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

Ladies and gentlemen, good day, and welcome to the Century Textiles and Industries Limited Q3 FY '23 Conference Call hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Srivastava from Batlivala & Karani Securities. Thank you, and over to you, sir.

Yes. Thank you, Ron. Good afternoon, everyone. On behalf of B&K Securities, welcome you all to the 3Q FY '23 Earnings Conference Call of Century Textiles. We have with us from the management, Mr. R.K. Dalmia, Managing Director; Mr. Vijay Kaul, CEO of Century Pulp and Paper; Mr. K.T. Jithendran, CEO of Birla Estates; and Mr. Snehal Shah, CFO. We will start the call with the opening remarks from the management, which will be followed by Q&A. Over to you, sir, for the opening remarks.

Thank you. A very good evening to everyone joining us today. Firstly, I wish you all a very Happy New Year, and I hope that you and your friendly members are healthy and keeping safe. It is my pleasure to welcome you all to the earnings conference call for the third quarter and 9 months ended for the -- of the financial year 2023. Let me first take you all through the quarterly industry and financial highlights. Amidst the global uncertainties, India GDP growth has been resilient. The pickup in economic activity reflected across the various economic indicators. Financial stability and inflation have been maintained through prompt rate hikes. Unfortunately, those are -- inflationary issue -- the inflationary pressure has impacted the consumer demand across the sector. Coming to the financial performance of Century Textiles and Industries Limited for the third quarter of financial 2023, the consolidated turnover grew by 10% year-on-year to INR 1,150 crores. The EBITDA of Q3 FY '23 declined by 13% year-on-year to INR 91 crores, and the net profit after tax stood at INR 7 crores. Now let me take you through some of the key highlights across our 3 business verticals. Starting with the real estate business, the real estate business achieved excellent growth with a strong brand pull, backed by a good festive season and a strong consumer interest in home ownership, notwithstanding and impending global crisis. India's story remains strong, especially for real estate due to stable and user-driven demand. Birla Estates achieved sales of INR 383 crores in Q3 FY '23, registering a year-on-year growth of 11%. Collections were robust with over 95% collection efficiency from all the projects during the quarter on back to back strong and pathetic customer approach. The revenue for this segment stood at INR 36 crores in third quarter. All the projects continued to garner strong interest from market. Birla Niyaara has become the largest selling project in a year in Mumbai Metropolitan Region with booking value of INR 1,915 crores in calendar year 2022. Birla Navya clogged a cumulative sales of INR 1,000 crores and is closely -- and is close to fully selling out the second phase, which was launched only in the previous quarter after having fully sold out first phase last year. Project execution at all our large projects are ongoing in full steam with complete focus on safety, quality and timely delivery. Birla Vanya, Birla Alokya, Birla Navya Phase 1 are due for delivery in the coming financial year. We are completely focused on providing an exceptional experience to our customers. The MSR and RR Nagar projects in Bengaluru which were acquired in Q4 of previous year and Q2 of this year, respectively, are currently under design stage, and we expect to launch both the projects in next financial year. Our 2 commercial assets Birla Aurora, Birla Centurion continue to generate a stable rental as well. The demand fundamentals are expected to remain robust despite the global economic slowdown in the near term. The mortgage rates are expected to remain stable at current levels, hence, the industry outlook remains positive. Large and listed players are expected to continue to dominate the sales as homebuyers are ready to pay a premium to mitigate execution risk as the demand has moved to under construction projects due to lack of good ready-to-move-in inventory in the market. Our unique positioning as a developer of trust will help us to become one of the top real estate developer in the country. Now moving on to Pulp & Paper segment. Unfortunately, this quarter has been a shift in the market demand as compared to previous quarters. The overall demand in writing and printing paper board and tissue segments are subdued on account of slowdown in FMCG sector, pressure from low-price import and exports order diverted to domestic markets. Apart from external factors, a lot of internal factors have also contributed a lower production level. The Pulp & Paper business undertook a shutdown in Paper, Board and Tissue plant for maintenance and CapEx commissioning, which resulted in a lower total production compared to last quarter. PM-III paper plant and board plants were shut down for 9 days. PM-IV paper plant was shut down for 22 days due to commissioning of shoe press. Also, the tissue plant remains shut for 10 due to power and steam constraints affecting production and profitability. Also the fiber line was shut down due to tower damage for 45 days. To keep the paper machine running, imported hardwood fiber was used, which impacted profitability heavily. For the third quarter, the overall capacity license was 93% with sales volume witnessing a decline of 17% on year-on-year of [ 95,834 metric tons ]. In the Q3 FY '23, our net sales grew by 18% on year-to-year to INR 863 crores, primarily driven by better realization, while EBITDA grew by 10% year-on-year to reach INR 100 crores. For 9 months FY '23, our net sales grew by 34% year-on-year to INR 2,662 crores, while EBITDA grew by 42% year-on-year to INR 427 crores and EBITDA margins were 16%. Considering the present domestic and global economic scenario, the short and medium-term outlook for Indian paper industry appears to be neutral. Lastly, talking about the Textile division. For the third quarter under review, the net sales declined by 10% year-on-year to INR 237 crores with an EBITDA loss of INR 7 crores. For 9 months FY '23, sales stood at INR 729 crores with EBITDA loss of INR 13 crores. In quarter financial year '23, the domestic retail market was under pressure with low to medium footfall across the segments in the real sector. The garment converters and branch started to delay their production on account of the falling raw material prices. Additionally, export inquiries also did not show much improvement, and the order from U.S. and Europe were at low level. Until the markets see stable raw material prices, price scenario and the stabilization in the yarn and fabric demand, it seems that the demand will continue to be under pressure. On the ESG front, the company will continue to pursue its goal of sustainable business and working on all controllable aspects to lift its performance and in an uncontrollable external environment. With that, we can now open the floor for the question-and-answer session. Thank you very much.

