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Ladies and gentlemen, good day, and welcome to the 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. [ Amit Shah ] from CDR India. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and thank you for joining us on Godrej Properties' Q4 FY '22 Earnings Conference Call. We have with us: Mr. Pirojsha Godrej, Executive Chairman; Mr. Mohit Malhotra, Managing Director and CEO; and Mr. Rajendra Khetawat, the CFO of the company. We would like to begin the call with a brief opening remarks from the management, following which, you will the forum open for an interactive Q&A session. Before we begin, I'd like to point out that certain 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 shared with you earlier. Thank you, and over to you, sir.
Good afternoon, everyone. Thank you for joining us for Godrej Properties Fourth Quarter Financial Year 2022 Conference Call. I'll begin by discussing the highlights of the quarter, and we then look forward to taking your suggestions and questions. I hope you and your families are all doing well. I'm happy to report that from an operational perspective, the fourth quarter was Godrej Properties best-ever quarter on multiple parameters. On the sales front, GPL had its best ever quarter in terms of the volume and value of real estate sold. We sold 3,699 homes during the quarter with an area of 4.24 million square feet and a value of INR 3,248 crores, representing a quarter-on-quarter value growth of 111% and a year-on-year value growth of 23% over what was our previous best ever quarter. This resulted in our fifth consecutive year of record annual sales of INR 7,861 crores despite the tremendous volatility of the sector has undergone during this period. We also recorded our highest ever residential cash collections of INR 2,678 crores during the fourth quarter. These collections led to our highest ever net operating cash flow of INR 1,045 crores. And for the full year, our residential collections grew by 57% to nearly INR 7,000 crores. We launched 9 projects or phases during the fourth quarter and received a strong response to all of them. Our project Godrej Woods in Noida delivered sales worth INR 1,650 crores within a year of its launch, making it GPL's most successful residential launch by booking value to date. While sustenance sales for the financial year grew by 6% to INR 4,826 crores, we're happy to note that our new launch sales increased by 40% to INR 3,000 crores. On the operations front, we successfully delivered approximately 5.84 million square feet across 5 cities in the fourth quarter. With a large number of project completions in the last quarter, GPL recorded its highest ever reported numbers on a quarterly and annual basis. Our total income for the fourth quarter increased by 191% and stood at INR 1,476 crores. Our EBITDA increased by 611% to INR 403 crore and net profit increased by 236% to INR 260 crores. For FY '22, our total income increased by 97% and stood at INR 2,397 crore. EBITDA increased to INR 705 crores and net profit increased to INR 352 crores. While the pace of new project additions in the first half of the financial year was a little slow, we added several projects during the second half of the year. In the fourth quarter, we added 3 new residential projects with a total salable area of 6.1 million square feet and an expected combined revenue potential of over INR 4,100 crores. We extended our existing arrangements with Shivam Realty to develop a 0.7 million square feet housing project in Kandivali in Mumbai, which will add an estimated further INR 1,000 crores of booking value. In addition to the new projects we have already announced, we have a robust pipeline of new development opportunities, and we are confident new project additions will pick up substantially in financial year '23. The real estate sector has recovered strongly during the year. While commodity cost inflation poses a substantial near-term risk to operating margins of projects where most of the sales have been completed, the price hikes we have taken will fully mitigate the cost pressure on upcoming projects. We are optimistic that the financial year ahead will be a strong year for Godrej Properties. We hope to grow residential bookings to over INR 10,000 crores this year through the launch of a large number of exciting new projects combined with strong sustenance sales. This, combined with strong project deliveries, should allow us to maintain rapid growth in operating cash flows. One of our biggest priorities for the year will be to add a large number of new projects to our portfolio, which in turn will set us up well to remain on a rapid growth trajectory. On that note, I conclude my remarks. We'd now be happy to discuss your questions, comments or suggestions.
[Operator Instructions] We'll take our first question from the line of Puneet from HSBC.
Congratulations on, once again, reporting record sales. My first question is with respect to your FY '23 launch guidance. Is it possible to get a sense of what would be the total revenue potential from these projects that you're looking at?
I think, again, we've -- obviously, things like the pricing of the project, et cetera, will be decided at the time of launch. And we've given the details on both the locations and areas. So I think an approximate amount of sort of revenue potential can be garnered from that. But we can perhaps help you offline with our more detailed thinking on this.
And this is also likely to be an important year from a delivery perspective, right? I mean any sense of what is likely to be delivery target for FY '23?
Yes. I think it will be a big year for deliveries, as you've said. I think we did about 6.5 million square feet in the last financial year. I think that number should at least cross 10 million square feet in the current year, if not more than that.
