Aditya Birla Real Estate Limited (500040) Earnings Call Transcript & Summary

All right. Good afternoon, everybody, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Century Textiles and Industries Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings conference call for the third quarter of financial year 2022. Please note that this is a webinar format. [Operator Instructions ] Now before we begin, as mandatory, I would like to mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as information available to management currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now let me introduce you to the management participating with us in today's earnings call before I give it to them for opening remarks. We firstly have with us Mr. J.C. Laddha, Managing Director; Mr. R.K. Dalmia, Senior President, Century Textiles and Whole Time Director; Mr. Vijay Kaul, CEO of Century Pulp and Paper; Mr. K.T. Jithendran, CEO, excuse me, Birla Estates; Mr. Snehal Shah, Chief Financial Officer; and Mr. Nilay Rathi, Senior Vice President of Commercial. Now without any further delay, I request Mr. Laddha to start with his opening remarks. Thank you, and over to you, sir.

A very good afternoon to everyone joining us today. And it is my pleasure to welcome you all to earnings conference call for the third quarter of FY '22. Firstly, I wish you all a Happy New Year, and I hope that you and your family members are healthy and keeping safe. The third quarter of FY '22 was an excellent quarter in terms of operational efficiencies and turnover, particularly in manufacturing businesses with capacity utilization saw a substantial improvement driven by the better market sentiments. I'm also extremely delighted to inform that the company attained a major milestone as we received all approvals for our much awaited flagship project Birla Niyaara at Century Mills Worli. And we have now commenced prelaunch market outreach activities as well. Now let me start by briefing you on the financial performance of our company on a consolidated basis for the third quarter of financial year 2022. The consolidated turnover for the quarter under review saw a 38% growth year-on-year to INR 1,050 crores from INR 758 crores in the same quarter in the previous financial year. This growth was majorly driven by both the manufacturing businesses, with the Pulp and Paper business growing by more than 49% with sales at INR 731 crores versus INR 489 crores for the same period last year. And the Textile business also grew by 22% with sales at INR 263 crores versus INR 216 crores for the same period last year. The consolidated EBITDA for the quarter under review declined by 3% to INR 105 crores from INR 109 crores last year. Please note, the quarter of last year contains INR 28 crores of exceptional onetime income of interest on income tax, so EBITDA is not comparable on a Y-o-Y basis. Without the exceptional income in quarter 3 FY '21, the EBITDA has increased by 31% in the current quarter over the same quarter last year. The Pulp and Paper business EBITDA grew by 52% to INR 91 crores versus INR 60 crores for the same period last year; and Textile EBITDA grew to INR 10 crores from INR 1 crore for the same period last year. The consolidated net profit for the quarter declined to INR 12 crores from INR 37 crores in the same quarter last year. Moving on to the cash flow for the company. We had an operating cash flow of INR 85 crores and free cash flow stood at INR 24 crores for the quarter. Now let me take you through some of the key highlights across our 3 business verticals. Starting with the Real Estate business. In quarter 3 FY '22, we achieved sustained sales of around INR 34 crores with robust collections of around INR 69 crores from all the projects on the back of strong customer connect and outreach. Overall, we have achieved total booking value of around INR 589 crores and collections of INR 193 crores in the 9 months of FY '22. Our 2 commercial assets, Birla Aurora and Birla Centurion continue to generate stable rentals as well. As I mentioned earlier, we received key approvals, commencement certificate and RERA approvals for our flagship, Birla Niyaara project at Century Mills Worli and kicked off the launch campaign for Birla Niyaara with an exclusive red-carpet even and a unique and innovative show with 300 drones lighting up the night sky. We also launched Birla Tisya in Bengaluru which received a stellar market response from customers by clocking in more than INR 250 crores in just 4 days' time, making it one of the most successful launches in Bengaluru in recent years. The increase in demand in the overall real estate sector was backed by robust momentum in manufacturing and services sector, improved hiring in companies, positive market sentiments due to festive season and continued record low home loan rates led to the highest quarterly residential sales numbers in the top 7 cities since 2015. A strong quarter 3 FY '22 clearly indicates that the real estate market is en route to recovery and the long-term upcycle. I'm also proud to announce that Birla Estates was awarded the economic -- The Iconic Real Estate brand of the year at TIMES Real Estate Conclave Awards 2021 and Best Brands 2021 at Economic Times Best Brands Awards 2021. Birla Niyaara was also awarded the Iconic Residential Project of the Year and Iconic Residential Project Launch Campaign. Going forward, the third wave of the COVID-19 pandemic could result in short-term disruptions due to labor shortages at sites. Although the demand fundamentals remain robust and would reimpose the idea of self-owned home being the center point of our lives. The Birla Brand and the well-established digital channels will ensure our continued steady performance over the coming quarters. Now moving on to the Pulp and Paper segment. The quarterly outperformance momentum of Century Pulp and Paper continued with the business achieved the lifetime highest ever total production of 1,22,888 metric tons with an overall capacity utilization at 110%. In quarter 3 FY '22, sales grew by 49% year-on-year to INR 731 crores, and EBITDA grew by 52% to reach INR 91 crores, while EBITDA margins for this segment also improved marginally to 12.4%. The improvement in demand for writing and printing paper, especially in the corporate segment due to the opening of offices and judiciary systems boosted retailers to build up stock. The non-copier grade paper demand also improved with opening of educational institutes including high school classes after a gap of about 18 months. The board segment continued to perform well with robust demand from pharma, FMCG, goods packaging sector and even uptick in demand from the nonpackaging sectors. Quarter 3 FY '22 saw a major impact on operational costs with a sharp increase in raw material prices, that is wood, imported pulp, coal, chemicals and increased freight costs due to containers unavailability. Thus, to balance out costs, CPP undertook multiple price increases in all segments. All price increases have been absorbed in the market. I'm also happy to announce that as against planned budget of -- planting 1 million trees in FY '22, the company has achieved plantation of 1.5 million trees in 9 months of FY '22 itself and planning to reach to 1.75 million trees by end of this financial year. Post deduction of Omicron variant, short-term market conditions for paper and paper products demand as well as its consumption are facing slowdown. Writing and printing paper demand is facing slowdown as government has not yet cleared its guidelines on new syllabus. As a result, Book Publishing segment will continue to remain under pressure. Major tissue consumption centers are operational with restricted guidelines, which may curtail tissue demand. However, due to COVID-19, people are more hygiene cautious, which will push tissue demand in the long run. Board demand continues to expand with good order flow from pharma, FMCG and food sectors. Export demand is also expected to remain good, especially in the Middle East and Africa. Now let us move on the Textile division. I would like to request Mr. R. K. Dalmia, who is a Senior President of Century Textiles and a Whole Time Director of the company, to give the key performance highlights. Over to Mr. Dalmia.

