Prestige Estates Projects Limited (PRESTIGE) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Earnings Conference Call of Prestige Estates Projects Limited, hosted by Axis Capital Limited. We have with us today Mr. Irfan Razack, Chairman, Managing Director; Mr. Venkata Narayana, CEO; Mr. Amit Mor, CFO; along with other senior members of Prestige Estate Projects Limited; and Mr. Samar Sarda from Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Samar Sarda from Axis Capital Limited. Thank you, and over to you, sir.

Yes. Thanks Yashashri. Good evening, everybody, and thanks again for taking the time out. May I please request Mr. Razack to take over for his initial comments on the sector and the company? Over to you, sir.

Thank you. Thank you again. It's a pleasure to again host this conference. I welcome everybody to this. As you would have seen in our numbers, I think the team and the entire company has done amazing work to see that we clocked INR 3,000-plus crores sales in a quarter, which for me is quite overvalued. But the team is looking at bigger things. After, obviously, INR 750 crores came from Mumbai and the rest from other geographies. But there's a lot of work to do. I think we'll keep doing more. As far as the sector itself is concerned, I believe in spite of all the headwinds that we are getting in terms of interest rates, in terms of cost escalations, we still have got our heads together, and we have got different ways of mitigating this. And I'm sure the momentum will not stop. And the other sectors in which we are in like hospitality and retail have really kicked in. Hospitality is doing a very good. The business has really boomed, and our newest asset that is JW Marriott and Prestige Golfshire also has traded well in the last 3 months. Similarly, all the other assets that we hold, like the Sheraton brand and the Conrad Hotel all have done exceedingly good business. And of course, retail, we are now on the verge of opening and completing and opening for trading 2 large malls, one in Bangalore that was the Prestige Falcon City with a large auditorium also. That's 1 million square feet plus mall, all [indiscernible] almost completed. We are near 100% overbooked in terms of tenancies. And the mall should start trading on the Rajyotsava Day. And similarly, Kochi, maybe a month later or latest by December, even that should start trading. With these 2 new malls trading, another 4 or 5, which are under plan in design to execution, even that will get kicked off 3 to 4 years that will happen. But the business in retail has done well and continues to do well. And we have kept tabs on what's happening on the retail market, though an initial portfolio of 8 malls we have divested to Blackstone, but we are well aware of how the trading is happening and it's trading well. And office is doing well. Office leasing is also quite strong. And we have minimal vacancies, about 3% or 5% vacancy, which is minimal. And going forward, the demand is good and the traction is good, and we believe more and more work will come to this country. And of course, property management is there. It's a big thing that keeps happening as we complete all of our projects. And we are also looking at doing bigger things in the warehousing section. With this, I think I will ask Venkat to supplement whatever we'd like to say, and then we can open for Q&A.

Thank you, sir. Thank you, everyone, for the participation in our con call. Just quickly take you through the operational highlights for the quarter. It has been yet another good quarter, INR 3,000 plus crores of presales. We sold 3.6 million square feet of area. Average pricing is INR 8,500 per square foot. We sold 2,560 units in the quarter. It will translate into almost 28 homes a day being sold in the Q1. Collections are also good at INR 2,146 crores up 110% compared to last year same quarter. And we had 9.67 million square feet of launches during the quarter, spread out to office and residential. Two residential projects, predominantly in Prestige City at Mulund and Prestige City at Bangalore and 2 of these projects in Bangalore. We also had three project completion, all 3 smaller projects, Woodland Park, Prestige Metropolitan and extension of [indiscernible] 0.78 million square foot of area. And sales have come across all projects, Bangalore contributed to 67% of sales. As Chairman said in the opening remarks, we are extremely happy with the kind of response that we have received for launches in Bombay, 25% of the presales have come from Bombay between 2 projects, Prestige City at Mulund and Prestige Jasdan Classic at Byculla. Moving on with respect to financial performance, we had INR 2,000 crores of top line, [indiscernible] of top line coming in this quarter. We had the completed and recognized revenue from one of the major projects, Prestige Jindal City that contributed recently because during the completed method of contract, the project got completed and we recognized the revenue. EBITDA is at INR 535 crores and PAT at INR 251 crores, margins are at 26.59% and 12.48%. And during the quarter, in terms of spend with respect to different segments, we have spent overall INR 1,272 crores of money and construction of various projects. Segment-wise breakup would be on residential and commercial projects meant for sale which sold around -- we have spent around INR 1,127 crores. Commercial CapEx projects, we have spent INR 218 crores. Retail CapEx project, we spent INR 77 crores, in the hospitality, INR 50 crores. Two projects, retail, are primarily Falcon City Mall and Prestige Forum at Kochi will get completed this year and incrementally start contributing to the rental income to the extent of INR 180 crores per annum. So with this brief, we would like to open the forum for question answers.