Okay. Understood. And my last question is, if I look at your cash flow statement, you have broadly been spending close to INR 2,000 crores a year on development cost. And you alluded to business development being the biggest priority for the current year. So what kind of number should be penciling for that?
Rajendra, you want to take that?
Yes. Sure. So Puneet, basically, the construction -- as the progress -- the projects across the sites are going up, so construction costs will also proportionately increase. And like if you see the operating cash flow, we have been able to do INR 1,750 crores for the year. So hopefully, this operating cash flow would be positive and will be stronger as more and more projects keep getting into the launch and to the cash flow cycle. As you rightly said, our cash flow would be for the new BD purpose. That obviously would continue for at least a year or 2, where we are investing into the new BD opportunities. Otherwise, operating-wise, I think the cash flow would be healthy, and we expect this should grow further.
But the BD cash flow, which is land approval and advanced JV partners, what can that number become from current...
So that, Puneet, is again like the deals which have been tied up. So there would be some outflow on account, which is a milestone link. That will be in the range of INR 1,000 crores to INR 1,500 crores. The rest will depend on the new BD opportunities which we will tie up in the coming quarters. That will -- our outflow will be directly proportional to the new BD opportunities which we will be able to tie up. Like we are sitting on a INR 4,000 crores of cash flow. The idea is to deploy that into the coming quarters.
Understood. My last question, just on the sales strategy side. Historically, you focus on selling as much as you can when you launch the projects. Do you intend to continue this strategy given now the cost pressures are there in various phases of projects?
Mohit, you want to comment?
Sure. I think, overall, the strategy is to sell as much as possible, Puneet, at launches. Of course, we are adjusting prices significantly given the way inflation is moving and also budgeting a slightly more future inflation in our budget. Having said that, there is -- obviously, a project has large phases. So on a continuous basis, it kind of catches up on a portfolio basis.
Our next question is from the line of Abhinav Sinha from Jefferies.
Congratulations on a strong set of numbers this quarter. Just wanted to -- a couple of things -- on the sales front when you're talking about 100 billion plus in FY '23, is it going to be a similar sort of back-ended mixture on both launches and sales? Or do we have higher visibility in the first half of the year?
I think we do have a higher visibility on the first half, which has -- and also, just remind us that last year the start was -- the first quarter was, of course, marred by the Delta wave. So we had only INR 500 crores of sales in the first quarter. We actually even in the second quarter of the year did quite well and had about INR 2,500 crores, INR 2,600 crores of sales in the second quarter. So it's not that the first half was really cyclically weak, but rather that this pandemic impact was quite strong. I do think that this year, we'll have a reasonable percentage of these sales in the first half of the year itself. Already, we have a couple of Mumbai projects that will be launched this quarter. And so I think we'll have a better balance in the first half of the year this time.
Right. And you also alluded to higher pricing now. So can you quantify that? I mean, what does that number look like on a pan India Y-o-Y [indiscernible] number?
Yes. Mohit, you want to take them?
Sure. See, what we have done is in the start of the quarter 4, we did an exercise to look at what is the inflation impact, if the prices were also significantly rising up then. And we took an almost 5% to 7% hike across projects at the start of quarter. And just to let you know, even at the start of April, we have already instructed projects to take price hikes for the inflation, which has hit us now in the last quarter. But in Q4, we took almost 5% to 7% price hikes wherever it was possible.
Also, cumulatively, you would have raised prices by maybe 7%, 8%...
I would say -- if you have to ask me a blended average, I would say it will be closer to 5%, plus, minus 1% on a blended portfolio basis.
And how much have cost come by broadly?
Almost similar in terms of percentage of booking value, around 5%.
Okay. So margins should be under control incrementally you're saying?
At a portfolio level, yes, because we are taking that price hike. But projects which have already been sold a lot, they would under some kind of margin pressure. And the new launches, we are kind of increasing prices to mitigate both the cost inflation hit for that project and also some bit for the portfolio.
All right, then. Finally, my question on balance sheet side is on the gearing front. You are seeing strong cash flows already. I mean is the 0.5 target on gearing, is it likely to be hit in FY '23? Or you think we are slightly behind? Or how are you seeing that number?