Thank you, Mr. Laddha. Good afternoon, ladies and gentlemen, and wish you all a very Happy New Year. In the third quarter of financial year '22, apparel demand was good in the domestic market as well as international market during Q3. China supply disruption affected certain products, but with domestic marriage season, the demand has picked up faster than expected, bringing down the inventory to normal level and production increased by 10% against last year, with the plant using more than 95% capacity utilization. The sales of the quarter grew by 22 year-on-year to INR 263 crores, while the EBITDA grew substantially from INR 1 crores in the same quarter previous year to INR 10 crores in this quarter. Unfortunately, the bed linen segment is going through a tough time in U.S., which happens to be our main market; as inflation touched 6.8% in the U.S., highest since 1982, thereby leading to consumer shift toward nonessential item. Furthermore, late rains have delayed the cotton crop arrival, resulting into unexpected rise in the raw material prices, which is more than 100%. Also steep increasing observed in coal, power, dyes and chemicals and container cost which has further put pressure on the product cost about 40% to 50%. The stability of raw material prices is most important. Market will have to absorb our new prices but fluctuations in the use and demand is not good for the business. We expect stability by February in the market and have a better start for the next financial year. Finally, I'm happy to inform that we have successfully completed the Facility Social Labour Module of Higg Index, we scored 72%. The Higg's Facility Social and Labour Module measures the social impact of manufacturing across area such as wages, working hours, health and safety and employee treatment. This is the first time when FSLM score is verified by third-party auditing agency, Teks Tech, to fulfill brand requirement. Now I hand over the call back to Mr. Laddha.

