Max Estates Limited (MAXESTATES) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Max Estates Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference to Mr. Sahil Vachani, MD and Vice Chairman of Max Estates Limited. Thank you, and over to you, sir.

Thank you, and good morning to all for joining us on this quarter 1 FY '26 Earnings Conference Call for Max Estates. Along with me today, we have Mr. Nitin Kansal, our CFO; and Mr. Archit Goyal, our Head of IR and SGA, our Investor Relations Advisers. The presentation has been issued to the stock exchanges and uploaded on our company's website. I hope you've all had the opportunity to go through it. Let me first share some industry highlights and then business highlights for the quarter. Delhi NCR is expected to maintain its dominance across the country's top metros in terms of semi-luxury and premium housing demand and supply in the country. Infrastructure advancements, employment opportunities and increased urbanization continue to strengthen the NCR's housing market in the near to midterm. The first half of the calendar year '25 proved strong for this residential segment. Ultra-premium homes priced at INR 5 crores and above continue to attract high-end buyers with volume sales growing by 9% to 5,200 units approximately in the first half of the year. Across the top 7 cities, Delhi NCR accounted for 65% share of the total premium and luxury sales. Factors such as rising disposable income, aspirational lifestyle priorities and homebuyers scouting for homes with better amenities have kept the demand steady in this region, not to mention the consolidation that we see is continuing. Despite an annual decline in residential sales volume for the first half, real estate developers are actively launching premium supplies with the best amenities and superior construction quality. The share of premium and luxury sales to overall sales has also risen to 27% as compared to 19% previous year. On the commercial front, NCR's office space leasing touched an all-time high of 7.2 million square feet in the first half of the year, up 27% year-on-year. This makes NCR the second largest commercial office market in the country. Gurugram leads both commercial and residential segments as demand shifts towards premium offerings and global firms expand their footprint. Noida has also caught up well with the Gurugram market in the last -- in the first half of the year. Global Capability Centers or GCCs have also expanded their share growing from 11% of leasing activity last year to 31% in the first half of commercial year '25. Transaction volumes also remain vibrant across major business districts in both Gurugram and Noida. Noida's Expressway corridor and Gurugram's Golf Course Extension remain magnets for global enterprises that value high construction standards, robust infrastructure and fantastic ecosystem and developers with a proven track record of execution. Coming to Max Estates, I'm delighted to share that till date, we have recorded cumulative presales of more than INR 7,300 crores in just 2 years for which the projects are under implementation. Of this, we have already collected close to INR 1,800 crores with a collection efficiency of more than 96%. We plan to launch INR 9,500 crores of new projects or GDV in the second half of this year across three projects and across two micro markets, one in Gurugram and two in Noida and target of FY '26 presales of INR 6,000 crores, which is -- which was our original guidance as well, representing 15% to 20% growth over FY '25. On the commercial front, we are poised for an annuity rental income potential of over INR 700 crores over the next 5 years basis peak occupancy of projects currently in the portfolio. At present, our real estate portfolio stands at 17 million square feet, spanning both commercial and residential asset classes, including projects currently under development. Speaking on the residential portfolio and coming to our projects. First, Estate 128 Noida, both in Phase 1 and Phase 2, having booked more than INR 2,700 crores of presales, 100% sold out, we have collected INR 905 crores till date already. Phase 2 of Estate 128 saw a 40% price premium over Phase 1, reflecting strong demand for design and hospitality-led end user-focused residential developments and solidifying the brand of Max Estates. Estate 360 in Gurugram recorded presales value of INR 4,600 crores approximately with 98% of the projects sold as of 30th of June. The project has already received a collection of close to INR 900 crores as of June '25. Max Estates joint development in Gurugram on a land parcel of 18 acres having a potential of 4 million square feet adjacent to the already successfully launched Estate 360 project has a GDV potential of INR 9,000 crores and is planned to be launched in Q3 of FY '26. On a medium-term basis, we target cumulative presales of INR 21,000 crores by FY '28, growing at a 15% to 20% CAGR. Of this, projects, which we have already secured include Estate 361 in Gurugram, Delhi, One in Noida and Sector 105 in Noida as well, which contribute about INR 15,000 crores of this GDV, and these launches planned in FY '26 and FY '27. Now coming to the mixed-use portfolio. As we updated, Max Estates has received the final approval from NCLT and NCLAT for the revival of the Delhi One project, which is designed to be as a luxury first-of-its-kind mixed-use development. The project spans approximately 2.5 million square feet within the 10-acre land parcel. The project planned to be launched in Q4 of FY '26 has a gross development value of INR 2,000 crores as well as an annuity income potential of INR 120 crores annually. The development of this project will consolidate Max Estates' position as a leading premium real estate developer in Noida and in NCR. In addition to this, Max Estates had acquired a 10-acre land parcel in Sector 105 through an auction from the Noida Authority for INR 711 crores, which is again a mix of residential and commercial. This project has a gross development value of approximately INR 3,000 crores and annuity annual rental income potential of approximately INR 150 crores. This project is also expected to be launched in Q4 of FY '26. With this, please allow me to hand it over to our CFO, Nitin Kansal, for a detailed update on the commercial portfolio and also financial updates. Thank you.

