Kolte-Patil Developers Limited (KOLTEPATIL) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Kolte-Patil Developers Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Savli Mangle from Adfactors PR. Thank you, and over to you, ma'am.

Thank you, Yusuf. Good evening, everyone, and thank you for joining us on the Q1 FY '25 Results Conference Call of Kolte-Patil Developers Limited. We have with us Mr. Atul Bohra, Group CEO; and Ms. Dipti Rajput, Vice President, Investor Relations. Before we begin, I would like to state that certain statements made in today's discussion may be forward-looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available in the Q1 FY '25 results presentation that has been shared with you earlier. I would now like to invite Ms. Dipti Rajput, to begin proceedings of the call. Over to you, Dipti.

Thanks, Savli. Good evening, everyone. Thank you for joining us today to discuss the operating and financial performance of Kolte-Patil Developers Limited for the first quarter ended 30th June 2024. As you would know, Mr. Atul Bohra has taken over the mantle of Group CEO at Kolte-Patil with effect from June 14, 2024. Before joining the company as Group CEO, Mr. Bohra briefly worked in the capacity of Regional Business Head at a leading real estate company. He has worked with Kolte-Patil Group in different roles across geographies over a period of 2012 to 2023, during which he also served as the Group CFO. During his tenure at Kolte-Patil, we demonstrated keen business, transformative approach and financial expertise. We look forward to his continued success in achieving new milestones. I would now like to invite Atul to discuss the operating highlights and business outlook. Following his discussion, I will take you through the key financial highlights for the quarter. We then look forward to taking your questions and suggestions. Over to you, Atul.

Thank you, Dipti. Good evening, and warm welcome to everyone present on this call. We appreciate your continued support and look forward to sustained engagement with all of you. Let me begin by sharing with you my view on the real estate environment, followed by an overview of key developments of the quarter. The Indian economic continues to display remarkable resilience and Reserve Bank of India has estimated real GDP growth of FY '25 at 7.2%. The recently presented Union Budget emphasized physical consolidation and growth, including capital spending and social welfare, reflecting the government's confidence in continued economic growth. Overall, we have seen that residential market has strengthened significantly with the demand reaching 11-year high in the first half of current year '24. A shift towards premium segment is evident with higher-priced homes driving the market volume. We believe that the mid- and higher-end segments are expected to remain the primary driver of the Indian real estate market in coming quarters. In the rapidly evolving real estate industry, we have been persistent in customer centricity with product offering that enrich their lifestyle. These offerings are across segments ranging from mid-price segment to a premium luxury segment. During our 3-decade journey, company has incubated the brands and create research-backed product that has enhanced the customers' price value proposition. I'm excited to take forward the legacy of redefining, leading along with the very capability we have. We are geared up to scale new heights and deliver long-term value for our stakeholders. Coming through the performance during the quarter, the presale value of INR 711 crores with the sales volume of 0.96 million square feet improved marginally over the same quarter previous year. Sustenance inventory is largely contributed to the sales of this quarter. Strong execution and timely delivery resulted in our highest ever quarterly collection of INR 612 crores, making a 19% year-on-year growth. Our flagship project, Life Republic in Pune recorded a sales volume of 0.46 million square feet in quarter 1 FY '25. For the year, till date, we have launched a project with sellable area potential of close to 2 million square feet, translating into a GDV potential of around INR 1,500 crores. This largely include the project at Phase 1 R5 sector in Life Republic township. This sector being developed as a luxury segment with total development potential of 2 million square feet. Second launch is at the last phase of 24K Altura premium luxury project at Baner. And the third launch, what we have is at Wagholi in Pune East Zone, we have large projects, Spring Shire, which has total GDV potential of over INR 400 crores. I'm glad to share that all these project launches across micro market of Pune are receiving a strong response from our customers. The launch pipeline is largely on the track, and we are confident of launching the project with total GDV of INR 8,000 crores during the current financial year. Strong offtake of existing inventory and encouraging response from the newly launched projects give us confidence to meet FY '25 presale guidance of INR 3,500 crores. On the business development front, we are working towards definitive closure on a few deals and should be able to share once we have the final closure. I would like to bring your attention that our project acquisition strategy judicious with the defined parameters on the financial prudence and aligns with our diversification goal. Our main objective is to deepen our market presence while focusing on capital productivity that strengthen our brand presence. Here, I would like to talk about revenue and operating margin for the quarter, which stood at INR 341 crores and 8.2%, respectively. For the full year, the revenue will be in line with the stated guidance and operating margin will be in the [early phase]. To conclude, I firmly believe that economic and sectoral optimism will continue to drive the growth during the course of year. With a growing project development potential, strong balance sheet, we have validated governance structure and a strong brand presence connected across the geography, we believe that Kolte-Patil is attractively placed to deliver sustainable growth over coming years. With this, I now hand over the call to Dipti to share the financial highlights.