Thank you, Mr. Dalmia. Lastly, let me highlight to you on the various ESG initiatives undertaken during the quarter. The Pulp and Paper business has embarked on a program to use wood bark as fuel in boilers after being fed to chipper, which earlier used to be discarded. 1,278 metric tons of wood bark was used as fuel in boilers, which resulted in saving of approximately 543 metric ton of coal during quarter 3 of FY '22 alone. On the social front, repairing, water proofing and painting work was done at government-run Girls High School in Lalkuan and Adarsh Inter College, Bindukhatta District, Nainital. And 25 toilets were constructed during this quarter at Bindukhatta for poor people. Also the toilet block was built in a Government Girls School at Baddi which will benefit approximately 1,500 students. Further developed the Ambedkar Park at Sanjay Nagar, Bindukhatta, which will benefit around 10,000 people. In our Textile business, towards sustainable sourcing, we have taken one more step to strengthen our journey of manufacturing excellence by initiating to purchase wind power as a renewable power source. We've initiated to take 3-megawatt wind power per day from renewable power sources. This will further help us in gradually decreasing carbon footprint. On the social front, we are constructing a training center building at VGTK, Sewa Rural Jhagadia, where the plant is located. Key objective of this initiative is to set up a high-quality training center at Sewa Rural to impart training and improving technical skill in tribal community of nearby villages. This activity will also help us in getting trained workforce for our present setup as well as for coming new factories. In our real estate division, we conducted campaign on several safety topics like behavioral based safety, construction safety management, P&M operator, fire and road safety. We also kicked off the project of ESG road map for Birla Estates. Documentation is in progress for BREEAM precertification for Worli project. We initiated the air purification solutions for preventive measures to reduce air pollution impacts. We also carried out various initiatives for sustainable construction and water-saving solutions. In conclusion, we are proud of the many milestones achieved by the company during this quarter and are confident of continued performance in coming quarters. With that, we can now open the floor for the questions-and-answer sessions. Thank you very much.

[Operator Instructions] The first question, we can take from Biplab.

Sir, my question is on Real Estate. The first question is, you have done exceedingly well in the newly launched project in Bengaluru. Just wondering that is INR 290 crores. And out of your INR 350 crores, INR 290 crores is from the bookings from the Bengaluru project, INR 344 crores, INR 290 crores is from the Bengaluru. So it looks like the sales booking from the remaining projects seem to be muted. Is it the right way I'm reading your sales booking? What's happening in other projects? And so just -- this is the first question, sir.

Yes. So we -- you're absolutely right. We have almost run out of inventories of all of -- most of our other projects. The NCR, we have sold out a position in our first phase. Kalyan, we did extremely well in the previous quarter in -- while we launched the second phase. As you know, phase 1 is again an almost a sold-out situation. We have sold about 50% of the inventory and the balance, what you're seeing is basically Kalyan. So basically, then the one is this project. As you know, Birla Alokya in Bengaluru is also almost 75%, 80% sold out. And now we are looking for a price revision, et cetera, so that we save the balance inventory closer to be launched, closer to the delivery. So largely the impact has been because of the -- where the inventory was maximum was because of the Birla Tisya. So largely, it's driven by Birla Tisya.

Okay. And so sir, does it mean that going forward, what would be the next 2, 3 quarters pipeline besides the Niyaara? Do we have some visibility? Or we are focusing on Niyaara for the sales booking in the next going forward?

Yes. Birla Niyaara will be one of our prime focus. In addition to that, we will have a new phases of NCR coming. As you know, of the INR 2,200 crores or INR 2,250 crores, we have so far launched, only INR 600 crores odd. We have plenty more to come. So that will be really a huge boost for sales for the last phase. And of course, the new phase from Kalyan will also come up.

And on the Niyaara, sir, what kind of -- can you give us some insight on what kind of response you are seeing? I mean you have been taking EOI. So just that -- what would -- how is the Niyaara response?

Yes, I'm very happy to say that the response is very encouraging. And it's beyond expectations, and we are hoping that once we start booking our sales in the month of February, we'll be able to announce good numbers.

That's very good. Sir, one final question is on the business development. Just one question, if I may squeeze. On the business development, how is the things on business development front? I mean, yes, Niyaara is your focus, and we want to see Niyaara performing, and that will give you a lot of leverage. But in general, also, on business development front, could you give us some color where are we here? So because last 1.5 years, 2 years, we have not seen much business on business development, and I understand why. But going forward in the next 1 year, where do you see our ourself in business development front?

Thank you, Biplab. Yes. So for -- we are extremely focused on business development and expansive growth. Our key -- focus markets remain Mumbai, NCR, Bangalore and also Pune. We are very aggressively looking at these markets, but we don't want to tie up any deal which is not sound. At this point of time, I would be very happy to say that we are working on several deals. And as soon as something gets finalized, we'll be very happy to announce them. But we rest assure that we are working very aggressively and positively on several deals.

Next, I request [ Mr. Venkata Ramana ] to unmute himself and go ahead.

Sir, you did mention -- my question is, firstly, on Niyaara. So you did mention that you're seeing very good response. If you could also sort of give some color as to you had given an earlier guidance of INR 1,500 crores from this year, right? So would you want to sort of revise it? And are we good for 2,500 number for the next fiscal?

Thank you, Venkat, for that question. As I mentioned right now, we are in the process of book building, EOI building, et cetera. And we are quite encouraged by the response that is coming despite the temporary setback because of the COVID lockdown, et cetera. So it might take a little more while for us to confirm our bookings. And the exact numbers or guidance, I would be happy to let you know maybe in due course of time, maybe about a month later. I need a much more formal report to give you a more formal guidance.

