Ladies and gentlemen, good day, and welcome to the Prestige Estates Q1 FY25 Earnings Conference Call, hosted by Axis Capital Limited. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I'll hand the conference over to Mr. Ashutosh Mittal from Axis Capital Limited. Thank you, and over to you, sir.
Thank you, Neha. Good afternoon, everyone, and welcome to the call. We have the management from Prestige Estates, represented by Mr. Irfan Razack, Chairman and Managing Director, Mr. Zayd Noaman, Executive Director, and Mr. Amit Mor, CFO. I now hand over the call to the management for the initial comments. Thank you.
Hi, good afternoon, everyone. I'd like Zayd Noaman to give his opening remarks. As usual, we've got a good quarter in sales. Only thing is there wasn't too much inventory for us to sell. That's why it looks as if the top line is low, but eventually we'll get there. I want Zayd to say his bit, and then I'll add up if there's anything to say.
Thank you, sir. A very good afternoon to each and everybody on the call. We are looking forward to eagerly having this call with you all. As Mr. Razack commented, the quarter was decent given the macroeconomic events that took place in the country, namely the elections, which we had the Code of Conduct. So we had quarterly sales of INR 3,030 crore.
Sales were complemented by healthy collections, which are very important for us, for our operations, and we had INR 2,916 crore of collections. We sold 2.86 million sq ft of area across 1,364 units, with an average realization which increased to INR 11,934/sq ft for apartments, villas, and commercial spaces, and INR 7,285/sq ft for plots. We launched two projects this quarter, spanning 1.86 million sq ft, despite the lag in approvals, as I mentioned earlier, due to the Code of Conduct. The first was Prestige Camden Gardens, which is an apartment complex in North Bangalore, and Prestige Kings County, which is a plotted development in South Bangalore.
We had a strong mix of sales from our key geographies, mainly Bangalore, Hyderabad and Mumbai. Bangalore at 43%, Hyderabad is 32% of sales, and Mumbai contributed to 23% of the sales mix. We have key launches lined up for the coming quarters, notably Prestige Raintree Park, Prestige Falcon City and Prestige Southern Star in Bangalore, Prestige Forest Hills and Metropolis in Mumbai, Prestige City Indirapuram and Prestige Bougainvillea in NCR, Prestige Pallava Gardens in Chennai, and Prestige Seascape and Prestige Biosphere in Goa. With this, I complete my opening remarks, and we'd like to, if Mr. Razack would like to add on. Yeah, I mean, whatever after Zaid has said, it's only that there is a lot of inventory to come.
As of today, the company has very minimum inventory, and, yeah, the teams are working very, very hard to see that the approvals come and the RERA clearance is coming. The positive thing is the market is still pretty strong, the demand is there, and as long as I can feed the demand, I think, we will get some great numbers in the next few quarters. With this, we're open for 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 handset while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.
Yeah. Hi, Mr. Razack. Congratulations on the launches, but despite you've been able to do sales of INR 3,000 crore. So my next question is, that for the rest of the year nine, so now we have a big task of, like, growing 20%-25% on the base of last year's sales. So how do you think the launches will pan out for the last three quarters? And, largely in the second half, do you think that pre-sales will see a significant pickup now?
Yes, it should and must. As it is, see, we've already finished off with July, and even in July, we've not had any launch. But, hopefully August and September, we should see at least three to four launches in, Bangalore as well as in, Mumbai, and, that, that should prop up the numbers. There is a plan, game plan. I only hope, the... It's all about the regulatory stuff. As, as long as the regulatory falls in place, I think we should have a very strong quarter, the second quarter. And the third quarter will be quite big in that sense, because we'll also have, NCR kicking in. We'll have some high-end projects in, Mumbai as well as in, Goa. So there is a lot of inventory that will come. There's a lot of,
It's not that there's any dearth of raw material. Raw material is there. It's all how it can be churned up, brought to the market. Good news is the market is still very strong. It's still there is demand, and still there is appetite, and there is you know, whatever we've launched gets consumed, like Zayd talked about by the time we opened it, it was shut, it was sold, and we are like a lot of inventory. We launched just a part of Kings County because we said, "Let's stage it out properly." The first phase, whatever we launched, got sold out on day one, and that's how we got the numbers for the June quarter. Let's strategize, let's see how things pan out.
We are working on it, the teams are working on it, and I think we should have a robust 2024.
Okay. The second question on the fund raising, you've taken enabling a resolution for raising funds. So just wanted to get some sense on how are you looking to deploy these funds, and what will be the time period of deployment? Have you already identified some opportunities, growth opportunities, wherein you can start deploying it within this year? So what kind of growth partners do you think you can build with these funds?