[Operator Instructions] We have our first question from the line of Biplab Debbarma from Antique Stockbroking.

Good afternoon, sir. Sir, my first question is on the BKC project. So I happen to be passing by that area and saw some excavation and some work going on. So my question is, sir, you have put it in still in the upcoming project and not ongoing. I assume that since you have started excavation, you would put this in ongoing? And second on this follow-up is, has both the BKC work is going on both BKC 1 and BKC 2 or only just BKC 1 because the area is quite large from what I saw. So that's my first question, sir.

Thank you. So the BKC 1 and 2, that we call it as X and Y building, the work has started on both of them. In terms of completion, there may be a difference of 6 months or so, but work has started. Both will be moved from upcoming projects to ongoing projects this quarter.

Okay. That's great, so BKC 2 is -- work also started at BKC 2. So that's a great news.

BKC 2, is what we call it as a Y building, X and Y. We'll have an office space as well as hotels in that.

Okay. That's a great news. And the second question is on the Delhi Aerocity project. And there also I have seen that you have put it as ongoing. So has the work started there? I mean what kind of work has started there? In that Delhi Aerocity Project, sir? Can I get an idea of what you are going to do there?

No, no, Aerocity work is in full swing. Since you stay in Bombay, you [indiscernible] progress. But in fact, the pace of work in Aerocity is very good. And hopefully, we should be able to complete the project in the calendar year '24.

Okay, calendar year '24. And what about BKC 1 and 2, when do you expect it to this project will complete?

2.5 years from now.

We have our next question from the line of Rishabh Parekh from Sunidhi Securities.

Yes. So just following on the question of the previous participant, are we to assume that all permissions have been received for BKC 1 and 2?

Yes. So all permissions including environment, CRZ everything has been received.

Okay. That's great. And secondly, my question was on...

Again, I have to tell you that is we see in Mumbai, it works a little differently. So it's a different stages as we keep building. But as things stand, everything including height also has been received.

So we can build out the full building in 3.5 years without needing any more permissions.

We'll take it as 4 years.

Sure, sure. And my second question was on our net debt level. So we have guided for a 0.5x net debt to equity ratio. So the ceiling comes to about INR 4,500-odd crores. We are currently at about INR 4,000 crores. So does that guidance still hold? And how are we looking to manage the debt level from going ahead?

No that is good. No issues. We have enough cash flows coming in for the new launches that we're going to do. We've got completed inventory, which is going to do cash flows. And the export also will increase because more and more projects will get completed and come for revenue recognition.

[Operator Instructions] We have a next question from the line of Parikshit Kandpal from HDFC Securities.

Congratulations on a strong quarter. So my first question is on the Mumbai portfolio on the regulation side. So we had all the projects which had approval cost launched, and we had a robust quarter in terms of retail. So if you can just highlight what is the residual GDV release in this year? And are we still holding to that INR 3,000 crores of pre-sales number for the full year?

You are not fully -- I couldn't hear properly.