Understood. Understood. But the FY '23 number is kind of still intact, right? And this, again, goes down to the linking with the same question that Biplab also asked, right? I mean in terms of visibility, we don't have much as on today. And we just have to subsequent 1 phase each coming from Gurgaon and Kalyan, right, apart from Niyaara. So that is the crux of my question.

Yes, yes. So we will -- yes, so we -- as I mentioned, we are very aggressively working on new deals, and I completely understand your point. New deals are very critical to show sustained growth. And we completely understand and you're totally focused on that, Venkat.

Sir, any reason why there is some kind of a delay? I mean, is it because the expectation from the landowners are kind of elevated seeing the pickup that everyone is talking about in real estate?

If you have seen the number of new deals, which has got closed in the last 1 year is not what it was the previous years. And largely because landowners expectations has definitely gone up. And so yes, that's 1 reason. And also we want to make sure that whatever we do, we do it the right way. It is -- to the extent possible, we would like it to be a JVA, a joint venture. If it's a great opportunistic deal, we won't shy away from an outright also. We are looking at new markets and also a lot of our focus was to get Niyaara off the ground. But that -- but as it may be, I think right now, our focus is completely on building a new pipeline of business.

Understood. Right, right, right. And just 2 more questions. One is just related to the collections. If I look at the collections in quarter 3 and compare it with Q2. So obviously, the sales number is quite encouraging, right? But that has not really translated into improvement in collections. Any particular reason?

That's very simple, Venkat. This is basically the sales numbers are encouraged because of the launch sale. Obviously, the collections will come with a phase lag so that you can expect in the next quarter.

Okay. Okay. Okay. So that improvement will be visible in Q4?

Absolutely.

Okay. Okay. And my last question largely pertains to the EBITDA margins. So I think last quarter, we did speak about improvement in the margins, especially on the paper side. And you also spoke about some of the price hikes that were taken in third quarter and market seeing good reception. And then you also spoke about your margin expectations of maybe around 19% in Q3. So what has really changed between the quarter? And I understand that you mentioned that the raw material prices have gone up. And to some extent, you've also been able to pass that on. So my question is how do we look at the margin trajectory knowing the prices where they are now largely on the paper segment, yes.

Yes. I think what has happened is I mentioned the pre-COVID margin levels were definitely 20% plus. However, continuously after first wave, there was a second wave. And when it was settling down and the paper market was becoming better, again, there is a third wave. So these ups and downs is really impacting sales, particularly of writing and printing paper. Definitely, the margin for the quarter could have been better, but for increase in the raw material prices, particularly imported pulp, plus the logistics cost, basically, a lot of disruption internationally on availability of containers. So in my opinion, the things are settling down and slowly it will improve. And in my opinion, the current quarter also will have a little impact of third wave. But after that, we are hopeful that we'll be, again, going towards pre-COVID margin levels. Hope this answers the question.

Right. And so sir, just as a small follow-up. So then are we likely to see more margin pressure in Q4, meaning is it likely to get more worse before improving? Or this is the bottom?

No. In my opinion, it won't worsen. Only thing is we are hopeful of achieving good volumes. However, the impact of lowering or softening raw material prices will virtually come into the bottom line. And of course, there's a lot of uncertainty about availability of containers. So it all depends on external factors, but I'm hopeful it won't worsen in Q4.

Right, right, right. And what capacity utilization levels you're running, sir, the paper segment as of today?

In quarter 3, we are running at about 110% capacity utilization. But I believe the demand on the board is absolutely very good, even writing and printing paper was good. Tissue definitely has been very good. We have the additional installation of tissue capacity which is basically under trial runs and we are at 70%, 75%. So in my opinion, the capacity utilization for the quarter going forward will remain good.

Right. Right. So current also, we are running close to 100? Is that right to understand despite the impact of...

Yes.

Thank you, Venkat. Next question, I request Amit Srivastava to unmute himself and go ahead.

So I just want to chip in more on the same question, which Venkat has asked on the paper business. So sir, last quarter, if you remember in the call itself, you have said during the 2Q, our cost inflation is already factoring whatever the increase has happened in raw materials, so it was around 8% increase. And the price increase has come with a lag effect, so that should benefit us during the Q3. So that was during the mid of quarter. And again, we were expecting a margin improvement whereas the decline is very sharp. So is the raw material increase that has happened during the quarter was so sharp that we are not able to pass on? And how is the current prices versus the raw material scenario?

