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Sunteck Realty Ltd
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Ladies and gentlemen, good day, and welcome to Sunteck Realty's Earnings Conference Call for H1 FY '23 and Q2 FY '23. We have with us today Mr. Kamal Khetan, the Chairman and Managing Director of the company; and Mr. Prashant Chaubey, the Chief Financial Officer.
Please note, this call will be for 45 minutes. [Operator Instructions]. This conference is being recorded, and the transcript for the same may be put up on the website of the company. [Operator Instructions] Please note, this conference is being recorded.
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 related to general business statements, plans and strategy of the company, its future financial condition and growth prospects. These forward-looking statements are based on the expectations and projections and may involve a number of risks, uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by such statements.
Now I'd like to turn the conference over to Mr. Khetan, the Chairman and Managing Director of the company. Thank you, and over to you, sir.
Thank you for joining Sunteck Realty's Second Quarter and First Half Earnings Call for financial year 2023. Hope each one of you and your family are safe and healthy.
In the first half of 2023, we have achieved a strong growth in both pre-sales and collections. This continued strong operational performances has enabled us to generate close to INR 225 crores of operating cash flow surplus which further makes the balance sheet more stronger, taking the negligible net [ debt-to-equity ] ratio from 0.18 to 0.15. On a cumulative basis, since financial year '21, we have generated close to INR 750 crores of operating cash flow surplus. I'm happy to inform that all our existing growth engines, namely Sunteck City at ODC Goregaon West, Sunteck World at Naigaon and Sunteck Beach Residences at Vasai West are doing positive cash flows on a sustained basis.
Now on the execution front, construction is in full swing at all our ongoing projects. In the second quarter, we have leveraged one of our core strength of business development by acquiring approximately 7.25 acre of land parcel in the posh location at Beverly Park, Mira Road in western suburbs of MMR. We intend to develop this close to 2.5 million square feet of luxurious residences along with premium retail in this location.
Now since past 2.5 years, we have acquired approximately 25.5 million square feet across micro market of MMR, and this is our company's best-ever performance. Our endeavor is to maintain this momentum going forward.
I'm very proud of the team that we have built at Sunteck in the last 15 years, and we are laser-focused on strengthening it further.
I will now hand over the call to our CFO, Mr. Prashant Chaubey, for his comments. Thereafter, I will be happy to answer your questions, if any. Over to you, Prashant.
Thank you, sir. Good evening, everyone, and thank you once again for joining us today and taking out your valuable time for this conference call.
The financial and operational numbers have already been published on the stock exchanges. I believe all of you must have gone through the same. Now, I would like to highlight the key financial and business performance numbers.
Our pre-sales grew by 24% year-on-year in quarter 2 FY '23, to INR 337 crores compared to INR 272 crores in quarter 2 of FY '22. Collections grew by 60% year-on-year to INR 331 crores in quarter 2 FY '23 compared to INR 207 crores in quarter 2 FY '22. For the first half, similarly, the pre-sales grew by 49% and the collections grew by 63%.
With respect to the financial highlights, we have reported a consolidated revenue of INR 224 crores in the first half of FY '23, and our operating cash flow surplus stands at INR 225 crores for H1 FY '23.
We can now open the forum for questions from the participants. Thank you very much.
[Operator Instructions] We have a first question from the line of Adhidev Chattopadhyay with ICICI Securities.
I've got a couple of questions. I'll ask them together. Sir, firstly, can you just tell us about what is the approval status of the [ upcoming ] project, especially Borivali and Kalyan? And the new Mira Road project we have acquired, if you give us some context on the -- when we could see the launches over there? And sir, secondly, the more longer-term strategy question. So in your slide, I reference slide, I think, 28 or 29 of your presentation. You have given a proposed launch pipeline of 7.5 million square feet over the next 18 months, and I think which is worth well over INR 6,000 crores, the potential sale value of that inventory. Plus, I think they have got over INR 2,000 crores of unsold inventory across our ongoing projects, so that gives us almost INR 8,000 crores plus of inventory to sell. So considering that, where do you see the company's overall annual sales bookings growing in the next 2 to 3 years and the visibility for this year, for the INR 1,800 crores sales guidance? Yes, that's it from my side.
Yes. Good evening, Adhidev. Thanks for asking this question.
