© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
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 the Oberoi Realty Q3 FY '22 Earnings Conference Call. We have Mr. Oberoi, the Chairman and Managing Director of the company; and Mr. Saumil Daru, Director of Finance of the company, with us for the call. Please note that this call will be for 30 minutes. [Operator Instructions] And this conference call is being recorded, and the transcript of the same may be put up on the website of the company. After the management discussion, there will be an opportunity for you to ask questions. [Operator Instructions] Before I hand the conference over to the management, I would like to remind you that certain statements made during the course of this call may not be based on historical information or facts and may be forward-looking statements, including those relating to general business statements, plans, strategy of the company, the future financial condition and growth prospects. The forward-looking statements are based on expectations and projections and may involve a number of risks and uncertainties and other factors that could be caused actual results, opportunities and growth potential to differ materially from those suggested by statements. I now hand the conference over to Mr. Oberoi, the Chairman and Managing Director of the company. Thank you, and over to you, sir.
Thank you. Good morning, good afternoon, good evening to you all as per the time zone from which you have logged in, and welcome to the conference call of Q3 FY 2022 results and business updates. Thank you all for taking time for this call. I hope your family and you are doing well and keeping yourself safe. Let me begin by wishing you all a very happy new year, and I hope 2022 brings in a lot of good news for all of us. Before I begin, I would like to share with you some quick business updates. I'm very happy to let you know that we have delivered the best ever gross booking value for the 9-month period of any financial year, which stood at INR 3,150 crores. As you are aware that we had launched the second tower in Elysian in October 2022 (sic). This means that this was the second tower in the same financial year, and it's heartening to see an overwhelming response. In fact, in just the quarter itself, we crossed INR 1,000 crores of sales booking, which is also a great thing. Other projects Sky City and Maxima reported strong numbers and delivered the highest booking values in any non-launch quarter. With this, I want to open the floor for question and answers. And both Saumil and I will be happy to take your questions and answer. Thank you.
We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Parikshit Kandpal from HDFC Securities.
Congratulations on a good set of numbers. My first question is on the office space, the mall space. [indiscernible] the strategy and earlier we have been like, staying away, to be a little cautious. So do you think [indiscernible] properties or more assets here, that is my first question.
Again, we are a residential centric developers. We do commercial and we do shopping malls, and we do them well. So I mean that is like our extended business. We, obviously, are an agile company. Looking at what we see as demand, we probably will pivot towards that. Some land parcels are specific to its use. Somewhere we have already made commitments. So we obviously will continue. Like durably, we will continue to do that. We are building Commerce 3, which is close to 2.4 million square feet. And so a little less than 50% is already leased. So our commitments continue with both these projects, and that's where we are.
Any update on the non-MMR CEO and non-MMR [indiscernible] and also if you can touch upon the redevelopment opportunity, which was highlighted a couple of quarters back with us.
So again, at both ends, we have a strong focus. We are awaiting certain things to happen so that we can share that good news with the market. But right now, it's all under development. We are at final stages at some places. We are probably a few months away in closing transactions. So it's work in progress. That's what I would like to say. Very, very strong focus and an absolute clear drive and desire to do this.
Okay. And just last question on the CapEx. So, Saumil, you can just touch upon what is the total spending CapEx and what the timeframe you are looking to deploy it?
CapEx, what really?
CapEx and commercial assets and malls. So any pending -- the total amount yet to be invested in the mall and the office.
Can you take that offline? I mean, I can just tell you that our malls will be ready. I mean at least the structure part of the mall will be ready by April this year. And then we get down to doing our finishing. Our office building, the COM 3 building, we are, I think, on the 17th level. More than 70% of the 2.4 million square feet is constructed. Rest, we are -- again, I mean, we are running on schedule as far as that building also goes. And so -- but these numbers, I'm sure you guys can offline discuss with our finance team.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
How are you?
I'm good. How are you doing?
Excellent. So first question is regarding the rentals at Commerce 2. It's been, I think, 12 quarters or a bit more since we've been stable at 140. So is the next escalation around the corner?
