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Ladies and gentlemen, good day and welcome to the Oberoi Realty Q3 FY '23 Earnings Conference Call. From the company, we have with us on the call Mr. Oberoi, the Chairman and Managing Director; and Mr. Saumil Daru, Director of Finance. Please note that this call will be for 30 minutes. [Operator Instructions] And this conference call is being recorded, and the transcript for the same will be put up on the company website. [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 prospect. The forward-looking statements are based on expectations and projections and may involve a certain number of risks and uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by such statements.
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 all of you as per the time zone from which you have logged in, and welcome to the conference call of third quarter financial year 2023 results and business updates. Thank you all for taking time out for this call.
While globally, we are all combating pressure of inflation, domestic consumption here has been robust and demand for residential segment has been well-established. The resilience of Indian economy in the coming years will be something to closely watch for. The demand for commercial industrial warehouse is being fueled by increased consumption, e-commerce and broad policy-level support.
Before we begin, I would like to share with you some quick business updates. I am pleased to announce that Oberoi successfully concluded the acquisition of residential premises in Three Sixty West. We all -- we now almost own the entire inventory available for sale, which puts us in the driving seat for future sales.
With conclusion of this transaction, we have also freed up a lot of management bandwidth as well. We are also happy to announce the acquisition of another 8.5 acre of land in Pokhran Road. This is a purchase from Blue Star. This will also give us an additional saleable area of about 21 lakh square feet and another 1.5 lakh square feet of commercial area.
With this, I want to hand over the call to my Group CFO, Saumil Daru, after which, we will be taking questions and answers. Thank you.
Hi. Very good afternoon, everybody. If we can move into the question and answer, the operator can give time for people in the queue to form.
[Operator Instructions] Our first question is from the line of Parikshit Kandpal from HDFC Securities.
Congratulations on the Three Sixty West enclosure. My first question is on Three Sixty. Now we have seen such a large sale of inventory as reported by the media report. So do you think the pipeline is still very strong for this product? What would be probably the leads running now? And on the pricing also, if you can give some view because this seems to be at a huge discount to the current prevailing prices.
Parikshit, firstly, the deal itself shows the ability of the brand to be able to sell such large inventory. That's one. This is actually not the real pipeline that we have. This is over and above the pipeline that we have been having.
You all know that my partner had debt obligation. He has prudently sold his inventory and made sure that he has repaid all the debt. This actually -- like I said, the building now has occupation certificate. The purchaser of this large inventory also happens to be marquee names. And like I said, that we have a separate pipeline for the rest of our inventory, and we are very confident that we will be able to sell the rest of it.
And this -- you all know that this is going to be all cash for the company. The entire expenses are paid for. And now -- I mean having transferred the inventory into ORL, we've also paid part of the tax and stamp duty. So we will net off a lot of cash out of this deal.
Okay. My second question is now both Mulund and Three Sixty have, and they will generate an asset of INR 7,000 crores to INR 8,000 crores of cash flows. So if I interrelate it with the BD activity. So we have been talking for more than a year that we are accelerating our BD line acquisition, but we have not seen any large announcements coming out, right? Our peers have been going on all guns and announcing big deals. So if I combine the 2, how do you see deployment of this excess cash flow -- surplus cash flows, which will get generated in terms of ADM growth. So both if you can break it up in resi and commercial.
So Parikshit, it's nobody's guess, but, obviously, all the money that we'll get generated will get deployed back into business. We are in the market looking for land. And again, not that it's a big deal, but buying Blue Star next to our property in Thane is a testimony that we are in an investment mode irrespective of whether we get these cash flows or not.
Now having got this in place that much more. So focus is absolutely on BD. And like I also said in my statement that this has seen a lot of management bandwidth. We will use this now going forward in making sure that we acquire whole land.
And how big maybe the BD pipeline [indiscernible]?
Again, like I said that I don't want to give any forward-looking statement. All the money that will get generated, it will go back into BD. And I mean, let's say, if I'm generating INR 6,000 crores, INR 8,000 crores, I would have gone and buy land over that much and more. Because all our residential projects are cash flow-positive. You are only looking at just 2 projects where construction is done. And we have so much receivable. But if you see all our land parcels, look at Goregaon. Even Goregaon is cash flow-positive. So for us, I mean, this additional cash has to be deployed in buying new land.
