Shriram Properties Limited (SHRIRAMPPS) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 Earnings Conference Call hosted by Shriram Properties Limited. [Operator Instructions] Please note that the conference is being recorded. I now hand the conference over to Mr. Murali Chairman and Managing Director from Shriram Properties Limited. Thank you, and over to you, sir.

Good morning, everyone, and thank you for joining us for the Q1 FY '27 earnings call. We have commented here on a positive note with a strong operational momentum on the record first quarter sales of INR 484 crores. The response to our new launches in China and the Kolkata has been particularly encouraging. Our entry into the premium residential segment in Chennai and the successful launch of our branded plotted development in Kantar important milestones in our portfolio strategy and have further strengthened our confidence in the underlying demand. While Q1 financial performance was relatively steady, the quarter was also characterized by strong collections, continued execution momentum and a healthy level of investment towards our future group pipeline. With a strong set of scheduled budget completions and launches lined up for H2, we have good visibility on improving revenue and earnings momentum through the balance of FY '27. Our balance sheet remains healthy, giving us the flexibility to continue investing in new opportunities [Technical Difficulty]. We remain confident in sustaining our growth momentum and creating long-term value for our stakeholders. With that, I will now hand it over to Mr. Gopalakrishnan Jagadeeswaran, CEO; and Mr. Ravindra Pandey, CFO, to take you through the financial and operational details in greater depth. Thank you.

