Ladies and gentlemen, good day and welcome to Puravankara Limited Q3 FY 2025 post-results conference call hosted by Motilal Oswal Financial Services. As a reminder, all participant 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 now hand the conference over to Mr. Abhishek Lodhiya from Motilal Oswal Financial Services. Thank you, and over to you, sir.
Thank you, Yusuf. Good evening, everyone. On the behalf of Motilal Oswal Financial Services Limited, I would like to welcome everyone to Puravankara Limited Q3 FY 2025 results call today. As always, we have from the management Mr. Ashish Puravankara, MD, Executive Director. Mr. Abhishek Kapoor, Executive Director and Group CEO. Mr. Deepak Rastogi, Group CFO. Mr. Neeraj Gautam, Deputy CFO. Mr. Vishnu Moorthi, Senior VP, Risk and Control. Mr. Rajat Rastogi, CEO, West and Commercial Affairs. Mr. Mallanna, CEO, Provident Housing Limited. I would now like to hand over the call to the management for their opening remarks, after which we will move on to the Q&A session. Thank you, and over to you, sir.
Yeah. Good evening, everybody. I am Deepak Rastogi here. I thank you for joining the company's earnings conference call to discuss the performance of the third quarter and nine months ended financial year 2025. The results and a comprehensive presentation is available on the stock exchanges. We hope that you will have a chance to review the same. Before we begin, let me thank our host for today's earnings call, Motilal Oswal Financial Services. Moving on, let me first start by giving you some brief highlights on the sector performance and outlook, followed by our financial and operational performance for the quarter. India remains a bastion of growth and opportunity. With our balanced foreign policies, India is a strategic player in the global geopolitical and economic landscape. These factors have continued to propel the momentum of the country's real estate sector, reflecting the broader optimism surrounding the country's economic future.
India's residential real estate market scaled new heights in 2024, achieving a 12-year high in annual sales and is recording steady growth across major cities, with the final quarter performance accelerated by the seasonal festival demand. This growth propelled annual sales over 300,000 housing units for the second consecutive year. While there is a Q-on-Q growth of 7% in housing unit sales during Q3 of financial year 2024-2025, we have witnessed a clear shift during premiumization towards premiumization. The evolving buyer preference driven by aspiration for an enhanced lifestyle and confidence in Indian economic trajectory. The office real estate market has sustained its record-breaking momentum, with annual transaction volumes surpassing 72 million square feet, the highest on record, to an all-high absorption of 79 million square feet in 2024.
There is a strong momentum in leasing activity during October to December quarter of 2024, with the required quarterly space take of 22.2 million square feet. This robust performance led to a 10% Y-o-Y jump in the office leasing during Q4 of 2024 and an 8% Q-o-Q increase in net absorption. Technology sector drove highest leasing activity, followed by flexible space operators and BFSI. The recent changes in the union budget and RBI reducing repo rates by 25 basis points to 6.5%, marking the first rate cut in the last five years, which would actually stimulate economy growth and is expected to make loans, including those for homes and vehicles, more affordable, potentially boosting consumer demand in the real estate sector and provide incentive to India's real estate industry.
We expect that coming years are poised for robust growth driven by country's economic performance and rising demand across residential, commercial, and industrial segments. Increased urbanization, infrastructure development, and favorable government policies are boosting home buyers' confidence. Now, I will actually move to the company's financial performance and operational highlights. So during Q3 of 2025, our sales were INR 1,265 crores, where sales volumes were 1.43 million square feet. Customer collections for Q3 increased by 6% Y-o-Y to INR 993 crores. Similar numbers for nine months of FY 2025, the customer collections improved by 19% Y-o-Y. It is important to note that collections have increased significantly, growing from around INR 350 crores per quarter during FY 2022 to our current quarterly run rate of approximately INR 1,000 crores.
