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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to Earnings Conference Call of Godrej Properties Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on Godrej Properties Q1 FY 2022 Results Conference Call. We have with us Mr. Pirojsha Godrej, Executive Chairman; Mr. Mohit Malhotra, Managing Director and CEO; and Mr. Rajendra Khetawat, CFO of the company.We would like to begin the call with opening remarks from the management, following which we have a forum open for an interactive question-and-answer session. Before we begin this call, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation e-mailed to you earlier. I would now like to invite Pirojsha to make his opening remarks.
Good afternoon, everyone. Thank you for joining us for Godrej Properties' First Quarter Financial Year 2022 Conference Call. I'll begin by discussing the highlights of the quarter, and we then look forward to taking your questions and suggestions.I hope you and your families are staying safe and doing well. The second wave of COVID-19 has been devastating for our country and has affected each one of us in some way. I'd like to take this opportunity to convey my deepest condolences to those who have lost loved ones.In May, we halted all work at Godrej Properties for a 5-day period to provide our team members space to recover from the tragedy that around us. We have now been able to administer the first dose of vaccine to all of our employees as well as to other stakeholders, such as our customers and the construction workers at our site. We expect to be able to administer the second dose by the end of the current quarter.After a strong close to the last financial year, we had a very weak start to the new financial year. The total value of bookings in the first quarter stood at INR 497 crore through the sale of 655 homes with a total area of 0.7 million square feet. This was our lowest quarterly sales since 2017. Most of our planned launches got postponed due to delays in regulatory approvals as a result of the regional lockdown restriction. We also did not aggressively launch sales schemes as we had in the first quarter of the previous financial year as we believe the context this year to be quite different.Unlike last year, when we didn't know whether we would have successful vaccines or how long they will take to develop or what consumers' disposition towards real estate purchases would be. This year, we have answers to these questions and fortunately, the answers are encouraging.GPL had its best-ever annual sales last year despite the pandemic due to very strong momentum for residential real estate demand in the second half of the year. Buyers were driven by the increased desire to pursue the security and comfort of home ownership in greatly uncertain time. We were also driven by record low mortgage rates and the highest ever levels of affordability for real estate. These positive factors all continued to be in place, and we expect a considerable improvement in the business environment from the current quarter of this financial year.Already sales in June and July have been 384% higher than those in April and May. Given our exciting launch pipeline, we remain confident of a strong sales performance, both in the rest of the financial year as well as in the current quarter.It is encouraging to note that despite the severity of the second wave and concerns on the impact of work from home on commercial real estate, we were able to lease over 1 lakh square feet of office space in Godrej 2 in the first quarter. On the operations front, construction activity continued on most sites during the lockdown time period, albeit at a somewhat slower pace. Unlike last year, we managed to retain most construction workers at our sites and the workforce strength at the end of the first quarter stood at an all-time high, which will allow us to deliver strong construction progress in the remainder of the year.The gross collections for the quarter were relatively better compared to the same period last year and stood at INR 1,201 crore as compared to INR 446 crore in the first quarter of last year. We expect collections to meaningfully improve in subsequent quarters with a pickup in construction activity across our sites. As a result of lower project completions during the quarter, our revenues were extremely low at INR 232 crore. Adjusted EBITDA stood at INR 84 crore and net profit stood at INR 17 crore. From a business development perspective, while we didn't announce any new project during the quarter, it has been a busy quarter with a significant number of large new project discussions progressing well. We hope to have several positive announcements on the business development front in the quarters ahead.We exited one of our upcoming projects in Ambernath on the outskirts of Mumbai due to regulatory approvals not being procured by the joint venture partner within the required time line.I also want to update the investor community on a recent setback at one of our projects in Bangalore, where the Honorable National Green Tribunal has squashed environmental clearance, rendering the project's future uncertain. We have now had the opportunity to review the honorable NGT order in detail and disagree with its conclusions. Multiple committees established by the NGT itself have previously investigated the facts and conclusively found no wrongdoing. The current order does not take full-fledged cognizance of these findings. Notably, the issue of adequate buffers being left from the lake as mandated by the Honorable Supreme Court order of 2015 was proven in our favor, the committee is set up by the NGT, indicating that the development would not, in fact, adversely impact the lake or surrounding ecosystem.The lack of predictability in the planning process with various government agencies contradicting each other has a hugely deleterious impact on India's sustainable economic growth, in a project of this type where there are a number of stakeholders including customers and construction workers. This decision doesn't affect us as a development, but also has a significant negative impact on a broader set of stakeholders.We certainly reiterate that as a responsible corporate, we follow all the concerned regulations and I'm confident of our compliance in this project. The Godrej Group has been extremely focused on environmental protection and enhancement for many decades. The group has maintained and preserved one of the largest parcels of mangrove in Vikhroli, and Godrej Properties has recently been ranked #1 globally by the Global Real Estate Sustainability Benchmark for its sustainability practices.We enrich all of our developments, our third-party certified green developments and have in no way breached our focus on sustainable development with the project in question. This order, we believe, is incorrect on the fact and detrimental to the sustainable development of Indian cities. We are in the process of challenging the set order, and I'm hopeful that the Honorable Supreme Court will reverse this judgment. We'll certainly come back as soon as we have any further updates on this.While the quarter gone by it has been extremely challenging for the sector. We believe this was a short-lived pause to the recovery that was underway in the sector during the second half of last financial year. We look forward to a much stronger operating performance in the remainder of the year and expect even the second quarter to see much, much improved momentum from the one that was just completed.On that note, I conclude my remarks. I'd like to thank you all for joining us on the call. We'd now be very happy to discuss any questions, comments or suggestions you may have.