Thank you, Sahil. Good morning, everyone. Let me give you an update on the commercial portfolio. Max Towers, Noida and Max House, both Phase 1 and Phase 2 in Delhi, continue to be 100% leased and occupied with a rental income of INR 13 crores and INR 12 crores, respectively, for the quarter 1 of financial year '26. Max Square has also achieved 100% occupancy within a year of its launch with a recent lease of 23% area to a marquee lessee Adobe, commanding a 30% premium to the micro market, showing strong leasing traction. Now coming to commercial projects under design and development, Max Square 2, Noida, projects having a leasable area of 1 million square feet is on track and is expected to receive occupancy certificate by the quarter 2 of financial year '28. The project is expected to yield an annual rental in excess of INR 110 crores. Max 65 at Sector 65, Gurugram, having a leasable area of 1.6 million square feet is on track and is expected to receive Occupancy Certificate in two phases, first phase of 40% by quarter 2 of FY '28 and the second phase by quarter 3 of FY '29, respectively. The project cumulative is expected to have an annual rental in excess of INR 200 crores. Overall, our commercial portfolio is poised for an annuity rental income potential of over INR 700 crores on a 100% basis over the next 5 years. All the developments across WorkWell & LiveWell portfolio are precertified to LEED or IGBC Platinum or Gold ratings with deep focus on best practices of sustainability and health and well-being. We are delighted to also announce that our commitment to end user experience reflected in how we operate our assets has also earned us the prestigious LEED O&M, well health and safety and multiple ISO certifications. With our strong growth momentum and an unwavering commitment to the LiveWell & WorkWell philosophy, creating spaces that elevate the quality of life, we are confident in our ability to emerge as a dominant force in the NCR real estate market, targeting a position among the top 2 brands. Our priorities remain centered on sustaining a healthy balance sheet and generating robust cash flow, enabling timely execution and delivery of our commitments. To give you a financial update on the quarter 1 results, our Consolidated Revenue stood at INR 52 crores in quarter 1, showing a growth of 27% on a year-on-year basis. That Consolidated EBITDA stood at INR 14 crores in the quarter 1. Consolidated PBT was INR 17 crores as compared to INR 12 crores in the corresponding period. Total area leased is 1.2 million square feet across all our commercial assets. The Lease Rental Income across the three assets, Max Towers, Max House and Max Square was up 33% year-on-year basis. And the revenue for the facility management on Max Asset Services was INR 13 crores in quarter 1, showing a growth of 52% on a year-on-year basis. As on 30th June, the gross debt of the company stood at INR 1,406 crores with a cash balance of INR 1,578 crores. We had net cash of INR 172 crores. Further of the debt of INR 1,578 crores, share of Max Estates stood at INR 837 crores with the balance of 750 crores representing the share of New York Life in the commercial assets. Now I would like to open the floor for the question and answer session.

[Operator Instructions] The first question is from the line of Ashwini Agarwal from Demeter Advisors.

I had a couple of questions. One is on the commercial portfolio. Once the whole thing is rolled out, what is the kind of debt on a consolidated basis that you will have in the commercial portfolio once your full INR 725 crores odd of rental potential is in operation? And how much of that would be Max Estates share? Any ballpark number?

So thanks Ashwini. This is Nitin. Once we have all the assets completed under construction and the lease rental flowing of INR 700 crores, our construction finances would have been converted into LRD and our existing LRDs would have got significantly paid down. At that point of time, we would be expecting a number of close to INR 1,500 crores, which would be outstanding, of which our share would be corresponding to 51%, a number close to INR 750 crores, which you can expect a debt on account of Max Estates.

And is there any money that New York Life still needs to bring in or they brought in everything? Because now they have 51% across all projects, right?

They got 49%, across...

49%, sorry.