Average realization for the quarter has also increased by almost 60% Y-o-Y to INR 8,847 per square feet because of the mix of inventory, while Puravankara and Provident saw 29% and 7% Y-o-Y increases respectively. Our sales for the quarter across projects were led by Provident, which saw massive growth of 76% Y-o-Y and the sales were INR 737 crores on account of consistent sales in ongoing projects and successful launch of Ecopolitan phase two. While Purva maintained its resilient sales velocity, achieving 29% increase in realization. The geographical contribution for nine months period of this financial year, 60% was contributed by Bengaluru, followed by Chennai at 16%. Mumbai and Pune were at 11%, and Kochi at 9%, respectively. Increase in sales from Mumbai and Pune is indicative of growing presence in western region.
New acquisitions and redevelopment projects in Mumbai, with GDV of approximately INR 9,200 crores plus is expected to contribute to the market share in the coming quarters. Our launch pipeline for the company is robust, with approximately 1.63 million square feet of the new planned projects, with non-Bengaluru projects now accounting for 47% of the share of ongoing and 73% of planned projects. Mumbai and Pune together constitutes 50% of the planned projects, indicating our robust pipeline in western India.
On business development front, we have done land investments of approximately INR 1,236 crores during the nine months of the financial year. We have done business development close to 7 million square feet with GDV over INR 12,000 crores during this time. This strategic investment strengthens our development pipeline, positioning us for sustained growth and value creation. Our operating cash flow for the nine months stood at INR 3,209 crores, up by 14% Y-o-Y.
Coming back to the Q3 performance for this quarter, our total revenue was INR 334 crores. EBITDA margins for the quarter were around 10%, while we had a net loss of INR 94 crores. For the nine months ended for this financial year, our total income increased by 16% Y-o-Y, while the total comprehensive loss was approximately INR 99 crores. The pre-sales revenue for nine months was INR 3,724. The sales and marketing expenses and overheads incurred for the pre-sales have been entirely charged to P&L as per Ind AS Standard 115. While we have reported a loss of INR 99 crores for the nine months for the financial year under Ind AS, under the percentage of completion method, we would have actually reported zero profits for this particular period.
Similarly, like last year, for the financial year 2023-2024, we had reported under Ind AS a PBT of around INR 68 crores versus under percentage of completion method, the profits were actually at INR 160 crores for a similar period. Further, we are expecting occupancy certificates for the projects like Capella, Atmosphere, Oakshire, and Adora De Goa indexed to quarters. A total sellable area of 3.95 million square feet with total GDV of INR 3,200 crores, out of which the sold value is INR 2,550 crores. Coming to our debt management, our net debt stands at around INR 2,824 crores as on December 31, 2024, with a net debt equity ratio at 1.58x. Our cash and bank balance was INR 736 crores, which indicates strong liquidity profile, ensuring stability and operational continuity.
The debt per square feet has increased vis-à-vis the previous quarter, primarily due to CapEx towards commercial development and land acquisition for future growth and deferment of projects launched due to delayed approval. However, we remain committed to optimizing financial resources by continuously working to reduce debt per square foot for under construction projects. We are also focused on maintaining optimum financing structure, including raising equity through QIP, AIF, obligatory platform-level funding, et cetera.
We are excited about the next 15 months, which will see increased velocity in acquisitions and new launches in line with the growth plans of the company and also the country. We want to highlight our strong growth trajectory over the last three years. Our sales growth has grown at CAGR of 57%, while collections have increased at a CAGR of 58%. The area delivered has expanded at a CAGR of 47%, reflecting our commitment to execution excellence. To conclude, we continue to be optimistic about the sector considering the demand-supply gap and the rapidly growing economy. We are strategically launching new projects in our focus markets with a strong pipeline of already launched projects and further planned launches as well as ongoing business development. Thank you for patiently listening. We can now open the floor for the question and answer session.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, to ask a question, you may press star and one. First question is from the line of Ishita Lodha from Svan Investments. Please proceed.
Yes. Hi. Deepak this side.
Mr. Deepak, your voice is breaking.
Am I audible now?
Yes, you are audible now.
Hi. Good evening to the management and congratulations, Rastogi, for the new role.
Mr. Deepak, your voice is breaking again.
Okay. Audible now?
No, sir, it is not clearly audible. It is breaking in between.
I will join back in the queue.
Sure, sir. Thank you.
Yeah. Thanks.
Before we move to the next question, a reminder to the participants, to ask a question, you may press star and one. Next question is from the line of Chintan Mehta from Puniska Family Office. Please go ahead.