So approval of obviously, various projects, we have all acquired these projects recently in last 1, 1.5 years. The 3 projects, which you namely said Borivali, Shahad in Kalyan, and the third one, I think, Mira Road, which we recently acquired this a few months back.
So obviously, we are aggressively -- our licensing team is working towards getting the approval, along with the landlords. Because in all of these 3 projects, getting approvals is the responsibility, as per the agreement, is landlord's responsibility. These are all 3 JV projects. However, our team is putting the best effort in partnership with our landlords to get these approvals ASAP.
Although whatever target we have set for this year, we are quite confident that we will achieve our pre-sales target. And going forward in future years, obviously, with the new launches and all this coming up, I think we will be taking the sales -- exponential growth you will see in the sales. And that's what we have been seeing quarter-over-quarter, if you look at it.
Coming to the -- in [indiscernible], what you mentioned in the presentation, the 7.5 million square feet of launches. I think Prashant, can you please?
Thank you, sir. So Adhidev, Prashant this side.
So Adhidev, as you have seen in the presentation, the target for -- the pre-sales target for the company for FY '23 is INR 1,800 crores. And the overall target of the company right now is to double our pre-sales every 2 to 2.5 years. So we want to -- so if you consider that, by FY '24, we want to reach a pre-sales of close to INR 2,500 crores. That is the target for the company.
Now in order to achieve that target, in the next 18 months, we are looking at these launches. So Kalyan and Vasind, we are looking at 2 million square feet of launches. We are looking at, in Borivali, around 5 lakh square feet of launches. In Mira Road, again, 5 lakh square feet of launches. And Vasai, Naigaon and ODC Goregaon West, these are projects which are already running, which are already the existing growth engines. So in these projects, you will see -- you will keep on seeing new launches happening on a yearly or a 1.5-year basis, so that's why this gives us the confidence that we can launch around 7.5 lakh square feet in the -- by the end of FY '24. And that should help us or enable us, so to speak, to achieve that target of INR 2,500 crores of pre-sales that we have in our goal. So that is how this number has come, Adhidev.
Okay.
Sir, just a last follow-up, that this Goregaon, ODC or other -- Naigaon, can we expect to see new [ phases ] being launched in the second half of this year, considering the other projects may take some time to get launched?
No. So we are pushing simultaneously everything, Adhidev. ODC, we are launching -- we are recently planning to launch, in fact, in a couple of weeks, not even months. In maybe 1 or 2 weeks, you will see. The higher floors of 4th Avenue, what we have [ passed on ], so the new inventory will come in the market for both the towers. So all -- and then again, we'll do something, a new tower launch in Vasai.
So Prashant already tried telling you that all this new launch -- again, those existing projects from where we are already getting the [ sustenance ] sales, where you see new towers or new floors or new inventory coming up in the same projects. And those launches will continue to happen, for sure, in the next 6 months. And we are very confident at least out of these 3 projects which you are saying, Borivali, Shahad and the Mira Road, at least one new project also we are planning to launch in the next 4 to 5 months. So we are pretty much there what we expect our target is. We are pretty much confident about achieving these targets because of all.
We have next question from the line of Pritesh Sheth with Motilal Oswal.
So firstly, on launches, I will just ask it other way around. So your FY '23 pre-sales target is around INR 1,800 crores, and we have achieved 1/3 of that probably in first half. So obviously, we would need launches to come up. So in terms of your expectations, how much launches we would need in terms of GDV potential to achieve that pre-sales target?
So Pritesh, very frankly, even if we don't do any new launch out of these 3, we are pretty much there for INR 1,800 crores, looking at our existing portfolio itself. If you see, if we do some new launches of higher growth of 4th Avenue in ODC, existing projects of Sunteck City, and some new towers in Vasai West, Sunteck -- the SBR projects, Sunteck Beach Residences at Vasai. And again, the Naigaon, One World, there are 4 to 5 towers which are to be launched, the new towers. And plus, there are 4 to 5 towers which are -- we are coming up in the Sunteck MaxxWorld as well. So those 2 launches.
Plus 1 or 2 of our commercial projects, which are already in construction in full swing, Sunteck Crest then Sunteck Pinnacle, and then the Sunteck Icon and Sunteck BKC 51. Out of these 4 projects, even if we launch -- re-launch one more project once again, I think we'll be pretty much achieving INR 1,800 crores or maybe more than INR 1,800 crores of the sales, pre-sales for this financial year FY '23.
