Kolte-Patil Developers Limited (KOLTEPATIL) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Kolte-Patil Developers Limited Q2 FY '25 Earnings Conference Call. [Operator Instructions] This conference call is being recorded, and the transcript for the same will be put up on the website of the company. [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, Neha. Good afternoon, everyone, and thank you for joining us on the Q2 and H1 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 remind you 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 Q2 and H1 FY '25 results presentation that has been shared with you earlier. I now hand over the call to Mr. Atul Bohra, Group CEO, to begin the proceedings of this call. Thank you, and over to you.

Thank you. Good afternoon, and warm welcome to everyone present on this call. Seasons greeting from our end to everyone, and I wish you and your dear ones a prosperous New Year. Thank you for joining us today to discuss operating and financial performance of the company for the second quarter and half year ended September 2024. Let me begin by sharing with you my view on the real estate environment, followed by an overview of key developments during the quarter. There onward, Dipti will take over to you on the key financial highlights. Following this, we will open up for the question-and-answer session. Indian economy, we have seen the landscape continue to strengthen, driven by both domestic resilience and a gradually improving global outlook. RBI forecast growth of around 7% for FY '25, reinforcing India's position as one of the fastest-growing economy. Customer confidence indices been reflecting optimism, and we have seen strong customer sentiment in the housing sector, too. Stabilizing interest rates have further supported the sustained demand for housing. This robust activity within the residential market highlights a broader trend, increasing aspirations among the homebuyer driven by rising disposable income, evolving lifestyle preferences and focus on premium and preferred location housings. Developers are responding by expanding their offerings to appeal to aspirational homebuyers seeking enhanced living experience, growing infrastructure development and rising employment rates are creating new opportunity in the emerging micro markets. For example, in Pune as will we have seen a well-developed transport system, improved connectivity with other parts of the city helped Pune secure the one of the top spot in the ease of living indices among the Indian cities. The upcoming second phase of Maha Metro project is expected to enhance the city's transport system as well. The city boasts of good infrastructure even in remote areas, which contributes to increased demand across existing and emerging micro market. In Mumbai as well, the project like [ Mumbai harb ] [ trans harb ], Harbour Link, Coastal Road Project, Navi Mumbai, suburban rail, Phase 2 multiple metro lines and enhancing connectivity leading to residential expansion in the areas like Navi Mumbai, Thane, Western Suburbs. Similarly, Pune benefits from initiatives such as Pune Metro, rail expansion, Pune Ring Road and improvement to Bus Rapid Transit System. Coming to the operational performance during the quarter and half year ended 30 September 2024, our Q2 FY '25 presale value stood at INR 770 crores with a sales volume of 1.03 million square feet. We have registered 22% growth in our presale value, making it the highest ever quarterly sales value. The complement of offering across segments and preference has enabled us to continue on the strong growth trajectory. During the half year, our presale value stood at INR 1,481 crores with a volume of 1.99 million square feet. 24K luxury segment contributed to 30% of our presale by value for H1, reflecting the sustained demand for premium and high-quality residences. This number was 12% for FY '22. The sales momentum at our Life Republic township projects remain strong, further reinforcing our leadership in Pune market. Sales volume of Life Republic stood at 1.03 million square feet during the first half of the financial year. Over time, we have expanded offering from 1 bedroom, 2 bedroom, 3 and 4 BHK as well as rowhouses, villas at our flagship project Life Republic alongside developing infrastructure aim to enrich the lifestyle of the residences. As a result, Life Republic has seen steady growth over time, going ahead, large volume -- value addition opportunity is expected to materialize given the pending development potential of 20 million square feet in the upcoming phases of the project. Robust sales and timely execution of the project resulted in from collection of INR 550 crores in Q2. Collection for H1 reached a new high of INR 1,162 crores. Moving on to the launches. Year to the date, we have launched projects with nearly 2.2 million square feet in the saleable area. This includes strategic launch across micro market designed to cater to the varying preferences of homebuyers in Pune and Mumbai. I'm happy to share that recently, we have launched a project in Sector 2 in Vashi, making our entry in Navi Mumbai market and expanding our footprint in MMR region. As we look ahead, our launch pipeline remain robust with the project representing a total GDP potential of INR 7,000 crores plan in the fiscal year. Nonetheless, we are excited about our robust launch pipeline planned for the second half as well. These launches along with our sustenance inventory position us to achieve our growth targets. On the business development front, we are focused on deepening our footprint in high-growth markets of Pune, Mumbai and Bangalore. Our approach is towards building a balanced portfolio positioned to capture demand across all the segments, reinforcing our role as a trusted brand across housing spectrum as well as plotting, which will be a new segment. During the first half, we have recognized revenue of INR 650 crore. While the first half has been low on revenue recognition, we are on track to close year with strong deliveries and revenue around INR 1,800 crores. Moving on to the margin we have recorded 23% gross margin for the H1 as the higher-margin projects are recognized in H2, there will be further improvement in margin. We are committed to improving our margin through enhancing operational efficiency at every stage of the project life cycle from cost management to pricing strategy. As the scale starts reflecting in the P&L, there will be positive impact on operating margins going forward. Cash flow remains strong. Operating cash flow for the quarter stood at INR 442 crores. The real estate sector is experiencing a strong growth and KPDL is well positioned to capture the significant value with its proven track record. Historically, we have delivered improved performance in the second half of the financial year. We expect a similar trend to continue in the current financial year as well. KPDL's growth trajectory is supported by robust governance framework, strong balance sheet and brand recognized for quality and trust. With the legacy of over 3 decades built on quality, customer satisfaction and operational excellence, we have the foundation, the team and the region needed to navigate the evolving market landscapes. Here, I would like to share that we have deepened the leadership pipeline through selective recruitments, region setting and succession plan creating a robust talent platform for accelerated business growth. We are confident that our balanced approach, strong financial management and commitment to innovation and customer satisfaction will continue to drive value for our stakeholders. With this, I now hand over the call to Dipti to share the financial highlights.