Thank you, sir. Good morning, everyone. My name is Ravindra Pandey, and I'm the CFO of the company. Thank you for [indiscernible]. Today, I will present the performance highlights for Q1 FY '27. We have uploaded the presentation on the website and the stock exchanges, and I hope you all have access to it. Over the next few minutes, I will walk you through the operational and financial performance of the company for Q1 FY '27. Following that, Mr. Gopal, our CEO, will also join me to take the questions asked by you. Let me start with operational highlights referring to Slide #4. Q1 has been a good operational start to FY '27, providing is an launch momentum and improving visibility on sales and over and revenues for the balance of the year. Coming to the overall performance. We had a strong operational start with 3 launches during the quarter, 2 new projects, Shriram Stellar in Chennai; and Shriram Southbrook in Kolkata and a new phase at Green Meadows in Chennai. We achieved our highest ever coal sales of INR 484 crores with sales volume of 0.85 square feet. Collections INR 365 crores, supported by the cushion and handovers. The amicable resolution with Banana Westend achieved in FY is now translating into monetization opportunities and accelerated launches supporting Kolkata, [indiscernible]. We have expanded the product portfolio from apartment to Village and are development. The response to the partner development launch has been particularly encouraging with approximately 55% of inventories sold within the first 30 days. With Shriram Stellar, we have been the Chinese senior deidential segment with our premium poring Around 20% of the project was sold during the first weekend of the launch, validating the product positioning with our brand distant. Overall, the strategic direction remains to increase the budgets in our core markets minimization wherever appropriate and diversification of the product portfolio. This year continues to be estimated while Q1 performance remained modest from a revenue recognition perspective, healthy collection, sustained construction progress and Sidun completion pipeline provide tangibility for the balance of the year. Referring to Slide #5. Coming to the quarterly KPIs. Sales value argues is INR 484 crores, up 10% year-on-year with sales volume of 0.85 million square feet, up 4%, collection stood at INR 665 crores, up 8% and we handed over 690 units in this quarter. On P&L front, revenue was INR 271 crores, EBITDA of INR 42 crores and INR 11 crores. Revenue growth does not fully reflect [indiscernible] primarily due to timing of handovers and project completions. With limited new projects reaching OC milestone in Q1, we expect a stronger revenue recognition in Q2 and 3. The hinted margins are largely product mix driver rather than structural with around 40% of relatively lower margin legacy projects from Kolkata. Margins are expected to improve in S2 and higher-margin product reaches completion. On the cash flow perspective, we generated INR 135 crores of free cash flow before new product investment, invested INR 88 crores in new projects and ended the quarter with standby position. Our business development to be added 0.7 million with an estimated GDV of INR 650 crores. Overall, Q1 margin strong operational start. Slide #6 summarizes what we just discussed. Referring to Slide #7. During Q1, we launched approximately $0.9 million is part as 3 launches, 0.3 million area at Shriram Stellar in Chennai, 0.4 million is Shriram Southbrook in Kolkata and 0.2 million [indiscernible] Green Meadows launch in Chennai. These launches divested demonization and product diversification while also validating customer demand in our core markets. In Chennai, Shriram Stellar is our premium residentional offering as the product was launched towards the end of June, its impact on Q1 was limited worthless approximately 20% of the project was sold during the launch weekend. In Kolkata, [indiscernible] as the branded land concept. The response was particularly strong with approximately 55% of the inventories sold within 30 days. This provides confidence in the parts and support faster lending realization and capital recycling in the [indiscernible]. Referring to Slide #8. This slide provides a glimpse of the 2 key launches during the quarter. Both launches received intelligent customer is fast and reinforce our strategy of premiumization and product diversification. Referring to Slide #9, project pipeline and business development. So this pipeline remains 1 of the stranger aspects of the business. We currently have approximately 16 million square feet of ongoing projects and $17.7 million in profit of the upcoming projects giving us a total current pipeline [indiscernible] profit. The ongoing portfolio has 2.9 million square feet of console area with console GDP of proximity in INR 1,970 crores. The upcoming portfolio of [indiscernible] which has a GDV potential of approximately INR 11,560 crores. Overall, the GDV potential of the current pipeline is approximately INR 13,530 crores. In addition, over 7.6 million square feet of projects with GDP potential of more than INR 6,000 crores are at advanced stage and are likely to be added over the next 3 to 6 months. We continue to earlier 20-plus million square feet opportunities for accelerating pipeline additions. Therefore, management remains confident and committed to nearly doubling the upcoming project pipeline over the next 18 to 24 months. Referring to Slide #11, financial highlights. Q1 revenue was INR 271 crores, up 4% year-on-year, with a gas profit of which INR 56 crores, EBITDA was INR 42 crores and PAT stood at INR 11 crores. The top line performance was impacted by the timing of project completions and product mix. Revenue was primarily driven by lower handovers from FY '26 completion and recently completed legacy low-margin projects from Kolkata, particularly Grand and on China, resulting in lower gross margin. Other operating revenues income predominantly comprise our reversal of constructive public asset latter along with fair value gains on projects and land advances relating to Shriram's posttest Safira. Implied costs were marginally higher due to routine annual increments, while other expenses remain broadly stable with some increase in new or plant expenses. Finance costs were also broadly flat. The JV loss of around INR 4 crores primarily reflects higher selling expenses at partly offset by handovers from recently completed during projects. The dual project completions providing is ton visibility, revenue and earnings momentum will be stronger through the balance of FY '27. Referring to Slide #12 which summarizes our discussion. Referring to Slide #13, consolidated cash flows. Operating cash flow remains healthy supported by [indiscernible] collections and execution that handovers. We generated free cash flow before new project investments of INR 135 crores and invested INR 80 crores -- INR 88 crores in new projects. resulting in net free cash flow ARPU to INR 37 crores. The positive net free cash flow improved our closing cash balance to INR 219 crores. Overall, the cash flow position is held with adequate liquidity to support ongoing for this institution and planned [indiscernible]. Referring to Slide #14, debt profile. The balance sheet continues to remain comfortable. Gas external debt at INR 651 crores against a cash equivalents of INR 219 crores. This results in net INR 432 crores. Net debt to equity is 0.39x, which remains a healthy level. Our CASA debt is around 11%, and we continue to benefit from the reduction in [indiscernible]. The company's equity stood at INR 1,471 crores, supported by healthy liquidity and the crystal A330. This provides ample funding capacity to support future growth. Therefore, with our strong liquidity, healthy base and liquidity and low gearing, we have sufficient dialed capacity to support future growth without taking leverage to uncomfortable levels. Slide #16, the 27 guidance and outlook. Our guidance remains unchanged. We remain confident of achieving our full year guidance. Confidence is primarily underpinned by the strong launch lineup and the project completion visibility. Referring to Slide #17, the FY '27 launch calendar. We have 7 million part of potential launches with approximately 6 million square feet planned for FY '27 across the lumpiness. Out of this, we have launched 2 projects with 0.7 million space during Q1. With the distributed launch calendar across the year, we are well positioned to direct sales growth and maintain a strong business momentum in FY '27. Referring to Slide #18, the 527 handovers. This is 1 of the most important slides from an earnings perspective as it provides a strong visibility on the new recognition for the balance of the year. Recently completed projects has over 410 units and INR 400 crores of unrecognized revenue from sold units, which is expected to be recognized during upcoming quarters. In addition, 2 projects with over 400-plus units and in INR 160 crores of revenue potential are targeted for projects with over 2,100 units INR 1,000 crores after east for CST. -- operator than 2,900 units representing over INR 1,560 crores of revenue potential are sold for handover and revenue recognition during the balance of the year. The high confidence and over pipeline provides a strong visibility for improving the new and movement of Q2 and the balance of FY '27. Referring to Slide #19, the FY '28 mission. We are familiar with this slide, and I would like to reiterate and assure to our investors that we are on track towards receiving our FY '28 mission. The current pipeline provides substantially substantial visibility for this objective. The 33.7 million is paid current pipeline has revenue potential of approximately INR 14,000 crores to be recognized over the next 5 to 7 years. To summarize, Q1 FY '27 has been a strong operational start with our highest ever Q1 sales and healthy collections. We launched response in Chennai and Kolkata validates our strategy of premiumization and product diversification. The project pipeline with $33.7 million in part of current ongoing and upcoming projects along with additional opportunities on the revaluation. The balance sheet dividend is strong entity of only 0.29 as INR 119 crores and most importantly, BSI launch and completions for client provides a strong visibility and therefore confident of seeing FY '27 guidance. Overall, that the business is on a strong decree with the benefit of the current investment, launches and [indiscernible] completion is expected to become increasingly visible through FY '27. On behalf of the management team, I reaffirm our commitment to government customer experience and relocation. Thank you. I now hand over the call back to the operator. Myself, along with our co-CEO, will be glad to you answer all your queries.