In fact, what you say is right that the raw material prices have further gone off, and there was an [indiscernible] factor of disruption in the logistics, the availability of containers globally. And that really has increased the freight substantially. So whatever we were hoping that did not happen, though with the increase in the raw material costs, we had increased the prices of the finished products as well multiple times. However, that was not commensurate with the increase in the raw material prices However, we are seeing the trend of raw material prices softening now in the month of January. So I'm hopeful if the third wave does not impact the demand too much, the current quarter would be much better.

Next question to K. T. sir. First of all, congratulations for a successful launch of Bengaluru project, which was remarkable. Second, sir, in terms of the Birla Niyaara project, which we have given in the presentation, we have an area of around 2.4 million square feet for space, which we are looking at 14 hectares. So that is giving a revenue potential of around INR 10,000 crores. So implied realization could be around INR 41,000. So are we factoring in the current prices? Or is it factoring the like inflationary scenario into the price is on that. Second is that after this 2.4 million area, what is going to be remaining in Worli considering we'll have a commercial as well as one of the staff colony area will be there. So considering all these things, how much be remaining? Yes, 2 questions there.

Yes. Thank you, Amit. Yes. So largely, overall, I had -- in the previous -- our conversations also mentioned that overall, we have potential of almost about 5 million square feet, monetized 5 million or thereabouts. If you monetize all of them, the potential is close to more than INR 20,000 crores, which will be ranging anywhere between INR 20,000 crores, INR 22,000 crores. Obviously, there is a price inflation -- price escalation, I would say, because this is for a period of 10, 12 years, and there are several infrastructure and many other price trigger points, which is going to happen over a period of time. So therefore, there will be -- there are price increases. And based on that, this whole plan -- business plan has been made. Yes, you mentioned, right now, we are launching the Tower 1, which space is about 8.5 lakh square feet, then we'll go with Tower B, then Tower C in a phase-wise manner. Each to the time, we will -- you can see the response of each tower is faring in the sales market, and after certain amount of inventory is sold, we will embark upon the next phase considering into what's the consumer changing demand, what kind of amendments we need to do in the design, et cetera. And once we do this at some point of time and hear enough and more cash, we'll also start the commercial development of 1 million square feet. And then, of course, as you very rightly mentioned the other side of the road, Worli West, the labor colony starts. So -- and the demand is very strong. Maybe we can do all this action even earlier. So broadly, that is the plan, Amit.

Next question, I request Saket Kapur to unmute himself and go ahead.

Firstly, sir, as you have already informed that for the paper segment, we are already at the optimum level, even more than that deflation levels. So -- and also the realizations have moved up over quarter-on-quarter period. So the impact of the increase in the raw material prices have -- the pass on happened? Or are we expecting more price increases? So if you could explain what -- how are you explaining this decrease in margin for the paper segment, sir?

So Saket, you're right that there have been multiple price increases in all the verticals of paper business. However, we could not pass on the entire increase in the raw materials as well as logistics cost in the market, particularly in the writing and printing paper segment. This definitely will happen gradually. We have to balance what market basically can absorb seeing the demand. In fact, we would have done better, but for the third wave, which again has temporarily spoiled the sentiments, particularly -- the schools are closing down offices, again, working with the lower capacity. So it is impacting overall. Once we see the improvement, again, the next wave comes and that really impact these sentiments. However, we feel that as far as volumes are concerned, we'll be definitely having the same volume or better than this. However, we'll have to see how the imported raw material prices and logistics challenges, which are there globally shifts up in the current quarter. So we are keeping a close watch. And as and when there is an opportunity, definitely, there will be further increase in the prices so that at least we can recover the increase in the variable cost at list.

And also, one more thing. In addition to what Mr. Laddha had said, everyone is asking for paper. It's from INR 82 crores to INR 60 crore, how it has gone down. So it's -- INR 13 crore is onetime income of EPCG reversal during last period. So genuinely, if we say apple-to-apple, if you compare, it is only from INR 69 crores to INR 60 crores, only INR 9 crores has gone down. It's not a huge amount. It's the last time onetime income had been booked in the books of account as a EPCG provisions. We have completed the obligation during last period. That's why we have done reversal of some provisions. So it is again INR 69 crore -- INR 60 crore, INR 9 crores is towards whatever raw material prices, we could not pass it to the customers.

Rathiji, this reversal was for the second quarter? Or the last year December quarter?

Last year, December quarter.

So if we compare quarter-on-quarter, say, September to December, then also -- with the increase in the turnover, the commensurate margins have gone down. So that is totally on the inflationary part only that has played out?

Sorry, it's -- in last quarter, I said.

September '21 was the number.

Yes. In July to September, we had done onetime reversal of EPCG provision because of completion of our obligation.