So Sameer, I feel whenever I peek out of my window, I see the Metro trials going on. We're bang on the station. We are literally like, in fact, we are building a private connection from the metro into, I wouldn't say only our development, it's for the public also. So you'll literally be walking out of the metro and walking into your office very much like what happens in Hong Kong. And we are obviously waiting for that to happen. And I surely believe that it will completely re-rate the entire area because of simple accessibility. I mean -- and really, when you see the Metro operational, you feel that exhilaration in your heart and you feel that really, infrastructure is getting built around your -- in the city and around your development. And I feel that, that probably should help increase both, I mean, focus and rentals. I mean at least one can hope.
Yes. Great. I was referring to the contractual escalation that should be happening every 3 years, 15% or so.
Yes. That -- obviously, like we were just coming out of COVID, a lot of people have reneged and increased their tenure. And we, at some point, either averaged our rates out or coming only for a marginal increase or probably let that go also. So we've been very practical, accommodating, and that's about it. So it's not like -- this was the time where one could push here, whatever deals happened during the COVID time that obviously one couldn't trigger the 15% escalation. But anything now will all start because people are back, offices are back. Everyone has realized that work from home is not that great an idea. So I guess, -- now again, with not much supply in office, I actually see demand picking up also. In fact, as we speak, we are talking to so many people for new office space. So I think that probably will give us the confidence to go up there and then hold our prices or hold our terms.
Okay. Great. And the second question is on 360 West. So very good news to see it getting recognized. The profit that you recognized, INR 235 crores, share of associate, what does it correspond to in terms of the overall sales done and cash collected roughly INR 2,500 crores in that project?
So This is firstly only our share, and I mean we have done historic sales. There are some sales that were transferred from our erstwhile project into this, so they were really low. I would say close to 28-odd percent of the sales are done and the rest have to be done. And like I said, that this is just our share of profit.
Yes, but it corresponds to all the sales cumulatively done so far and cash collected.
Saumil, would you answer that, please?
Yes, sir. So it follows the typical -- what we can say the POC method, Sameer, that we use in every single one of our projects. So it will always be related to the percentage of work done. And then as Mr. Oberoi pointed out, corresponding to that in line with the JV agreement, the share of profit that belongs to Oberoi, that is what gets consolidated.
The next question is from the line of Puneet from HSBC.
Great set of numbers. My question is on your future portfolio strategy. As you guys have been very cautious in buying land, do you see prices of land going up now? Or do you still see enough opportunities to expand your portfolio for future?
I think everyone should be prudent in buying land. It's like buying raw material, and that forms the basis of our profit that one makes. So obviously, we will continue to be prudent. But we are very open in buying large land parcel and create value right from the beginning, as in like we will first establish the location, then make sure that prices go up and then we profit out of the rest of the development, which is what our strategy has been, if you see how we played Goregaon or Borivali or any other project, now Thane. So very similar strategy.
So do you see pockets of these similar opportunities still available in the market?
I mean there are plenty in fact. In fact, I want to tell you all that today, you can count the number of developers who can write a big check on your fingertips. So the market is big, and it's just for all of us to play that out. And each one needs to understand that buying land is not the only thing, we will have to build it, deliver it to the quality that we all are known for and all that. So execution also is an equal challenge, just buying land is not the only thing. But you're right. I mean, we are continuing to focus on new land. And if you will see our company and the cash flows that we'll generate, look at the stock we will have in Mulund and Borivali and Worli, just the cash flow out of all these 3 projects need to be deployed. And they are large in number, I mean if you just do a back of the envelope, you will realize that this money needs to go in buying land, which we will of course do. And we've always done that.
Right. Yes. Okay. That's great. Second question for Saumil. The Maxima saleable area seems to have gone down. Is there a revision in the plan? Or did something get excluded?
So Puneet, yes, what has happened is as far as Maxima is concerned, the original plans were moving on the basis of a slightly higher number of floors. We have now decided to cap off the building at about 29 floors. So whatever correction came in on account of that just as much, that's it.
Okay. Okay. So this is the final number now?
Yes, that is the final number.
The next question is from the line of Pritesh Sheth from Motilal Oswal.
