Ladies and gentlemen, good day, and welcome to the Oberoi Realty Q2 FY 2022 Earnings Conference Call. We have with us today on the call Mr. Oberoi, the Chairman and Managing Director of the company, and Mr. Saumil Daru, Director of Finance of the company. Please note that this call will be for 30 minutes, and for the duration of this conference call, all participants' lines will be in the listen-only mode. This conference call is being recorded and a transcript 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 fact and may be forward-looking statements, including those relating to general business statements, plans, 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. 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, and welcome to the conference call Q2 FY 2022 results and business updates. Thank you all for taking time to attend this call. I hope your family and you are doing well and keeping yourself safe. Before I begin, I would like to share a few updates. I'm sure most of you would have gone through our press release and would have seen that we launched our next phase of Elysian project at Oberoi Garden City on 28th of October. We received an overwhelming response from our customers and clocked in INR 787 crore of gross booking. The transactions now for both ongoing phase of Elysian and our completed projects, including Exquisite, continue to be equally strong.
Our Sky City project crossed a cumulative booking value of INR 4,000 crore with a total area sold in excess of 2.5 million sq ft. Mulund also continued its upward trajectory with Eternia and Enigma together crossing a cumulative booking value of INR 2,200 crore with a total area sold in excess of 1.5 million sq ft. The sale growth across all our products make us feel very optimistic, both overall demand environment, the volume recovery, along with the supply, site consolidation and also our ability to deliver quality gives us immense confidence for the upcoming launches. I would also like to let you know that going forward, we would like to make our interaction more focused and we will be opening the floors for question and answers straightaway.
With this, I will let the question and answer queue assemble, and I will be happy to address your individual questions. Thank you.
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 the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Anyone who would like to ask a question, please press star and one at this time. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Puneet from HSBC. Please go ahead.
Yeah. Thank you so much, and congratulations on, you know, great booking. Clearly shows that there's a lot of demand for your product. My question is on Three Sixty West. We were expecting a similar performance there. That didn't happen. What's happening there? If you can give more color.
Hi, Puneet. Thanks for the compliment, firstly. We are waiting for occupation certificate to happen for Three Sixty West, and then we will start sales there. I am hoping that it should happen within the next 30-45 days. Once that happens, we will see the momentum there also. We have so much inquiry and you know, there is absolutely no resistance on price on that product. The product is absolutely complete now and many of them are doing their interior finishing. Once we have OC, which like I said is another 30-45 days away, we will see similar you know sales trajectory there as well.
Okay. Second, Pro, any update on Thane launch?
you know, we were hoping to launch Elysian more like September, but that happened in October. Now we are hoping that we will be able to launch Thane before December. within this quarter. Fingers crossed. Everything ready. Our plans are ready. you know, just waiting for a few final approvals and, then we'll get cracking on that one.
Right. I'll come back in the queue. Last question. Any thoughts on price increases in your Goregaon project since there is a great amount of traction there?
If you would have noticed, the second Phase has already begun with higher pricing and there is absolutely no resistance on the price mix. We've been able to push prices up by, you know, INR 500-INR 1,000 per sq ft basis, the view and other things. Not only that, we've increased the price even in Powai. To answer your question, you know, it's imperative not only for me but most developers because the input costs are going up and whoever does not increase price, you know, it'll be very difficult for them to deliver the project.
You know, I mean, I really would want to know how they would manage to deliver the project without increase of price, given the fact that, you know, input costs are going up, commodity prices are going up, and, you know, we are likely to hit hyperinflation. We are for, you know, that price adjustment. I wouldn't even call it price increase. It's just, you know, the increase in input cost needs to be passed on.
Understood. Thank you so much and all the best. I'll come back in the queue.
Thanks, Puneet.
Thank you. The next question is on the line of Parikshit Kandpal from HDFC Securities. Please go ahead.