[Operator Instructions] The first question is from the line of Girish Choudhary from Spark Capital Advisors.
Couple of questions. Firstly, on the sales trajectory. Last year, we did see a strong comeback and posting a 14% growth. And this quarter has been soft. So how should we look at FY '22 in terms of growth expectations, considering what you have in launch pipeline? And then also some bit on the sustenance sales?
Yes, I think overall, we should expect a pretty strong year, we think. The first quarter was certainly very weak, as we already discussed. And that was largely April and May. June with more than 2/3 of the sales in the quarter. So I think already what we're seeing in July and June is quite encouraging. We have a large number of launches, not just in the later part of the year, but even in the current quarter. So we think we'll be back to kind of the second half of last year momentum even this quarter. And then, of course, we'll hope to continue to build on that. So we had guided at the start of the year that we were quite hopeful of at least exceeding last year's numbers, even given the hit that the second wave is introduced, and we remain pretty confident on delivering that. And hopefully, we can have some good growth as well. But I think that will depend a little bit on launch approvals and so on. But I think as a base case, we should look at some growth over last year.
Sure. Sure. And then my second question is on the project, the Godrej reflection, which you did comment that you're going to challenge this order. But just if you could share at the project level, how much has been sold, collected and also the money spent on construction? And then what's the scheduled completion as per RERA for this project?
So Rajendra, do you have those details?
Yes. So we have sold around 500 -- more than 500 units around -- just a minute.
532 units.
532 units, and we have collected somewhere around INR 571 crores. Customer collection is around INR 151 crores. Our units sold is around INR 571 crores. And that's what. And the construction is hardly because we have done only the basement, so we have spent a very nominal amount on the construction part. Majority is on account of land costs and certain approval costs.
Okay. And then the scheduled completion?
Scheduled completion is still away, at least 2 years, 2.5 years away. That's what the RERA time lines we have given, at least 2.5 years away from today.
But we also believe that if we are able to have the judgment reversed, that this will count to sort of a force majeure for RERA time line. But we're in the process, obviously, of discussing this with both our customers as well as our financial partners. We should also point out this project was done under a platform, with our investment platform where Godrej Properties equity stake is 20%.
Okay. And then just the last question, if I may. On the pricing environment, any thoughts what is happening here? Are you able to take price hikes in existing projects? So if so, any quantum? Anything which you can share here? Just wanted to get your...
Mohit, would you like to take that?
Sure, Pirojsha. So early days to give a guidance on pricing. But markets are started to improve. And if things continue to pick up momentum, then hopefully next couple of months, one can start looking at some kind of pricing hikes in the project. But as of now, too early to comment on this. We'll wait for another 6 months before we can take a firm view on this.
The next question is from the line of Puneet from HSBC.
Just drilling a bit on the Godrej inspections. Has [indiscernible] asked you to stop those or can you continue with those?
No, work has been stopped already for quite some time. They've asked, in fact, that the project be demolished, which we hope to get a stay against that order.
Okay. And when you file a suit against them, then will you be allowed anything or will the status quo likely continues?
No, I think that the status -- just for the information, for the last over a year, the project has been at a standstill while this case has been underway. So that status won't change. It will continue to be at a standstill until the Supreme Court passes its judgment. Obviously, if the Supreme Court reverses the judgment or -- then we will be able to continue construction and otherwise, the project won't be able to take off.