Hi, sir. Good evening. A question regarding, can't we recognize the purchase of land cost for many years, 5, 10 years down, that kind of? Or we need to only recognize it upfront?
What do you mean by recognize it?
The land purchasing cost.
Going to our inventory and investment. Sorry, I did not follow the question. Please come again.
Can we amortize for the 5, 10 years or until we execute the project?
No, this is raw material for us as a real estate development company. As we go along, we are not expensing it out of the P&L. I think when Deepak was referring to cash flow and debt, he meant there is a substantial amount of investment that has been done from cash flow perspective in land. Obviously, as and when as per accounting standards, the cost is booked when we deliver the project, because this is a project completion method of accounting. That is how it operates. I am not sure if that answered the question.
Okay. Sir, subcontract cost, it is only for the project which we delivered, or it is for the entire in particular quarter time?
Subcontractor cost is for the projects which have been delivered. I t includes subcontractor cost. Subcontractor cost which is coming on the face of the financial statement, it reflects the kind of construction activity we are doing and amount we have incurred in our inventories. That also includes the cost of the inventory, the inventory which we recognize during the period.
Understood. Sir, I have a question regarding the land asset. Did we mention we have close to around 27.23 million square foot. This is the total land bank we have, not the developable area, correct?
Area under development currently is about 33 million square foot and land bank is about 27 million square foot.
Okay. If I need to arrive at saleable area, I need to multiply with FSI, correct, sir?
This is the saleable area. Yeah. You are multiplying FSI. Correct.
Okay. And, sir-
FSI is different in different geography, different locations, and our lands are spread in different part of country. Hence, the easier understanding of the user of this statement, we have applied the applicable FSIs and we are publishing the data with the saleable area.
Okay. Sir, this perception, many real estate company pose that in which area or which geographical part they own the land, for example, South Bangalore, North Bangalore, how much acre they own. So if you can arrive or share that data on presentation, that would be great help for us.
Sure. We can do that. As of now, page 17 of the ICP consists of city-wise distribution and brand-wise distribution. If you need any further details, we can write to you separately, and we can answer it.
Okay, sure. And sir, what is the peak debt we are targeting that maximum debt which we go to?
Sorry, what is it? What we are targeting?
Peak debt number.
Peak debt number. As I said, we have been maintaining that. From the residential debt perspective, our target is always to maintain at INR 1,000 a square foot and under of area under development. That is the target with which we work. If you see, refer to slide 21, it shows that debt per square foot on residential and land currently is at about INR 910 a square foot.
Eventually, debt is a factor of the quantum of business that you do, and how we look at it is what kind of surplus are you able to generate with the debt that you currently have? If you look at while our debt is at INR 2,800 crore, and if you look at our slide of surplus, the surplus is including the new launches which we have shown is of INR 14,000+ crore. Which means there is more than adequate cover in terms of the surpluses coming in from this side.
Okay. And sir, the typical construction cost in [inaudible] , for example Bengaluru per square foot construction cost in Mumbai.
Construction cost differs from market to market and area to area. In Mumbai also it would differ should it be in a market like a Thane or in market like a Virar or a Borivali versus what could be in south of Mumbai. It could be anywhere between INR 7,500-INR 8,000 a square feet on sellable area going as low as INR 3,500 a square feet area in different suburbs, depending on the height, type of product, specifications, et cetera. That's the general range if you're asking about the Mumbai market.
And sir, for the Bengaluru?
I'm sorry.
For Bengaluru.
For Bangalore would be anywhere between INR 3,200 per square foot going up to INR 3,800 per square foot on sellable area.
Okay. Thanks for answering, sir. I will get back in the queue.
Thank you.
Thank you. Participants, to join the question queue you may press star and one. Next question is from the line of Deepak Purswani from Svan Investments. Please go ahead.
Hi. Good evening, sir, and congratulations, Mr. Rastogi. Sir, I just wanted to check out a couple of things. Firstly, from the debt point of view, currently we have the net debt of INR 2,800 crore, and it is showing that in the next one year we have a repayment schedule of INR 1,071 crore.
Yeah.