And what was the value, sir, 19?

INR 13 crores.

INR 13 crores? Okay. So 13 crores needs to be strike off to have the apple-to-apple comparison.

Yes, yes.

Okay. Sir, if we take the mix in the Paper segment sir, what should be the writing part tissue and the packaging. And overall, sir, [Foreign Language] how much -- by what percentage are we vertically integrated from pulp to the finish product?

Laddhaji, would you like to take this?

Yes. Mr. Kaul, would you like to come in? Okay. I will take that. See, the mix of 3 verticals is about 45% is writing printing paper about 41% time is the board and the balance is tissue. So by and large, it is likely to be the same in the short term. Whatever plan we are making to improve the capacities further that perhaps will change the mix. We are also thinking of creating some flexibility, in terms of converting the capacity of writing and printing paper, that if the demand is not sufficient, whether we can produce the board. So those experiments are going on. So it will all depend on once we finalize our plan.

You said 45, 41?

That's right.

And sir, for the vertical integration part, how -- by what percentage are we integrated from the pulp [Foreign Language] depend on imported pulp? How are the prices being set for the imported pulp quarter-on-quarter?

Mr. Kaul ?

Yes. I think the tissue segment, we are totally 100% on imported pulp, and for board and for the paper segment, we are totally on the domestic pulp, which we make ourselves, is that clear Mr. Kapur?

Sir, please could you repeat it once again sir?

For making the tissue paper, we are depending on the imports and for board and the paper making process, we have our own internal pulp.

Sir, and lastly, sir, can you explain that the stand-alone or consolidated [Foreign Language] numbers are down on a consolidated basis. There are lower numbers for the consolidated numbers wherein the real estate also, we are posting PBT losses wherein -- on a stand-alone side, there are profits. So if you could explain the reason -- rationale for the same?

Snehal you can take that.

The fact is, the way it works, is the numbers for the stand-alone includes the leasing income of our 2 buildings because they are housed in the parent company. So we take the income of the leasing in the standalone statement. And when we add the losses, basically are the overheads, et cetera, which are incurred by the real estate subsidiary. So that actually is all expenses as -- because as of now, there are no income in their particular balance sheet. So as you know, the projects EBITDA has to be added only when the projects are completed. So therefore, all those expenses, which are incurred by the real estate subsidiary, which gets -- consolidated with the parent company, the profit levels drop.

So to have the clear picture, we are looking at the consolidated number only, just to understand what the potential of the real estate, sir, 2, 3 years down the line when the projects will start kicking in the revenues will be booked. What kind of potential from -- on grounds, can you give us a ballpark number? How should we look at this segment? So because other than that, the paper segment, the Textile segment we are able to get the utilization levels and the margins and extrapolate the same thing. But for the real estate part, [Foreign Language] going forward from this vertical.

Saket, the way everybody looks at the real estate business is basically you first look at whether our booking value is growing, that is what are the sales that we are clocking. Then you have to, based on the booking value, you have to see whether our collections are actually in line with the projected progress of the project. Now the question comes about profitability. Unfortunately, the current accounting standards does not allow us to book the EBITDAs for the profits of the business as we progress, you can only account for it once we get an OC for a particular project. So most of the EBITDA would be lump sum closer to the time when we expect the project to get completed. For example, our first EBITDA booking, profit booking, for the Real Estate business, possibly will happen in the year FY '24, where 2 of our launch project -- earlier launch project, which is the first phase of Birla Kalyan and Birla Alokya in Bangalore will get completed and we'll probably try to book. So then suddenly, we'll see a big EBITDA booking over there. Then again, there will be a lag for a couple of years or maybe a year. And then again, we'll start booking our EBITDA for the Gurugram project, for example. So accordingly, that is how we will have to see. And I mean, in terms of what you call it projections, et cetera, I think in terms of booking value, there will be some guidance which the real estate business will keep on giving all of you from time to time.

Next, let me take from Anurag Jain.

My question was more on the Textile business. So there was an opening comment made that the home textile or the made-ups business in U.S. is kind of seeing a slowdown. So is this a more recent phenomenon? Or because at least 2, 3 quarters back, we were witnessing a huge demand and inquiries from that segment. Maybe as an industry as a whole. So is this a recent phenomenon where we are seeing challenges in the U.S. business on made-ups.

