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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 the Q4 and Full Year FY '22. We have with us today Mr. Kamal Khetan, the Chairman and Managing Director of the company; Mr. Manoj Agarwal, the Chief Financial Officer; and Prashant Chaubey, SVP, Corporate Finance.
Please note, this call will be for 60 minutes [Operator Instructions] This conference is being recorded and transcript for the same will be -- may be put upon the website of the company. [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 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.
I would now like to hand 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 Fourth Quarter and Full Year 2022 Earnings Call. I hope each one of you and your family are safe and healthy. At the outset, similar to previous quarters, I would like to reiterate yourself to the guiding principles of New Sunteck, what we call Sunteck 3.0. Sunteck 3.0 is focused on 3 key priorities: One, maintain a strong balance sheet and cash flows; continue to do marquee acquisitions in line with our business development strategy; and building an exceptional team.
In the year gone by, we have achieved strong sustained growth in both pre-sales and collections. In fact, on both the parameters, this is our best ever performance till date. The strong operational performance has enabled us to generate more than INR 400 crores of operating cash flow surplus on a cumulative basis for the past 2 financial years. In line with our Sunteck 3.0 framework, we continue to maintain a strong balance sheet with net debt of equity of 0.19 despite of new acquisitions and the advanced premium payment of more than INR 200 crores to avail the 50% benefit in premium from the state government. This will enable us to sustain our margin in a cost inflationary environment.
In the cost inflationary environment, our announced construction capabilities is enabling us to maintain accelerated execution and also the stringent supervision on cost and quality. I'm happy to note that Sunteck Westworld project at Naigaon has received occupation certificate.
Execution at other projects are in full swing, namely Sunteck City 4th Avenue and Sunteck City Pinnacle at ODC, Sunteck MaxXWorld and Sunteck One World at Naigaon, Sunteck Icon and Sunteck BKC 51 at BKC Junction and Sunteck Crest at Andheri. On the business development side, we have done one of the highest acquisitions during the COVID-19 pandemic, acquiring approximately 23 million square feet across MMR. Going forward, our endeavor is to capitalize on our strength of business development and continue to do similar acquisitions over time.
I'm happy to note that in the first quarter of FY '23, we have launched a premium residential project on a 50 acres beachfront land parcel at Vasai investment, namely SBR, Sunteck Beach Residences, for which we have got an overwhelming response which will be reflected in pre-sales number of the current quarter of FY '23.
The launch of new project at one end and the spectrum-like SBR, Sunteck Beach Residences at Vasai and completion of projects at the other end of the spectrum, like Sunteck Westworld at Naigaon, gives us immense joy and confidence to keep on striving to do well.
Last but not the least, I'm very proud of the team that we have built at Sunteck in the last 15 years, and we are focused on strengthening it further.
Thank you, everybody. I will now hand over the call to our CFO, Mr. Manoj Agarwal for his comments. Thereafter, I would be happy to answer your questions, if any. Over to you, Manoj.
Thank you, sir. Good evening, everyone, and thank you once again for joining us today. You have taken out your valuable time for Sunteck. I hope all of you are safe and well.
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 financials and business performance numbers.
Our pre-sales grew up by 43% on quarter-on-quarter basis in quarter 4 FY '22 to INR 503 crores compared to INR 352 crores in Q3 FY '22, and an increase of 36% on a year-on-year basis from INR 371 crores in Q4 FY '22, which is the highest-ever achievement for this year.
Collection grew up by 50% quarter-on-quarter basis in Q4 FY '22 to INR 404 crores compared to INR 272 crores in Q3 FY '22, and that is an increase of 26% on year-on-year basis from INR 321 crores. For the period 12 months ended FY '22, the presales grew up by 27% on a year-on-year basis to INR 1,303 crores compared to INR 1,022 crores in the last year, which is the highest-ever pre-sales for the year's achievement. Also, the collections grew up by 35% on year-on-year basis to INR 1,053 crores compared to INR 780 crores in the comparative period. It's again also highest-ever achievement for the year.
With respect to the financial highlights, we have reported a consolidated revenue of INR 156 crores in Q4 FY '22 compared to INR 122 crores in Q3 last quarter. On a 12-month basis, the revenue for FY '22 stood at INR 513 crores compared to INR 614 crores in the comparative period last year. The consolidated EBITDA for Q4 FY '22 is INR 3 crores as compared to INR 35 crores in the last quarter. EBITDA for 12 months, March '22 stood at INR 95 crores compared to last -- INR 137 crores in the last quarter.