When I am looking at the operating cash flow before the land investment, this nine months we had close to INR 250 odd crore. Just wanted to get the sense, what is your broader plans to manage or in terms of the debt management over the next one year, especially this debt repayment part over the next one year? How should we look from the broader point of view?
Currently if you look at our quarterly collections is about INR 1,000 crore per quarter. With the launches which we are expecting, there are about eight launches which are lined up between this quarter and next two quarters. Between these launches we are expecting that the cash surplus will increase significantly and the cash collections will increase significantly. Of course, I think somewhere in the presentation we have also mentioned the way forward in which we are looking at different methods of capital raising in terms of equity, which includes QIP, platform level and project level. This is on slide 31. AIF and of course the commercial platform. There are multiple levels at which we are looking at increasing our equity.
At the same time, significant increase we should see in our cash flow collections as the launches come through, which had largely been delayed on account of land sanction approval, which has been the industry situation largely on account of elections last year. We would expect that this should more than adequately cover. As I mentioned earlier, if you see the surplus slide it is given the cash surplus out of the new launches and existing projects itself is about INR 6,600 crores. From the commercial platform it is about almost INR 1,950 crores. With the new launches will be another INR 5,700 crores. That more than adequately is just a matter of time as you start seeing that money coming in. This is surplus. Obviously the collections are higher.
Secondly, sir, if you can also throw some light on the launch pipeline. How has been our launch pipeline in last nine months, and how should we look into it in the Q4? Which are the project which are at the RERA ready at the current juncture from the launch point of view? Because we do understand there was some approval related issue. But where do we stand in terms of the launch point of view at the current juncture? Which are the key project which would be coming up for the launch in the next six months, specifically in the Q4?
Right. If you see slide 19, it mentions the launches, which is expected in this quarter and the next quarters. Some of the launches which we are expecting in this quarter are Bellandur, Grand Hills, Mundhwa Thane. These are launches which are expected in this quarter, including Hebbagodi, but these one or two of may spill over to early Q1. Having said that, most of these launches you will see in next two quarters coming. Other than that, a couple of additional projects will come in. Mallasandra will come in the next quarter for sure. Citys pire will be coming. In this quarter, we are expecting Bougainvilla to come in. What we are expecting is, in addition to this, there are a couple of other projects which are there in the pipeline.
I think we will announce more projects by 31st of March, which will get added for the next year's plan. So, we have a very robust pipeline and an extremely robust pipeline of acquisitions, which will continue to help us maintain and create the momentum for further growth. Which I think when we talk in April quarter, I think you will get a better sense of it in terms of what more we will add in the next year. But currently what visibility we have is shared on Slide 19, which is about 12.63 million square feet.
Okay. My question was majorly related to the, in terms of the out of these launch pipeline, how much are currently RERA ready, which are about to launch in the next 15-20 days?
As I said, currently you have another 50 days to go in the year. Currently, Mundhwa, Grand Hills, Thane and Bellandur have visibility. Hebbagodi may come in this quarter, we will have to see.
Okay. Secondly, in terms of the nine months, what are the key projects which have been launched and what has been the contribution in the pre-sales from the new launches in these nine months?
Look, for the last nine months I can tell you that we have highest sales from sustenance. Out of about INR 3,700 crore odd, INR 3,200 crore have been from sustenance. This is the highest ever we have done in sustenance. Last year we were at about INR 2,800 crore in sustenance. The gap has largely been at about INR 500+ crores has come from new launches. The gap has really been in the new launches, and we are expecting to catch up with this gap as I mentioned earlier, largely on account of procedural delays and the government approvals.
This has been the case with the industry for this financial year. There has been a supply side constraint. If you look at the industry data also you realize that there has been more absorption than supply. And I think that trend kind of continues till we all are able to bring in more supply, which I think will normalize in this quarter, in the coming two quarters after.
Okay. And finally, sir, from the trajectory point of view, we have been highlighting that this growth trajectory will continue, but from the overall perspective, if I were to look from the nine month perspective, this time we are somewhere close to INR 3,800 crores and last year we did a sales of INR 5,900 crores. So how should we see this trajectory now from the overall perspective as a financial year as a whole?