Okay. And just the last question, are you on track along the Thane to open in this quarter, fourth quarter?
Yes. So we are fully geared to launch Thane in the fourth quarter. I mean that's really our internal plan. Ballpark date is about 16th of March and we are really working towards it.
What about Kolshet and Pokhran Road?
No. This will be Kolshet and Pokhran will follow immediately after that. We want to get the master plan of Kolshet right. We don't want to -- sorry, we want to get the master plan for Pokhran right? We have pretty much cracked it, but we want to make sure that, see, this is a large development. We want to commit to building phases, but we also want to have flexibility in changing the sizes, like how we did the Goregaon. We have learned a lot out of the Goregaon layout and want to implement all the learnings. And just for everybody's reference, Thane is as big as Goregaon is.
But both will get launched in March only or Pokhran will be later?
So Pokhran probably will be a quarter later and -- yes.
Our next question is from the line of Pritesh Sheth from Motilal Oswal.
Congrats on land transaction. Firstly, I've been on Three Sixty West. So will partner continue to sell units at -- with the pricing, which he has sold the previous transactions for? And just in terms of the units that got sold, is -- are each one of those for end consumption or there would be some units who can again come back as inventory to the market?
So to answer your first question, my partner now does not have much of an inventory left. He's pretty much done with it. So we -- like I said, that we will almost be the sole seller. Now I can't comment on people who have purchased. They have purchased a paid stamp duty, and a lot of them are almost wanting to start interiors. So I'm hoping that they are not going to be reselling. But one can never say. I mean I would love to believe that they have acquired something, such a nice building. I don't think anybody in this site might want to sell. But if, let's say, financial compulsion requires them to, there's nothing stopping anybody. But as far as we are concerned, like I said, that we have our inventory and we will be going about selling them.
Okay. And just a clarification, partner would still have a good chunk of units because we had 63, probably the project had around 120-odd units. So out of 50-odd units, 28 are sold. So you still have like around 25, 30 units, right?
So he has his majority stake. Now he's in 8 hour. He also is keeping a few for his family. And that's why I'm saying that there is not much of an inventory left for him to sell.
Okay. Okay. That's very nice. And second, I think on business development, so parting from previous participant. So we have a lot of cash generating that there are players who are doing business development. A couple of days back, there was a news about [indiscernible] based developer buying the land in Andheri. Where are we not making progress in sourcing such land? Is it specific margins that you are particularly looking for and that we are not getting? Or what's the strategy there?
So our strategy is very simple. If you see all our land acquisition has been marquee lands. We don't... [Technical Difficulty]
The line for the management dropped. Let me reconnect him. Mr. Oberoi now reconnected. Please proceed, sir.
Can you hear me?
Yes.
Okay. Sorry, just repeat your question, please.
Yes. On the land transaction, so I was asking about our addition acquiring -- yes.
Okay. So if you really see all our land acquisitions have been marquee land, we are very, very clear that when I say that in my head that I'm a customer-centric company, I want to make sure that all my land parcels are well located. That's point number one. Number two is we want to make sure that they are of particular scale. That's point number two. And after that, they are purchased from good sellers. Like most of our lands are purchased from multinationals. So we do have our own set of parameters where we want to deal for land, and we'll continue to apply those parameters. And that's about it. And there is enough and more available. I just want to tell you that we are looking at 15 million square feet at Thane itself. So like I said, there is actually another Goregaon in the making. And if you see the amount of money we've generated in Goregaon, we'd probably end up doing more than that in Thane. And that's simply because the pricing, I mean, in Goregaon, we started at INR 2,500 a square foot. In Thane, we will start at -- my neighbors are selling at INR 20,000 and INR 22,000 a square foot. So again, like I said, that there is enough and more with the company. And we have a very good pipeline for land transaction also. So we are absolutely not worried. And the -- we've been in the business now, I mean, listed for the last 10 years-plus. And this question keeps coming again and again. Just before when we bought the Tata Steel property, there was this question. After that, we bought Thane, again, there is this question. So again, I mean, I'm not saying that it shouldn't be there. But we are very mindful, and we are really looking at the BD in a very big way, and we will continue to do that. We like buying land in large chunks, and that kind of works for our strategy.