I think that's a good question. It's all work in progress. First thing is, we definitely have to identify what we are going to do when we are going to raise capital. First, the intent to raise capital is there. The teams are working on how to raise the capital, and it's all work in progress, like you said. And it'll be a mixed bag. It'll be, probably, you know, definitely some retirement of debt, and then also, it'll also be used for growth capital. So it, it'll be a mixture of a whole lot of things. We can't keep funds idle. But whenever they do come, whenever that does happen, there is a game plan for it. You'll come to know as we go along.
Okay. And just the last piece on the office and the retail mall piece. So, so how are you seeing the lease momentum there, given that you have a large pipeline you're building out? So if you can also give some sense on how is the exit rental looking for FY 25 and 26. So are you on track to achieve your rental guidance, which you have been giving, quarterly? So, so do you think that you're on track?
We've even, I think, now the last few quarters, we've been giving segment-wise reporting also.
Yeah.
You look at the overall, the return on investment and other things, if you look at that, I think all segments as of today are performing very well. And, retail, you ask me specific, specifically, retail, whatever malls we have as of today, are all, 95% or 97% occupied. Because 2%-3% is basically only to churn some, get certain better brands. And, appetite is there in the retail, space, where there's good trading that happens. Our Forum South Bangalore is trading at more than 100+ INR crore per month, which is a good sign. And because most of the deals are linked to revenue share, and the more the trading that happens, the more the revenue that comes to us.
Having said that, if you ask me, our, our game plan to build 10 more malls is already in place. We started construction of 2, and there are many more that need to start construction as and when the approvals fall in place. So these, all these, as per that 2028 number that we gave, the exit rental, we should and we will meet those numbers. There shouldn't be any problem on that.
Any outlook on office market, sir? How is the office market looking at?
So you see, when COVID happened, the office market also, we, we were a little skeptical. But the good part is, office is also doing extremely well. The vacancy levels have gone down comfortably, and now it's 90% plus occupancy is there, except for one or two new properties which have just got ready. Those is work in progress, but I think in the next two quarters, even those should get filled up. So the vacancies are minimal, and whatever is coming up also, there are people who are interested in pre-leasing, including see even Delhi, like our Aerocity property. By the time next year we complete it, but we've already signed the lease. So that's a good point.
Okay, sir. Thank you, Sir, and wish you all the best. Thank you.
Thank you so much.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Pritesh Sheth from Motilal Oswal Financial Services. Please go ahead.
Yeah, thanks for taking my question. So firstly, you know, on your hospitality portfolio, which now is enhanced by another 2,300, 1,300 odd keys, so what you had disclosed last quarter, right? If you can give us some, you know, geographical mix in terms of where these new keys are coming up? And second, you know, how that increases the revenue and profit potential from that segment? Because earlier we were expecting around, you know, INR 2,600-odd crore of revenue from 3,000 odd keys that we had planned for, right. Now, how it increases, you know, from here on?
I see. Like you rightly said, we have got operating, as of today, 1,465 keys, and that doesn't change. But, under construction, what we have is 955 keys. And then, that is the Aerocity property as well as, we are doing a W Hotel in, Bangalore North, and the Aerocity is Delhi. And upcoming, this is what you asked for, where are these keys coming from? There are 2,942 keys that have been planned. There are various hotels in different geographies, including Mumbai, and Mumbai is, this, BKC is one hotel coming up, and there are many others that are in the pipeline. But these are upcoming is also where properties and land, which is tied up.
It's not something which is not yet tied up. And then, there are many things, opportunities that do come by. But with this itself, our overall top line revenue on this should be just let me give you that exact figure on this, on this. INR 4,562 crore. At the end of the day, what will be our revenue? We've already got. Revenue is 2,289. INR 2,300 crore, you can say that. That's our share. That is the fee share. It's 3,200, but we also have some partners. If you take only our share, it's INR 2,300 crore per annum. The top line.
Okay, got it. That's helpful. Second, on the leverage, you know, so out of INR 8,200 crore of net debt, roughly INR 4,500 crore is in the residential segment. And now with, you know, almost, you know, a couple of years since we have scaled up massively in residential business, how do you see this, you know, trajectory going ahead? You know, would we be, let's say, in next 1, 1.5 year, we would be at a net cash position in the residential segment while having some bit of debt in the commercial segment? How do you look at this debt going down?
Now, that's an excellent question. See, the thing is, I always say in my residential business, I have no business to have debt. Now, if I do have debt, which is almost now, INR 5,000 crore on the residential side, it's only because in the last few quarters, we've picked up a lot of lands. We've paid for land, unlike joint development, and where we paid for land is in, it's in Delhi, it's in Goa, it's in Hyderabad, it's in Mumbai. Now, all these projects will come to fruition, they'll be launched, and also in Bangalore. So now these launches will come in, and I, like you rightly said, in the next 6 quarters, I think we should come into a cash surplus situation, and there should be no debt in the residential segment.