As I said, INR 3,800 crores is in and about similar number of what we were at last year. I think we were at INR 3,966 crores. So it is not very far from where we were nine months period. Obviously, the last quarter as I mentioned, we are expecting these four launches so that will add value in terms of the pre-sales number. And some of this as I said, will spill over in the next quarter or the quarter after. From the way we are looking at it, the growth trajectory will continue. If it was not for the delay in plan sanctions, I think we would have had a very robust growth in this financial year as well. Having said that, I think we will definitely beat the industry average. That is our goal and target with which we are working.
Okay. And sir, from the investment point of view, we had also raised a capital from the HDFC fund as a whole. If you can please provide us an update how much capital has been deployed out of this and how should we look from the deployment point of view over a period of time?
About INR 417 crores is already deployed. The balance capital, which is a little over INR 700 crores, is expected to be deployed before June of this year. That is the target with which we are working. A lot of active deals are currently at final stages. Of course, due diligence, I am sure you will hear about it. It takes its own time. I think we are in that process. Hopefully within next 90 days you will start hearing more and more deals. But definitely before June is the target to deploy the entire capital.
Okay. Sir, finally on the demand environment front, we have seen, especially in your core micro market which is at Bangalore, there has been a double-digit price hike over the last nine months or something of that sort. How do you see the absorption trend going ahead in that particular micro market?
You are right. I think from price appreciation point of view, we have reached a very peak. Absorption has been very robust. As I mentioned earlier, we have seen the highest ever sustenance sales. Largely the prices have also gone up because of the supply side clash, right? The industry has not been able to bring enough supply to the market. Hence the supply is literally somewhere between seven to nine months in the Bangalore market, for example. Across the country, we are still currently looking at less than 12 months supply in general on an average. What we are expecting is with the new supply coming in, into the market, we would expect an inflation + 2%-3% kind of average incremental price appreciation. Unlike in the past, where it was steep, also on account of increased input costs of construction, et cetera.
We would expect that it will be a steady state. From absorption point of view, we believe that there is no respite in terms of the demand side. We are continuing to see significant demand in the market and I am sure you hear about it as and when we do our launches. On ground, we are not seeing. Of course, there is a lot of anticipation and requirement and need for housing in all of these markets. Somewhere, Deepak covered the point that about 71 million square feet of commercial office has been leased out in the country this year. That is a clear indication of, it will have a multiplier effect in terms of employment and the economy, and we believe that this demand is going to continue.
And add to that, consolidation will continue, and I am sure Puravankara is going to be in a very good position to capitalize on that consolidation. So we believe that the demand is definitely there. Price appreciation could be possibly in inflation + 2% or 3% industry average. Of course, different micro markets may have exceptions. You may have certain markets where you will see very high price appreciation because of lack of supply. And certain markets, you will see relatively low price appreciation because there is enough supply. So those factors could be in different projects and micro markets. On an industry average, that is our position.
And from the margin perspective on the-
Sorry, Mr. Purswani, may we please request you to rejoin the question queue for the follow-up question?
Sure.
Thank you so much, sir.
Thank you.
Participants, to ask a question, you may press star and one. Next question is from the line of Harsh Pathak from Emkay Global. Please go ahead.
Yeah. Hi, team. Thanks for this opportunity. I have a few questions. First is, I guess in the current quarter, we have so far launched two projects, one in Bangalore, the Ecopolitan, and one in Pune, Keshav Nagar. So how has the response been on these two projects?
Both the projects response has been quite good. Ecopolitan sold out. In fact, as far as Keshav Nagar is concerned, we have had over INR 100 crores of sales at launch. And we are seeing very good and increased sanction in that market.
Great. How big would this launch be? I mean, each of these, Bangalore and Pune.
We can share that data separately in detail, if you don't mind.
Sure, that's fine. The second is on the approval side. I guess in the first half we had seen approvals move very slowly, but how have things picked up? I mean, from the last two, three weeks of December, we have been starting to see some approvals come through. How is the situation now?