Abhinav, I think we think it can be done during the year. I think -- look, ultimately, there are some deals that are quite large also that in a single shot can help us achieve some of these targets. At the same time, we don't want to let this cash burn a hole in our pocket. We want to wait for the right deals and do the right quality of deals. But we've seen, as I said, a pickup in momentum in business development over these last 3, 4 months. In addition to the deals we've already announced, we actually have a few deals which are already fully concluded, but will be announced post the completion of certain conditions, precedents that the partners have to complete. So we feel pretty good about the momentum on the business development side and would certainly not want to be at the kind of near 0 net debt levels that we currently are. I don't think it's out of reach to get to that 0.5 kind of number this year. But again, it depends on us getting the right quality and quantity of deals.
Our next question is from the line of Kunal Lakhan from CLSA.
My first question was on the new launches. A couple of key launches. If you can give us some indication on when those are expected to launch, like say, Ashok Vihar? And Wadala, I believe we have already launched or prelaunched. So if you can give some indication on these 2 launches?
Mohit, you want to jump in?
Yes, you're right, Wadala we have already prelaunched. We have all the approvals. So that will be a big launch in quarter 1. On Ashok Vihar, the approvals are at final stages. But given the way approvals have been moving, we are quite hopeful that either in Q1 or Q2 we should be having a positive outcome on that launch.
And any indication on like how the response has been for Wadala so far?
Very early for me to comment on that.
Sure, sure. Just a related question on your launch tracker, right? I mean, when I look at last year's launch tracker, a couple of Mumbai projects: Sanpada, Bayview and Riviera, which we couldn't launch last year. I find those names missing in the launch tracker for this year. So any particular reason?
See, Bayview we did launch last year. Sanpada was a project which we find in Navi Mumbai. And unfortunately, there is a litigation going on between the 2 government agencies there with this project -- and not just our project, but the whole set of projects there have got stuck. So we have kind of taken it out from this year unless we get visibility on the litigation side between the government agencies.
Okay. Okay. And my second question is on the booking side or rather the revenue recognition side. So we delivered 6.5 million square feet this year, and against which, we booked INR 1,800 crores of top line and INR 350 crores of bottom line. And now with the 10 million square feet plus kind of guidance for FY '23, we are actually reaching close to what we are selling in terms of deliveries, right? So my question is on when we can see the revenue and PAT coming closer to the sales terms of value that we clock on an annual basis? Because clearly, INR 1,800 crores and INR 350 crores worth of PAT is not nearly close to what we sell on an annual basis.
Mohit?
Yes, I'll answer on PAT because revenue is a combination of how the deals are getting recognized. Especially, in JV projects, it comes as a line item as PAT. So clearly, revenue is not something I would like to comment on. On PAT, actually, we feel very confident that the trajectory of PAT for the company is now absolutely on the track of the guidance we have been giving in past. So I think next year is going to be a spectacular year for us on PAT. And FY '24 is where we should be able to hit our original guidance which we had given to the investors.
Just to add. The revenue -- the way the accounting works, because of our JV, the JV revenue doesn't get reflected into our top line. So to that extent, you will always find that gap, because booking value reflects the entire booking value of the JVs, whereas the revenue only reflects the one-line item, as Mohit said. So to that extent, there would be a gap.
So -- yes, I get that. So in terms of, like, say, for example, we do, say, INR 7,000 crores or INR 8,000 crores of these sales, right? On a PAT level, even at the JV level, right, or even after accounting for the JV, we should be at least making 1,000 per square feet kind of a PAT on a 10 million square feet kind of a delivery of sales velocity. So my question is that if you are delivering like 10 million square feet, could we see profit or PAT levels of, say, 1,000 odd crores?
Yes, we should be able to see that in 2 to 3 years' time frame. I think FY '24 onwards, you'll see a number closer to what we have intended.
Our next question is from the line of Pritesh Sheth from Motilal Oswal.
Congrats on both operationally and financially. A very strong performance. My first question is on -- again, on P&L. So I was trying to reconcile your fourth quarter's revenue declaration since we have only completed one outright project, that is Godrej Aqua and rest all were JV. And that Godrej Aqua, if I understand it correctly, it won't be more than INR 400 crores, INR 450 crores kind of a revenue top line. So where this INR 1,300 crores is exactly coming from? I mean, just any clarification in that.
Okay. So we have not only completed one JV project. Godrej Aqua is our outright project. Apart from that Godrej Aqua, we have completed 2 of our plotted development: one is Godrej Retreat, which is at Faridabad; second is Godrej Woodland. So both have contributed -- Retreat has contributed around INR 350 crores of top line. Woodland has contributed around -- to another INR 250 crores of top line. And then we have Godrej Avenues, which is, again, our own project. That has contributed another INR 178 crores. So all 4 projects together have contributed around INR 1,150 crores of top line.