Thank you, Atul. I will now briefly take you through our financial performance for the quarter. Sales on CCM-based accounting in Q1, we reported revenues of INR 341 crores. Q1 FY '25 EBITDA was recorded at INR 28 crores. Our net profit after tax post minority interest stood at INR 6.2 crores. Here, we would like to remind you that recognition of revenue and profits are dependent on the timing of project completion based on statutory accounting guidelines. We ensure the continuity of construction activities at a healthy pace, and improved momentum in sales, registrations, construction and CRM drove Q1 FY '25 collections of 19% Y-o-Y to a record INR 612 crores. The liquidity in our business operations remained strong, resulting in further reduction in net debt. Our net debt to equity stands at negative 0.05 as on June 30, 2024. Further, the operating cash flow for the quarter stood at INR 247 crores. Our focus will remain on maintaining sales performance, timely execution and deliveries, strengthening the business development efforts, as indicated by Atul earlier, which will continue to drive overall performance of the company. With that, I hand over the call and leave the platform open for questions and -- the Q&A session.

[Operator Instructions] First question is from the line of Dhananjay Mishra from Sunidhi Securities.

My question is with respect to this quarter number. So I mean, last time also we had some legacy project delivery issues, and because of that margin got impacted. So are we still -- in this quarter also, we had some delivery from legacy projects where the margins are lower? Or it is something normal quarterly phenomenon?

This quarter, we have slightly improved on EBITDA margin of 8.2%. And as you have seen like last 2 years, the APR has marginally have improved on most of our projects. And with those recognition coming up to the P&L, we are confident that this year, we will match our margins to the guidance.

Okay. And secondly, in terms of launch, in first quarter, we have done close to 2 million in terms of volume. And we are targeting INR 8,000 crores revenue potential this -- for the full year. So Mumbai project, I mean, we have not launched any big project after Goregaon. And so how confident that whatever target we have for 1.5 million and which will have a revenue potential of INR 2,600 crores as per PPT. So how confident that all these sales will be launched?

So as you rightly said that the first quarter, we already have 2 million square feet, which has launched with the potential -- GDVP potential of INR 1,500 crores. This year, we have a strong target and strong pipeline of launches of INR 8,000 crores. Particularly as your questions is on towards Mumbai side, we have planned for -- mostly Q4, we have the Mumbai launches, which is at Jal Mangal Deep at Goregaon, Jal Nidhi at Goregaon, then Nand Dham at Dahisar, Vishwakarma, which is at Mulund, project with 6.1 lakh square feet of the potential -- GDV potential of INR 900 crores. So I think more or less, these are all under the approval phases. And looking at the current scenario, we are pretty confident that by year-end or quarter 4, we will launch most of the Mumbai projects.

And lastly, in terms of...

Mr. Mishra may we please request you to rejoin the queue for the follow-up questions. Thank you. Next question is from the line of [ Hemant Agarwal from Leo ] Capital.

So my first question was, is there any change in strategy with the new management team? And with regards to our society redevelopment projects, right, that is luxury versus mass market of financial structure. So is there any change with respect to these at the company level?

Mr. Agarwal, please request to use the handset, your voice is muffled.

Okay. Am I audible now?

Slightly better, but still it is muffled.

Yes. So my question was, is there any change in the strategy with the new management team? And with regard to society redevelopment projects or type of projects on luxury versus mass market of financing structure, is there any change with respect to these at the company level?

So in redevelopment space, as you are aware, like we have already delivered 3 projects and other 5 projects are under the ongoing pipeline and in the final league of completion as well. And with another 6 projects which we have concluded and in the phase of launches, the upcoming acquisition strategy towards redevelopment is more or less focusing on the larger skill because the team is quite confident we have established a strong team to take care of redevelopment vertical, and we are pretty confident on this segment.

Okay. Got it. And my next question was like the 2 million square feet of INR 1,500 crores worth of inventory that was launched last quarter. How much of the presales has the company collected from these?

No. So that is -- like these launches has got tremendous success. But yes, we will -- at the right time, we will announce those numbers.

Next question is from the line of Pritesh Sheth from Motilal Oswal.