Hi, Vikas. Congratulations on a great phenomenal sales in the phase II. My first question is, last time you had said that business development on the redevelopment side, you're setting up a team, and you're also looking to hire a non-MMR CEO. Any update on that?
Sorry, I completely missed your question. Can you repeat that question again, please?
You said the last call, you said that you're looking to build a business development team, a separate business development team for redevelopment projects.
Mm-hmm.
You're also looking to hire a non-MMR CEO for
Correct.
Any updates?
Yes. Thank you. We have, you know, we are close to closing somebody. You know, like we have hired somebody rather, but, you know, they're serving their notice period and so on and so forth. We would wait for that to happen. I mean, all companies have three-month notice and so on and so forth. Yeah, that's happening as we speak.
Okay. The second question was on HBS Rialto project. Any update there? How's the progress going on, and when do you think that project can be brought into the market?
Sorry. Sorry, come again. I think your voice is blurring a little. I'm not able to hear you very clearly.
Yeah, Vikas. Is it better? Hello?
Better. Yeah, a little better.
Yeah. I was asking that on the HBS project, the Shivs ai society. Any update on that? How's the progress there, and when do you expect to launch that project?
You know, HBS is a complex project. There are a lot of layers. I mean, unfortunately for us, the society has signed as a co-promoter and, they've also mortgaged their property to the banks and, that needs to be sorted out before we can move any further on that. We knew that there is a little bit of a hair in the property, but not so much. Obviously we are treading cautiously. Luckily, we haven't put any money in the project, but we wanna make sure that, you know, whatever we take, we can deliver. Few surprises, but, like I said, that we haven't invested monies in it. Continue to work towards cleaning it up and ensuring that, you know, whatever can be done to do the project is being done.
Here again, we have 192 members who need to understand that they have in turn, you know, created a lot of, you know, I would say, hurdles in their own development, you know, like by doing these two things. We have to tread very cautiously on that.
We continue to remain in the project, right? We're trying to clean up and get it going.
You know, we like we continue. It's a two-party, you know, effort. It can't be singularly at our end. I mean, you know, the project needs to be viable for it to be, you know, paying off whatever had been created by the erstwhile developers. We continue to look at it, but like I said, it'll need both the society and us to ensure that this is sorted out.
Okay, Vikas. Thanks. Those were my questions. Thank you.
Thank you.
All the best.
Thank you. The next question is on the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Hi. Good afternoon, everyone. Vikas-
Hi, good afternoon.
Just talking about the pricing environment, how are you thinking about other sites, more specifically, Borivali, you know, Mulund and Worli SL?
On the pricing front, Borivali, we are continuing to maintain pricing. You know, we have enough margin there. So is Mulund. In Worli, like I said, we feel that we are able to push the prices higher. One, there is hardly any competition. The product is ready. Once we have OC, you know, we will be able to command that price. This is where we are on the three projects on pricing.
Okay. You're not thinking of taking any price hike in Mulund or Borivali?
Not really. Not in Mulund and Borivali. We are continuing to maintain the pricing. In fact, if you see, in Goregaon, we had started Elysian Tower A much lower than the existing product, and we didn't have any supply, almost any supply left in Esquire. The first project that will get ready is now, you know, whatever, three, four years away in Goregaon, and people realize that. At one end, there is a huge, you know, traction on the ready product. Booking also has to be doing well. What, you know, we tried to communicate in our press release was that between January and October, we were able to sell INR 2,700 crores worth inventory in one single location, you know, and this is a very big high.
By the time we finish this year, I mean, you know, if things go well, we could probably be crossing INR 3,000 crores in one calendar year out of one project. That genuinely gives us the confidence that going forward, you know, ORL can actually achieve significant numbers when all these projects start really showing numbers, including Thane. I mean, you know, we want to set ourselves up for the volume game in all these projects. I mean, even in NCR, our idea is that each project should ideally give us INR 1,000 crores, and as the project progresses, you know, it should actually end up giving us anywhere between INR 2,000 crores and INR 3,000 crores. This is what really our drive effort is all about.