Yes. This is a recent development in the home textile business since last 2 quarters, mainly -- particularly earlier after this lockdown when the market has opened in May in India also, in U.S. also, demand was very good. Because at that time, work from home was there and everybody were looking to change their home textiles at home to feel comfortable, and a lot of orders were there, even it was very difficult to meet out the supply chain. Afterwards, more challenges has come because of the container shortage and the scene at the port, when all the company at home textile shift their goods, they could not reach to the retailers on time because of congestion. So their shelf was gone empty and they could not sell. So now they have lot of inventories in their warehouses because of this -- the good which were on the water reached them and then the season has also gone down. And because of this Omicron further aggravate the situation, the demand for home textile is lighter. So this is the main reason [indiscernible] total type and secondly, at present, the cotton prices have gone up so much. It is around 100%, as I said, and half of that other cost of the container cost, which has got the last 21 months, 374%. There are the challenges which home textile is facing because both of the home textile business goes to CIF. So in CI the cost comes to the seller. And now therefore it is difficult to pass on that and how the industry started to selling FOB and that the cost has increased on the part of the retailers. So it is difficult to pass on entire price on MRP and because of these challenges at present home textile market is dried up. But hopefully, in the next few months, I'm not saying immediate next quarter, but in 2 months, it will again pick up.

Next question, I request Mr. Sunil Jain to unmute himself and go ahead. I think you're not connected to audio. We'll take the next question from Alpesh Thacker. Alpesh?

Just a small question from the leasing business. So can you throw some light on the drop in leasing income and leasing rental this time? So was it that there was some client tenant renegotiation on the rental part?

Yes. Thank you, Alpesh. No, I think there is one of the clients that in Birla Centurion and who reduces demand by 1 floor, which is the co-working space, we have taken 3 floors. I think the business wasn't doing well, flexi office spaces. So 1 floor, they bought out of 1 floor, so that is where that kind of a slight dip in the leasing income that you are seeing. But as it may, currently, our -- in Bombay in the region, the average occupancy or vacancy rates are in the region of about 22%. And our for us are in our portfolio that vacancy rate is about 10%. And that's the other -- and the other redeeming thing is that at present, we are talking to 4 or 5 very promising clients for both our buildings where vacancies are there. And if this current lockdown and the prices doesn't go deeper, I think we should be able to redeem our position.

Biplab, if you could unmute yourself and go ahead.

Yes. I have mainly 2 questions on Real Estate and 1 small question on Paper. Sir, K.T. sir, 1 thing is the pipeline that you mentioned in Gurgaon, Bangalore, Kalyan to be launched. So what would be the -- in each of this project, how much you plan to release in the next coming months or quarters?

Okay. So Kalyan, we have launched about 370 plus 300, about 670, INR 700 crores. So the rest of the INR 400 crores, INR 430 crores we'll be launching, either next the month, most probably this quarter itself because we have all the approvals. We're just waiting for the right environment. Kalyan, because current COVID things, et cetera, it's not the right time. But once we get the right time, we will be ready for the launch. So that's about Kalyan. In Navya, again, we have got the approvals. We are waiting for the RERA clearance. So this parcel will be about INR 200 crores, INR 300 crores, the INR 350 crores-or-so, this parcel. And then, of course, next year, we'll be launching a large big chunk that will be close to about INR 900 crores.

And there is no new launch in Bangalore, sir?

So Bangalore, I think, both these projects that we have, we have fully launched it now because these are relatively smaller-sized launches. So we've completely launched it. And the sustaining sales will go on.

Okay, sir. And sir, if you assume that you have received significant -- if you receive significant response in Niyaara, so does it mean that you'll launch -- I don't know, properly recall, but somewhere you told that you will be launching the second tower, once 50% is sold. So if you have that kind of sales, do you see another tower launch -- second tower launch in the next 6 months or so in Niyaara?

Yes. So a difficult question to answer today. 6 months definitely looks too short. We need to first to confirm the sales of this. We need to take the customer feedback, et cetera, and the consideration for any amendments design, et cetera. We have to go through the approval process. So it will take more time than that.

And second tower would be another 0.9 million square feet, 0.85 million...

Must be roughly around that. Okay.

My final question is on the Paper business. Sir, just wanted to understand the Paper business, what you have given increase in revenue and there is a margin squeeze. I'm just trying to understand how do I see this number? So the increase in revenue is because of the volume increase, I might have missed? Or it is because of cost inflation, you have increased the prices revenue has shown growth -- so this is my to how -- what is the reason behind the revenue? Is it because of the volume and price or just price increase in the Paper business?

Kaul Saab, you want me to take up or you want to?

Yes, you can answer, sir.

So you're right, Biplab. This is coming from both the volumes as well as the price increase, both are contributing to this. And as far as margin is concerned, as I said that it is very difficult to pass on the total input cost increase which is settling down. And as you know that where we are depending on the imported material, it takes time to come in. And once we consume that, the impact of that will come only after that. So basically, it's a mismatch between the increase in the input costs and our ability to pass on that at the same time. Does this answer your question.