Secondly, on your JV, as you mentioned that a lot of JVs has started moving. Can you comment a bit more on the quality of these JVs? Whether the terms have improved or they are at similar in nature before pre-COVID second wave?
I think the terms are quite attractive. Obviously, each project is different, and it's difficult in some sense as to generalize about them. But we're looking at a few different things. So we're looking both at joint ventures, as you pointed out, but also society redevelopment projects in Mumbai, where there's some exciting discussions underway. We're looking at some land purchases where we think we're coming in at a good value and with attractive payment terms. So generally, I think things are looking quite attractive in terms of the terms we're able to get. There's no -- I wouldn't say there's a distress valuation or anything like that. But certainly, we think there's some attractive opportunities out there. And for us, we think the timing is very interesting because most developers continue to be struggling with liquidity issues. After our recent QIP, we have a net cash position currently, and I do think it's a good time to be investing that capital and that land markets probably will start tightening a year or 2 from now. So I think the more of it that we can get done within that 12- to 24-month time frame, the better it will be.
Are you targeting more land versus the joint development?
I think it's quite a mix of all of these, redevelopments, joint ventures as well as joint land purchases.
Sir, can you give some guidance on what is the delivery plan for this year and likely construction?
Rajendra, do you have any details on that?
Puneet, majorly, I think we are looking at completion of 2 of our plotted development. One is that NCR, Faridabad, BPTP. And second is what we are looking to get OC for our Bangalore plotted one. So these would be the 2 major deliverables from a revenue recognition perspective. Obviously, in the regular course, there would be other OCs, which has been received. But from a revenue recognition, but this would be too significant...
Okay. And in terms of construction sales, would this quarterly run rate likely to continue? Or should we see acceleration...
In fact it would be better because I think the constructions are at a rapid pace, so I know it would be better as compared to previous quarter.
The next question is from the line of Abhinav Sinha from Jefferies India.
A couple of questions. One, on the launch side. So I assume we did not have any launch in the first quarter. But has it improved already in July? And when you're talking about 2Q being similar as second half of last year, so what are we expecting from new launches in the near term?
Yes, it has already gotten much better. So I think on a very rough level, these are not exact numbers, but we had a little under INR 500 crores of sales in the first quarter, of which about INR 300 crores was in June. July has been a little just under INR 500 crores again. And we think August and September will be considerably be higher. We have a large number of launches planned. I think our investor presentation lists out both the new phases and new projects. Some -- we've already launched a project in Pune. We're in the process this quarter having more launches. So we see pretty good visibility on that. Mohit, do you want to add anything?
So, all the launches are going very strong. We are already launched the project in Bangalore and Pune. Seeing a very strong traction in both the projects. NCR, we have 2 projects getting launched this month. So we are seeing a very strong traction across launches. We feel very comfortable that Q1 was more of a blip, and we should be back on track.
Mohit, which projects in NCR? Is Ashok Vihar, something in this quarter or is still second half?
No, we are looking at launching the Phase 2 of our Central Noida project. It is in 43 Noida. And also, we are launching the Phase 2 of our Sohna project in Gurgaon.
Okay. Yes. And secondly, on the cash flow front. So -- I mean we are looking at the net cash flows were negative by about INR 340-odd crores this time. So ex of the business development spending, how are we looking at this cash flow for the remainder of the year?
Mohit, why don't you go ahead?
Sure. We are looking to aggressively invest on construction side because we feel that there is a disproportionate opportunity to invest in these projects, especially this project which are coming into revenue recognition. So there's a lot of investment. But overall, if I would give you a high-level picture, I think there will -- we will still be running on a positive cash flows or a breakeven kind of cash flows on operations. But the collections are going up significantly and so our construction outflow. So we are quite happy with that trend.
The next question is from the line of Mohit Agarwal from India Infoline.
My first question is, Pirojsha, in your letter to the shareholders in the annual report, you mentioned that going forward reported earnings will be a key component of the management incentive program. Can you elaborate anything on how is the incentive structure looking now versus what it was previously?
Yes, it's quite similar in some ways. But a few years ago, we thought that bringing reported earnings into the incentive system didn't make a lot of sense because the opportunities to deliver reported earnings with project completions, newer projects being a while away, wouldn't really properly reflect operating performance. So we've focused entirely on what we call imputed metrics or imputed both earnings and return on capital, which we do think remain the most important metrics for a real estate company because they focus on things like booking value, margin enhancement and so on. But now I think with particularly next year a significant number of project deliveries happening, we do want to make sure that this translates into actual delivered accounting results. So we've now got both the imputed metrics as well as reported earnings into the managerial incentive system. Whereas, earlier, the reported earnings were not part of it.