Yes. So what is happening, they have deployed capital for our commercial assets, 65 Max Square and the Delhi 1105, there's a small component of across close to INR 100 crores across these assets, which they need to bring in, which they will deploy. We'll do a capital call at the appropriate time as and when the project needs capital. At this juncture...

Sorry, what's the amount I think still needs to be called?

Close to INR 100 crores across all the assets. But having said that, this is a total availability of capital, which we have with them. Having said that, parallelly, we have also achieved financial closure on these assets by raising debt. So this capital would be required to be called from -- if I'm right, it's in the second or third year from here on.

And the area that is being serviced by Max Asset Services, there you collected INR 13 crores during the first quarter. Is all of that just the service revenue or that includes some development revenue that you're allowed to collect on projects under development jointly with New York Life?

So this is all facility management income. The development manager fees, which is 5% accrues on the balance sheet of MEL. That doesn't go to Max Asset Services. This is purely on account of facility management.

And this is roughly about INR 35 per square foot per month. Would that calculation would be correct...

We have got multiple assets. Now we have got facility management charges ranging from INR 20 to INR 30, depending -- in the case of Max House, the number might be close to INR 30. And in case of Max Square, the number will be INR 20. You can say the average would be close to INR 25, which you would be collecting across the portfolio.

But that INR 13 number doesn't come because right now, area that's being serviced is roughly 1.3 million square feet, right?

So the only catch, which comes in this is in addition to the area which we own, there's another about 0.3 million square feet, which is owned by Max Life Insurance Company, Max Towers in which the income also accrues to Max Asset Services.

Okay. That's a mistake I'm making it. Okay. And the residential portfolio will basically be self-funded by -- through customer deposits or customer advances?

Yes, yes. In fact, if you see, we have been already able to collect close to INR 1,800 crores across both the assets, which we have launched till date. And we also carry a balance close to what INR 850 crores, INR 900 crores against both the assets, which is currently in the RERA accounts.

And last question, Sector 105 Noida, the residential portion, is there a minority interest holder there or that's 100% Max Estates?

So there are, in fact, three holders in that. We have got Max Estates owns 51% over there. We have got New York Life and we have got other minority shareholders also, which are in the tune of 7% and close to 43% is owned by New York Life.

No, but that. The New York Life would be the commercial part, right? The residential part, they don't participate or they participate there as well.

In these two projects, Ashwini, in both -- this is Sahil. In both 105 and also Max One or Delhi One, New York Life has a shareholding across the whole project.

So whatever other realization that you do from residential sales will go to them as well.

Yes, I won't think the revenue, but at the bottom line.

The bottom line?

Yes. After we fund the commercial portfolio there.

The next question is from the line of Pritesh Sheth from Axis Capital.

First question is on the demand side. So I think quite an actionable quarter in terms of multiple launches across various developers. And we have seen projects getting absorbed from 50% to even 100%. How do you see the demand going ahead, considering this uncertainty around tariffs, et cetera, which might impact certain sector, et cetera. So how you see it going ahead? And as per your assessment, what has worked in last quarter in terms of products, et cetera, which would be a key learning for our projects, which are coming for us in second half?

Thank you, Pritesh. So firstly, I think we all live in a very uncertain environment, and it's very difficult to be able to predict the future. Frankly, my guess is as good as yours in terms of how some of the things will pan out with tariffs and the ramifications or outcomes of that. Having said that, what I will say is that for us at Max Estates, we remain very confident because of the following reasons. Number one, if you look at our launches, they are spread over three different projects. In Gurugram, there's a project and two projects in Noida. Second, in the project in Gurugram, our launches is -- we have a section that is for Max Estates and a section that we will sell under the Antara brand. So from our perspective, there are two different product categories. There are two different brands, and there are two different sales networks or channels through which we are selling that. So that's the second. The third is, if you look at it from a size perspective, each launch that we are doing is not more than 350, 400 units per se in each location or micro market. In fact, in Noida, we'll have 290 units. In Delhi One, we'll have 50 units only and in Gurugram, we'll have a total of about 450 units. So it's not that the concentration of number of units in each micro market or in each location or in each project is very large. Fourth, what we are seeing to your question in terms of how we have seen it in the past is brands who have -- there is a consolidation trend. There is a shift towards quality. And we believe that at Max Estates, we are at the forefront of that with what we have delivered and the kind of confidence that we have garnered. More so that there has been an uplift and even for the price appreciation that people have seen in our projects has been far superior to what the market has seen. So there is an overall added optimism in terms of what we want to do. So if I were to summarize our strategy of having multiple brands, which is Antara and Max Estates, our strategy of not concentrating in one micro market in just one location, our strategy of the number of units in that project, we remain very confident that we will be able to do that. In terms of your larger question on demand, honestly, very difficult to predict the future in these uncertain times.