Okay. Great. That clarifies. And secondly, on business development. So we have already -- last quarter with that deal with DB that obviously got shelved off. But we have cleared out our intentions on large-sized SRA projects. So how the pipeline is looking right now? Are we still thinking of a couple of opportunities from those DB lands? Or how is it going to be?
Yes. I think we have said that we are open to looking at project level partnerships. I think basis the feedback we received from our various stakeholders, we decided to call off the strategic investment, as you know. But we are open to project-level partnership. And of course, there are a lot of other potential new project additions in Mumbai. We're very happy actually that the project we added last year, which is quite a sizable redevelopment project, not a slum redevelopment, of course, is actually already getting launched this quarter. So we certainly -- one of the key priorities for the year will be to strengthen the Mumbai portfolio. And we're quite -- we think we have quite a good pipeline in place to be able to do that.
Right. And lastly -- I mean, so seeing that Wadala project, we turned around within 9 months' time frame. Would that be the similar time line that we should look forward to from the projects that you guys sign in from here on, because previous projects we have seen some delays. So what should be the turnaround time line from here on?
Yes. I think projects, of course, are at different stages when we enter them sometimes. And I think this one was at a more advanced stage, which did allow us to turn it around very quickly. Of course, the goal will be to always turn it around quickly. None of the projects we're adding do we think of as like a future land bank that we're expecting to wait many years. But you do sometimes have situations, particularly in some of the larger projects that they end up taking a little bit longer than one hopes to launch. But certainly, the goal is always to do it as fast as possible. And we're very happy with the time lines in this one. But I wouldn't necessarily say that for all redevelopment projects, we can expect this quicker turnaround.
Our next question is from the line of Samar Sarda from Axis Capital.
Congratulations on a good FY '22. I had a couple of questions on collections in cash flow and one on Vikhroli. So just to take a quick question on Vikhroli first. FY '23 launch pipeline also does not include any residential launch in Vikhroli. We have some like previous, more or less, completed and sold out. Any reason why we're not releasing more area in that micromarket?
Yes. I think it's, again, regulatory approval linked, Samar. So certainly, I think both Vikhroli and Worli we would hope to launch something during the financial year, if possible. But I think the level of conviction was not high enough to include it in the guidance. So hopefully, we can have a positive surprise on those.
Okay. And on collections -- probably, Rajendra or Mohit could take it. Collections were really good in FY '22, like INR 7,700-odd crores. Your increase in construction as a percentage is not that much, so -- and which is why like OCF is good. So will our construction expense increase a little more in FY '23, '24 on a percentage basis versus like how collections have gone up? A related question here is, we did a lot of subvention sales during COVID. So most of those collections have chipped in for this year or might come in FY '23 and '24 as well?
So Samar, just to take your question. It will be -- it is coming over. Because when we did subvention, those projects were at different stages. So as and when those projects reach that milestone of OC, where the 90% gets due, so those will fall -- must have fallen due in '22, some will come in '23 and some will come in '24. So those collections will chip in the next 2 years also. That was your question. What was your second -- other question on collection?
Construction expenditure increase.
Yes. So if you see, there is a steady increase in the construction expenditure, because as and when your milestone -- construction milestone increases, your billing milestone also increases. So definitely with more projects under construction -- those expenditure, if you see compared to last year, construction expenditure has substantially gone up as compared to last financial year. And that is going to keep happening. And similarly, our collection also will keep pace with that milestone. Obviously, we have sold it. So as and when you build, your milestone gets triggered. And that's where the collection will keep coming in.
One last question on OCF. Like if I go by your numbers of INR 7,700 crores and, say, INR 1,750 crores of OCF for this year. So we've given a guidance of INR 10,000 crores. The collections might reach there probably in a year, 18 months. If we really collect INR 10,000 crores, will our collection margin or OCF margin also likely improve and go up? We are doing some outside project acquisitions. How do we see this moving over the next 2 years?
It should improve -- definitely, it should improve because the margins are -- like we have been doing a mix of outright, plotted and other. And even the JV projects are of high-margin projects. So as and when they start contributing, definitely we should also see an improvement in the OCF.
Our next question is from the line of Venkat Samala from Tata Asset Management.
Am I audible?
Yes.
So just wanted to understand. When I look at the interest expenses, they look so low, right, I mean, at 5.95%. If you could give some color as to how we are able to borrow at such low cost, assuming it's construction finance?