It definitely improved. Somebody earlier on the call asked what is the pipeline looking like, and I did mention, you mentioned Ecopolitan and Mundhwa. I also mentioned Grand Hills and Hebbagodi and Thane and Bellandur. These are projects that we are working on, which we see visibility of. Then, of course, the rest of the projects we are seeing possibly may spill over to the next quarter. Overall, there is a much better momentum on the approvals. Given the number of sanctions and approvals that real estate deals with, then you do still have certain situations where you may have certain authorities not functioning, changes in committees, et cetera, chairmen getting appointed. So those are individual certain things that happen. Overall, yes, you're right, there has been a much better momentum on the plan sanction.
Right. And sir, coming to the west region, I think we already have a couple of projects, Pali Hill and Breach Candy, maybe where this would be on the luxury side. How is the demand shaping up, and when can we see these launches coming up?
From the new project perspective, we have four projects, which is Thane, Apna Ghar, Pali Hill, and Breach Candy. Thane, we are expecting to launch in this quarter. Apna Ghar, as well as Pali Hill and Breach Candy, we are expecting between the September and December quarter to take it to the market. Our target is that within this calendar year, on or before December, we should take all the projects which we have taken in Mumbai to the market.
That's great to hear. I visited the Pali Hill project. I mean, the location is superb. Are we seeing demand traction there? Because we are seeing a lot of buzz around the luxury segment. What dynamics are you hearing on the ground for this project?
Look, fortunately, each of these projects, and we can get into a detailed discussion. Like example, Pali Hill is extremely unique in itself because it's 2.5 acres, the largest land parcel in that market. All the projects, I'm sure you're aware, since you're from Mumbai, is largely half an acre, at best, short than an acre. This is a 2.5 acre project. That gives us an opportunity to really create a large community. For example, Juhu doesn't have any large communities, and whenever one or two projects have come where you have created large communities, you've commanded a premium of more than 40%-50%, in fact, equivalent to Juhu and higher than Juhu. We expect that this market, this particular project in Pali Hills will see significant demand given the scale and size of the project in that market is possibly the largest.
That is one. Secondly, very interestingly, the residents themselves have shown keen interest in buying homes here. Not only getting what they have already got, but buying. So we see that interest. There are already a lot of people who have got off the project reaching out to let them know as and when we do the launch. Similarly, at Miami, again, this is next to Breach Candy Club and overlooking the sea. Again, something which is very premium because every unit will have sea view and it's a very prime location. Lokhandwala again, very similar in the sense there isn't any project of this scale and size in that market. The only other project is one project, which is SRA project. In that sense, we believe, and the previous project that was launched there in the same area was sold out 100%.
So we're very confident about what we expect in the Apna Ghar market. Of course, Thane is a brilliant location. It's right to One Hiranandani Park. Again, we would feel that the numbers should look good in all of these projects. From the demand perspective, the strategy of acquisition has worked very well in terms of choosing the right project and the right location. So we're very confident about pushing through these, expecting good robust sales from these projects.
Oh, great. Thanks for that elaborate answer. Just last two bits from my side. So one is we are targeting to take the land bank to 45 million square feet over the next two to three years. So how is the project visibility and especially since we are focusing more on the west region. So, what kind of projects are we targeting? I mean, in terms of locality, in the Mumbai and Pune, if you can throw some light there.
So, when we say 45 million square foot, it's not just the west. Substantial acquisition will also happen in the south between Puravankara, Provident, and Purva Land. Of course, west will continue to remain focused, but West is not about volume of square footage, especially Bombay. Mumbai will be more about value. Of course, Pune, we will definitely bring in more acquisitions. But much larger volume of acquisitions will happen in the other parts of the country, in the southern markets specifically. And in terms of square footage, the 45 million square foot, majority, if you were to look at square foot, not value, will definitely happen in the southern market.
How we look at each of these markets is we have divided the city into different sub-markets, where we understand the supply and demand dynamics. Those are the markets that we are going after across these cities to look at focused effort for each of these categories, Puravankara, Provident, and Purva Land, which has all got different product offering, to ensure that we are able to create the scale of acquisitions that we are targeting.
Sure. One last question. What is the update on the commercial project? When can we see rentals start kicking in? I mean, for both the assets.