Congrats on the great quarter. So with this 360 West getting recognized, firstly, should we assume that OC is received? And secondly, would we now see a restart in terms of sales in 360 West?
So thanks for the question. In fact, very eager to answer that one first. We have got our entire project approved under 2034 DCR. That means we have all our debts, everything that was originally taken free of FSI, which was available in 1991 DCR. We paid premiums, we paid that cost, and got that approved. We got that approved on 31st of December. We have now applied for OC. And probably in the next, if everything goes well, next 2 to 3 weeks, we'll have our occupation. And you're absolutely right, we will press the accelerator on sales and get going. The building is complete. It's come out really well. We have like a pipeline of people waiting to buy. And so that -- this is -- 2022 will be the year for 360 West.
Great. And maybe another question you would might be eager to answer is Thane launch. When are we expecting that?
So even Thane, we've just paid -- we were all lucky how government extended the payment to Jan 31. We made all the premium payments and are now getting our plans revised. We'll then get started. We were waiting for a few things. Now most of them have fallen in place. So hoping to do it in this quarter. I mean, I'm really hoping, and I always give you current information. Our strategy is to continue to hope that we launched within this quarter, feeling which worst-case scenario it will be first quarter next year. But our attempt is to do it this quarter.
The next question is from the line of Kunal Lakhan from CLSA.
On the 360 West, right. What is the take on this of which we all recognize the profits? I remember the stake range was in the range of 25% to 40%. So this INR 235 crores is equivalent to what stake?
Saumil, here. It's close to about 32%.
Sorry, come again?
It's close to -- it's 32%.
32%.
It's 32%. And this is also -- our agreement is a variable on price. Now as the price goes up, one can even hope for a better realization.
Correct. Correct. Got it. Got it. And in terms of, again, just a related question, what is the margin, EBITDA margin that we are getting on the current realization?
So Kunal, as Mr. Oberoi pointed out in one of the earlier answers, the current top line is a mix of many things, especially sales where we have transferred people from one of our earlier projects over here and also the sales which have happened over the years. So in all fairness, this EBITDA margin number is not necessarily indicative of what it will be once we start doing fresher sales and recognize on that basis. So it would be more relevant to look at that number rather than the historical number because a lot of these sales, as I mentioned earlier, are done at different numbers. So maybe once we get into a more, what we can say, regular basis of recognitions and the newer sales start contributing a lot more to the EBITDA, it would be more relevant to look at it at that point of time.
Sure, sure. Okay. And my second question is on the premiums that we have paid. So how much premium might we have paid in December quarter and also in Jan, as you guys indicated so far?
Can we do a math and come back to you. Actually, that was one thing I told our people to collate and come back.
They will come back.
Sure no worries, if I may squeeze one last one. On Thane launch, right, what is the holdback there? Like it's been -- you were planning to launch it since a while now.
No holdback at all. We have tweaked our plan. We are so active on it. I mean we like added Zoom meeting rooms. We added balconies. We added those large decks in front of it because, look, the way people live is changing. So we want to include certain lifestyle elements in the project, which we had to amend. And these are not -- these days, you have to get all approvals before you get your RERA permission and all that. So we want to be sure that everything is in place and only then we do that. Otherwise, like I mean, you show a particular layout and then you want to amend it's not possible. So we have to be very, very sure of what we are doing in terms of everything around it, which is what we have now frozen and we will get to starting.
So we have submitted the revised plan?
In fact, because you're asking, I can tell you, we have paid a premium of close to INR 200-odd crores in Thane itself. And yes, so that's where we are. We paid premium for the 0.5 FSI, we paid premium for the ancillary FSI, and we have close to 6 million square feet of FSI readily available today for us to shoot without going in and doing any TDR or anything of that sort.
The next question is from the line of Abhinav Sinha from Jefferies.
And congrats again on a great quarter. Just a couple of things. So one, have you seen any impact of the third wave on sales? And is there any change in momentum for that one? And secondly, if you can also answer your outlook on pricing now.