Okay. And any guidance or any indicative targets on what kind of ROEs you are looking at in the next 2 to 3 years?
No, I think the long-term target -- I think we don't want exact amount to giving sort of earnings guidance, which we prefer to stay away from given all the uncertainties inherent to the business. But certainly, the long-term target, once we're able to deploy the capital we've raised and have the projects reach revenue recognition continues to be 20%, I think that's the kind of level we think is achievable given the opportunity, but we wouldn't comment on very short term. Clearly, it will be a little bit subdued ROEs for a while given the scale of the capital raise we completed, which added a very significant amount to our net worth and from which earnings will only follow once the investments are made, projects are added to the portfolio, projects are sold and actually fully delivered.So that does create a little bit of a drag on reported earnings. But we certainly expect to see a very strongly improved absolute earnings momentum in the next few years, and that hopefully should give everyone confidence that we're on that right journey to our medium-term ROE goals.
Sure. So my second question is on with respect to our commercial strategy. So are we aggressively chasing entering into commercial projects? We've done one JV this quarter. Or we are just going to pursue them on an opportunistic basis? So just want your broad thoughts on that. And second part is if you could share some details on the rentals and all on the Godrej to leasings that we've done? That's all from my side.
Sure. On the commercial side, we have added quite a few projects recently. I think our thinking has been that it is useful for us as a company to maintain a foothold in commercial real estate. At the same time, the earlier ways that we've developed commercial real estate, trying to almost do it the same as a residential project [indiscernible] doesn't work, and we don't think is the appropriate way to develop commercial projects. The challenge is always that the scale of investment required for commercial projects is quite significant and something that could hamper our growth on the residential side, which makes -- which remains, of course, our #1 priority. So the way we've tried to address that is to do commercial developments only in partnership with Godrej Fund Management and its institutional capital partners, where Godrej Properties stake in these projects is roughly 20 -- not roughly, it's 20%, thereby limiting the total capital lockup that we need to put into these projects, but also allowing us to benefit from the long-term value creation that we think will unfold. It also improves returns versus an own project through fees and things like that. And over a medium- to long-term horizon, I think this could be a very interesting opportunity for the company to create a REIT to other such structure where Godrej Properties would have a minority stake, but in a pretty sizable venture as some of the REITs that have already listed are examples of some what similar structure. So I think in the long term, we do think this will create value. It also allows us to look at some mixed-use developments and so on. But we're quite clear that we don't want to invest 100% on GPL balance sheet in these projects because that becomes then a very significant amount of capital.A question on rentals. I think I could be off by a few rupees, but I think the Godrej 2 rental deal was about INR 165 per square foot.
And the next question is from the line of Parikshit Kandpal from HDFC Securities.
So my first question is on the land banking side. So as you rightly pointed out earlier in the call that there are not many players who can write a big check in the current market. So if I remember correctly, last time you had bought back INR 1,300 crores land in Ashok Vihar. So I just wanted your ballpark sense on the [indiscernible] lands, which are coming up in multiple places that having off their land banks in prime places. So are we comfortable writing a check as big as INR 1,000 crores in this market?And looking at multi-phased developments or kind of projects in these markets, if you can give some sense on that? And also if you can touch upon the redevelopment opportunity. How big this could be for Godrej given some of your peers are looking to add some 8 to 10 projects every year [indiscernible] about INR 1,000 crores. So how are you placing ourselves in that market?
Yes. I think the redevelopment opportunities, we think, is a very big one. We are definitely looking at it, and we have some interesting deals that are in advanced stage there. We think we have some strong advantages in this. For redevelopment in particular, customers are often -- or almost always leaving their homes for a period depending on the developer to provide them rents, then coming back in. So in our experience, trust plays an incredibly important role there. And I think we do believe we have some advantages there given the Godrej brand, given our own delivery history. So we feel pretty good about being competitive in that market.On the scale of the deal, I think we are open to doing much bigger deals. We think it's the right stage for the company to make some of these big bets. Of course, the level of due diligence, the level of focus on really understanding the micro market, getting those dynamics right goes up as the capital quantum goes up. But the short answer would be, yes, over the next couple of years, we would expect to see some fairly significant transactions getting added to the company's portfolio.I think in Mumbai, it's a very big market. Clearly, there are -- there is opportunity for multiple players to grow and do well. If we were rating our own performance in Mumbai, we honestly give ourselves a pretty low grade. Clearly, there's no reason for our sales in Mumbai to be at the levels they're currently at given the scale of opportunity, given our market share, given the fact that even in markets that we've entered since then, we've achieved greater scale. So we've taken a look at where some of the areas we haven't done well in Mumbai. We've actually also recently rechanged our Mumbai management team. We've brought in a new CEO for the Mumbai zone, who's been in the role now for only about 6 months and laid down what we think is a fairly exciting vision for the next few years for Mumbai. So certainly, a good chunk of the capital we're investing, we expect, will go into Mumbai deals, and we'd be disappointed if we don't see our scale in Mumbai very meaningfully increase over these next few years.