Okay. Perfect. That's good.
And secondly, obviously, we don't track it on a quarter-on-quarter basis. [indiscernible] revenue [indiscernible]. So where did we have a lower recognition this quarter in terms of any particular projects you want to highlight?
So Pritesh, Prashant this side.
So Pritesh, as I have elaborated in the opening remarks also that the company follows project completion method of accounting. So because of that, currently, if you see, currently, the majority of the revenue is coming from Sunteck City and Sunteck Westworld in Naigaon. These are the only 2 projects which are currently coming into the revenue side, which you see of INR 81 crores for the quarter.
Now, what is happening is on the expenses side. On the expenses side, all your revenue expenditure which you incur like sales, marketing, those -- or brokerage, those cannot be deferred. Those have to be amortized immediately in the quarter in which you incur them. So what happens, your expenses are -- for projects whose revenue is not coming, their expenses are also getting booked into the P&L. However, revenue is only getting booked in the P&L of the projects which are completed.
So because of this misnomer, you are seeing the EBITDA margin to be slightly lower and the PAT also becoming significant lower. That is...
Because of the expenditures which are taken ahead of the -- is in the booking of the revenues of the other projects. So due to the consolidation.
Sir, yes. Fair enough. In terms of margin, I understand. But just wanted to understand on why there was a lower revenue recognition. So I mean, understood that part that Sunteck City and Naigaon are the comparatively slower sales in this quarter that might have led to this lower revenues. Is it fair to assume?
Yes. Pritesh, just to give you one more data point. If you look at our operating cash flow surplus, okay? So for the first half, that has come at INR 225 crores, okay? Now this number is coming in the cash flow statement, but it is not coming into the P&L. It is not getting amortized as of now. So what this shows that going forward in the coming 18 months, you will see our P&L also performing in line with the cash flow statement. And as more and more projects get launched and executed, this anomaly will get corrected. So it's only a matter of 18 months, Pritesh, that you have to take it -- that you have to live with. After that, things will be much more stable.
We have next question from the line of Rahul Jain from Dolat Capital.
Sir, 2 questions.
First one, if you can give us a breakup of sales between ODC and Vasai for the quarter?
So Rahul, I'll give you the number for -- in -- Yes.
So in terms of the breakup of sales, Rahul, from 4th Avenue, we have done close to INR 200 crores and the balance from SBR, we have done close to INR 75 crores in the current quarter. And if we look at the first half, in the first half, we have done from Sunteck City, we have done close to INR 230 crores. And from the Sunteck Beach Residences in Vasai, we have done close to INR 300 crores. So that's the number for the quarter as well as first half, and I will be sharing this Excel sheet also with you, sir.
Okay. Okay.
And second one, sir. Just -- I think the [ uber luxury ] projects [indiscernible] in the market have been taking off well. So I just want to know what's your sales strategy. Are you planning to look at or relook at your sales strategy at [ BKC ]? I mean, that is still -- [indiscernible] is not taking off that well as of now?
Yes. Rahul, Kamal Khetan here. Yes. So, well, I appreciate the question. We are definitely, Rahul, looking at our sales strategy at BKC. We are looking -- and we are quite optimistic. Let's hope the coming quarters, you will see some numbers coming there as well.
[Operator Instructions] We have a next question from the line of Parvez Qazi with Edelweiss [ Securities ].
So first question from my side is, would be great if we can get an update on the construction status on the various commercial projects that we have in BKC, ODC and Andheri.
And second question for Prashant, what would be our unsold inventory currently in ODC, Naigaon and Vasai?
So Parvez, Kamal here.
Parvez, construction status of our 4 commercial projects which are ongoing, full commercial projects. So Sunteck Crest, I can say it's almost more than 90% complete. I think we will be looking to give the possessions -- get the occupation certificate in this quarter or maybe early next quarter. And we are looking to book that into the balance sheet. I mean, book the revenue and take the revenue into the balance sheet, P&L.
