way the whole flow played and the way things have worked here from design point of view. It's absolutely, you know, top-class commercial building. It could be anywhere in the world, that sort of product. You know, little over 50 elevators and all. Really not done, you know, in India almost as yet, that sort of product. Very confident, not worried about it at all.
Great. That's useful, sir. Thank you very much. Saumil, just one question for you. In the cash flow statement for first half, there is a INR 650 crore change in loans and advances. Can you talk about what exactly does it relate to?
Sorry, which, in the?
Cash flow statement for the first half. Change in loans and advances of INR 650 crores, I guess.
The financing cash flows is only about INR 80 crore.
Sorry, no, in the working capital, in the change in working capital part.
Operating cash flows are at about INR 150 crores. Investing cash flows is about INR 913 crores. Investing cash flows is, you know, the CapEx as well as, you know, some of those aspects which are there. You know, it's been pretty standard. I mean, there has been no unnatural movement in all fairness to it.
All right. All right. I'll take it up separately. Thank you.
I mean, happy to take up with you offline, but, uh you know, uh the investing cash flows represents the investments made in, uh you know, the capital assets. That's all.
Understood. Thanks. Yeah. Okay, great. All the best.
Thank you. The next question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.
Hi. Thanks for the opportunity. Again, on cash flows, Saumil, if you can, operating cash flows were, you know, negative INR 160 odd crores this quarter. While collections we have seen it, they were strong on quarter-on-quarter basis. I can guess, I mean, there were some land or premium investments, if I'm not wrong. If you can highlight on what projects and how much was the quantum.
These represent both advances towards certain lands as well as, you know, for TDR. Once those transactions kind of culminate, then I think we will be in a better position to, you know, discuss that with you, Pritesh. As you're aware, and we have told you all earlier also that, you know, for us, whenever we have these transactions related to land or, you know, related FSI, and unfortunately for me, since that becomes a part of my current asset, it becomes a part of my working capital changes, and hence it reflects that number. If you were to take out the impact of that, then this again is a very healthily positive number, you know.
Sure. Absolutely. I mean, yeah, clear on that front. In terms of realization for Three Sixty West this quarter, we are seeing somewhere around INR 80,000, over INR 80,000 kind of a number, INR 80,000 per sq ft. Is it something like optically, I mean, taking it higher or that's the reference rate we can take it ahead? Because I think carpet rate is somewhere around INR 90,000-INR 95,000 for the transactions we have closed and have been reported in media. How should we look at, you know, the rate which on the saleable area that we see?
You know, now everybody's moved on to RERA carpet, and these rates are RERA carpet rates. You know, one other thing I want to tell you is that there are some of the sales that are done previously who have been living on allotment letters and things like that. You may see, like, you know, discrepancies in sale value, but these would be pertaining to some old documents being registered today only because now occupation has come. Some of the people were paying us only on allotment letter and all that. The new sales are at close to INR 1.1 lakh on RERA carpet.
Sure. Got it. Thanks for answering my question, and all the best.
Thank you.
Thank you. The next question is from the line of Saurabh Kumar from JP Morgan. Please go ahead.
Hi. Just two questions. One is, comment on this Worli, if you have recognized revenues of INR 3,300 crore, yeah, as a profit. The margin, correct me if I'm wrong, is just, you know, 18% of this project. What am I missing here?
Sorry, repeat.
Profit margin is? You recognize INR 100 crores of JV income, right?
Correct. Yeah.
Effectively, at the project level, you would have recognized INR 300 crore. One third will be your share, right?
Correct. Basically what happens over here is, our share of profit over here, I mean, sorry, on the P&L side, it is about 32.5%, Saurabh.
Yeah.
That is what we kind of take, and that is at the gross level. Then out of that, you take out, you know, multiple things, expenses as well as taxes. This is not a full consolidation in all fairness. You know, if you'll see, it's, uh you know, just a single line item which appears.
But-
This is a.
Yes.
This is a share of profit net of tax which flows into ORL.
I agree. My point is the net margin on the project will be about 10-odd%. This is because you've recognized INR 100 crore.
The project profit would have been something like INR 300 crores on a recognition of INR 3,300 crores. Is that?
Basically what has happened is as far as the earlier ones are concerned, you know, on the INR 3,300 crore, we have already been recognizing revenues from the last year itself, Saurabh. It is not the entire INR 3,300 crore which comes into play now. In this quarter it is only the INR 600 crore which comes into play. Because again, when I received the OC in June, that's when I kind of trued up the financials and I had a share of profit till then. After that, every quarter from here onwards, what you will see is only revenue recognition and the corresponding profit element of that from that quarter view.