Okay. My second question was, as you pointed out on Mumbai. So Mumbai, we see there is a very limited number of players in the premium segment now. I mean I can count it, not more than 2 to 3 players. And that has been the market where we have been in limited presence for GPL. Do we have projects like Bandra and Worli, but I don't think what's the update on that being on the forthcoming side. So if you can just touch upon how are you positioning ourselves in that market, like Central Mumbai premium projects, and key projects? So what's the strategy there? Any update on the Worli and the Bandra project? So when we see projects in the light of the day?
Yes. I think Mumbai, large part of the city, lend itself very well to premium project. So as we scale our overall Mumbai business, I think some of that will be in mid-income housing, but a fair amount of it will also be in premium housing. We think there's very good opportunities in some of our own projects in that space, like the trees in Vikhroli have done quite well. So we do want to scale up there. On Worli and Bandra, I think we certainly expect that these will come to the launch stage. But given the approval requirements for some of these -- some redevelopment projects. We're quite dependent on our partners' performance in some areas. The projects have also moved at different paces, some have faced different sets of challenges. But our current expectation is that both of these projects will be launched. I think the exact time line can be a little bit up in the year.
Okay. Just the lastly, I wanted to know on this deployment of this cash. So is it right to assume that over the next 2 years, we'll be deploying a large part of this cash, which is not on the balance sheet?
I think that's the goal. Obviously, we don't want to let the cash burn a hole in our pocket. We want to make sure we have the right deals, and we apply the right level of prudent judgment to it. As I mentioned in one of the -- in response to one of the earlier questions, we think now is the right time to invest in land, right? So I don't -- I think it's quite likely that 2 years from now, land markets will tighten if the overall market improves, as we expect it will, and more developers have a little bit of time to improve their balance sheets and have the opportunity to get more aggressive. I think if you look at the number of developers that are today in a position to look at business development opportunities is a bit of aggression, it's a very, very short list. So I think it is the right time. We will push to do a lot in the next 2 years. But again, obviously, we will also make sure we try to get as high-quality opportunities as possible.
The next question is from the line of Parvez Akhtar Qazi from Edelweiss Securities.
So 2 questions from my side. One, with the housing demand pickup, is there a thought in the management about maybe venturing outside the 4 markets where we are present today to tap larger opportunities in the other cities? And the second -- I mean obviously, the land payments are contingent on our partners achieving certain milestones, but what could be a probable trajectory for land CapEx going ahead this year?
On this land CapEx, I think -- should we have a significant amount of cash that we think is available for an investment if we look at what we raised in the QIP and an appropriate amount of leverage. We think we have about $1 billion that we can invest over the next few years. How much of that happens this year versus next year versus the year after that, it's really quite difficult to comment on because it depends on specific opportunities closing. But we would obviously like to see good momentum on that this year itself. Sorry, what was your first question again? The other cities, right? So I think we continue to think that the big opportunity for us is to deliver stronger growth and higher market share in the cities we're in. We talked about, for example, Mumbai, where a sales of INR 1,300 crores to INR 1,500 crores that we've been in the past couple of years, we think there's a huge opportunity to very meaningfully take that up. We have a team in place. We have a good pipeline of projects to look at. So I think that's probably, to us, remains the lower-hanging fruit, which is increased market share in the cities that we're in. But we're also interested in new cities in specific formats. So for example, a market like Hyderabad, we're starting to take a look at it again. We don't want to go into cities and just do a one-off project. And for certain types of residential projects, maybe like things like plotted or very quick turnaround projects, we might even choose to look at a broader set of cities. But I think for group housing projects, the focus for the next couple of years will remain the top markets and possibly something like a Hyderabad as well.
The next question is from the line of from Alpesh from Antique Stockbroking.
The first question is, have the JDA JV deals flow improved post second wave of COVID, given the liquidity conditions for the smaller developers?