We are expecting to complete a total of about 2.2 million square foot in this calendar year, which is expected between June and September. As we complete these projects, we expect that a large amount of leasing should get completed by December. Any commercial asset to get fully occupied and has fully stabilized income takes anywhere between 6- 12 months from date of completion. We would expect to see rentals obviously coming in between December and March of the next financial year. Thereafter, I think another three to six months, we should see completely, fully occupied, stabilized income in these projects.
Okay. Great. Those are my questions. Thanks for answering.
Thank you, Harsh.
Thank you. Participants, to ask a question, you may press star and one. Ladies and gentlemen, if you wish to join the question queue, you may press star and one on your touchtone telephone. The next follow-up question is from the line of Deepak Purswani from Svan Investments. Please proceed.
Yeah. Thank you, sir. Thank you for the follow-up opportunity. Sir, firstly, wanted to check it out on the portfolio basis from the embedded EBITDA margin point of view, how should we look into at the current juncture? What are the inbuilt embedded EBITDA margin at the current realization on the portfolio basis?
EBITDA margin, I think, as mentioned in the past, will be somewhere between 27% and 30%. Of course, barring what we do in a redevelopment project and in a JDA. Generally, on an outright basis, somewhere between 27%- 30%, 35%, depending on the kind of product. In fact, Purva Land is much higher EBITDA margin. Of course, redevelopments will have a lower EBITDA margin. Therefore, on an average, we could easily assume, we should target between 27% and 30% of EBITDA margin.
Okay. Considering that in mind, if you can also share your thought process, what are our internal target in terms of managing the ROE of the company? I mean, how should we look from the trajectory point of view, return on equity from the next two, three year perspective?
Look, I think that's a very different way of looking. This is being real estate and being the way the sector is and the way we operate. We don't look at return on equity. We look at our margin on the top line. The reason I say that is, for example, if I land up doing a JDA and make an investment of deposit, my return is absolutely. You can't compare the return, right? Because you put in a deposit of INR 50 crores, but you may have landed up with a substantially higher margin. Therefore, the equity return is very disproportionate, and hence we do not create equity return as well as overall business system.
We focus on what kind of sales we are able to do and what kind of. Your earlier question, which is a perfect question, what kind of EBITDA margin and PBT margin you can target. Our goal is that if you were to look at an EBITDA margin, we've continuously worked towards 27%-30%. Of course, the ROE will be very different in terms of in certain cases will be very exponential.
Okay. Let's put it in this way. What would be the threshold IRR or targeted IRR we are looking based on whatever investment we have made in the last 12 months? These IRR would be based on the last one year realization, and since we have seen some kind of. Whatever quoted IRR we would have looked at the underwritten price in the last one year. If there is some hike in the realization, where does this IRR stand at the current juncture?
To answer that question, IRR would be anywhere. Again, it is extremely exponential in JDA, so I will put that as a disclaimer here when I answer that question. But should it be a redevelopment project or an outright purchase, your IRR will be in high- 20s and early 30s. And of course, that is pre-cost of capital. And of course, once you subtract the cost of capital, that is when you arrive on the company's IRR. So that is the target at which we work towards.
Okay. And sir, sorry again, harping on this cash flow point again. If I were to look from the debt point of view of repayment schedule of INR 1,000 odd crore, if you can also give some sense in terms of like you mentioned about there would be improvement in the operating surplus that would be sufficient. But if you can also throw some light in terms of the collection and construction outflow and what are the land payment plans over the next 12 months, that would be really helpful.
Okay. Let me answer this question a little more differently. We have a debt slide which gives the breakup of where the debt is sitting, in land or in residential. So if you look at the debt, INR 2,200 crores is in residential. Right? Out of the INR 2,800 crores. This is slide 22. Are you with me?
Yeah.
Okay. If you see slide 22, there is INR 2,192 crores of debt sitting on the residential. Now this is self-liquidating debt, pretty much money going from the project itself. Right?
Yeah.
Now the land debt, which is about INR 889 crores, is what really is the only debt we are talking about because INR 479 crores is again CapEx towards commercial development. As soon as it gets completed within six months thereafter, that is pretty much self-sustaining coming from the lead rental. In fact, you can lease or discount it and you can pare a lot of debt and use that excess capital. Correct? Are you with me?