What we do, we do 2 types of borrowings. Even the construction finance, we are able to catch a very low rate. So our construction finance are in the range of 7% to 8%. So apart from that, we do a lot of corporate financing, where we are able to negotiate a very fine rate. And we have some mix of product. We have done some long-term kind of debt. We have placed NCDs in the past for long tenure, which were at a very fine rate. So blended, we are able to keep our average borrowing cost down.
And what would that mix be, I mean, between construction finance and these other NCDs or other types of finance?
So mix would be in the range of 70% -- or 75%-25% kind of a thing.
75% in favor -- sorry?
75% is towards the corporate finance. 25% is towards the construction finance.
Okay. And what would be the cost, sir, of this corporate finance?
Our average borrowing cost is 5.9%. And the 5.9% is what the YTD we have reported.
Right. No, no -- so assuming that is 7% to 8%, then this should be around 5%, right?
Yes, it's a blended. So for the JVs, it's not getting reported in this. So it should be around -- 5.5% is what we are -- at the corporate level we are able to borrow. So blended will come at around 5.95% kind of a thing.
Understood. Understood. Right, right, sir. And one last question is, sir, I mean, the bookings number that you report, does it include any taxes or any other element? What I want to understand is, assuming it's an outright deal that you're doing, so whatever...
No, it doesn't -- no, it's a pure booking value. It doesn't include any GST or other taxes.
Okay. Okay. So assuming it's an outright sale, whatever amount we are booking, we expect to -- that to be recognized in P&L as revenue whenever it does, right?
Yes. Yes.
With the exception of the joint venture projects, where there's single line consolidation.
Yes, yes, yes. Sure, sure, sir. And sir, I mean, even now we are seeing some losses on the JV side despite such good completion of projects. Any reason?
Sorry, sir. Come again?
Even in this quarter, we are seeing some losses being reported, right, on the JV side?
Let me explain for better understanding. So JV losses, actually, those are not losses. It comprises of 2 parts. One is because of a Godrej commercial project, G2, which is completed and it is not yet fully leased out. So the interest gets expensed out. So bulk of that INR 80-odd crores is coming out of that as an expense item. Secondly, a lot of projects which have not contributed to the revenue recognition, the marketing and other period costs get expensed out. So that is another. And the third important part is most of our JV are structured in a manner where we do a most efficient tax planning. So a lot of income from the JV is being taken as an interest income or a DM income or in the other form. So it is grossed up. So what -- till the time the JV comes to an OC completion stage, you will not see that and the period costs will keep expensing out. Otherwise, the JVs are always in profit. Maybe JV to JV, it may depend at -- the margins may differ. But none of the JVs are like in red. It is only the reporting, because of which it is coming as a one-line negative item.
Right, right. And sir, just as a follow-up, this Godrej 2, what will be the hit, if you could quantify annual...
Around INR 80-odd crores.
INR 80 crores in a year?
Yes. And this will come down as and when the premises get leased out.
Our next question is from the line of Mohit Agrawal from IIFL.
Congratulations on a great set of numbers. I have just one question, trying to understand your business development strategy. In the last quarter, we have added projects in Nagpur, in Sonipat. We have earlier expressed our interest that we want to focus on 4 markets. Has that changed? And is there something that you're doing different this time around?
Yes. We are focused on the 4 markets still. I think what we have also said that if it's a plotted development, we are willing to look at a broader range of cities. So these would both be plotted development projects that you mentioned.
So outside the 4 markets, it will be only plotted development?
That's right. And -- I mean, we may still, of course, occasionally add projects in like Calcutta and Ahmedabad, et cetera. But yes, almost all the projects outside these 4 markets will be plotted.
Okay. And apart from faster turnaround, also is the margin profile or the IRR profile different for plotted projects in these markets versus our core portfolio?
Yes, they're much faster to complete. So both the margins and IRRs tend to be higher.
[Operator Instructions] We'll take our next question from the line of Manish Gandhi from KPMK Investments.
Congratulations on a very good, strong quarter on all the fronts. My first question is, Mohit, with regards to construction time line and our aspiration to reduce it by 50%. And going by a few projects of, say, Pune and Bangalore, I've observed that despite COVID-related disturbance, we are delivering in 2 to 2.5 years. So do you think we can make it 2 years or below for, say, INR 20 crore to INR 25 crore developments in the near future and which could lead to strong competitive advantage as well as satisfying great customer needs? That is my first question.
We have significantly brought down the OC time line for the types of buildings you mentioned. We actually recorded the best ever OC time line by a project in Pune at 22.5 months. So which is the fastest ever. Last fastest was 24 months. So we have brought it down. Also, the slab cycles, we have been consistently bringing it down. So this year, the average slab cycle for the company has been brought down to 12 days. So a lot of work has been happening on this front, and we remain confident that with our focus on construction we should be able to continuously bring this time line down. But I think 24 months is something we are now trying to work towards, as almost consistent with all projects.