[Operator Instructions] The first question is from the line of Subrata Sarkar from Mount Intra Finance.

Sir, can you reiterate and explain a little bit about our mission target, basically, we are still we are speaking with like sales value and then revenue of INR 2,500 crore. And then PBT, we are talking about INR 250 crores. So right now, our FY '26 PBT was actually INR 8 crores. the kind of -- so is it right figure to match like you are talking about from INR 80 crores of FY '26 to INR 250 crores by FY '28? And in that case, how much will come from our asset sale of the Kolkata land basically?

Yes, the numbers are right. And Kolkata land sale is not a significant part of it. Kolkata, we are developing Calcateland from where we are today, which is about 100 to 110 acres of more is left for development beyond whatever approvals we have. Those will also be developed into a project or monetize in some way to a development through third parties. We'll have to -- we are evolving the strategy there because we got the approvals. We got the litigation out of our way only late last year. But this INR 20 crore PBT or INR 2,500 crore revenue is coming from ongoing projects that are to be completed. As you can see on Slide 19, we have sold -- launched, sold and to be recognized of about 8 million square feet to be recognized over the next 2 years. That alone brings you to INR 4,800 crores of revenue recognition potential between FY '27 and '28. Therefore, where the confidence of INR 2,500 crore annual revenue coming in. In addition, the new launches, some part of the launches will also come for revenue recognition depending on what the product mix is and when we launch the FY '27 and early product with [indiscernible]. It's a lot, it takes only to 18 months to 24 months to turn around. So some part that it also will be ready for income recognition. The combination of these two gives us the confidence that we will reach the revenue recognition of INR 2,500 crores. And we are looking at PBT stabilizing in the range of about 10% margin. And that's fundamentally where we are coming from. It's a bottom up based on individual projects. not on one sale.