Thank you, Atul. Good evening, everybody. I'd now like to take you through our financial performance for the quarter and half year ended 30th September 2024. Under CCM-based accounting, our Q2 revenue stood at INR 308.3 crores, marking a significant increase from INR 198.2 crores in Q2 of the previous year. For the first half of '25, we reported revenues of INR 649 crores compared to INR 769 crores in H1 FY '24. Our EBITDA for Q2 FY '25 was INR 16.2 crores, an improvement from INR 3.5 crores in Q2 of FY '24. For the half year, EBITDA reached INR 43.9 crores. Net profit after tax post minority interest stood at INR 9.7 crores for Q2 FY '25 and at INR 16 crores for the first half of FY '25. Our strong construction momentum led to robust collections. Our strong operating cash flows continue to enhance capability facilitating further reduction in debt. Our net debt as on 30th September stands at negative INR 58 crores. For H1 FY '25, operating cash flow stood at an impressive INR 442 crores, underscoring our commitment to financial discipline and operational efficiency. In conclusion, our focus continues to remain on maintaining sales performance, timely execution and deliveries, strengthening the business development efforts, which will continue to drive overall performance of the company. Thank you. And I now request the moderator to open the line for Q&A.

[Operator Instructions] The first question is from the line of Viraj Mehta from Enigma.

Atul, my first question is regarding the margins. Just wanted to understand, this quarter margins actually were at like 5% few bps here and there. It is actually even lower than the first quarter. And I understand that there are overhead costs, but the revenue record -- in spite of higher revenue recognition, how does the margin slip off in the second quarter?

As a quarter specific, as you mentioned, that 5.6% of EBITDA, at the same time, the gross margin is stood around 23% for the quarter. As an blended EBITDA for H1 stood around 7% and we see that H2 will have higher margin recognition and gradually it will grow. So I would say that there are a couple of projects which is recognized during the quarter, which are of low margin projects. And gradually, once we are getting better projects to support P&L, the margins we see on the upside.

So just to recollect, at the start of the year, in Q4 con call commentary, you had mentioned that we will do early double-digit margins for the year. Now if we have to do that, we have to do 13%, 14%, 15% margin in the second half. Is that doable?

Yes, Viraj it's doable. And we have evaluated, as I said that in the second half, we have a couple of projects, which are of high margin gradually, APR has picked up. And once it gets recognized, as I said that we see the year in the early teens, which is still doable, and we are quite hopeful for that.