Mohit, do you want to take that?
Yes. I think the deal flow has definitely improved. And also the quality of deal flow, the sizes of opportunities have significantly gone up. So yes, multiple interesting opportunities have come to us.
Okay. Okay. And my second question is more from the strategy point of view. Like, can you please give me more color on the first quarter of FY '22 performance mostly from the perspective that most developers were hit significantly during the first wave of COVID, and we were the outliers, but this time, the hit on the operational performance is quite visible. So what could be the reason there? So was there any change of strategy or by -- from the demand side that consumers were not moving out or doing a purchase or not? So any color on that would be very helpful? So that's it from my side.
Yes, it was quite -- obviously, nobody -- we certainly didn't want to have a poor operating quarter. But it was quite a conscious decision not to try to go for very aggressively in the quarter. And the difference for us with Q1 of last financial year, as you rightly pointed out, we sold quite a bit more than any other developer in the country, but we think the context of these 2 waves was totally different. As I mentioned earlier, during the first wave last year, there was a huge amount of uncertainty in the first quarter, nobody knew quite how bad COVID would get, whether we would have a vaccine, when we would have a vaccine, what the overall impact on the economy, both globally and India would be, what the effect on property demand would be? And we thought it quite appropriate to be aggressive in getting as many sales locked in as we can. If you might recall that we had launched sales schemes at the time of the type of 10-90 where they were a bit back-ended to attract people to invest in the whole optimum. As we saw it in the first quarter of this year, the context was quite different. It was -- first of all, in April and May, things were obviously really bad. We wanted to not put a huge amount of pressure on employees for delivering operational outcomes. We wanted to give people the space to be with their families and take care of their loved ones. But equally, we just also felt that it was quite clear that it was going to be short-lived. We had our own vaccination program rolled out from May onwards. The country is obviously rapidly vaccinating. The third -- the second wave itself hopefully have created some level of protection given the severity of the spread during the wave. So -- and we saw in the second half of last financial year, both in India and frankly, anywhere in the world, what the impact on residential demand from this situation was. And that was the reason a significantly increased residential demand. We also saw interest rates were very favorable. Overall economic conditions were quite likely to get much better post the first quarter. So we said, what is the reason to try and have very aggressive sales schemes and give cash flow benefits, et cetera, to lock in some bookings when we can probably do the same bookings a couple of months later at more attractive terms to us? And frankly, so far, that's playing out pretty much as we expected. As I said, while Q1 was our lowest sales quarter in the last 5 years, we are quite hopeful that this quarter will be one of our best sales quarters ever. So we -- I think this one quarter to a next in real estate can be very different. We saw it last year, for example, where our lowest quarter in the year would have been about INR 1,000 crores sales and highest quarter almost INR 3,000 crores. So there is an ability when launches are present, when we want to get more aggressive even on custom sales, to very significantly pick up momentum. And we didn't feel the need both in April and May from an employee wellbeing perspective. And for the whole quarter, from our analysis of how the rest of the year would likely play out, we didn't feel the same need that we felt in the first quarter of the previous year to be quite aggressive.
The next question is from the line of Manish Jain from GormalOne.
I had 2 questions. First is in the launch pipeline, we still don't see any projects from Vikhroli. So if you can give insight on that? And the second question was on plotted development projects, especially when we had 2 stellar projects last year both in Faridabad and Bangalore, do we plan to take this momentum up in the current and next year on plotted development?
Thanks for the question. On plotted development, yes, certainly, we'd to increase the momentum there. So hopefully, we will be able to do that with some new project addition this year onwards. And as you rightly pointed out, we launch so far, we think, have done well. And as Rajendra mentioned a couple of people also hopefully achieve completion this financial year. On Vikhroli, we remained in the same position that we were, which is for the larger land parcel, several steps have to be taken before we'll be ready to launch it. On the couple of parcels we've identified, there's been specific issues with the BP that need to be sorted out, and those are taking a bit of time. We hope to obviously bring them to market as soon as possible. But the rest of our Mumbai portfolio, I think we will also see a very significant enhancement hopefully, during the remainder of this financial year.
So I just had one follow-up question that given that our time horizon is a little longer this fiscal year, given that we have Bandra, Worli and maybe Vikhroli coming in full flow next year, would it be fair to assume that we'd be able to have significant uplift in good-sized, good value projects in next fiscal year from Mumbai?
We certainly hope so, Manish.
The next question is from the line of Aman Vij from Astute Investment Management.