We want to tell the market or demonstrate to the market that, you know, like the run rate at which, you know, we were originally envisaging the INR 500 crore and the INR 800 crore every year out of single project can really be pushed. You know, it may not be to INR 3,000 crores, but certainly to INR 1,500 crore and INR 2,000 crore. We now have that belief and aspiration to do that in other projects. Yeah, it's really the idea.
Okay, great. Just one more question, and that is on the balance sheet. How do we see next 12-18 months, in the sense that if you keep in mind the construction cost, the CapEx from mall and office, et cetera, do you think the residential cash flows is going to be sufficient to fund that? Or do you think the leverage is going to go up over this time period?
As far as the office goes, we already have debt in place, and it's a long-term debt. It's you know, to be repaid in 11- years. It's sub 9%, so it's really cheap, and it's easily taking care of the rentals that we have already committed, where we have been committed by you know, our tenant. That's absolutely no issue. The residential cash flow will certainly take care of its own development. That's one. We also want to use the residential cash flows in buying new land parcels. You know, our strategy has always been that we hypothecate the receivables of these ready assets to banks, take money and buy a land parcel, like what we did in Thane. You know, Esquire cash flows literally funded the entire acquisition of Thane.
Once Esquire sales are done, Thane will literally be sitting, you know, free of debt on ORL, which is amazing, you know, and it'll start throwing cash for itself. Similarly, we have, you know, enough receivables out of Mulund and Borivali once these projects are ready, so we can even do the same thing there and use that cash flow. Going forward, I don't see, you know, any additional debt or, rather any big debt. All the growth will very easily be managed out of the cash flows that come in. A few pop up here and there. Again, because we are building these, you know, annuity assets, they do get built at the back of certain debt. But otherwise, we don't need. I mean, all our.
Look at Elysian, I mean, you know, INR 750 crore, anywhere between 35%-40% of cash will come to us. A lot of these are construction linked sales. That money will come in, and it kind of takes care. I mean, A and B have taken care of all five towers literally of Goregaon, you know. Then imagine the inventory that will get ready, even if, let's say, one doesn't sell, but that's not the idea. The idea is like to continue to sell, you know. This is how it is.
Okay, great.
We're very conservative, nothing surprising for anybody, you know. We aren't changing our strategy at all as such, you know. I think the aggression will come more out of sales, which you saw in Elysian and other projects, and that's exactly what we wanna stick to.
Okay. Got it, Vikas. Very helpful. Thanks.
Thank you. Thank you.
Thank you. The next question is from the line of Samar Sarda from Axis Capital. Please go ahead.
Hi. Good evening.
Hi, Samar.
Hi, good evening, Mr. Oberoi. I hope all is well.
Good evening, Samar.
Mr. Oberoi, I had a couple of questions. One, on the Three Sixty West, I understand the project is converted from, like, 1991 DCR to 2034. If that's the case, any approval related payments were done in quarter two or quarter three?
Thank you, Samar. Thanks for asking that. Yes, we have converted our project from 1991 DCR to 2034, which means we have taken all the earlier approval area that was free of FAR into FSI, and we have made the requisite payment before August, because that was one window where we were getting to pay at the discounted price. That's been done. This is why we thought, you know, that because we are now gold plating the project so much, why not wait until you see and then, you know, sell these in the market.
Fair enough. Thanks. The second question was with regards to Elysian. Like, you've sold roughly 46%-47% of Tower A and now 40% of Tower B. I understand most of the units sold in Tower B are 4 BHKs. So, any likelihood of the next tower happening in this fiscal or you would want to push it next fiscal that you're seeing so much demand right now?
You know, if you see tower A, we did sell similar numbers and then literally in the next six months double that sale also. When we have a tower A, also we had similar numbers. Then you know the sales continue. We are hoping that tower B also the sales will continue. We have Thane in our hand. We've got to take momentum in Three Sixty West. We will probably be launching another tower in Borivali, because again, Borivali is also doing well. We've got higher floors of Mulund that will come into play and all that. Not really. I mean, you know, we may not. We will not launch another tower in this financial year for this financial year for sure.