Actually, that's a great achievement for the Godrej team, and especially our records in India to give possession. And my second question is on the launches this year. A very exciting lineup. I was just wondering -- would like to understand your thought process behind launching Wadala, 1.6 million in one go. So which could be INR 3,500 crores plus sales. So what gives you this confidence to launch the whole project in one go?
No, I think we are not launching the whole project at one go. This is the overall potential of the project. We will be launching it in phases. But depending on how each phases perform, we can significantly bring more phases into the year. If you see what happened in Noida last year, we actually sold close to INR 1,800 crores of sales in 12 months period. I think this is the overall project size. The exact area would depend on how the launch is performing for each phase.
Manish, thanks for pointing this out. I was just looking at the presentation. You're right. I think this has been incorrectly put. So let's -- Rajendra, let's correct this.
I was hoping that you must be thinking of selling INR 2,000 crores, INR 2,500 crores in one go.
We'll do our best.
Our next question is from the line of Manish Jain from GormalOne.
First of all, congratulations on raising the bar for you all, because you all are setting up new trends in the industry. And what was really heartening to see is that now first glimpse of scale is visible. And really, as the previous speaker asked on launches, I had 2 questions. First is on the business development side. On the business development side, we have been doing an excellent job on NCR and Pune. In what time frame do we plan to excel in Mumbai and Bangalore? I'm leaving out the plotted projects for now.
Mohit?
Plotted projects which you plan to do across the -- outside the 4 geographies, I'm leaving that. But in what time frame do you plan to come back to excellence in NCR and Mumbai -- sorry, Bangalore and Mumbai?
This year, actually, we were very happy with what we did in Mumbai. We have committed more than INR 1,000 crores of capital in Mumbai in business development in FY '22 and have a very strong pipeline of projects in Mumbai for the next year, which is already in term sheets and at fairly advanced stages of closure. So I think from an overall perspective, very, very strongly focused on turning around Mumbai business development, and we feel it could give us a big thrust and scale in Mumbai. On Bangalore, again, there has been -- we have been adding 2, 3 projects every year. But I think we really need to get our strategy right in Bangalore. And I am hoping that in next 6 to 9 months we should see a turnaround in Bangalore as well. So Mumbai, I see a very strong visibility upfront, Manish.
Our next question is from the line of Parikshit Kandpal from HDFC Securities.
My congratulations for a brilliant year and quarter. So my first question is on...
I'm sorry to interrupt. Mr. Kandpal, your audio is very muffled, sir. We can't hear you clearly. If you're on a speaker...
Is it better now? Hello?
Yes.
Is it better now?
Yes, sir.
Yes.
Congratulations on a great quarter and the year. So my first question is on business development. So we have seen a big spike in input costs. So what's happening on the land side? Do you intend to do a lot of land acquisitions this year? So can you give any overview on how the land cost is going up or how is the inflation there, some sense on that?
I think it's varying a little bit by geography, but certainly we expect both end property prices and land prices to continue to move upwards over this next couple of years. So I think we are quite keen to do business development this financial year. But we are already seeing some increase in pricing on the land side over, say, a year or 2 ago.
My second question is on Mumbai. So I think Mohit did mention that you're looking to add a large pipeline in Mumbai. So if we have to -- say, an outlay INR 100 next year. So is it right to assume a large part of that will go into MMR now in this year?
I think we are open to doing projects in all of these geographies and would like to expand in all of them. Yes, I think it's fair to say that Mumbai amongst these 4 cities is the #1 priority for new project additions. So we're quite hopeful that a big chunk of new investment will go there.
Okay. Just a last question on -- what I've been hearing from the market is that you are not buying -- like you're buying land, but you're not buying land, say, where the development potential is for 10 years. So you're looking to do like more 3 to 4 years, 1 single phase kind of new land acquisition. So -- but if the opportunity comes in where you have to write a big check of, say, INR 2,000 crores or INR 3,000 crores, which in India hardly like 2, 3 developers can do, so are you open to that kind of opportunity? Because government has recently formed that land monetization authority, wherein you can see those kind of opportunities opening up from the government side on government land. So are you open to exploring those kinds of opportunities, where there could be big outlays, maybe 8, 9, 10 years kind of project?