Well, I feel every buyer is currently enjoying the pricing without the developer having factored in all the increase in input cost. So it's great everyone wants to sell. I feel once the existing stock starts expiring and people realize that the input cost has gone up, of course, they do, which they will feel when they start buying, I see a decent correction happening then. So I feel that's one part. And two, I also see that we are forgetting that we virtually had almost 1.5 to 2 years of almost no construction happening. So there will be a huge supply constraint that will hit the market between '20, '24, '25. We are lucky we have Borivali getting completed, Mulund getting completed, Worli is, of course, complete, so we have stopped there. So we'll have a lot of material to sell. But by and large, if you see many developers, they don't have enough inventory that will come in 2022, '23, '24. So these 2 things are going to play out parallelly, and I really see there will be an increase in price.
Sorry, second question was on the third wave impact.
Again, I feel -- I don't want to say it too soon. But okay, if I have to just tell you my opinion, COVID is a passe. It is -- most countries have recognized this as like a little more than a common cold. Of course, if you have co-morbidity and all that, there is an issue, and this takes you probably 5 days to recover but it's going to be business as usual. Most of Europe is saying no mask. India is also getting there. So I feel there is not going to be anything like third wave, I hope, and I hope that I'm right. But I don't see that, just how quickly ,I mean, we all bounced back with the second wave. And I mean, I was tracking other countries in Europe, also cases are coming down big time. They're 40% down from what they were last month. So I would say that, a) either people have started to live with it. They've realized that it's not like as threatening as one thought 1.5 years ago for sure, and we live around it. If you see it's not impacted anybody. People have learned to live around it, and that's about it.
Yes. Sir, if I may just ask one more, what are the expected delivery timelines for Sky City A to D and Eternia Enigma.
So we obviously have enough time as far as our commitment to people through RERA is concerned. But we are putting all efforts to ensure that we complete these projects much before or at least in time for whatever commitment we've given in RERA. So we'll not delay that. I don't want to make a statement here and get like, I mean, misguide anybody. My timeline is RERA, I will do it either then or before that, for sure. Do it then for sure, and before that is also a very big possibility. So I don't want to kind of say and then get stuck that I'm committed that I'll give it. So that's how it is.
The next question is from the line of Rakesh Vyas from HDFC Mutual Fund.
First of all, happy new year to you and your team. Two quick questions. First one is on the launch pipeline on the residential space for us in next 12 months, if you can highlight, apart from Thane launch, what other projects you are planning to launch?
So have Borivali, our last phase, [indiscernible] last phase. We have -- so these are projects then, of course, I mean, we do not want to sit quiet. We'll obviously be acquiring new land, and we'll continue with that.
But just for clarity, Vikas. Acquisition of land and launch will get pushed out more than 12 to 18 months, right? So basically next 12 months is new towers in Borivali, which is the last phase you indicated and maybe Goregaon another tower is it apart from Thane?
I have 3 more towers in Goregaon. I have 2 more towers in Borivali. I have a lot of inventory in Mulund. I have, again, like I said, Thane that will get launched. And we have our entire Worli to sell. So a lot of activity, and like you just saw that one does not need a launch to have a very good quarter, both Enigma and Sky City did a fantastic job, it sold a lot, and we'll continue to do that.
I agree, we are very strong -- we have very strong inventory to sell and maybe a strong pipeline and launch as well, that clarifies. Because second question just out of curiosity. If I was looking at the residential operating margin, it seems to have come down materially in this particular quarter compared to what our historical numbers suggest. So any comments around that as to why that should be the case. And secondly, in Exquisite, the inventory that we sold is at a significant discount to the earlier prices as well as it is at comparable or discount to the new region. So just out of curiosity, why prices should be lower?