We just couldn't hear you correctly.

Is it better now?

Better. But what you're asking is clear.

My question. I'm asking, sir, in this quarter, we had almost all the Mumbai launch which is getting launched. And we had a very strong quarter in terms of pre-sales. So for the year as a whole, what are the residual launch pipeline for the Mumbai portfolio? And what is the pre-sales number we are targeting for the full year as a whole.

Okay. All right. See now this INR 738 crores, what you are seeing is for the 45 days of sales. And then of course, when you do a launch, you always have a bigger multiplier. We've launched 2 projects that is Jasdan Classic as well as the Prestige City in Mulund. Now we are going to concentrate on [indiscernible]. Of course, that's pretty small, in terms of area. Even that, I believe, will start clocking and we will start bringing up numbers. Going forward, we've got one other major project which will definitely happen in this financial year, which is the Ocean Tower, which is marine lines. And hopefully, maybe -- and you see Prestige City in Mulund, what we launched is only on Tower D in Bellanza. We've got over D, E, F, all of that tower, actually C we did. Now we've got D, E, F. And then we've got much more on second phase. We've also got [indiscernible]. So there's a lot more inventory that will keep coming quarter-on-quarter as we keep selling. And we also have tied up in Shivshahi which now the society has finally given the green signal. The plans have been drawn up. It depends on how soon or how long it takes us for the approvals. Once the approvals are in place, even that will come. But again, it all depends on the approval process.

We look at INR 3,000 crores to INR 4,000 crores of retail coming from this region during the fiscal.

In this financial year, FY '23, you're talking about?

Yes.

So does it include any -- does it include the contribution coming in from the Ocean Towers?

It includes everything. Actually, we see the Shivshahi we named the project [indiscernible]. So that's the name that we have given. In case the team believes that they want to change it is up to them, but right now it's our working name.

And what is the total grant development value of the Shivshahi because I think the earlier developers mentioned about INR 4,000 crores plus, is it the right number?

No, no, that will be there because they had an earlier developer had taken into account some POD, which is not going to happen, there are some height issues. What we have done is we scaled down the whole thing and brought it in line with whatever height that realistically can be approved. And I think we are looking at some [indiscernible] approximately.

So between INR 3,000 crores to INR 3,500 crores is what will come. We are still in the drawing stage with respect to what is the exact available area that we can get without any problems. So I'll just answer your question, the total sale value of all the projects put together, that is Prestige City at Mulund [indiscernible] Ocean Tower, Jasdan Classic and [indiscernible] just mentioned, leaving aside the Jeejamata Nagar would be close to.

Around INR 2,500 crores to INR 3,000 crores.

Overall.

Overall value will be quite high.

Around INR 18,000 crores. Total sale value.

INR 18,000 crores all put together. And you will be having periodic quarterly leases, right? Like so every tower like the tower which you released just now, another tower D, which you mentioned in the call. So what will be the area approximately and the gross development value of the tower?

I don't have it handy with me because we are not broken down the project in that manner, but I'll tell you offline.

Okay. Second question was on the -- now we are moving with the commercial portfolio from this into ongoing projects, so are we in talks, because what I hear from the leading IPCs that you already started engaging for tenants, and also is there any visibility like pathway like in the financial year, we have some like tenants coming in at the anchor level in X and Y tower, so either in BKC or in Mahalakshmi, any guidance or any sense you can give us on that?

Actually, both these locations are top class. Both these developments are going to be grade A+. There is a lot of interest from all quarters, but for strategic reasons, I can't spell it out now. We'll let you know as we go along because I don't want to reveal all my cards just now on this call. But all I can say is the interest is huge and the traction is big, and only good things are going to happen.

By this year end something will happen, sir. Do you think by this year, you will have something?

If something happens, definitely you'll be the first one to come to know. But for strategic reasons, I don't want to spell out things just now.

Okay. So sir, just lastly, if you can tell us what is the total gross debt number for this quarter?