My first question is on the project updates on 3 of 4 projects. One is the Devanahalli in Bangalore, then the Godrej Palm Grove in Chennai and the Godrej Anandam in Nagpur?
Sorry, I was not able to fully catch the question. Could -- Mohit, did you catch it? Will you answer it?
Sorry, Pirojsha, even I was not able to catch it properly.
Yes. Is my voice clear now?
Yes.
Yes. I was asking for a project update on 3 of our projects. The first one is Devanahalli one in Bangalore, the second is Godrej Palm Grove in Chennai and the third is Godrej Anandam in Nagpur.
We have 2 projects in Devanahalli. Are you talking about the plotted development?
Sir, the one which we haven't gotten any update for the last 3, 4 quarters?
Okay. Yes. So that project, see, we are in touch with the joint venture partner. We had signed that project a couple of years back and paid a very nominal amount and locked the 100-acre parcels. Now there was a positive development on that. There were some family issues which were happening in the joint venture side, which has got resolved. So that's now started to move in a positive direction. On the other one, you mentioned was Palm Grove and the third one, sorry, which was the third project did you say?
Anandam, Nagpur.
Anandam. Godrej Anandam, the project had -- was tough for approval for many years. Now we are in the process of renegotiating with the JV partner because the old terms don't make sense anymore. So we are evaluating those -- that project from that perspective. Godrej Palm Grove. Rajendra bhai, you want to update?
Yes. Godrej Palm Grove, in fact, we have only a few inventory left out, so that we are looking to liquidate. We don't have any plans to develop further. So we -- I know, in fact, we are looking to exit from that project, and we will be doing it very soon.
Sure, sir. My second question is on -- a little bit on the longer term. So sir, we have progressed very well in the last 5 years. We used to do 10 projects a year, projects/phases, 4, 5 years back, which has moved to 35, 40 projects. Booking value has moved to INR 6,700 crores. So my question is, say, whenever we reached that INR 1,500 -- INR 12,000 crores, INR 15,000 crores of booking value. Does the number of projects or faces have to scale in proportion like 35, 40 projects which we are doing, say, 2021? As to scale to 70, 80, 100 projects? Or do you think the size will have to become much bigger going forward for us?
Mohit, why don't you go ahead with that?
Sure. Yes, I think it's not a direct correlation between the project sizes going up -- the number of projects going up because as we add more high-value projects in the portfolio, like we have been doing like we signed Ashok Vihar in Delhi, we have signed something in South Estate and again, in Delhi or in Mumbai we are looking at Worli, Bandra and some of these high-value item project. So I think it's not going to be that direct correlation. But yes, the number of projects will continue to go up as we grow, as a business. We don't see any constraint on adding more projects or developing them at all right now.
Sure, sir. And my final question is, we have talked about the new regional fields of MMR, Pune, Bangalore and Chennai. Could you give us some names because I was not able to find who are these people?
Sure. Mohit, you want to take this?
You want names of the people?
Yes, yes. Or whatever information you can give.
Yes. See, we have Gaurav, who leads our North business, Uday leads our South business, Priyansh leads our Mumbai business and Aman leads our East and West business. And all of these have been with company for more than 5 years plus. Some of them have been with the company for many years. Priyansh, of course, has rejoined us, but he has -- before that worked with company for a very long period of time.
Next question is from the line of Kunal Lakhan from CLSA India.
So my first question is on we have been clocking presales of upwards of, say, INR 4,000 or INR 5,000 crores per annum for the last 4 to 5 years now. And I believe we should have seen our revenues converging close to those presales that we did 4 to 5 years back. But we haven't seen that happen yet. But so when can we expect recognize revenues, which are in line with your historical sales?
Kunal, I think that you have to keep in mind the accounting standard where joint venture projects have very different treatment and often a single line item. And so the revenues will actually never match the booking value for those projects. But as you've also seen that the number of projects in which we have an outright ownership or area share of those sorts of structures has also increased. So we do think reported revenues will meaningfully increase. But honestly, to us, that is not a very meaningful number to track because it's more a derivation of the accounting rules for the project. So I think we'll continue to track booking value as well as, obviously, the profitability measures such as reported earnings and so on. But reported revenue isn't a particularly important metric in our mind, but we'll see a significant increase given the improved proportion of owned projects versus joint ventures.
Sure. Just a follow-up on that. Rajendra, if you can update us on what is the unrecognized revenue sitting in the balance sheet?