So my primary concern of where I want you to highlight is like we are talking about PBT of 10%, where we have not done the EBITDA more than 7%, 8% in last 4, 5 years basis. So like can you help me to understand that sales value part and revenue part I'm comfortable with -- only thing I want to understand that how we are on, what is the underlying explanation? And can you just highlight it in train details, then we can achieve 10% PBT basically. So that is my more point because if you track the way I'm tracking your company, more or less for last 3, 4 years, you have always locked the revenue you are talking about most of the cases Out of the margin basically. So that is very volatile, to be very honest. Now we are talking about we are giving a guidance of 10% PBT margin where we have not even done more than 7% at EBITDA level. So can you help me to understand that part basically? Because other than sales value and revenue, it's a PBT and maybe collection, these 2 figures, if you can highlight.

Yes. I think we have consistently reiterated this point in the past also. There is definitely a disconnect between how we look at our EBITDA and how the industry should look at and how we look at it at pace. Our other operating revenues are integral part of our business. So when you look at our other income in the financial segment, we need to be able to divide that into 2 parts. One is the normal other income secondly in other operating income. Other operating income is associated with our joint ventures, development rights monetization or other real ordinary cost of business income. And that is why in our presentation, we consistently show other operating revenues separately. -- accounting standard as a funding standard that requires all of them, auditors will combine all of this into non-income from operations. Therefore, if you add our EBITDA margins in FY '23 was 22.5%. -- is on to return call, I'm sure I'm ready to get on our team members to talk to you off-line. 26%, 25% or 18.4%, FY '26 was about 13.5%. We believe with the product mix changes, 27 and 28, we will see an improvement in EBITDA margins. And similarly, PVC FY '23 was 8.8%, FY '24 was 7.7%. FY '25 was 9%, 26% was lower at around 5%. That number, we expect with this change in product mix over the next 2 years, we expect it to stabilize around the 10%. So this systemic happens with most people because they're mechanically taking like money control or others. -- mechanically removing the entire other income as a mutual fund income or treasury.

Okay. But sir, indeed, in terms of our own estimate, like what kind of EBITDA we can do in FY '27 and FY '28 corresponding to 10% PBT, let's say, what should be our EBITDA in terms of our own calculation and FY '27 also, if you can even call for us ballpark.

I would not likely like to put the absolute numbers in such a large demand like to like that. What I would like to say is our EBITDA margin should be in the range of 2% to 4%. -- by FY '28.

Resi. This is Pat. I was not looking for a particular number as set range will help me. And sir, can you give last point. Can you give some highlight on the like date and interest that we will be having? Total what kind of total, what will be the figure as per our estimate of the disease and the corresponding interest rate that interest we have to pay basically?

So if I look at our overall gearing, it will go up. it would most likely go up during FY '27, the gearing can rise temporarily because as you know, as we are pursuing aggressive growth and trying to lock more project decline, understandably either equity or debt has to come in, not only the cash from operations. I have to live within our cash flow operations, the growth cannot be there. Therefore, we might go up on the gearing level, but our comfort zone, even on a short-term basis, it may not be very significantly higher. So our long-term comfort zone will be about 0.5 to 1. Temporarily, it might go up.

Got it. Sir, last point, sir, in our FY '27 outlook, we have given us sales value growth of almost 40% to 50% up to INR 3,300 to 3,500, whereas the forest collection figure is much muted at a 26% to 30% growth. of 2010 to 2000 2,100 crores to INR 200. So why this disconnect can help me to understand a little bit more where sales well will be much higher collection will be lower?

Yes. So the collections tend to follow the project program because as initial collection on pain will be only 10% and then with the ATS, it goes to 20%. After that, we'll be project progress late -- and sincbased on the project approval status today, as we indicated in the earlier calls, our launches are back ended, and you can also see that in the slide here on Slide 7. Since they are all Q3, Q4 launches, they were not transact to the same amount of collections. And so the this year base based on the progress of current ongoing projects and the timing of launches of our 5 ship launches that we are targeting in Q3 and Q4. We expect the collection to be raised about INR 2,000, INR 2,000 crore to INR 100 crore. As the project progresses, the collection will ramp up will be in subsequent quarters and in the next financial year. A reminder to all participants. Anyone who wishes to ask a question may on Dataonelephone.

[Operator Instructions] The next question is from the line of [indiscernible] from ICICI Securities.