We have many other launches lined up and we'll keep our company busy with that.
Great. Just one last question, if I may. Now that the market is improving, like a lot are not doing well or also trying to sell stock probably much cheaper. Do you think this will affect like land deals you're looking at either with like developers or projects are stuck or even with landlords where like they're realizing that the market is doing good, there might be price increase probably a year down the line and hence land prices might go up a bit?
You know, I don't know how many people will be in a position to buy land. Like I said earlier that if developers don't factor in the increase in cost and continue to sell at the same prices they were not able to make money then. I don't understand with increase in cost and, you know, delay in and adding to the interest cost, how will they literally even deliver? That is one question mark. I would like for myself to know how all other developers are doing, you know. People who have defaulted or not lived up to their word. Are the customers going back to them? If the answer is no, then this really leaves very few of us.
I mean, you know, let's say 20 credible developers in India, you know, to literally build all of India. Given that, I don't see that land prices will go up and we will have enough time to really look through and pick a good land parcel, pick a good seller, and only then do a deal.
Great. Thanks for this and happy Diwali to your team and yourself.
Thank you. Thank you, Samar. Happy Diwali to you and your family.
Thank you. The next question is on the line of Kunal Lakhan from CLSA. Please go ahead.
Hi. Good evening, Vikas.
Hi, good evening.
Since you have made the hire for the CEO for the non-MMR market, there must be a solid plan here, right? So just wanna understand how much, you know, capital do you plan to deploy in non-MMR projects say over the next three to five years? How much do you think the markets, these markets will contribute in terms of sales? Also, like, do you think that the, you know, non-MMR projects would have the same margins as, you know, our MMR projects?
Firstly, you know, we want to take a baby step. A step would be anywhere between 2-3 million sq ft of one site. We wanna build a team and then do it. You know, we put our thought on 100 years. We want the company to live its lifetime and not mine or your lifetime or our lifetime. We wanna be very calculated. We wanna be very conservative about this. We will take one or two projects at best. It won't be more than 2-3 million sq ft. You know, our investment will be less than INR 1,000 crores. That's the strategy really.
Sure. What kind of ROIs do you expect from?
You know, again, even the NCR market, there are very few quality players. Again, it's out of good quality players, and we feel that people really appreciate the fact that, you know, this is a professional company that has delivered quality and in time. I think we will be able to get the desired premium and similar margins that we get anywhere in Mumbai.
Sure. That's helpful. Secondly, any update on the leasing demand for Commerz III and also any update on the lease plans for our entire portfolio?
Yes, sir. We'll call you back in.
All right.
Ladies and gentlemen, we lost the line from Mr. Oberoi. We request you to please hold while we reconnect him. Ladies and gentlemen, please hold the line while we reconnect Mr. Oberoi. Ladies and gentlemen, we have Mr. Oberoi reconnected. Over to you, sir.
Hi. Sorry. Can you repeat your question, please?
Yes, sir, because I was asking, basically we are seeing some improved sentiments around, you know, inquiries for office spaces. If you can give us an update on the leasing demand for Commerz III, and a related question is any update on the lease plans for our rental portfolio?
Okay. Firstly, you know, the good news is that there is no cancellation or, you know, like, our existing lease continue to be strong. That's the positive. We continue to now get inquiry for new offices for Commerz I and Commerz II. That again is a positive. As far as Commerz III is concerned, we haven't started marketing. It's a little too early. We are in the process of creating a like a show office, and you know, so that we can explain to people how this is gonna eventually look. I must say that it's really coming out well. We're now I think on the 17th, on the 18th level, and we are doing our external façade, and the building is really looking gorgeous.
I don't see any problem there. As far as land goes, we want to have our critical mass, you know, and only then we will do that. Until then, you know, we'll continue to add it to our income of ORL as a rent portfolio, like what we do.