So all the projects which has not reached revenue in, I don't have a number offhand. I can provide you that off-line. But all the projects which we have started and not reached revenue recognition, the entire thing would be unrecognized actually. I can come with the number offline.
Offline. Yes, yes, yes. And my second question was on the Mumbai projects, particularly the Worli slum rehab and Bandra project. If you can give us a quick update on where we are in terms of approvals? And then the launch -- and then the launch time line?
Mohit, do you want to take that?
Yes. On Worli, the approvals are progressing quite well. There is one approval, which is the CRZ approval, which is where things are a little stuck because of issues between state and the center. So we are waiting for that one approval. Once we get that, things would start moving very fast in that project. Hopefully, it's been pending for a very long period of time, so it should come in quickly. So Worli has been doing a pretty decent progress from overall perspective.In terms of Bandra, the project has got delayed because of some of the issues with joint venture partners have been facing. But the way we have structured this deal is our revenue actually keeps going up with every quarter of delays. So actually, while -- we're not happy that project is getting delayed and would have left to launch it. But from a company the economic interest perspective, we are actually, in a way, compensated for this delay by getting higher share of revenues. And we remained very confident on this project. But again, given the way situations have evolved on the joint venture partner side, one can expect a slightly more delay on that project. So Worli should come in before Bandra, for sure.
The next question is from the line of Manish Agrawal from JM Financial.
My first question is related to Godrej 2. So what will be the current occupancy in the building and average rental per square feet basis?
Rajendra, do you have...
So right now we are 30% leased, I would asset. And the average lease rental is around 160 to 165.
Okay. And we have 50% profit share in the area, to, Right?
Maybe 50-50.
50-50. Okay. Secondly, on the Indranagar Bangalore project. So what would be the rough time line for the project and the CapEx, which will be required? And what will be the funding mix, debt equity for this particular JV?
So it's a JV with JFM. So it's a 20-80 JV. So the -- CapEx would be somewhere, the land cost plus the construction cost. So the land cost would be somewhere in the tune of INR 500 crores to INR 600-odd crores and plus normal whatever is a typical commercial construction cost. And the time line would be 3 to 4 years.
Okay. And the project debt equity would be, roughly?
Debt equity would be 1:1 is what. Obviously, it's been commercial, slightly higher is also possible. But we would like to stick it to 1:1.
And going forward, opportunistically, would we like to scale up on such commercial projects?
So I think Pirojsha answered this before. So selectively, we will look at the [indiscernible] said -- like you said, because there is always an opportunity to do a REIT and do an exit, although our portion is a marginal 20%. But then once you -- when these assets are commercialized and operationalized, there would be a good market, and the 20% value would be a substantial value.
Next question is from the line of Venkat from Tata Asset Management.
Sir, I just wanted to get a clarification. This time, the sales that we did, did it have any element of potential schemes in it?
No, most of these sales were on regular payment plans. But obviously, at the project level, there are different plans rolled out from time to time. But unlike last -- the first quarter of last financial year where we had rolled out large pan-India payment plan, that has been relatively much more limited this time.
Right, right, right. And the reason that I asked that is I keep seeing these advertisements with Helping Hand incentives. So I'm just trying to understand if at all that means anything in terms of the contribution to the sales?
Mohit, do you want to elaborate on this?
Yes. See, Helping Hand is more of a sourcing tool, but the payment plans are not being offered and there are some special payment plans we have for international markets. And for very few specific projects for very limited inventory, but it's largely a sourcing tool rather than a closing tool. Unlike last year, where almost 80% to 90% of sales happened through the subvention plans. Right now, they would be at a 10%, 15% kind of number. And again, at the project level, it obviously varies a lot.
Understood, understood. Sure, sure. And one last question from my end is, if I look at Slide 23 of the presentation, the other project-related outflow this time seems to be a little higher at around INR 6.6 billion. You used to usually clock between INR 4 billion to INR 4.5 billion. So anything you would like to highlight? And going forward, how this could trend?
So what we have done is there is a DM project. So there is a cash inflow, which has been in gross, so if you see the footnote. So we have included a gross collection of DM projects and other project related also includes the outflow towards the JVP share.
Okay. Okay. Okay. Understood. So the collection and the outflow is directly linked to whatever you would be collecting on a gross level from the DM project?
Correct.
Ladies and gentlemen, I now hand the conference over to the management for closing comments.
I hope we've been able to answer all your questions. If you have any further questions or would like any additional information, we will be happy to be of assistance. On behalf of all of us, I once again thank you for taking the time to join us today.
Thank you very much. On behalf of Godrej Properties Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.