Congratulation on good response for new project launches. Sir, my question was as for the guidance for FY '20, the precise number. So -- if we expect about INR 350-odd crore quarterly run rate from sustenance we make up to INR 1,400 crores. So the balance what would be the launch of GDV for the full year? Like I believe INR 450-odd crores we have launched during Q1. And if I assume you know INR 2,000 crores worth of GDV projects to be launched during FY and approximately 40% to be sold from this. Then also the total works to about not more than INR 200 crores, INR 2,300 crores. So if you can break up in terms of launch JV, what is the launch Doarexpecting in 2 and whether the sustenance sales number around INR 1,400 crores to INR 1,500 crores we can achieve for this year?

Yes, let me start with -- let me start with the GDV based on the 7.3 million supply that we are targeting to release we will be -- most likely we would get about 5 million square feet of launch area out of that 5.9 million of launch area. The GDV of the supply that we are giving is roughly about INR 6,000 crores. by somewhere around INR 5,050 crore INR 5,600 crores. And because all of this will not materialize. Out of this, we are looking at new sales contribution during the financial year or roughly about new sales. Sales are INR 1,450 crores seems right. The balance will come from the new launches.

Great. So that explains it. Secondly, you have got a good response in concert which we are testing the waters. And you had you are looking for about 2.3 million square feet apartment launches, which -- for which there were approvals in place. So whether this would come in FY '26, have you planned either whether there is any bifurcation in terms of how you would go for apartment or plot sales in Kolkata? If not for this year then next year.

So as far as Kolkata is concerned, let me take a few minutes to explain. I think it's a very interesting evolution which is happening, and I think we'll land properly in this current year. square feet approval that we have already obtained the preelection is unlikely to be launched fully this year. We have roughly about 650,000 square feet of apartments to be sold yet from the previously launched projects sometime 2 and 3. And when we -- as we reach like half of this are more about 200,000 square feet of unsold inventory, then it is probably worth releasing the next set of supply. Even then 2.3 million cannot be released in 1 stroke because then it would be an excessive supply and customers will pick up from multiple towers of sales, and then we'll end up spending our own money to construct. So release in phases. Historically, we have released 800 square feet per lot per tranche of launches, like Phase I, Phase II, Phase III type -- that is 1 part of it. We might launch 1 phase of it during this year, but nothing more than that. That is point number one, from the existing approval perspective. After these approvals are done, after the handovers of land has done to the government, we have about 160 acres roughly slightly less than 110 acres of land to be developed, giving aside the common infrastructure, water bodies and all that. That 1 is the 1 which I said in Mr. Pandey also said, and I said earlier in the earlier answer that we are evolving the strategy. For a simple reason, we wanted to test various products before concluding on what the revised development looks like. So in that context, we will launch in Q4, late last year and blood launch this year has been very encouraging. Based on the launch price that we have achieved, -- based on the launch price we have achieved and based on the cost of development, we believe both these products deliver between 65 to 70 net contribution to a -- if that is the case, it does not make economic sense to sell the land to a warehousing or any other bulk sale. It seems to make a for us to develop into this low gestation or a quick turnaround projects like product development. which seem to have taken off very well. As Mr. Panda mentioned, our product development sales, we really reached about 55% of our projects got sold in about a month's time, which is very encouraging and the appetite of the local market is very obvious. And therefore, we will do a combination of this release from 2.3 million square feet of apartment, which is outside is 14 acres. -- is already considered improved, and for land is utilized. The balance plan we will try and categorize in such a way that we optimize Pericle contribution, and that's our whole intent. And more importantly, it has been done with a faster time scale. Therefore, it is a combination of Villas, apartments and broader development to be developed in that site and intent is to complete everything in 3 years' time and hand over the projects in 5 years match and get out of this cycle. That's our broad strategy. How we are fine-tuning each pieces is something that we are working on internally. We hope to land it in a quarter.

Great. And lastly on the addition you have done for start. I missed one.

To supplement, I missed one, Ronal, sorry. So this -- I actually -- I don't know whether you picked it up gave you the contribution as well. So that shows what the land can fetch us as a company. land of 104 acres, 105 acres, maximum 110-acre developable land fetching you that kind of contribution is the inherent cash flow to be recognized over a 2, 3 years' time in Shriram Properties.