We can now open the phone for questions for the participants. Thank you very much.
[Operator Instructions] The first question is from the line of Adhidev Chattopadhyay from ICICI Securities.
Yes. Sir, my first question is on our sales guidance for FY '23. Maybe not a specific number, but at least the lower end, upper end of our sales projection, which you can see, considering that you have got many launches lined up this year. And if you could break that up into new launches, how much sales would come from there and how much would come from the existing inventory? That is the first question.
And second question is, what is the visibility on the business development pipeline for the coming year?
Yes. Adhidev, Kamal Khetan here. So your first question about the sales number, pre-sales number. We are looking close to, obviously, INR 1,800 crores sales for the current financial year. And out of INR 1,800 crores, we feel substantial, at least, 33% -- 35% should come from the new launches, 35% to 40% should come from the new launches, so minimum of that kind of number.
I mean to, I think, the second question is on the business development front. As I said in my opening statement that we have done one of the highest acquisition of close to 23 million square feet in this COVID-19 pandemic. And we continue to aggressively, we are looking at acquisitions, and you will see this momentum continue for next, at least, 12 to 18 months going forward.
Sir, if I may just squeeze in. Sir, what will be the value of the launches we'll be doing? The focus -- I mean, so this project, Vasai, you have done the launch you said? And are you going to launch Shahad, I don't know, Borivali and a few others, broadly, still as well?
Yes. So at least we can be -- we are confident of at least launching 1 more project in the current financial year, and these are all big projects. We are not launching any small projects. The sizes of these projects are -- they are new sites, so this will add substantial to our sales from the existing projects.
The next question is from the line of Rahul Jain from Dolat Capital.
So a couple of questions. First one is on ODC. If you can give a sense of how is the footfall trending versus last quarter? And is it fair to assume INR 100 crores, INR 120 crores run rate, quarterly run rate that you will be sustained in that particular project? And the second one is on JV opportunities. How are you seeing that panning out versus last year? I mean, is there any dilution in economic share that you are seeing on the ground?
Yes. So as far as ODC is concerned, I think the current run rate, we are confident of maintaining our current run rate. That is not a problem what we are seeing. In fact, demand is very good, and we are not -- the momentum of the sales is not reducing in spite of what we have increased the pricing. So that is one good thing I can confidently talk about.
Again, as far as JDA, I just answered this question. Whether it is a JV or a good acquisition, distress acquisition, we will continue to be very aggressive. At the same time, we are very clear that we will not compromise on the quality of the balance sheet. We'll continue to maintain on that level in spite of new acquisitions because of the strong cash flows from the existing projects.
The next question is from the line of Biplab Debbarma from Antique Stockbroking.
Sir, my first question is on the price increase. So in FY '22, what would be the average price increase, new price hike you took in ODC and Naigaon?
This is Prashant [ Desai ]. So in both ODC and Naigaon, we have achieved close to 5% to 10% price increase in FY '22.
Okay, okay, that's good. And second question is on just trying to understand the numbers. So what would be the total receivables? And what would be the cost to be incurred for finishing the ongoing projects? Just trying to understand the cash flow match.
Right. So Biplab, in terms of the balance cost to be incurred for the ongoing projects, it's close to around INR 900 crores, right? And against that, the balance receivables from the ongoing projects, and this includes our fourth quarter launch of Sunteck OneWorld as well, so the balance receivables is close to around INR 1,800 crores.
Okay. Okay. And if I may squeeze one more question. Just -- I was just checking the financials. So the margins, EBITDA margins, if you remove the other income, is around -- in FY '21, '22, is below 25%. It's around something like 22% and 19%, whereas the margin were a lot higher in FY '19, '20, around more than 30%, more than 44%. Is it because of -- I mean, what could be the reason for that drop in margin, a significant drop in margin?
So Biplab, the first reason is that we are following project completion method of accounting, so that is the first reason. And the second reason is that the -- is that basically in the P&L, due -- the sales, marketing and periodical cost is charged to the P&L in the current period itself. However, revenue from these projects will be recognizing in the year of completion. So that is the primary reason why this margin compression you are seeing.
Okay. If I may...
Just -- Biplab, just to add. So some of the -- because project completion mattered, you recognize the revenue and everything and the completion. Whereas some of the administrative costs and the advertisement and marketing costs are accounted in the current year itself, with -- irrespective of the project getting completed or not. So that eats into the profits of maybe the other projects and others.