Okay. The incremental margin will be how much, Saurabh, on this? You were thinking it would be something like 60 odd %. Will that be,
I'll have to work that out and come back to you.
Okay. Got it.
Okay.
Thank you. Thank you.
Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Thank you so much, and good evening, everyone. Saurabh, just on the previous question, this INR 100 crore profit recognition that you have done for Three Sixty West.
Yeah.
Is it on the uh revenue recognition basis or collection basis? Because collection was INR 400 and revenues were INR 600. Just wanted to-
It's on a revenue recognition basis, Sameer. For all of our projects, you know, including Goregaon, Mulund, Borivali, our revenue recognition always proceeds on the basis of agreement values, and it has nothing to do with billings or collection. Accounting will work at a corporate level on an approval basis. We consider it on the basis of that, you know, and not the cash collection.
Okay. Got it. Very clear. The second question is on the two rental assets, Commerz III and Sky City Mall. Can you just share with us how much you know CapEx or construction spend is left to be done, and how much has been done on both these projects?
For that, you know, I'll have to get more deeper into some of these numbers, Sameer, but I'll take a stab at doing that and come back to you separately.
Okay. Just broad level would have been okay, you know, if-
Yeah. About INR 400 crores each.
Is pending, is it?
Yeah. One second. Just give me a second. Let me come back to you on that. No, I have some numbers over here, but, you know, you want to know the balance spend, right?
Yeah, that's right.
Let me come back to you on that.
Okay. One final question. Vikas, how are you thinking about the prices going forward? Did you, aside from Three Sixty West, take any price action in 2Q?
You know, I wanna tell you all that, frankly, input costs have gone up, right? From manpower to material to approval to all other costs have gone up. We have, you know, we have to increase prices. Worli is already, you know, out there. We have increased prices in Goregaon, we have increased prices in Borivali and in Mulund, in fact, across. You know, there is no choice. There is no option really. I really, you know, fear and wonder how other developers are going to, you know, deliver if they do not increase prices, because costs have gone up. You know, interest costs have gone up for developers also. There is a huge input cost. We have, you know, had to take them up, and we have done that everywhere.
Vikas, you're talking about 2Q specific or you're going a little bit more further?
Going forward. I mean, we have taken our decision only a week ago, and we've now, you know, like already passed it on to the new buyers now. Obviously, we don't increase prices for flats that are sold, but wherever we haven't sold, the inventory will have to go at a higher price. Really, I mean, you know, we are doing the math and wonder how these guys are able to sell and, you know, will deliver. That will become a question mark, and that actually worries us because then again, you know, developers get a bad name.
Yeah, sure, Vikas. Just to conclude on that, this increase has been, say, roughly from first October onwards, and if you can just quantify, is it roughly about, you know, 3%-5% or is it what kind of a price increase have you taken?
You know, we increased this only a week ago, so I wouldn't say it's from first of October. It is probably somewhere around tenth, twelfth of October. You know, somewhere we've increased 5%, somewhere we've increased 10%, and so on. You know, it's not like a standard increase. Different projects have been given you know different treatment and you know like also depending on different stages of the project, we've gone out and done that. Like Borivali, we hardly have anything to sell today. In our tower A and B, if you've seen, Goregaon, we hardly have anything to sell.
You know, if you look at the comparative product, which is Exquisite and Esquire, you know, they are selling at a particular price. What we've also done is we've been prudent. We've discounted the value of the existing apartment, and we have given him the benefit of, you know, the pre-booking and all that. We made an attractive proposition, but he has to appreciate that the ready apartment is selling at an X price, and this is discounted to that value, you know, today. That value is certainly higher because all the ready product is sold and it's selling today at, you know, at INR 40,000-INR 50,000 on carpet in Goregaon. I mean, you know, like, there is no dearth of buyers there.
You've seen how A and B tower have been sold out. That way. We hardly have anything in A and B. Now, obviously, when we launch C, we will think of a price strategy and then do that. It's imperative for us to do it. I mean, frankly, you know.
Yeah, sure, Vikas. Got it. Thank you so much.
Thanks.
Thank you. The next question is from the line of Kunal Lakhan from CLSA. Please go ahead.
Yeah. Hi. Hi, Vikas and Saumil.
Hi, Kunal.
Yeah. Firstly, on the Thane project, right? You still sounded a little apprehensive in terms of launch this quarter. I thought that issue is resolved, as you said. What could happen that could make the launch spill over to next quarter?