Yes. Look, I think we're open to any opportunity within residential development in these few cities. I think for the kind of investments you're talking about, we, of course, have to have a great deal of confidence in the micro markets, salability of them and our ability to deliver strong annual sales on an ongoing basis. But certainly, I think the appetite to do big projects is very much in place. I think if you look at a project like our Ashok Vihar project in NCR, that's probably a INR 6,000 crores, INR 8,000 crore top line project. We bought the land for INR 1,300 crores. We have a project we're launching now in Bombay, would be a INR 3,000 crores, INR 3,500 crores top line project that we added. So certainly, as the company scales, I think we do want to focus on good returns on capital in doing projects that we can turn around quickly. I think that there's a lot of merit in those projects. But we're certainly also happy to cut large checks for strategic opportunities of a larger nature.
Because my concern is only coming that this year if you touch INR 10,000 crores plus, so purely on basis of volume growing beyond that will be difficult. So you'll have to take the average utilization much higher. So for that, you'll have to add more of premium projects. That will give the growth kicker. So that -- we need to see a lot of BD opportunities being worked out there in that front. So that was the only concern which I have.
I mean, yes and no. I think the growth opportunity in India -- us and any other developers are just scratching the surface of the opportunity. I always like to say -- our whole top management team just before the pandemic had spent a little bit of time in China, meeting with the top developers there. And if I recall correctly, I think we had done about 6 million square feet of sales that year and the big Chinese developers were doing 600 million square feet. So with a 2% or so share of the market currently, we don't see any sort of market imposed constraint on our growth. But you're certainly right that as the company continues to scale, I think the proportion of meaningful sized projects that we should have in our portfolio should also scale concurrently. And that will be the endeavor.
Our next question is from the line of [ Dhruv Jain ] from [ Himanshu Jhaveri ].
Congrats on a great set of numbers. Pirojsha, as a shareholder, when can we expect a dividend as it's been like a long time now, 7 years already?
I think our thinking has been that the company has a fairly unique opportunity to reinvest and grow for a sustained period. So I don't think that from our perspective we're thinking of dividends as a key means of shareholder value creation. We do think that reinvestment into the space given the kind of opportunities makes more sense. So to be perfectly honest, unless something changes in that outlook, I wouldn't expect any dividends over the next few years.
Okay. And any idea -- in Mumbai, as I have marked, the sale is always a little slow compared to NCR, Pune or Bangalore because -- any particular reason? Because I have marked like in NCR like Godrej Golf Links; Woods, Faridabad one; or in Pune, the Mahalunge, et cetera, all have been selling like very, very fast as compared to Mumbai, where the projects are a little slow in selling. Or that's a -- what's wrong?
I think the issue has been our projects in Mumbai have been a little bit on the smaller side in terms of the recent launches we've been able to do. We've certainly seen very strong launches in Mumbai in the past, including The Trees in Vikhroli, our redevelopment project in Chembur. We're quite hopeful that this quarter we'll have a good response to that question in terms of a couple of launches in Mumbai.
Wadala one and the Thane one which you're launching?
That's right.
[Operator Instructions] We'll take a next question that's from the line of Aman Vij from Astute Investment Management.
My questions are on the margin front. So if you can talk about reason why margin is at -- which we are achieving as of now NPR, Mumbai, Pune and Bangalore, what kind of EBITDA margins do you think are we achieving as of now?
Mohit or Rajendra, you want to take that?
I don't have a region-wise data right now. But on the sales, what we are doing, our blended average margin for company is right now upwards of 20% plus.
So the company EBITDA margin is 30% kind of a thing. So region-wise, obviously, depending on the project configuration, it will change. Like our plotted would be in the range of 40% kind of a thing. Group housing, depending on the type of project, whether it's a JV, whether it's an outright or whether it is -- that will depend on a project-to-project basis. So like I said, Faridabad, NCR, had a 40% margin. Like similar -- Bangalore plotted has a 40% margin. Group housing would be in the range of like Mohit said, 20% to 25%. So again, it will be overall different for different projects. But blended, it will be -- like our EBITDA is 30%.
So just a clarification on this part. So when you talk about blended it's 30% versus reported numbers. I understand the JV numbers are coming directly. But the costs are also, I think, coming -- we are not including in the top line. So that 16% -- 15%, 16% margin which we achieved in Q4, is it because of the older projects? Or this kind of margin only we should assume?
It's a blended. It's a mix. So it's a mix of old plus new.
Sure, sir. So that was my point. So going forward, when the newer portion is increasing, say, for example, in next couple of quarters, should there be uptrend on this margin? And can it cross this 20%, 25% number also?