Sure. And just whatever sales you did in this quarter, in terms of your usual conversion cycles, time lines, et cetera, any marked change there versus what we have usually seen?

Actually, for us, it's been pretty good because we have no inventory left now at all. We've sold everything that we had. And more so for us, the collections have been fantastic. So a key lever, I understand is how good collections are. And if you look at our collections, we're at 96%, 97% collection overall. And the remaining 4% are also that are not due right now. They are due like in the next few weeks. So what is due, we've collected 100%. So our collection cycle has been really fantastic as our numbers are showing. So we are very optimistic and confident that for us, particularly, it's not showing any signs. But like I said, we live in a very uncertain time, and we'll see what the coming months have in store for us.

And just on the slide on the growth pipeline, quite a few changes that I see on that disclosure versus last quarter. So one, I think Noida, one of the projects, which was outright last quarter has been converted to JDA this time. Is it on our discretion of how we want to go ahead or...

Yes, absolutely. That's on our discretion. And I think while we are very optimistic and we want to close out opportunities, we are very aggressively pursuing opportunities. We don't want to do that at the cost of financially being imprudent or being too over aggressive. And therefore, with some of the prices that they work out in the way that they are and there is sometimes a mismatch if we go out for an outright acquisition, we feel sometimes it may be more prudent from a balance sheet perspective to look at some of those deals through a JDA construct. Having said that, we are still very confident of our continued focus on business development. We have 2 years of pipeline that is already that we have secured, in fact, a little bit more than that. And we are very confident that this is our growth plan, we are very confident that we'll add to that for our third year onwards.

Sure. In general, what are the time lines for each stage? Like how much time it takes for us to reach a final signing from commercial negotiation or a definitive documentation, if you can explain that for our benefit?

So I think from the day we start commercially engaging on a deal to when we close the land, it takes anywhere between 9 months to 12 months from full -- for a full end of the cycle from start to finish. We have had experiences where we've done it in shorter time as well, about 6 months. But we like to take the time upfront to make sure that we don't get caught out on the wrong foot and we are -- because like I said, we are conservative in our underwriting. We are conservative in our diligence, and therefore, we'd like to take the time upfront to do that.

So all of these projects would get finally signed in next 9, 12 months, is it? And a little earlier as well?

Yes. I don't think that all of them will, but I think that, obviously, we are working on -- if you see our aspiration, it's to add 3 million square feet of projects. And if you look at the total deals that we are working on, we are working on around 14 million, 15 million square feet, right? So the idea is to add 3 million to keep with the growth pipeline that we are doing. So the question is we have to keep many balls up in the air and have many conversations and many deals and try and select the best one that we feel is in our interest.

And just one last, I think two Gurugram projects, the size of those two projects have also gone up. Is it just expanding the scope with same landowner partner or these are like completely new projects?

They are separate projects, they're separate projects.

[Operator Instructions] The next question is from the line of Ritwik Sheth from One Up Fin.

Sir, a couple of questions from my end. Firstly, just continuing the question on the BD, what kind of outlay do we expect to spend in [ FY '25 ]?

This is Nitin. What we're expecting to spend a number in the range of INR 500 crores to INR 800 crores in the BD in the current year.

And so the statement -- Do we have cash on hand, like usable cash, excluding the RERA cash of [ Estate ] amount.

So as we speak, we have got cash available for closing this funding and the operating cash flows, which should be generated from the existing projects will also help us fuel this growth.

And so in the last 3 years, we have launched two projects -- actually two projects and one more phase at Estate 128 also where we have seen immediate sales of those projects within a few months. So now seeing the cycle a little bit rationalized, what kind of internal estimates do we have like time period for selling these upcoming three projects for FY '26, Delhi One, Sector 105, and the Gurugram, Sector 36A project. So just trying to get a sense...

Ritwik, what we are doing is if you seen our target launch pipeline for the current year is close to INR 9,500 crores. And what we are expecting is giving a guidance of INR 6,000 crores to INR 6,500 crores. Although in the past, what we have seen a consistent trend across the project that we are able to sell all the units in a very short span of time. But in the current year, we've been conservative about it in spite of launching INR 9,500 crores, we will selling close to INR 6,000 crores to INR 6,500 crores across these three assets.

So 2/3 kind of project sales we are targeting 6 months, itself?

Yes.

And a couple of bookkeeping questions. How much money Max has invested as equity in the commercial projects in the under construction projects, the two under construction projects till date?