Right. And as far as the interest cost is concerned, I mean, as an outside investor, it's very difficult to understand because last year, in the second half, we almost had INR 52 crores of interest cost, which was INR 20 crores in the first quarter and INR 11 crores. Like what will it be for the full year? Will it still be INR 70 cores, INR 80 crore, INR 100 crore? Just a ballpark number for the interest cost?

Yes, Viraj, I think, as you mentioned, it is in the range of INR 70 crore, INR 80 crore. That's where we forecast.

So it is INR 30 crore for the first half. So it will be like INR 50 crores in the second half?

Yes. So this is according to our interest policy, recognizing in the P&L and a couple of projects which where the interest gets recognized under the WIP. So I see that around INR 70 crores, INR 75 crores is roughly the number, as you said.

Okay, sir, best of luck. And last question on BD...

I request you to come back for a follow-up question. [Operator Instructions] The next question is from the line of Biplab Debbarma from Antique Stockbroking Limited.

So my first question is, we see that in the PPT, you have reduced the launch pipeline from INR 8,000 crores to INR 7,000 crores. Just wondering what could be the reason of reducing the pipeline -- launch pipeline.

There are a couple of projects we have reviewed, considering the approval time line, we see that, okay, there may be instead of quarter 4, few projects we see may go in quarter 1 of the next financial year. At the same time, in Kharadi, we foresee that, okay, there are some certain opportunities of equating more land parcels around the project. So the phase that we are launching, we are restricting up to 0.55 million instead of entire phase at one go.

And so far, even -- so now you have given a revised launch pipeline of INR 7,000 crores and of which you have till date launched INR 1,800 crores. So you have around 4,200 -- sorry, INR 5,200 crore of launches in second half of FY '25. So sir, how certain are you in launching most of the projects in the second half of FY '25, considering see we have election in Maharashtra, and we have been hearing that there are certain challenges in some markets regarding approvals. So considering everything, you would have better idea. Considering everything, how certain or what would be the probability of you able to launch in the entire INR 5,200 crores in second half, sir?

As you rightly mentioned that definitely a few uncertainties on dependencies as well on the approvals and considering the elections of this environment, I think Pune portfolio, we have seen a visibility of launching this as per our schedule itself. And maybe in Mumbai portfolio also, we are trying our best to meet the expectations of this launching. However, maybe post election or maybe by mid of the December, we have to take a call if this pipeline will have any changes.

Sir, just to summarize, you are certain about Pune launches, almost certain it will happen. Regarding MMR, you would be able to say, with better certainty post election. Am I correct, sir?

Yes, because these are more redevelopment. So this needs a couple of more exercise of evacuating these societies and demolition and post that we get the final sanctions. Even though this quarter, we have launched Vashi project in Sector 2. But despite all the fact, I think we are still hopeful that this will come in this financial year itself. In case we see any deviations we'll certainly update on this.

The next question is from the line of Shreyans Mehta from Equirus Capital.

My first question is on BD. Sir, it's almost a year and BD seems to be one of the lagging points as far as Kolte is concerned. So where are we on this? Despite muted 1H, we are still maintaining our target of INR 8,000-odd crores. So how confident are we on that front?

As far as our BD goals, we are in a couple of BDs we are in quite advanced stage, and we are pretty confident that this number of INR 8,000 crores of our guidance we will meet.

So sir, assuming even if you do INR 8,000-odd crores in second half, how are we placed as far as FY '26 presales are concerned because majority of the projects for us will be opening by second half and largely LR would be there in terms of inventory for us. So is there any risk because even if you do INR 8,000-odd crores in second half, those will be coming on stream or will be opening, say, in FY '27 or at max base-case scenario would be fourth quarter of FY '26.

No, we don't foresee because usually, when we close the BD, it's like a journey of 8, 9 months till 12 months for securing all the sanctions. And accordingly, for this financial year, we have not carve out any sales from BD in new BD itself. So I don't see, at the same time, the launches so far 2.2 million, we have launched plus sustenance inventory and upcoming launches will keep us enough inventory for our target to meet. BD is definitely for the next financial year itself. And definitely, there will be then for FY '26, it will support us a lot.