Yes, we do have debt in the hospitality sector, a little less than INR 1,000 crore, about INR 1,000 crore in retail, and also INR 1,000 crore in the office segment. These, these are all lease rental discounting, and this, since the asset is being held by us, and if you look at the debt-to-equity ratio there, it is very minimal. I believe it's very, very comfortable, and even the EMIs can be serviced very easily. But our endeavor at the management level, company level, is always to see that the residential level, the debt will come down to surplus, and in the residential side, and we are working towards it. I don't see any reason why it should not happen, because even the markets are good.
We are able to get positive cash flows, and unless we go buy more land, that's a separate story, but then that they churn. But with a first-time churn, this money will be again used to churn the next, next churn. That's how it'll happen.
Sure. That's helpful. Just on cash flows, since you have not put that slide, but just if you can update us on what was the, you know, operating cash flow for the quarter, and how much did you spend on land investments and CapEx, to, you know, reconcile the debt movement, if you can help on that.
Amit will answer this. Amit?
Yeah. During the quarter, on the net cash flow from operations, we generated INR 1,075 crore. On the residential, of which INR 1,208 crore was spent on residential construction cost. On the investment, investing activity, we have spent INR 800 crore on the CapEx construction cost and close to INR 1,500 crore on buying new on business development, which includes land purchase of land and stake purchase by way of India. On the-
Land amount was INR 1,500 crore.
From financing was INR 90 crore.
Sorry, I didn't get the land investment. INR 1,500 crore, you mentioned? 1,500?
INR 1,500, in the cost of that. During the quarter, it was INR 1,500.
Yeah, okay.
Basically, we have done some business development. We have purchased some land in Bangalore. Then, we have one commercial property in Pune that we consolidated our space. It was only a 65%, we made it 100%. So, we have taken some contribution for that. So these... And then, one more land parcel we have purchased in Bangalore. So these three are four projects. There we have paid another INR 350 crore.
Sure. Sure. And sorry if I just can push one last. What's the updated CapEx now, you know, to be spent? Because we have increased our retail pipeline as well, retail project portfolio as well to 12 million sq ft now. So can you just provide, you know, as of June, how much we have to spend on the CapEx, including all office commercial?
INR 16,000 crore. All the three segments together, construction, commercial, commercial segment-
Retail
... hospitality and retail.
Sure. Thank you for answering my questions. That's it from my side. All the best.
Thank you.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Yash Gupta from ThinkSite Advisory. Please go ahead.
Yeah, hello, sir. So my first question is on the EBITDA margin. How EBITDA margins for the pre-sale are looking like? We have seen in the last two, three years, prices have gone slightly by more than 20%-30%, but costs more or less at the same level. So how is the current EBITDA margin for the pre-sales looking like?
Gross margins are in the range of 35%, and EBITDA margins in the range of 25%-27%.
After the increase in the pre prices, then also our EBITDA margin are at 25%-26%?
Yes, if you see, historically, we have been reporting EBITDA margins in the range of 25, 22%-23%. It has improved slightly to around 25%-27%.
Okay. Okay, sir. Sir, second question is on the competition. As of now, we are seeing that some competition has gained some momentum in last 2, 3 quarters. So during the signing of the project, are we facing some competition issues?
Which competition you are saying?
Sir, in the residential business during the sign off, signing of projects and all.
No, no, we don't go and give deals which are not just done on spreadsheet. We are conservative when we tie up property, and if things don't come as per what we believe should be the right numbers, we don't do the transaction. There are many transactions that come to our table, you know, hundreds and hundreds of them. We are very picky. We are very choosy. We choose the best location, best landowner, and also we make sure the deal is workable in good times as well as in bad times. Otherwise, if you try to ride the wave and do it on the upper curve and make certain transactions, certainly the market churns will be caught up with negativity.
Okay. Thank you, sir.
Thank you. The next question is from the line of Puneet from HSBC. Please go ahead.
Yeah, thank you so much for the opportunity. My first question is, when should we expect the launch to happen in the NCR market for you?
Yeah, not this quarter for sure. Though we do the launch in, I think, at maybe all the projects, two projects in NCR, both should get launched. And that there is a small project in KG Marg, even that also should get launched in the October quarter.
Okay. When you launch in that market, will you endeavor to sell everything at once, or will you calibrate the sales?
We have to play it by ear, depends on how things are. If there's momentum, as always, the cycle in our company is when there's momentum and things are good, please reap the harvest. Don't get greedy and try to do something for later and then get stuck.