Okay. Great, sir. And lastly, sir, on the project which we have added. So if you can give some details with respect to where exactly and what kind of structure it is there and how we are planning this project to come up for launch and some details on the new project you have added?

So during the quarter, we added a project which is a JDA. It is in Bangalore, we micro market is all Boston northern side of land. And we have already submitted the development plan. And it's a joint development. So roughly about 8 lakh spares we got thereabout is a totally salable area. We expect to get that on board in the year early Q4. The -- I did mention in 1 in with some of you on the group meeting or in our previous call. We are at an advanced stage of closure. We are at [indiscernible] approval with regard to the project, where our transaction is complete. Final documentation has been frozen, but we opted to buy this pay for this I once the approvals come through, and we're waiting for the plan approval. Once it comes within about a month's time, we should do to launch. -- which is called Manjari, the 2.3 million square feet, which is where we are doing an exercise purchase from the existing owner of that on ship. And so that project should also get taken off and Q2. We are basically waiting for the local authority approvals. Once it comes, we will launch, the list of launches, Mr. Panda talked about the next list, which you'll see is the Banega road, which is what we internally call is John, which is a element project. And so on approval has been submitted. -- and bidding for the plant sanction. And that should also take off most likely in Q3. There already have visibility on those approvals. Beyond that, it will go down or projects which are there in Slide #17, transaction is closed, be it Educa, Bangalore, Ballarat, India apartment in Lanka apartment project of 0.37 million square feet Delanco house of 0.5 million square feet that due just mentioned J. All these transactions have been completed. There are different levels of plan submissions. In fact, I must say that our planned submission has actually commenced the submission processes are already progressed in terms of apartment in Alankar rolls in Elana as well. Both the status of at June, and since then, we have made further progress. So I think credits are progressing well. Our external environment where we face challenge in the past has also become a bit more controlled a bit more stable. So I think -- and more importantly, as you have noticed, our launch dependency is not on 1 city anymore. It is across spread across multiple cities. Therefore, the risk profile of these launches is a lot less compared to what we witnessed suffered in -- and therefore, we have a great confidence on FY '27 sales value.

Okay. So, sir, Manjari will happen in Q2 versus the revised estimate we own in Q3?

Q2 is what I think the transaction will happen by the time RERA comes in because again, also day. So we safely took it a Q3 launch I was meaning people were set quota launch can be 1 more a couple of months here and there.

[Operator Instructions] The next question is from the line of Diwakar from Prudent Equity.

So in the presentation, you have mentioned you are expecting accelerated and vernals resonation in S2. So can you put any number to this I mean, what kind of accretion are you expecting in this financial year?

Yes. Sure. It is there on Slide 18. We are actually based on the OCT receipt, -- we have pent-up handovers of about 410 units as of now. And in Q2, we are expecting overseas for 2 projects, which will add up another 400 units, so 800 units in hand. We are working towards 5 or more projects. These are 5 Q4 handovers or overseas and that should add about another 2,000 odd units. So that's how in the presentation has alluded to 2,900 units in hand. Our 2,900-plus units would be available for handover. And we've already done about 690 or something in Q1. Therefore, we have a good visibility of reaching the 30,637 number. And this should be handed over in Q3 and Q4, the new in H2 will also be handed over in this year.

Okay. So around INR 1,500 crore that is mentioned, right, in the remaining of the financial year?

Yes.

Okay. Okay. And on the PBT level? Your guidance is...?

Yes, INR 250 crores by FY '28.

So this is cumulative, right, for FY '27 and '28?

This is what we want to achieve in FY '28.

Okay. And what is the guidance for this financial year, 10% PBT?

So this year, we might be in the 8% to 9% -- and as I said earlier in the past, our -- we would have at least a 20% growth in our revenue recognition, and therefore, from last year. And actually, it will be slightly higher as well. And therefore, we believe we should be able to reach a meaningful growth in PAT during the year.

Okay. And sir, this growth will come from higher-margin projects because in this quarter, the margin did due to product mix, right? So how the product mix is going to change in the in financial year?