Second is the project, obviously, the -- at ODC Pinnacle -- Sunteck Pinnacle, where we already sold the lower floors to DMart. Other sales are going as we are talking. In [ sustenance ] mode, we are planning to launch in a big way also in this next 1.5 months, even that inventory. That we are expecting to complete the project in the next financial year, FY '24.
Coming to the BKC 51, Sunteck BKC 51 at BKC and Sunteck Icon on the junction of BKC. Both the projects are again almost more than 80%, 85% complete. All the slabs are -- [ totally ] RCC structure is fully complete. The facade and the MEP work is going on. Even that, we are looking to complete the project and get the occupation certificate in next quarter itself. So 3 out of at least 4 commercial projects, we are hopeful to get the occupation certificate in this financial year of FY '23.
And Parvez, coming to your second question.
In terms of sales inventory. In Naigaon, we have close to around INR 375 crores worth of inventory, which is pending to be sold from the existing launches. And this does not factor in receivables, just to clarify. And in ODC, we have close to around INR 675 crores of inventory pending to be sold. So that's the situation, and again, I'm clarifying this does not include receivables.
And what would be this number for Vasai?
For -- yes.
So Parvez, in Vasai right now, we have launched -- whatever we have launched, we have already sold. So what -- I can give you a broad number of what our intention is of launching. If I keep that in mind, I have close to around INR 850 crores worth of inventory, which is pending to be sold from my target launches which is not currently launched.
And when can we see these launches in Vasai?
In 1 month.
We have next question from the line of Abhinav Sinha with Jefferies.
Sir, a couple of questions.
So one on the project. Have you seen any impact of the rising [indiscernible] rates on demand? I mean, is demand holding up well for the affordable segment or still some impact there right now? That's first.
And secondly, also, if you can talk a bit about pricing of the various segments in [indiscernible]?
So Abhinav, so regarding the sales, I think there is a good demand momentum. We all know that there is a sales -- residential demand has been quite robust in last 2 years. And we see that continue -- we see the momentum is strong even now.
Across all the segment, whether it is affordable, whether it's in mid-income as well as the luxury segment, so we are not worried about any of the change [ demand ]. We feel that residential sales demand will continue to remain very strong.
Your next question, Abhinav, was...
Sir, it was on pricing. But before that, can you give me an idea about what percentage of your customers take a loan, home loan?
So I can tell you approximately [ off-hand ] right now. So obviously, when it comes to luxury, [ super luxury ], which is the product which is about INR 30 crores, INR 40 crores, there, I feel only 1/3 or less than 25% of the customer takes loans, what we have seen in the past, what we have experienced. And in the mid-income segment, I can say this goes up to, let's say, 35%, 40% or 50%, which goes up. When it comes to affordable, I think it goes to even 65%, 70% of the customers, they take loans. So I think that is what we are seeing in the 3 segments.
Okay. That's very helpful, sir.
And my second question was on pricing. If you can talk a bit about that, have you taken up your prices this quarter, et cetera?
So pricing. Very frankly, if you ask me this quarter, obviously we have not raised much pricing. But if you talk -- if I talk to you about pricings in last 1, 1.5 years, I think across all the projects, maybe even in affordable or mid-income or luxury segment, [ uber luxury ] segment, the pricing has gone up. We have taken the pricing up by at least, let's say, 10% to 15% the prices have gone up.
We have next question from the line of Abhishek Lodhiya with YES Securities.
My questions, I mean, is among the Pen-Khopoli project, which we have acquired. So did we started selling over there? Or what is the status of that project exactly? [indiscernible]
Yes.
Abhishek, that project is obviously the land parcel of the Pen-Khopoli, what you're talking, for the -- which is like -- which we have to do a plotted development mainly and maybe some construction of villas and row houses, and all those things. That's now at a very recent stage, I would say. I cannot comment when and what about especially -- if you ask me specifically about this project. We are not very optimistic that when -- in next 1 or 2 quarters, we are not looking at doing anything on that.
Okay.
And secondly on, sir, you have given some color on the commissioning of commercial assets. So have you taken a call on whether we are, I mean, selling it or leasing it out?
So Abhishek, when it comes to Sunteck Crest, I think we have already taken a call and we are selling it. So there, we have sold quite a good inventory, if you must have seen in the pre-sales of last 2, 3 quarters.