Gross is around INR 5,600 crores.

We have our next question from the line of Pritesh Sheth from Motilal Oswal Financial Services.

Congrats on sustaining the strong residential performance. First question is on the cash flow side. So what was the land investments we made this quarter and what should be the number that we should look forward to for this year, given that we have already have a one quarter result?

INR 700 crores is the overall investment in land buyback and deposits, the INR 770 crores in this quarter. And considering the fact that we have around INR 7,000 crores of inventory right now, but our presales target -- benchmark at least is beyond what we have done last year, there's a need to launch more projects. And that's what we are working on right now. We will have enough launches coming across various cities. Hyderabad, we have Prestige City coming up. We have Prestige Rock Cliff coming up, and we have [indiscernible] three projects. We have Prestige Highline coming up in Chennai, large projects. We have multiple projects in Bangalore, as we have Prestige Ocean Park in Mumbai coming up. So we are adding to the inventory so that there are options available. There is geographical spread and we can cross the presale number -- the target that we have set. So we need to increase the business development and add enough upcoming projects to operate from where we used to be before at INR 5,000 crores of presale, INR 7,000 crores to INR 10,000 crores of presale level. So you can expect the business development activity to continue at around INR 700 -- INR 600 crores, INR 700 crores per quarter kind of deployment.

Got it. And whatever we have acquired till now, Hyderabad, Chennai, everything is right now paid out for? Or there's a balance that needs to be paid for those land banks, that we have acquired in last couple of quarters?

Yes. So in Hyderabad and some of it in Bengaluru, we have balance to pay off around INR 250 crores, INR 300 crores.

Okay. Got it. And one last, in terms of your Bangalore performance in terms of PCLs we are INR 2,000 crores this quarter. Should we assume that, I mean, we will be probably sustaining this number in Bangalore and most of the growth is going to come from the other markets like Mumbai, Chennai, Hyderabad, where we are just scaling up?

Bangalore also we have launched and another geographies are coming up. If you look at last year number, a little over INR 10,000 crores, we have done predominantly from Bangalore and Hyderabad. Hyderabad has contributed to INR 1,000-plus crores of sales, and Bangalore a little over INR 8,500. So there's a room to do so much and Mumbai will be a new addition. Of course, we'll have a launch in NCR also towards the end of this quarter, early next quarter.

Yes. So just to clarify, again, I mean, Bangalore would be somewhere INR 8,500 crores and the rest of the growth will come from other regions, right? That's what you were saying?

Correct.

We have a next question from the line of Biplab Debbarma from Antique Stockbroking.

So sir, on the Shivshahi project, first of all congratulations, excellent property. And sir, my understanding is that the project was stuck with previous developers, it was like 7, 8 years, the project was stuck. So I am assuming, you can throw some light on it, I am assuming there were issues like there were lenders, there were various parties like buyers who have already bought some flats and all. So are we to assume that all those issues have been fleshed out. So that is my first question, sir.

Yes. Without tracking that up, we won't even touch the project.

So all the liabilities, legal as well as financial liabilities has been fleshed out.

Exactly. Everything has to get cleaned up, only then and only then, we enter.

Okay. Excellent. That's excellent news. And just one more question is on the BKC 1 -- BKC X and Y project, sir, I'm just asking the question. Sir, have you -- at least have we decided that whether we'll do leasing model or for sale model or mix or we will decide later. I mean how we are going to go about it in this 2 projects, sir?

No, no. That's again, a very good question. As I said, we have certain costs and strategies in our mind. We are working on it, and it's too early for us to spell it out. The only thing that we can tell you is we have got all the approvals, and we have already broken ground and the contractors have been appointed, it's L&T and work will commence or have commenced soon.

Oh, that's great. So sir, just a final question. Who are the contractors? And what would be the total leasing area in these 2 projects, okay?

Which one? Total?

BKC X, Y who are the contractors?