So first question is, again, on business development. So our INR 8,000 crore guidance. How much visibility do we have in terms of -- or the confidence in terms of signing up these projects this year itself? Like all INR 8,000 crores, are currently under discussion. And just in the last stage where probably we are just waiting to announce that? Or we will still look to gather some of that in terms of pipeline and evaluate over the course of the year?

Thanks, Pritesh. Very important question and -- as you -- because in real estate, the business development until the final definitive never happened. We will never be too early to announce or maybe we don't foresee. But yes, as a pipeline, what the BD pipeline we had and the term sheet we signed a few deals, what we see that -- which has reached to the advanced stage and considering all those INR 8,000 crores, we are pretty confident that we will meet these BD guidelines. And at the same time, we are not too fussy, like, okay, we want to be in this region or that region. We even believe that whichever gets closed faster and our, always, trust is on the location. We never compromise on the location. At the same time, we always go with the prudent of title and the financial feasibility. And with all these things, I'm confident that INR 8,000 crore number, we will achieve for this financial year.

Sure. That's helpful. And second, we had some INR 140-odd crores of land spend this quarter. Is it all related to whatever you have in the pipeline? Or we have also paid something in advance for certain projects that we are looking to tie up once DA is signed?

So a few of these advances are paid towards obtaining the approvals in TDR and a couple of payments is towards our commitment towards the existing land bank.

Next question is from the line of Shreyans Mehta from Equirus Securities.

So just wanted to understand what was the contribution of new sales for the quarter? Or how much of whatever we launch INR 1,500-odd crores, how much was the contribution?

Yes. So for the quarter 1, it is mainly from the sustenance sale. As I said that this quarter 2, we have launch of R5 and Wagholi and Altura 3 projects. Like that, there are -- for every quarter, we have certain pipeline. So you will see contribution from the new launches from the next quarter onward.

Sir, my question is, I mean, in the slide, where we are showing that FY '25, you launched INR 2.09 crores or INR 1,500-odd crores worth of inventory. So is it towards the second quarter that you've launched towards July, August?

Yes this is towards second quarter, yes, INR 1,500 crores, this is towards second -- quarter 2. So it is mentioning still date. So that is -- that has happened in quarter 2.

Got it. Got it. Got it. Sure. And second question is just to, I mean, highlight, reiterate our numbers or guidance. Can you just highlight the -- or reiterate the guidance that you are given in terms of how we look at the P&L from the revenue and EBITDA perspective for this year and next year also, that would be helpful?

I think for that also, we had given guidance of P&L. For the full financial year, we foresee at INR 1,800 crores to INR 1,900 crores, and EBITDA margin in the early teens.

Next question is from the line of Deepak Poddar from Sapphire Capital.

Yes. Am I audible, sir?

Yes, you are.

Sir, just first, I just wanted to understand, I mean, INR 13,500 crores of presales we are targeting over the next 3 years. So generally, what is the embedded EBITDA margin or embedded PAT margin that is inherent in those presales?

So those -- see most of these INR 13,500 crores of the project, we always see a visibility of the project, almost 60%, 70% of the visibility we have from our approved land bank and upcoming launches. With the embedded margin, as your question like it is too early to comment because it comes from a different segment, but we target somewhere around 18% to 20% of the margins.

EBITDA level?

Yes.

And at the PAT level?

At PAT level around 10%, 11%.

At the PAT level around 10% to 11%. So how does this translation happen to your P&L? I mean, although I understand there might be some lag or incremental cost that comes from your new launches? But this transmission from the embedded EBITDA PAT to your reported EBITDA and PAT. So there is always a lag, right, in terms of your reported, you always lag behind because of the nature of the business.

Not the correct way of looking at it because for every quarter, once we scale up our revenue. I think this number will be realigned properly. At present, because there are certain fixed overhead cost and the employee cost and the marketing costs, which sits in your P&L. And in any quarter, if the revenue doesn't get recognized to the tune of that, so we always look -- at present, we never see any margin as a pressure on margin as a concern for us because whatever project we have. As I said that, okay, we have a prudent financial control and the financial mechanism we established, and we always looked at the margin at a GP level, about 28% -- 27%, 28%. And when it incorporate into P&L, it all depend on in what phases it's recognized. So -- but still at a full financial year for upcoming financial year, we are pretty confident that we will meet our guidance of the.

'26, when we say we will do about what we have earlier said about INR 3,000 crores of revenue recognition, right?

I think these questions may be, offline, Dipti can handle with you.