Okay, understood. And, you know, you are one of the very few developers who operate in multiple markets, so between Mumbai, Chennai, Bangalore, Hyderabad, NCR, which markets are looking the best to you? Is it possible to put it in some sort of checking order in terms of attractiveness, both in terms of, you know, opportunity size and also pricing side?
Each market has its own nuances. Since we are Bangalore-based, I would still, my, my preference would be still Bangalore. But every market has opportunity. Every market is, unique in its own way. Mumbai is unique in its own way. Hyderabad is unique in its own way. Chennai is unique in its own way. Of course, we are yet to, taste the, fruits of, NCR. We've, tied up land. We are under planning. We're waiting for approval. When that happens, we'll see. Of course, now there is also, we have been present in Kerala for a long time. That's a small market. We, we are there, our presence is there, we are building that, and we do recognize that we'll get small revenues from there. Not so much, but, not number movers like we get from the other metro cities.
I believe that once we do well in NCR, there, there's a lot more that we can do there.
Thank you.
According to me, it's overheated at the moment.
Okay. Okay, understood. And my, just two accounting questions. You know, if you look at the EBITDA margins this time, the reported one seems to be quite strong. What's driving that?
Sorry, can you just repeat the question again?
EBITDA, the reported EBITDA margin this quarter seems to be quite strong. What's driving that?
One major reason is we have booked one mark-to-market gain of close to INR 87 crore during the quarter on our Nexus retail unit. So that has contributed to our EBITDA margin straight to 100%. So that has improved our EBITDA margins significantly.
But that would sit in other income, right? Even excluding the other income, the margins are quite nice at almost 42%.
It's basically, apart from that, the increase in EBITDA margin is basically on account of the project mix, because in the we had a higher proportion of revenue from certain projects, where their margins are better when we compare it with last quarter. But otherwise, the EBITDA margins have been stable.
Right. Also, the interest and finance charges has fallen on a Q on Q basis.
...On our properties. So it's a combination of price increase, it's a combination of, the geographies that are coming in. There's some luxury properties in Mumbai that have added up to the overall thing. But I think Bombay hasn't given us any, financial, revenue at the moment because of-
Yeah, yeah.
-competition. But basically only, Bangalore and Hyderabad and other cities.
Okay. Understood. And just on the interest and finance charges, that also is down quarter-over-quarter, despite rising debt. Anything, how should one read that?
So that is basically because in the last quarter, because it was a year-end, in one of the SPVs where there's a JV partner, this is the cash flows we had interest first on whatever contributions made by the JV partner as well as the company. That is a mechanism of default of money from the project.
Okay. And in this quarter, there will be a JV partner share as well, or is it a completely clean number?
A lower amount. That accounting came for the first time in the last quarter, which because of which, the amount was higher, because this was the first time for the entire year.
Okay.
Now, going forward, we will look on a quarterly basis.
Oh, okay. Okay. Understood. That's all right. Thank you so much.
Thank you. The next question is from the line, Abhinav Sinha from Jefferies India. Please go ahead.
Hi. Sir, just wanted to check, do we still stick to our 25-30% growth guidance for the year?
Yes, Abhinav, we will. Inshallah, we will, we will still, maybe even exceed the 20-25%. It's work in progress, but it's inventory that comes in to us to sell. And I'm very confident once we get the inventory, the sales will be there.
Sir, which are the three, four launches that we should look forward to in the second quarter?
Yeah, this quarter, I think Zed told us first is Raintree Park, then we've got Pine Forest, then we've got White Sandals. These are all three in Bangalore. Then I've got Mumbai, which is Forest Hills. These are the four which we can look forward, and there's a plotted development, which is Sunset Park. We are trying hard to bring that also in this quarter. But these, I think, there'll be quite a lot of inventory.
Okay. Sir, lastly, on the CapEx bit, so the increases that we have done in the pipeline, on both hotel and retail, I guess, I mean, that was a question earlier as well, but I just wanted to clarify what the costs for that are as such? And do we, you know, did we like buy additional land, or they're essentially reallocation within our existing projects?
No, no, the land is there. I think in our investor presentation the entire details have been given on the amount of money that needs to be spent for hotel, amount of money that needs to be spent for cafe at the moment. I think we can share that with you.
Because of regulatory requirements.
Just say that now.
Because of regulatory requirements, those details we have not shared this quarter. Okay, but as I mentioned earlier, if you see in the last quarter, it was around INR 13,000 crore. Now with this thousand crores, the CapEx spent, money is spent, complete share.
Okay. Okay. Thank you. That's all.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. A reminder to all the participants, you may press star and one to ask a question. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you everyone for your active participation. I hope we've answered all your questions comprehensively, and look forward to interact with you in the future. Thank you so much.
Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.