But going forward, because it will get balanced once every year, the projects will be getting completed. So this is just theoretical, but I -- exactly, if you see project-wise -- project -- the EBITDA margins have not gone down at all. In fact, they have only increased going forward, which you will realize as the numbers get released further for the new projects getting completed.
They would be -- blended basis, they would be above 30%, right, sir?
Yes, for sure. Even -- that is including our affordable projects, including our affordable projects. Our EBITDA margin across all the projects are about 34%.
[Operator Instructions] The next question is from the line of Biplab Debbarma from Antique Stockbroking.
To you, sir, you mentioned about, best by '23, adding 23 million square feet in your acquisition. You are actually actively looking for the acquisition. Just wondering, sir, if you can give some insight? Like if I see, barring 1 project in Borivali, I believe, all the projects are in the peripherals above. We can say affordable space, maybe. Not Vasai though, Vasai is not kind of affordable. Still, it is in the peripheral suburb and outskirts. So is it a conscious strategy? I mean, I'm just trying to understand. Or is it just opportunistic? You can do, even in a premium or this is a part of your strategy 3.0 that you would be mainly looking into affordable and mid-income.
Not at all, Biplab. In fact, that's the reason we have created a brand across all the -- across the spectrum. So separate branding for high income, high -- uber luxury, and separate branding for mid-income and separate branding for affordable. So we are very clear and conscious that across all the segments, we have to grow. And we continue to -- so as you see, we have added, one that can see, road project last year -- last, last year, I believe, for -- in the uber luxury segment. And we continuously scout for more projects. That's not -- that's the only project we have acquired. We are scouting for it, and we are confident we will be doing some new announcements very soon.
Same as mid-income, you saw that we did SK resorts at Borivali. And I think Vasai, which is on the beach front is, again, in the mid-income segment, so we are going in mid-income as well. So again, affordable, obviously, we have done a lot. We know that. And that is -- obviously, we got some good opportunities, so we didn't want it to -- it's what, so tempting. So we didn't want you to miss this opportunity, okay.
Sir, continuing with this, what is the status of the mid-TMC road project? What stage is the project in?
So it's -- obviously, there are some of the things which we need to clear it up with -- then the approval process and everything. It will take time for sure, because it's the part of -- only the part acquisition we did when we did acquire the Orbit stake from the, "high." Thereafter, we are doing slowly, certain parts of percentage of acquisition, which is balanced. And I think very soon, we should get those, and thereafter, obviously, approvals, and then we should be able to launch.
The next question is from the line of Parvez Akhtar Qazi from Edelweiss Securities.
So first wanted to get an update on the Borivali West project, where is that project as far as approval status, et cetera? And then when can we see a launch there?
So Parvez, very frankly, the launch is -- we need to get approvals, so approvals are in process. I can only share that much. And definitely, we are looking at least 6 to 9 months for those approvals. So once those approvals are there in place, definitely, we will like to launch it on yesterday basis.
So we are equally keen to get it launched as soon as possible. But the approvals which is, again, it is the landlord's responsibility. So although my team is helping and assisting them to get the approvals, but we are pushing them a lot to get the approval ASAP, as possible.
And second, what would be the completion time line for our various under-construction commercial projects?
I think we are talking about the -- all these 4 projects of commercial, which are under construction. All the 4 projects, I can see, they are almost more than 89 -- at least 3 out of the 4, which is Andheri project, which is Sunteck Crest, and the BKC 2 Junctions projects, which are on the good junctions of BKC, which is Sunteck Icon and Sunteck BKC 51. Both these -- all 3 -- these projects are almost 80%, 90% complete. All the slabs are almost done. And I think we are very confident, at least these 3 projects will be delivered in this current financial year itself. And Pinnacle also may be early next financial year.
The next question is from the line of [ Sourabh Gilda ] from Motilal Oswal Financial Services.
Am I audible?
Yes, Sourabh. Yes. Go ahead, please, Sourabh.
So firstly, I just wanted to check on the commercial development status at the ODC. I know we had earlier deferred it due to the onset of pandemic. But now that we have a good acquisition of residential developing there, so, like, do you still want to go with the residential or we have any commercial plans for this?
No, we are -- we will definitely do residential as well as commercial in ODC. We have enough land parcels there, so definitely, we want to exploit the demand even in commercial. And so we are aware that obviously, we have been finishing these 3 projects. I think it is the right timing, I think, for completion of these 3 projects. So we want to add, obviously, new commercial projects to our portfolio. So definitely, we'll be looking to start that ASAP.