Yes. So on the margin bit firstly, Rakesh -- our -- so there are 2 things. If you look at it, the overall margin contribution is basis 2 parts. It also depends on the number of projects, which -- I mean the top line coming from each of the projects. So if you were to look at the earlier periods, when Exquisite and Esquire were a substantial part of those revenues at that time, in the earlier quarters, Exquisite and Esquire, both came in with -- they were -- they have been the highest margin of what we can say projects for us. So when that component is higher, you see a higher margin. If you look at the current quarter, in addition to Exquisite and Esquire, you're seeing Eternia, Enigma, all of these contributing to the top line. In fact, the proportionate share of Exquisite and Esquire within the top line this quarter is far, far lower than, it is virtually half of what it used to be in other quarters. So that's where you're seeing some of those numbers go up. The other thing is also that under our revenue recognition method until we commence profit recognition, some of the projects, our top line, we recognize on the basis of just cost incurred. So you will see the top line coming in, but you are not seeing the margin coming in over there. And that is the reason again that number gets a little depressed. But in all fairness, once again, the moment you will see the revenue recognition coming in from every single project, you will see that margin stabilize -- I mean going back to a normal number.
Got it. And any comment on Exquisite realization, this particular quarter?
All fairness, these are just the last 2 apartments left. I think after that, there is just 1 more apartment left. So -- and I genuinely wouldn't tell you. I mean I would be more interested in seeing what the Esquire numbers are rather than what the Exquisite numbers are.
But by floors and things like that, with this, we are done with Exquisite totally, 100% of Exquisite is sold. And I mean like Saumil said these are last apartments. Some of them may not have the best views, some of may have all those constraints. So in all done with that and this thing.
And guess just on this margin. As you indicated, the cost pressure is increasing, but industry is not able to take adequate price hikes as of yet. So is it likely to impact our margins as well, although they remain very, very healthy, but just in case there in case if there is any thought process around that or that.
Frankly, I want to tell you that it won't because in the beginning, somebody asked me a question that we've been very prudent in buying land, that prudence is paying us one. Number two, we don't carry debt, huge debt. We don't pay too much interest. So all this kind of helps us in regaining our margins, and we'll continue to do that. So that per se looks after what we've already done. And we are lucky we built a lot in that regime where the construction cost was low. And obviously, whatever new we'll buy, I think everybody in the industry will be raising prices and people will have to pay. They have no alternate but to pay.
And Congratulations on a great set of numbers and best if luck.
Just for everybody's knowledge, there was a question how much premium we have paid, I want to ask Saumil. Saumil, just for everyone, we both are in different locations, and that's why I'm asking. Saumil, is the INR 1,381 crores that we paid from August till today, does this include Thane or is it excluding Thane?
Excluding Thane.
Excluding Thane. Okay. So if you include Thane as of today, we have paid a little over or close to INR 1,600 crores, a little over INR 1,580 odd crores.
Sir, just give us one second. I'm just accessing that file as we speak. It includes Thane, sir.
It includes Thane. Okay, great. So just for everyone, we paid about INR 1,381 odd crores as a premium. This gives us a total FSI of about 8 million-odd square feet, and this is all monies paid.
This is the operator. Mr. Vyas, does that answer your question?
Yes.
It was more for everyone else because there was a pending question, so I just thought I had to say this.
So should we take the next question now?
Sure.
The next question is from the line of Parvez Akhtar Qazi from Edelweiss Securities.
Just 1 question from my side. There was a news article regarding us buying the land part in, I think, LBS ground Bhandup for about 115 crores. Just wanted to get your views on that.
Frankly, I just want to tell you, there was a DRT bid. We looked at the land. It's well located. It's not very big, we would have preferred to have a larger piece of land, but this is what it was. It was at a decent price and we bought it. That's it, we really didn't think much about it. This is our business. .Land is our raw material. It's in a good location. It's coming at a very good price. It's a clean transaction because you buy it through DRT, you had it clean. And that's what we did.
So when can you expect the potential launch here?
We've just got it. Maybe give us a quarter, we'll come back to you with a lot of clarity.
Ladies and gentlemen, we will take that as a last question. I would now like to hand the conference over to Mr. Oberoi for closing comments.
Thank you all for taking time for this call. These interactions provide us with a meaningful input, and we take back a lot of value and feedback from you all. Our team is always available to interact and speak with you. And if you have any further questions, please feel free to connect with our IR or Mr. Saumil Daru, our CFO, and me as well. Very happy to answer any more questions. I think with that, we can end our call. Thank you again.
Thank you, everybody.
Thank you. Ladies and gentlemen, on behalf of Oberoi Realty, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.