[Operator Instructions] The first question is from the line of Biplab Debbarma from Antique Stock Broking.

Sir, this is related to real estate. In the past quarterly presentation, the land parcel at volume was shown as 30 acres. And in the latest last few quarters, maybe, updates, it is only showing 14 acres. Just trying to understand, is this because there is some impediment in [ developing ] the remaining 16 acres? What is the reason for this?

Thanks for the question. So I think it's the same. There is no change. Birla Niyaara, the 3 residential towers that we are developing is consisting of 14 acres. Over and above that, we have a commercial development coming next to Birla Niyaara, which is -- which accounts the balance. So I didn't get you, were you saying 20 or 30?

30. Sir, earlier you used to show 30...

30 remains because Birla West, Birla -- the Worli Century Textiles, on the west side, we have the Colony land, the workers colony that is 10 acres, and this parcel is 20 acres. Together, it constitutes 30 acres. I think somewhere you must have misread saying Birla Niyaara, which is the 3 residential towers, that is 14 acres. So these 3 residential towers is 14 acres, then we have a commercial thing, which is coming next to it with a little bit of retail. So together, this part is 20 acres and the other part of the land, which is the -- it's colony development, which is 10 acres. So together, it remains 30 acres. There's no change.

There is no impediment on this 30 acers?

Yes, yes. Everything remains the same. No change.

Okay. Okay. And these 30 acres translated to more than [ 14 ]...

5 million square feet, yes. Roughly around 5 million.

Yes. Okay, sir. Second question is considering that there is no new project launches and all the sales booking is based on the [ sustenances ] you are doing excellent [ new, well]. So next focus will be on new projects. So can you give us some color, some kind of insights on where are we in terms of project acquisition? Because growth will come from -- besides Niyaara, growth would come from new project launches. So any -- where are we on business development so on, sir?

So Biplab, about new launches, new launches come from 2 places, one is completely new project launch. The other is a new phase launch in an existing project. So we are hoping to launch a new phase in our Birla Navya in Gurugram sometime in February -- mid-February or early March. We're just waiting for the RERA clearance. We haven't got it yet. We're expecting that to come sometime in mid-Feb. We're following up vigorously. So that should give an impetus for a new phase launch in our current project. As far as new project launches are concerned, you know that we have finalized 2 projects in Bengaluru. One is profit-sharing joint venture in Devanahalli and another one in RR Nagar. Both these project launches are expected in the next financial year.

So on business development front, sir?

Yes. So on business development, we are hopeful that in the next 3 to 4 months -- 3 to 5 months, we will be announcing a lot of new projects. We are very hopeful. We are in advanced stages of discussions in Mumbai, Bengaluru, Pune, and NCR, each of these regions. But because the due diligence, et cetera, is taking a bit of time, hopefully, before the end of this quarter or early next quarter, we will be able to make a few -- very encouraging announcements.

That's really very reassuring, sir. And this question is regarding Paper. Sir, what is the EBITDA margin you did in this quarter in Paper? And, If I have to see that, say, in Q4 or the next 3 quarters, what would be the steady state EBITDA margin in Paper that we should see?

So Biplab, the EBITDA margins last -- for the 9 months continue to be around 16%. This year -- this quarter, of course, because of the reasons that Mr. Dalmia has already mentioned in his opening remarks, there has been a little bit of a dip. But I think we should be able to maintain 16% or maybe in the next quarter, at least in the next quarter, achieve 18-odd percent.

[Operator Instructions] We have the next question from the line of Himanshu Jhaveri from [ Dhruv Gems ].

I just wanted to ask, aren't we little slow in the new business development deals? Because from what I see, the new projects, almost -- we don't have any much inventory to sell except the Niyaara one. So we should be a little aggressive in signing out new deals in the next growth phase of the company. Your views, please?