Sure, sir. Anything you want to comment on your expansion strategy outside of Mumbai? There was one transition, obviously, which was reported in media as well about you looking at a land in Goregaon. If you can comment on that part of your business?
As I said that we have done an MOU, and we are now close to doing the definitive agreement. And if everything goes through well, you will hear something in the next quarter that is done. And there, again, is marquee land, good quality land, and it will give you a great launch for [ Worli ].
Sure. So that condition is still on. No...
Yes, yes, yes.
Our next question is from the line of Murtuza Arsiwalla from Kotak Securities.
Just to clarify on Three Sixty West, Oberoi Realty now has no stake in the partner's share of inventory, which is there in Three Sixty West, and we are only concerned with the inventory that the company has bought over. Is that understanding correct? And also your presentation does not have any details on Three Sixty West. Should we assume no sales this quarter? How should we think of it?
Correct. You're absolutely right. In light of our own settlement taking place, we obviously, I mean, had to suspend -- almost suspend sales because we were figuring out how do we really bifurcate our areas and how does [indiscernible] end up buying its state and stuff like that. So we had paused for a bit. Now we'll start rolling.
And so going forward, whatever comes from Three Sixty West is really from Oberoi's 100%-owned inventory?
Absolutely.
Our next question is from the line of Kunal Lakhan from CLSA.
Just to follow up on the biggest question. So bought 40, 63 units from OSS Realty. So what will be the unsold units remaining in OSS Realty?
Again, whatever is my partner's inventory, Tower A and a few flats in Tower B, very few. And some that, like I said, that he's keeping for his family. That's about it. Nothing else.
That leaves a lot of inventory, right? Because about 123 units we had at the end of September quarter. So that would leave 60 units in OSS Realty, of which we sold the whole transaction happened with Damani & Family?
And in fact, that's only part of the inventory that is more that you have sold, and you will see that happen. It's already sold. They're just being red third, and all that is happening.
Okay. But all that inventory would be still in OSS Realty where we have a 32.5% stake, right? Is that understanding correct?
No. So there is more to it -- let -- we will -- there are many things that are playing out. Let that happen and you will know it when things actually happen on ground.
Okay, sir. So just going back to your previous statement that -- so our stake in the project is now shifted unlimited to 63 units. And we don't have any other impact in that project. Is that understanding correct?
Almost correct, yes. Like I said, that there is still dotting the Is and crossing the Ts of the entire process. Once that is done, you will have full clarity. This bit is done. Whatever was -- like whatever inventory we owed to ourselves, we have taken that. The permission that we had asked for from our AGM from our investors at large, whatever we went to, we've got that done.
Okay. Sure. Also, secondly, there were no sales in Goregaon this quarter, and we have taken a price hike this quarter. How should we read this? I mean, is the price hike getting absorbed in the market? Or are we getting any pushback on the pricing side?
So there is obviously -- it's not like I will say pushback. They are getting to see secondary sales, ready sales are happening at much higher prices, number one. Number two, we have only put cost and other things from that point of view. So I'm again saying that it started. I mean we have the, what you call, footfall happening and it will culminate into sales going forward. So I don't see that as a problem.
Okay. Sure. And lastly, like this Thane -- Pokhran Road has -- I understand like you're still trying to get the master plan right, but it's been a while since we've been talking about this launch. How certain are you that this will happen in Q1 now because we were planning to launch it in Q3?
Correct. Very certain. There is no doubt about that. That's not a problem.
Our next question is from the line of Mohit Agrawal from IIFL.
My question is on your earlier statement that both Kolshet and Pokhran would get launched within a gap of a quarter. So are these 2 products very different in terms of pricing and ticket sizes? How -- and because these both are going to be the initial stages, so how are customers going to differentiate? How are you going to differentiate between the 2 projects?