So any tentative time line, sir, that can we start the -- commence the project?
Let's say, close to 9 to 10 months.
Okay. Okay. Fair enough, sir. And sir, lastly, on interest rate trajectory. Like, I know the recent hike which has happened is too small to affect the demand. But from your conversations, like, did you show any change in strategy from the customers? Or at what level of interest rate do you think that it can start helping the demand from the customers?
So Sourabh, fortunately till now, whatever, 40, 50 basis points, I think, 40 basis points as we have increased the interest rate. In spite of that, we have not seen, until now, any drop in velocity of the sales. And in spite of increasing the prices by 5% to 10% across all our projects, which gives more profit, and it also absorbs the inflation of the increase in construction costs. So that is a good -- until now, it looks really good.
And going forward, at least, if it is not -- if it is -- once the interest rest rate rises, at least, let's say, we all know that at least minimum 25, 50 basis points in next announcement or very soon, we may hear from the RBI. But until that, I don't see any problem. Thereafter, it will be -- I mean, I would be too futuristic giving any answer to that. I think for current status, I think it looks very cool and it is not affecting the sales at all till now.
The next question is from the line of Adhidev Chattopadhyay from ICICI Securities. .
So first question is just a bookkeeping question on the consolidated balance sheet. The other current liabilities figure, since we have gone up quite a bit, could you just clarify the reason why -- what is the reason for that? What adjustment that is?
So Adhidev, Prashant this time. Adhidev, as you are aware that the company is following project completion method of accounting. And because of that, the customer advances are now getting booked into the P&L -- into the balance sheet, sorry. So because of that, the other current liabilities have gone up. Because earlier, what used to happen is that customer advances used to get amortized. So because of that reason, that is the only reason why it keep going up, so.
So INR 1,200 crores around increases because of that, the advances collections you have done during the year?
That is one of the major ones.
Okay, okay, okay. Fine, fine. Got that, got that. So second question, yes, just as a follow-up. Sir, what would be the inflationary cost you have seen for your new projects? I understand, for existing projects, we are -- maybe we are [ releasing ] a contract term. But for your new projects, it will come up in already upcoming phases in the existing projects or the new projects. What would be the average cost increase you expect to see because of the cost inflation?
So Adhidev, we -- across the -- if I talk about across the spectrum from affordable to mid-income to luxury projects, I think that increase is not more than, I think, INR 500 to INR 1,000 per square feet, let's say. That's -- so -- and that has already been factored by the market, and everybody has increased the pricing in every geography. So that wouldn't affect at all. I don't think it will be affecting anyhow to any profitability or any viability of the projects or the compromise on the EBITDA margin or something.
Okay. Sir, and just last one question, if I can squeeze in. Sir, this Shahad project, what is exactly the status of the land and the approvals? Could you just give some color on that?
So acquisition is obviously -- it is at an advanced stage. We have to get that, obviously, before signing the definitive document. We need to get that [ Shahad ] cleared, and I think that is in process by the landlord. I think it should be cleared very soon. And once the [ Shahad ] is cleared, I think we should go for the approvals.
And what we are targeting is, again, we are targeting, out of all the acquisitions, new acquisitions. As promised, that is committed by us, that we will launch at least one project in this year. We have already done that as Vasai launch. And we are quite optimistic of launching one more project in this current financial year.
The next question is from the line of Varinder Bansal from Omkara Capital.
All of you. My simple question is, sir, Sunteck, for me, the story, in terms of what you guys have done in the last, say, 25 years, you're trying to do the next 5 years. And with the environment changing now in terms of interest rates moving higher and commodity prices moving higher, do you think the pace of what you have envisaged for the company will get delayed? Because I think you were targeting around INR 1,800 crores of pre-sales and some INR 28,000 crores of sales from the projects which are undertaken, I think, many years to come. With the external environment, do you think, are we at the same pace what we were 6 months back?
Definitely, in fact -- we rest -- Varinder, thanks for [ such a ] question, I would say. We have been very -- if you have seen that Sunteck, in fact, history is not 25 years first of all, I'd like to -- sorry to correct you, 15 years. And 15 years, maximum we have seen the headwinds. And still, in spite of the headwinds, Sunteck has grown. . And we are quite confident with this increase in interest rate and also some inflation. I think we don't see any -- because we have seen, currently, the sales, and especially what we launched just now, our Vasai project, it is clear indication. We got an overwhelming response. What -- I think we are getting response more than our expectation. That it's a clear signal that it is not affecting the volumes and sales with the increase in this slight interest rate.