When it comes to Sunteck Pinnacle, the second project, there also, we have already decided and we have taken a sale model because there, we have already sold [ about -- an ] area worth almost INR 100 crores to DMart.
And then for other inventory, we are selling slowly on a [ sustenance ] basis. And right now, I told in my call just 2 questions before that -- 2 or 3 questions before, that we will be selling -- we will be launching it in a proper manner in 1, 1.5 month, even the further inventory of higher floors in Sunteck Pinnacle. And that, we will be selling it very aggressively.
Now coming to the other 2 projects, which is commercial projects, Sunteck BKC 51 and Sunteck Icon. Sunteck BKC 51, we are already in talks, I can say, to lease out the entire building to one of the good corporates. And with -- in terms of Sunteck Icon, very frankly, we have not yet decided what we should be doing, whether we should lease out or whether we should be selling. But whatever gets the best value for the company, I think we'll take that call because neither we are worried about sales due to any cash flow, because cash flows are very strong. We don't mind leasing it also. We'll try to maximize the value.
So we are just holding on our decision for Sunteck Icon. I think that, too -- because the building will be ready in the next 3 to 4 months with occupation certificate. Before that, we'll obviously take a call what to do with that.
We have a next question from the line of Prem Khurana from Anand Rathi [ Shares ].
Sir, first one was, I mean, if you could share your thoughts on competition? So why I ask this is eventually when I look at residential real estate demand especially in MMR, I mean, it's been fairly strong for the last 2 years now. So would this make some of these people, I mean, who were earlier in the business but then went away because the markets are not doing good? I mean, do you see them to come back or do you get to feel as, I mean, there will be no entrants on some of these large corporates? Because of the fact that when I look -- I mean, in terms of regulation, and it eventually seems that, I mean, the loopholes which used to be there earlier have been taken away, which is why, I mean, it becomes same for some of these larger corporates to kind of come and participate in the real estate industry now?
Prem, good question.
I think we are all seeing a very strong consolidation in the industry. So I don't think there is a -- so due to that consolidation, I think we did one of the best acquisitions in last 2, 2.5 years. And which has been, I think, best ever done by the company. So I don't see any worrying factor about the competition. And competition, if it is healthy and which is only good [ corporates ] are coming -- I mean, it is only good for, I believe, for the Sunteck and everybody. I am not worried about it.
And there are very -- there are n number of players which are compared to 1 or 2 players entering is always good new players. I think a lot many has vanished away from the system, which is much better, I think. And I think we are very -- pretty much confident with our strong balance sheet and a strong execution track record. We are not worried about any competition coming.
Sure. No, sir, why I want to understand eventually and what I've been made to understand is what I've learned over the years is essentially the market, or rather the [ cycle ], has to go bad. Not because of the demand goes down substantially, but essentially, because of the fact that you get to have oversupply situation and there will be someone who would give in and then would start cutting prices and which comes to impact the demand. Because, I mean, as an end user, if I'm buying a property, I mean, and I get to read in the media that the price is supposed to go down, I tend to -- I mean, there could be a situation here that I defer my purchase. So which is -- I mean, I understand competition [ would move ] from that side [indiscernible] do you get to see that there will be more launches and there could be an oversupply situation. You don't get to see that situation at least in the immediate future. That will be all from my side.
So Prem, I can only say that, obviously, there may be a situation maybe after 2 years, maybe after 3 years, maybe after 4 years, at one point of time, there may be oversupply of something. But I don't think, Prem, we should be worried about that. I think Sunteck has grown in the last 15 years with most of the headwinds in the industry. We have grown the company when most of the companies have not been able to survive or could even manage to stay in these tough times with the headwinds in the sector. I think we have grown ourselves in this segment, in this sector with the headwinds. I am pretty confident that going forward, if anything, any such situation comes, your company is strong enough, I think, to take this, to take that as a competition or anything as a challenge.
Ladies and gentlemen, that was the last question. I'd like to turn the conference back over to the Chairman and Managing Director, Mr. Khetan, for closing remarks. Over to you, sir.
Thank you all for taking out the time from your busy schedules today. In case if any of your queries have been left unanswered, you can get in touch with me or my team. We look forward to your continued support.
Thank you once again for joining us today, and please be safe. Thank you.
Thank you, sir.
Ladies and gentlemen, on behalf of Sunteck Realty, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.