So sir, just to reconfirm, you are saying that probably whatever BD we do would be coming into picture or into play in FY '26 itself? The turnaround time would be faster? Is that what you're trying to indicate.

Those BD were after -- post closure, it's a minimum time line of 9 months is there, 9 to 12 months for launching on the project. So we don't foresee that even though we closed the BD, will immediately come in the launches.

Sir, can you help me reconcile...

I request you to come back for a follow-up.

Just a follow-up of what I just talked. So sir, just wanted to reconcile, I mean, the 30% growth which we are targeting for FY '26 if you can help us in understanding from LR how much we could be gathering from the existing inventory and how much would be coming from new projects?

So for FY '26, it's very early to comment. We'll definitely give the guidance for the next financial year and what are our sales strategies. It's very early to comment on that FY '26.

The next question is from the line of Rohit from ithought PMS.

Sir, my question is on LR. So it continues to do well. And I think now the realizations have touched almost INR 6,900. So my question is, I mean, given where the project is, do you see any kind of realization ceiling there? And at some price level, the demand will start to taper off?

So considering the Hinjewadi micro market and specifically Pune West micro market, we've seen a tremendous demand, particularly in those micro markets, given the fact that there are lot of infra developments are happening in -- particularly in Hinjewadi region, Metro and all this. We see this demand is sustained and will grow from here onward. There is absolutely no concern over the demand on those, particularly Life Republic itself. And this is one of the flagship projects. It is a preferred location. So we see that, okay, here onward, the demand will definitely grow up there.

And my second question was, sir, I mean, in the past, I mean, we have a slew of launches in Bombay, almost INR 2,000 crores in H2 notwithstanding how much ever we will get pushed to the next year. But in the past, we have seen that, I mean, some of the older projects are not being that profitable. So what are the key learnings for us? And I mean what are we doing now differently to ensure that we don't go back to poor margins and overall drag on the numbers for the company?

So at least on the margin front, we are -- the ongoing projects and the recognitions, we are tracking it and monitoring it very closely. And here onwards, we see a better side improvement itself. At the same time, when you ask Mumbai launches, so we have a couple of pipelines like Vashi, as I said, already launched Laxmi Ratan in Versova, we are securing most of the sanctions now. So that we have certain visibility coming up. Jal Mangal Deep, Goregaon here also we see a certainty and certain approval progresses. At the same time, we should have [indiscernible]. So we are monitoring our approval progresses and I think once we secure that, we will be good to go for further launches, and we'll definitely try to make it for this financial H2 itself.

But from a margin point of view I'm asking, I mean, we may launch. But I mean, because in the past, margins have been an issue in some of the projects in Bombay.So I just wanted to get your sense on these projects if this is -- I mean is there some change from the way we look at it?

So as an overall pricing, we have seen upside in the Mumbai portfolio also. Here onward also, when we are selecting a couple of redevelopment projects, we are setting our strategy of margin to the team at the time of acquisition itself, which is roughly around 16% to 18%. And accordingly, we are strategizing our new BD. I think you will see definitely some improvement in the development space as well year onward.

One more question was in terms of finance costs.

Sir, I request you to come back for a follow-up question. [Operator Instructions] The next question is from the line of Himanshu Upadhyay from BugleRock Capital Private Limited.

My question was on Life Republic. If we look at nearly 3 million square feet is pending planned launches in FY '25, okay? But land for approval is around 2.16 million square feet in Life Republic what we have shown on the Slide #17. From where does the remaining portion comes, okay? And it will be across how many types of projects? Or how do you look at it? It's a mature -- or it's a, let's say, existing market for us where we do a significant sale. But 3 million square feet of launches. Can you give some idea? How are you planning the project launches and type of projects you're looking at there?

So Life Republic is almost around 400-plus acre of township project. And as you rightly said that we already launched 1.19 million square feet, and you mentioned 2.16. So the total pipeline for this financial year, we have 3.8 million square feet, depending upon how the absorption happened, we preponed certain launches as well. And there is -- because there's a fully paid acquired land bank. So we have all the visibility in terms of infra and at least on the project itself. So for the second half of this financial year, already this 2.16 is already under approval. We have in a couple of sectors, we have already submitted for the approval we are waiting. Once this approval will get, we will launch the project.