Yeah.
Then you have about INR 736 crores of cash and cash equivalent against INR 889 crores of land debt.
Okay.
Right? Now this INR 889 crores of land debt is what we are talking about moving to the residential piece. The moment this moves and in fact, what we are taking to the market, if you look at 12+ million square foot, is far more than adequate to cover. From the debt perspective, as I said, INR 2,200 crores self-liquidating from the ongoing project where inventory is already sold.
Money is coming in, it is getting liquidated as we go along. INR 479 crores taken care of from the commercial lead rental. INR 736 of cash equivalent lying against INR 889 of bank, which is going into production. From our perspective, the way we look at it and another way to look at it, the same thing is, I think somewhere I mentioned about the cash surplus, which is about INR 6,600 crores and about INR 4,851 crores from the ongoing project. That also more than adequately covers the debt scenario from your perspective.
Okay. Would it be fair to say, probably just checking from the broader point of view, let's say even if we were planning to raise the fund, even if that does not get implemented over the next 6-12 months, we would be sufficiently placed to reduce the debt from the current juncture?
Absolutely. We will be very comfortable to reduce the debt because as I said, INR 2,192 crores is going right from the project which is already under construction, INR 2,192. The second thing is with these launches, the rest of the debt not only starts getting repaid, but starts providing you further room for acquisition. That is from the debt perspective. Of course, the choice will be ours whether we want to square debt or continue to grow. This has been a conversation we have had.
We continue to grow the business because we believe that the brand is able to really perform well and in the consolidation phase, enjoying the premium in the market, where we should bring in more and more supply and take more and more market share. Hence, from our perspective, yes, to answer that question, that can be easily paid by the ongoing and new launches. Not just that, we are confident we will be able to go forward and get more liquidity in the system with the launches to be able to continue on new acquisitions.
Just one more point. The surplus which we continue to maintain is close to INR 14,000+ crores. You know that is hardly INR 2,800 crores. Whichever way you look at it, the debt is far more lower than compared to the surplus which gets actually generated out of the ongoing industrial and new projects. So we are not really concerned from that perspective overall.
Okay, got it. Thank you and wish you all the best.
Thank you.
Thank you. Participants, to ask a question, you may press star and one. Next follow-up question is from the line of Chintan Mehta from Puniska Family Office. Please go ahead.
Sir, you have mentioned somewhere that the capital value of commercial projects is INR 2,833 crore. It is excluding that value or the total value of the commercial project?
No, this is the total value of the capital value of the asset.
Okay, so you are taking it 10% of the yield of the rental value, correct?
Yeah, if we look at it, 8.5%.
Okay, so we have planned to hold it for the longer time. We are expecting a more square foot realization going forward for the five, 10 years, and the capital value will multiply many fold. I think what will our ROIC return on equity would be close to 2020, correct, sir?
I genuinely didn't hear a thing about what you said. Sorry, but the voice is very muffled. Can you repeat that for me, please? Pardon?
We want to hold this commercial project for many years, correct? We are expecting more size-
Yes.
Realization going-
Yeah, I'll just ask if I got the question now right. You said, will we hold the asset? So there are two assets which we are talking about currently which are under production. One is Aerocity and the other is Zentech. As far as Aerocity is concerned, we intend to hold that asset and build a platform. In fact, we are looking at another acquisition also in Bangalore itself. On the other one, which is Zentech, which is a JDA, we are evaluating an exit there, and there, of course, we will pare off the debt and move ahead. At this point in time, that's the thought process.
Okay. And sir, both of the combined value we are spending close to around INR 1,250 crore somewhere. Correct, sir? I read it somewhere.
Correct.
Yeah. Okay. Thanks so much, sir. All the best.
Thank you.
Thank you. Participant, if you wish to ask a question, you may press star and one. Ladies and gentlemen, to join the question queue, you may press star and one. As there are no further questions from the participants, I would now like to hand the conference over to the management for the closing comments.
Thank you this evening for joining us for this call, and we look forward to hearing from you if you have any more questions. Have a great weekend. Thank you.
Thank you. On behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you all for joining us and you may now disconnect your lines.