You know, frankly, it's just sequencing whether nothing, really nothing. Actually nothing. I mean, I don't know why you're making it out to be apprehensive. I mean, you know, one has learned to kind of build in some cushion just in case it doesn't happen then probably, you know. There is really no apprehension. Actually, I did not even think. Because you're asking me, I'm saying that maybe it's just become our second nature to be a little more cautious when we commit and, you know, like, surprises like these just keep coming, and, that's it. Otherwise, there is really nothing.
Sure. Thanks for clarifying. Secondly, on Worli, right? We have around, say, unsold inventory of about 150-odd units now?
No, less than that.
Less than that, no. We have sold about 75.
77.
77 out of, totally close to about, 200. 125 odd.
Okay. What will be that monetization timeline that you will be looking at, I mean, going by the current traction that you are seeing, the pipeline of inquiries that are there, what kind of timeline you're looking at, monetizing this project?
You know, this surely will qualify as forward-looking statement. All I can tell you is we are committed to selling. Like I said, you know, there's tremendous demand. We are probably the only one with pole position there. Loving all the attention we are getting from the buyers. Respect that, love that, and want to honor that also, and want to continue to sell it. Don't want to become complacent. Like I said, there's no problem. I mean, I genuinely don't want to put in a timeline, but you know, the product is ready for people to enjoy, and we certainly won't come in their way. You know, we'll be happy to sell.
You know, in your opening comments, you did mention that, you know, the only reason why people are not able to buy it is because they can't afford it. How do you look at that in the context of the price hikes that we have taken, like, you know?
No, no, I didn't say that they cannot afford it. The only reason they will not buy, as in if somebody comes in, it is so compelling as a product that he'll want to buy it. I mean, you don't buy it only because let's say the person who's coming in doesn't have the money. Barring that, it ticks all the boxes. That's what I meant. It's not about. There are plenty of people. You know, I want to tell you all that nobody seems to be buying just one apartment. People are buying one, two, and three apartments, amalgamating them, joining them, making a duplex out of it, and all that. Really, it's like a splurge of, you know, real estate volume. People are buying 12,000 and 14,000 sq ft and, you know, making.
I mean, I'm telling you, I've been to people's homes, and it's such a delight to see them, you know, make their own version of the shell that I give them and, live so beautifully. Really it's so amazing to see. These are people with deep pockets bringing their own set of designers. They've been there, seen the world. They bring the best of the world and put it in. Again, I must say that, very, very fulfilling apart from the fact that it's making us money. It's very fulfilling to see that how people are adapting to what we have made. You know, the entire outer living area, the inside apartment. No building has one floor plate, which is, 5.5 or 7,000 sq ft at single level.
You know, when people make a duplex out of it's INR 15,000 and then INR 12,000. The effect is something else, you know. Beautiful. Like, really, I must say that you know, really feel good about it.
Sure. My last question was on if you exclude, say, Worli this quarter, our overall sales excluding Worli were about INR 550 odd crores, which was lower than what we sold last quarter or even in previous quarters, right? Especially like projects like Borivali and Goregaon, where we usually sell well, were quite tepid this quarter. How should we read this, and what's the outlook there going forward?
You know, you should read it very nicely and happily because there is really nothing to sell in Borivali and Goregaon, which means that we have to make a launch. I mean, you know, we have to launch our next phase, and we have so much demand for the next phase, I can't tell you. I mean, actually, there are people who are telling me: "You know what? I don't care when you open, take my money." I tell them: "Listen, I can't do that. I need to follow a certain decorum, and that's how I will do it." Because we haven't launched, we haven't sold. I mean, whatever was like, you know, the remaining apartments that got sold. And now, you know, we have tremendous demand. I mean, like, people available for new purchases.
Elysian, it shows that we have about 1 million sq ft or so of inventory, unsold inventory.
Sorry.
Elysian, it shows that about 1 million sq ft order of unsold inventory. Wouldn't that be like-
You know, there is like you're talking about the entire A, B, C, D.
Yeah, the launched inventory.
Yeah.
Kunal-
25 lakh sq ft.
Out of that, we have sold INR 15 lakh.
15 lakh sq ft.
There is 10 lakh, but in all fairness, you know, this building is also going to take another 4 years to build, Kunal. So we have got that time period over which also we can sell the balance.
Yeah, 60% is sold.
Sure. All right. Thanks, and all the best.
Thank you so much.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Vikas Oberoi for closing comments.
Thank you all for taking time out for this call. We look forward to hearing from you on all the ongoing on an ongoing basis. You know, please feel free and reach out to us or our investor team, you know, for any other additional questions that you have. Thank you, and Happy Diwali to everybody. Thank you again.
Thank you. Ladies and gentlemen, on behalf of Oberoi Realty, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.
Thank you.