Yes, sir, yes, sir, I got it. And just to add, sir, you mentioned the capacity utilization and since the volume also seemed to have increased. So beyond this, if the volume -- the demand keeps on coming, so what will happen? Because you have 110% CapEx capacity regulation in Paper. So do you outsource the incremental demand in terms of volume? Or how do you want to tackle or are you are planning for CapEx in the same?

So there are 2, 3 things. One is, of course, we are increasing the tissue capacity by 36,000 metric tons, which perhaps will happen by the end of this year. So the capacity will increase from 450,000 to about 486,000 metric tons. There'll be some low-cost debottlenecking which our business is looking for. And of course, we are also trying to create the flexibility between the capacity which we have of Paper, whether we can switch over to board as and when required, depending on the economics. So all these factors definitely will contribute to that. And of course, there's no plan of having a large CapEx investment, but definitely, whatever is required a little bit, definitely, we could take care of that. As far as CapEx is concerned, as we mentioned, it will be in the range of about INR 100 crores per year for next 3 to 5 years, roughly.

And this CapEx is increasing the total capacity as you are increasing? Or it is just enhancements or maintenance kind of CapEx?

It is both actually. One is the CapEx which we're spending, which will lower down the variable cost. It will be improving the margins based on that. And whenever there's a possibility of debottlenecking, we'll have to spend a little bit money and increase our capacity to the extent possible.

Biplab, just as a small addition. I guess you are trying to compare the quarter-on-quarter volumes. To answer, I think in terms of our total volumes, I think the volumes of last quarter were 116,000 tons, which is more or less what we sold in this quarter also on the overall basis. But number two, what happened was we sold less of paper and more of tissue. And also because of that mix and the increase in price realization is what has taken our sales higher.

Next question, I'll take from Dhiral Shah. Dhiral if you could unmute yourself and go ahead.

My question is, again, on the Paper side, so particularly on the packaging board side, so we have seen one of the largest player in the paper industry have recently commissioned the packaging board facility. So wanted to know, does -- it will have any impact on the demand supply economics? And what is the annual demand of packaging in our board in India? And how is the supply scenario right now?

Yes, Mr. Dhiral Shah, the point is that recently, the capacity increased by JK Paper, yes, it will be about 15,000 tons a month we should have increased. And today, our capacity is about 15,000 tons a month. And there are certain other capacities also prevailing in India. But the demand for the paper board is quite high, both internationally and domestically. So -- and by the time they've achieved their capacity, we would have also rather increased our capacity from 180,000 tons to our 200,000 tons by next year. So the demand for such things are growing, and it's already growing at the rate of more than 10% -- 10% to 12%. So we see that there should not be any issues. In fact, paperboard was being imported into the country in a very huge quantity. That was -- that imports will stop into this country. That's all. I hope I have answered your question.

So what is the annual demand of the paperboard, if you have any?

It's more than about 600,000 tons.

Per year?

Yes, yes. 600,000 tons per year, yes.

Okay. And sir, how is the import in that? So how much Indian players are supplying in and what is the import.

No. As I told you earlier, the import was there. That's why JK Paper went to increase the capacity by 180,000 tons in a year. So around 2 lakh tons was getting imported into this country. But in the meantime, during the recent -- because of this pandemic, the demand of our board has gone up because so many things which the FMCG businesses and the -- which has grown up like anything during the COVID time, they require these boards to -- for packaging purpose -- so that's why the demand has gone up. And even the food deliveries because the food deliveries have gone up, which was not there earlier. So demand in food segment has also gone up. So the consumption of boards has increased more than, I would say, 20%, 30% during this last 1 year.

Okay. So it will not disturb the overall paper packaging board industry, right?

No, no, no, not at all. Not at all.

Unfortunately, that's all the time we have for today. I'll request Mr. Laddha to give his closing comments. Over to you, sir.

Sure. Thank you all for participating in this earnings con call. In the current quarter, we have observed excellent operational efficiencies as we have discussed and turnaround on the back of improved market sentiments. We are hopeful in quarter 4 FY '22, third wave of COVID-19 will soon subside with marginal impact on the business. Going forward, I'm confident that coming quarters will be even stronger in view of the robust business fundamentals and market dynamics. I hope we have been able to answer your questions satisfactorily. If you have any further questions or would like to know more about the company, we would be very happy to be of any assistance. We are very thankful to all our investors who stood by us and had the confidence in the company's growth plans. And with this, I wish everyone a great evening. Thank you, and stay safe. Thank you very much.

Thank you.

Thank you, everyone. Thank you, management.