And I don't see the plans for Sunteck changing, and we continue to maintain our pre-sales number for this current financial year target of INR 1,800 crores.
So when you say INR 28,000 crores, that will mean over a period of how many years, sir, if I may understand that?
That is 8 to 9 years. Because these are all projects which are, like, 50 acres, 100 acres, 150 acres. If we talk about Naigaon, it's 150 acres. 50 acres in what we talk about, Vasai, what we have launched acres, 50 acres. More than 50 acres in Shahad, Kalyan, what we talk about.
So all these projects -- and these are, like, projects for 8 to 10 years. So we are talking about these numbers, obviously, 8 to 9 years. And we continue to acquire more projects going forward.
Is everything acquired? Because we already have a lot of projects on hand. And my second question, just to complete it will be, I think we have done an appreciable number of acquisitions in the last 2, 3 years. Will we need to raise capital now? Because under JV, JDA, we have done acquisitions. But since now execution is coming to forefront, do the company sees any chances of raising capital to execute these projects faster?
So definitely, we don't see -- we need to raise any capital to execute these projects faster or anything, because the moment we do pre-sales, we are cash positive almost in every project that we launch. So we don't need cash in spite of our acquisitions, and that's -- we are maintaining that we'll continue to maintain our debt levels similar in spite of new acquisitions. That's our strategy, and we'll continue to do that.
And as far as -- I think I will only say you asked me, is there -- it's not -- it's already too much. I don't think it's too much for Sunteck. We are hungry and -- for the growth and we'll continue to grow.
If I can squeeze in one last question, sir, on page -- Slide #28. I think the numbers, what you have taken from projects for FY '22, '23 versus '23, '24 that this is what I'm looking at. So we have not seen any incremental sales happening in projects -- on the top 4 projects in EBIT '23, '24. What could be the reason for that, sir? Like Naigaon, Vasai and Kalyan and Vasind?
No. Varinder-ji, if you see on Slide #28. In Slide #28, in FY '23, we are looking at launching ODC Goregaon West, even Naigaon, Vasai and Kalyan. So all the 4 projects we are looking at launching, and those 4 projects plus are already completed projects. They will contribute to the pre-sales that we are looking at of INR 1,800 crores, sir.
Yes, yes. I'm talking about '23, '24. In the '23, '24, we are not looking at incremental sales from the top 4 ones, which is ODC, Naigaon, Vasai, Kalyan, Vasind.
We are looking at the matter. That is the point. That number is not cumulative, it is a per year number, sir. So if you look at FY '23, '24, we are looking at 0.6 million from ODC. We are looking at 1 million Naigaon.
I understand. I'm saying, Prashant, we are not looking incrementally. We are looking at the components of it. We know 0.7 million, 0.8 million, or we're maintaining the same pace only, right? Every year?
In the coming year, I think we would like to be conservatively making the statement. You will be always -- we'll be always happy to make you happy by giving better numbers. We don't want to overcommit and underperform We'd rather prefer to under-commit and overperform. That's what we will go with first, Varinder.
Got it, got it. Sir, last question. There's a lot of newcomers who are coming to Mumbai. I know your geographies are very different compared to other players who are coming in. Do you see now supply side increasing in the real estate sector?
Because a lot of projects are now coming up. Prestige coming very ferociously in Mumbai and all. So the supply side, which you were talking about that it is decreasing, it seems like supply side also in the real estate sector increasing again. Do you think that could be an issue going ahead?
No, Varinder. I think it's always better to have good players coming in and having a healthy competition. I don't see -- I think the demand have increased and with few players adding up. Because we have -- we know all of us that a number of players have gone out of the business. . And definitely, at every time when the market is good, as I said that this is the first-time headwinds. We are really seeing a good tailwind, I would say, tailwind in last 10, 12 years. And definitely, there will be new players entry. And again, we'll see some players going out again. But I don't see any concern for Sunteck. We are well placed, and I think I don't see any concern for that.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to the Chairman and Managing Director, Mr. Khetan, for closing comments. Over to you, sir.
Thank you all for taking out the time from your busy schedule 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. Ladies and gentlemen, on behalf of Sunteck Realty, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.