Okay. So good questions. They are locationally very, very different, and they will be from a price point of view. And there'll be a marginal difference in area. So all 3 positive.
Okay. Understood. And anything on the I-Ven? Have you decided on the configuration or what kind of launch you want to do, and you want to do a launch of I-Ven?
So like I said that our management bandwidth, our mental bandwidth and all of that is now free from early. And so we will now start focusing on other things. And I-Ven is on top priority.
But is it decided, will it be a residential or a commercial or retail?
You will know in 1 quarter now. We have plans already, but we like to want to keep it tight-lipped now.
Okay. And then last one from me. Post this Worli transaction, is there -- is that -- on a net basis, is there debt going up? Like you've invested INR 4,000 crores, and I think construction cost has come back. But net-net, is there a net debt increase?
I'll let Saumil answer that.
Yes. Mohit, Saumil here. So for the Worli transaction, we did take on debt to basically fund the outflows that we mentioned in the release to the exchanges. But simultaneously, as you are aware, the Mulund project, also the OC has come through. So we also expect the loan over there to kind of start coming off as the collections come in. And by the end of March with some of the sales in Worli, if that happens, then we'll also look at deleveraging on this loan, which we have taken for Three Sixty itself. So in the end, as of March, I would want to believe that our net debt ratio should come back to what it was at the end of December.
Our next question is from the line of Sameer Baisiwala from Morgan Stanley.
Can you talk a bit about the rental rates for Borivali Mall and Commerz III?
Borivali Mall, again, I mean, we have topped up, finished superstructure, interior work in progress. One of the marquee international brands also signed other than the cinema brand. And huge traction, I can say that it's surprising. I think we can -- I mean breaking any rule of forward-looking statement, I can only tell you that we can literally close the entire mall in 1 quarter, that sort of demand. So again -- and then very good rentals, I would say. So that's one. What else did you want to do the price?
And for Commerz III, rough rental rates.
Okay. So Commerz III, the market, I would say, I'll just tell you for the market on a cap rate basis is at about INR 250. And so we are hoping that we should be somewhere around that on capital area.
Okay. And that's great, because...
Again, they are depending on the size of the deal. Like if somebody is taking a large area, then you do give a discount. So it oscillates between anywhere between INR 220 to INR 250 a square foot on cap rate.
Okay. And if I have to take a guess for Borivali Mall, because on an average, once you have fully done, INR 200, INR 250 is that range possible or it's...
Per square foot?
Per square feet, yes.
You are -- you will be pleasantly surprised if you have at your expectations at that. I think we could beat it by 50% also.
5-0? 1-5?
5-0.
Okay. Okay. Then that's great. Basically, what math is running in my mind is our journey from roughly INR 350 crore rental to, I think, 1,200 that we have articulated in about a couple of years from now. Do you think with these numbers, we are well on course for that? Or it looks like we may fall a bit short on that.
No, no, no. I think we are pretty much on course to gauge that, pretty much.
Okay. Okay. That's great. And because -- any thoughts on the budget announcement regarding the capping of the capital gains at INR 10 crores for the residential units? You think because you do luxury housing so...
Yes. No. In fact, for me, I feel that this is one market which actually is not sensitive to any of these. Luxury -- globally, I mean, if you see, they've always ended up doing well irrespective. It doesn't really matter for them whether the cost goes up or goes down by whatever. So I don't see this as a bummer at all. I just don't see that as a bummer.
Okay. And final from my side, in Goregaon, you have launched 2 towers and 3, more or less, right? And...
Correct.
Any thoughts on that when would you be launching the third tower?