Sure. Just to follow up on that, by when at what stage would you open Commerz III for leasing?
Yeah. Again, you know, we haven't proactively done that. But maybe, you know, probably either beginning of next year or probably first quarter financial year, something like that.
Okay. Sure. Thanks so much, and wish you a very happy Diwali.
Happy Diwali to you as well. Thank you so much.
Thank you. The next question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.
Hi, Pritesh.
Hi, Vikas. Thanks for the opportunity. First question is on the CapEx that we have done this quarter as well last quarter. I think we have somewhat around INR 700 crore of payments for FSI and commercial CapEx. This quarter we are seeing similar numbers. Just a bit of detail into that and what is the expectation for this year? How much would we be spending?
You know, can I let Saumil take this offline with you because these are very detailed? I'll let Saumil take that separately with you.
Yeah, Pritesh. Saumil, can we discuss some of this subsequent to the call?
Yeah. Sure. No problem. With regards to the society redevelopment, I think since you have taken one project, Shiv Sai, where you have
Hello?
Mr. Sheth, we cannot hear you.
I have again lost him.
I think we have lost him, sir, so.
All right. We'll move to the next question.
[cross talk]Yeah.
The next question is from the line of Amandeep Singh from Ambit Capital. Please go ahead.
[cross talk]Hi, Amandeep.
Thanks for the opportunity.
Yeah. Hi, sir.
Vikas, firstly on your Mulund projects. While these projects witnessed healthy traction in 2Q, we note that there has been some impact on pricing versus the last couple of quarters. Firstly, can you help us with your thoughts on the same? Also in October month, we note that the Sheth Developers had launched a project next to yours, which witnessed a healthy traction during the same month. Consequently, if you could give us some sense on how has been the last month for you.
You know, for us, last month has been exceptional. In fact, in all projects, you will see it in our next quarter, number one. Number two, there is no reduction in price in Mulund. If at all, these must be lower floor flats sold, and hence, you know, you would see a lower number. There is no reduction in price. You know, none of these sales have affected our velocity in Mulund. We've done really well. We continue to do well. Again, you know, the clubhouse is almost complete. Show apartments in the building are complete, and people are now going there and really seeing the difference in quality that we have brought in, and you'll see that.
I mean, our apartment sizes are also very different from what Sheth is offering.
Sure. That's helpful. Secondly, you indicated your plans for outside Mumbai. Just a continuation on that, will it be possible to give us some sense on what would be the business model, like land purchase or JV/JDA initially?
You know, we prefer doing land purchase, and we would like to stick to that. Even if it's a JDA, then it will be only area in return. We don't want to, you know, have a very complicated relationship with landowners. We would rather value the property and give them area in return and be done with it. You know, we don't want to do any other model.
Sure. Thank you. Just lastly, on the commercial bits, will it be possible to help us understand how has been the physical occupancies at your assets currently, and any sense on the fresh lease ups at, say, Commerz, et cetera, picking up?
Physical has been good. I would say most offices are working anywhere between 50 and, you know, more percent of people walking in. I see, you know, now, like our office is working like a regular office. I think, most people are now going back to office and I mean, this is exactly what is very heartening. I feel, you know, we saw a big, like, offtake in residential. The next in line is commercial and which is not too far away. You'll see similar stories, you know, people back to office with a vengeance.
Sure. Thank you. All the very best and happy Diwali. Thank you.
Thank you. Happy Diwali to you as well.
Thank you. Ladies and gentlemen, with this item concluded, that was the last question for today. I now hand the conference over to Mr. Vikas Oberoi for closing comments.
Thank you everyone for taking time out for this call. We take your feedback very seriously. We really like interacting with you. I hope you like this new format, which is really focused on question and answers instead of, you know, we giving you a commentary. Thank you again. I wish all of you a very happy Diwali and a prosperous new year ahead. Thank you again. That's it.
Thank you. On behalf of Oberoi Realty Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.