So the endeavor would be to go take that to the higher. But obviously, it's still -- there would be old projects which aren't -- which will keep coming into the revenue recognition. And like I explained, our revenue recognition depends on the project completion. Till the time that project completion happens, the period cost will keep expensing out. So there would be some amount of, I would say, averaging out across the high-margin contributing projects with the projects which have not yet started contributing. So obviously, the endeavor would be to improve our margin profile. But for some time, there would be an averaging out of old, new and the marketing expense.
Sure, sir. My second question is on the Bangalore side. So you've talked about we are lacking in some ways. If you can talk more about it, because whatever we have aimed in the last 3, 4 years, we have -- the gap between what we have targeted and what we have achieved is the maximum in Bangalore region. So if you can talk about where according to you is our gap. Is it project selection? Is it something else? And when do -- what are we doing to fill that gap?
Mohit?
I think the key issue in Bangalore, if you really asked me, has been business development. We haven't been able to add as many projects as we would have liked to. On operations, actually, the region has done quite well. The sales performance has been quite good. The delivery performance has been pretty good. But it's been largely the function of the lack of new projects in business development, which has pulled it down. But as I said earlier that we intend to correct it in the next 6 to 9 months, because we are targeting a lot more in Bangalore for FY '23. It's like 2 to 3x our average sales which we have achieved over the last 3 years. So...
And it's a function of launches. We have a couple of launches planned in Bangalore, and they are at fairly advance stages of approval. So this year pretty confident on the numbers we have recognized for Bangalore.
Our next question is from the line of Harsh Pathak from B&K Securities.
Congratulations for a strong quarter. So this is in continuation to one of the earlier question on land prices. So basis -- what our check suggests is that land prices in Tier 2 cities have risen sharply in the past year. So if you could please quantify or give a ballpark figure on how much the land prices must have risen? And what has likely put pressure or put hindrance to our target of getting better margins and IRR profile for plotted development on these land parcels, please?
Mohit?
See, we -- if you're talking about Tier 2, we have just entered 2 cities, which is Sonipat and Nagpur. And there, we are seeing both margins and IRRs actually much upwards of 30% plus, closer to 30%, 35%, which is a very good return, which we're very happy to underwrite and would be happy to have that.
Right. But how much have been the land price increases in the past year? Because -- is that putting any pressure or getting it difficult for us to procure new land parcels? What trend are you seeing on ground?
See, there has been pressure of land pricing in NCR, which I've observed, especially in Gurgaon. But if you look at other parts of the cities like Mumbai, Bangalore, Pune, we haven't seen significant increase in land prices. They're in line with the pricing increase.
Sure. That's helpful. And my second question is regarding -- the smaller players are reentering the market is what we are hearing for the Mumbai region at least. So in your experience, are they launching projects all by themselves and how is the response these players are getting from home buyers? And does this make negotiating new attractive deals tougher for us? What trend are you seeing on ground?
Not really, actually, if you ask me. If you see our Shivam project, it is by the -- Kandivali project is by a local developer. And they came back and asked us to do the second phase as well. So people see value in cleaning up the land, but at the time of sales and launches would like to partner with bigger companies like us and some of the other players. So I think that there could be sporadic launches by the existing players, but new launches, definitely, they are going and tying up with the larger players. Not seeing much issue with business development in Mumbai as of now.
Our next question is from the line of [ Neeraj Sahjwani ], an individual investor.
I have 2 questions.
Mr. Sahjwani, if you're on a speaker mode, could you please switch to handset mode. We can't hear you clearly, sir.
Am I more audible now?
A little better.
I have 2 questions, mostly around Bombay. So one is, do we have any clarity on the Bandra project? I think that's marked even probably beyond FY '23. And second is, there has been a wave of redevelopments in the western suburb of Mumbai, especially in society development. Have we intentionally kept out of that considering they're usually smaller in size?
Mohit?
So answering your second question first, see, we have evaluated society redevelopment projects, but we can only do it if there is a certain scale to it. So smaller projects, we are kind of avoiding because it doesn't make sense to spend [ value ] on it. On Bandra project, there has been an unfortunate situation at the JVP end. So the project has got delayed. But I believe that once the situation on the joint venture partner side gets resolved -- and I believe it is getting resolved -- then we should see a positive traction on it. But unfortunately, it's got stuck because of some of the unfortunate incidents which have happened on their end.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Over to you, sir.
I hope we've been able to answer all your questions. If you have any further questions or would like any additional information, please reach out and we'll be happy to be of assistance. On behalf of the management, thank you again for taking the time to join us today. All the best.
Thank you, members of the management. Ladies and gentlemen, on behalf of Godrej Properties Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.