So 2 things. In fact, one I did not answer the last time -- I mean the last question they asked is that we've increased price. Firstly, I don't have much of an inventory left. I mean of 4 bedrooms or the locations that people have been wanting, they're all sold. So me increasing the price, whether I increase the price or I don't, my sales wouldn't go up because I don't have the inventory you guys want. So for me also, I also saw that Exquisite and Esquire continue to sell at 30% and 40% higher than the prices that I am actually selling today at. So we did a simple math that if people are willing to pay today for something that is ready and I am likely to give this product 3 years later, if I were to discount that or whatever time that I've committed, if I were to discount that, I'm still selling this cheaper with the current pricing that I'm offering. So hence, we increased the price. And now, like I said, that when we launched the third tower or the fourth tower, I already have people who have said that whenever you open it, whatever price you open, I want this side of the inventory. And there's my commitment to it or whatever. Of course, I can't say yet, but they are like ready to close it today. It's that kind of demand for Goregaon.
That's great. And so what's the time for the third tower launch?
Again, I don't know how many of you know, but we have started work on all the 2 of the 3 towers already. In fact, not only started. We are at Level 4 or Level 5 in all that. So we aren't wasting any time doing that. We know that this is like -- literally like a running tab for us. Whenever we open, we can sell. And if I'm already working, my profit recognition, revenue recognition, all that happens simultaneously. So it doesn't hurt the company delaying that launch. We're only building it up and so on and so forth. So everything is set. We could either look at September or -- something like that, maybe September, October that sort of launch.
Our next question is from the line of Dhruvesh Sanghvi from Prospero Tree.
One question related to the preplanning in terms of building. So how does the approval allow you to probably retain the configuration and positively so? Because you said that you will use this learning. Because sometimes, let's say, now Exquisite or Esquire has a 1,300 or 1,500 carpet range. And none of our few -- the incremental projects have something like that. So let's say, we decide to choose on 1,300 and 1,500, but if you were already building, does the regulation allow you to probably change and the plinth work can be replanned in between? Just some thoughts to understand how the industry and regulatory bodywork.
So how we do it is our own trade secret. I don't want to diverge much into that. But like I said that if you see, these are all termed as future projects, and the plinth is not always done. So we obviously having started work there and these are parts of future projects, and that's how one can do it. Anybody can do it really.
So indicating that flexibility there and you have tracked that model in terms of making it as ready as possible and then changing it dependent upon the market requirements and our understanding of this?
So what we do is we allocate locations for the buildings that we want to build. And we mark some sort of footprint because it's very important for us to make sure that all the buildings, you get a particular view and all that. And then we play within the marketing that we have in our hand and all that. Like I said, this is a little trade secret. I don't know how much of it. Nevertheless, we enjoy doing this.
And one more. So the way you are saying that Thane is part 2 of Goregaon, at least in your master planning and your broader estimates of how long then this takes. So the master planning being done thinking that, okay, in 10 to 12 years, we should be out instead of 15 or 17 years or some thoughts around it? Of course, it's too long. But just to understand what kind of launch we can expect, maybe we can reverse it in our head.
So see, like I said, that Thane could be potentially be 15 million square feet. And like even if I were to launch, let's say, 1 million or 2 million, every year, we are looking at a 10- to 12-year horizon. And this also will also -- like absorption what's the velocity, all that needs to be tested. And I feel that when we do our development, we make sure that the entire market gravitates toward -- or rather into our product, not even toward that area. We try to get maximum from the entire market into our project. And we've been successful in doing that in Goregaon. I feel we will -- we did that in Worli. We would hope to pretty much do that in Thane as well.
Right. And sir, one strange advertisement on the website, I assume that, that might be from a broker. It says 2 and 3 BHK launch in South Mumbai by Oberoi Realty. This is the first time I ever saw 2 BHK return under the name of Oberoi Realty. So is this true? Or -- and if so, can you give some understanding of what this project is based?
Please forward that to us. We will have -- we will complain to cybercrime and get this guy locked up. There are many of these who -- like we come across many such advertisement. People have had advertising for Thane also. And it's a real pain, but yes, we can't end it.
Ladies and gentlemen, we take that as the last question. I now hand the conference over to Mr. Oberoi for closing comments.
Just give me a second here.
Sure.
Thank you for taking time for this call. We look forward to hearing from you on an ongoing basis. If you have any queries, please feel free to reach out to us, and we'll be more than happy to answer the same. Thank you again.
Thank you very much. Ladies and gentlemen, on behalf of Oberoi Realty, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.