Contractors is L&T, L&T has been given the contract, and they are already onboard. [indiscernible]

And what will be the total leasing area in both X and Y?

Leasing area, okay. I think leasing area, both put together will be roughly around 4 million.

We have our next question from the line of [ Poonam Joshi ] from Nirmal Bang Securities.

Yes. Am I audible?

Yes, we can hear you.

Congratulations to the management for posting good set of number. I have a query like we have a pipeline of roughly around 19 million square feet, especially in annuity business rather than commercial space. I believe out of which 10 million is supposed to come out of Mahalakshmi. So I wanted your understanding when is it supposed to get launched? Any time line do you have for that?

We're talking about the commercial portfolio?

Yes, yes.

Can you please repeat the question specifically? What is it regarding Mahalakshmi?

Yes. I wanted to understand that when it is expected to get launched especially in Mahalakshmi location, where we have a huge pipeline roughly around 10 million square feet. Is it expected to get launched in this year?

We don't have 10 million launch just now. We have Liberty Towers, which is 2.74 million square feet of office.

Okay. But the pipeline is roughly around...

Sorry. If you're asking for Jeejamata Nagar, a large project, yes. So that is slated for launch, not this fiscal. Maybe in the next fiscal. So Prestige Liberty Tower, which is at Mahalaxmi, we have just commenced the work. The project has already started, and it will move to ongoing projects this quarter. And the other project that you are referring to, Jeejamata Nagar, that will be the next fiscal.

Understood. Sir, one more thing. I see that the revenue from commercial project has declined sharply by 12.4%. Is it because you have concluded [indiscernible] deal with Blackstone in the last quarter?

We have concluded the [indiscernible] .

Sir, your volume is low.

So last quarter, last year, we concluded [indiscernible] transaction. So CPPIB in a project called [indiscernible]. Therefore, the rentals are down because of the sales transaction. Yes, we sold one building -- rental building to CPPIB.

Okay. Okay. And what would be the consideration for this?

Gross consideration was a little of INR 2,000 crores, and we had 51% stake in that.

51% stake. Okay. And that would be for what leasable area, if you can elaborate?

Your voice is echoing, we're not able to follow your question.

Sir, am I audible now?

Ma'am, please use the handset.

Yes. I wanted to understand the leasable area for that transaction?

Which transaction?

The sales -- like one building we have...

A little over a 1 million square foot.

Sorry? 1 million?

A little over a 1 million square foot. [indiscernible] million square foot.

Okay. And one more thing. So right now, the interest rate...

Ma'am, may we request you to come back in the queue? Ladies and gentlemen, I would request you to restrict your questions to 2 at a time. We have a next question from the line of Sameer Baisiwala from Morgan Stanley.

Venkat can you update us on the funding platform that you were planning with some private equity players for land acquisitions?

Sameer, so we have concluded our discussions with the partner, the [indiscernible]. And we are in the documentation phase. This quarter, the platform will be hopefully right. And we also have identified the [indiscernible] , which will acquired into the platform. So by the time we have a conversation next quarter, we should be able to give more detail. On the discussions with respect to the terms, I think depending on the investor, the size of the platform is going to be around INR 2,500 crores to begin with.

Okay. That's excellent. And the second question is, any updated thoughts on the 15% stake that you have in the mall portfolio that you had divested, where you want to keep it? Or do you want to monetize it? Any thoughts would be great.

As you are aware Blackstone, I think, getting ready for lifting of retail REIT, consolidating all the assets that we have. So therefore, our stake will get converted into the REIT unit. And once that happens, we'll take a decision whether we should retain the units or we should monetize.

Okay. And one final... .

Sir, I request you to come back in the queue.

Let him ask the question.

Okay, sir, please go ahead.

Okay. Just Venkat on the BD activities. Now what really interests you going forward now that you have a very strong hold in Mumbai. So just your thoughts, locations, verticals or cities that you're looking for?