Himanshu, thank you for your question. Yes, I mean, I take your point, take your feedback. We have been very cautious where lots of development happening. As I said, a lot of talks and discussions happening there in advanced stages. We are also mindful of that because of the current inflationary stage. Prices of land has gone up. But our -- we have also taken a very open view in terms of we're open to now even buying properties as against previously sticking only to JVs. So we are having an open mind. We have just been cautious of the various risks involved, being a company which is establishing itself, strengthening its balance sheet, et cetera. Having said that, we are very, very enthusiastic and aggressively looking at the right opportunities. And as I mentioned to you, I'm quite hopeful that in the next 3 to 4 months, we should be signing quite a few good deals across 3 or 4 regions, across all 4 regions.

Okay. And have we taken any price hikes in the Birla Niyaara project? And when is the second phase -- new launch over there?

Yes. So Himanshu, we have taken a price hike. We took it some time back. We have taken a 7.5% hike. Today, we are selling in the region of about INR 63,000 per square foot and carpet. We are at -- so that's the state of Birla Niyaara. Of course, as you have seen that we have sold more than INR 1,900 crores of inventory here out of INR 3,200 crores, possible. We are now in the stages of -- final stages of the designing of Tower B. They are bringing in some changes, et cetera, depending on the current market situation. We're quite hopeful that we will be able to bring this into the market by next year, next financial year, either Q3 -- hopefully, by Q3. After getting...

And, what is the -- like the carpet area construction cost in this Niyaara? Should be around 20,000 a foot, 20,000, 25,000?

Overall cost including all escalations, contingencies across the 5 years of construction should be in the region of INR 18,000, INR 19,000.

INR 18,000, INR 19,000?

Yes.

This is also carpet, right, or...

That's right.

Okay. So we are selling at around 60,000, 63,000, right?

As of now, yes.

As of now, right. So we -- and before you were saying that when we sell off 50%, 60% of the project, we will immediately launch the second phase. So is there any like delay in all? Or we are just waiting it out for launching the second phase?

No. The delay is largely we want to understand the changed dynamics in the Worli market. Things have changed, so we're just absorbing that, of course, and creating a new product in Tower B, which will be very different from Tower A. So that's the only reason for waiting out -- waiting till December, because the entire approval process itself is going to take in Mumbai and that much time.

[Operator Instructions] The next question is from the line of Biplab Debbarma from Antique Stock Broking.

Sir, just trying to understand on the business development front. Sir, what kind of -- can you give us some color what kind of project in terms of GDV, gross development value, or in terms of sales value of these projects. Are these big projects INR 5,000, INR 10,000 or INR 2,000 crores kind of projects that you are doing -- you are in discussion.

Biplab, difficult to answer that question right now. We are, as I mentioned, in all types of -- we are looking at scaled projects. We're looking at midsized projects. We're looking at brand projects, which are of smaller size. We are aggressively, currently pursuing all these deals. How many of them and which one of them will be finally fructify, and there will be too much of a forward thinking. So I don't want to speculate there. That will be up for speculation. So I'll refrain from that. Suffice to say that they are pretty good, strong number of deals are there. And hopefully, they should -- we are very, very hopeful that to grow this business -- very aspiration to grow this business at a very huge scale over the coming years. So this -- the projects that we are pursuing is consistent with that goal. I cannot reveal beyond this, that will be open to speculation.

Okay. And that's all right. And sir, regarding the Niyaara project that you have, I guess, sold more than 64%, 65% of the inventory. And do you -- are you seeing any kind of change in footfalls because you have sold a significant...

Too early days now Biplab. We have finished less than a year. We just started construction about May -- April or May. So -- and we have taken all the contingencies, escalation in our budget. So I don't see any change in input costs at this early stage.

No, sir, my question is on the footfalls in the sense of inquiries and conversions, all footfalls to this project site and everything. Do you see any change or you see the momentum of that sales that we have seen so far continuing in Birla Niyaara?

Yes. So the position is very different. As Dalmia mentioned in his opening talk, this has been the fastest selling project in Mumbai by more than a huge distance. So we've sold as INR 1,900 crores in the last calendar year, so I don't think there is any. The only problem now is that we don't have inventory. So we are now waiting for Tower B. 292 -- 293 flats have sold out of the 410 or whatever. So -- and most of the small size inventories are gone. What's left is the large size inventories. Now they are also finding traction. Even the large inventories are moving. So I am -- the only challenge we -- now would be to increase prices and create more value. I think our focus will be to just keep on, because we don't want to sell off everything in the first year or second year. We would like to wait it out and they allow this to capture more value by selling it at the right time. I think -- so that the staggering of sales is what we are focusing on. I think this is more -- I think more than 70% of 293 or 410 -- so 413. So I think we have sold enough, and we'll wait for the traction. Of course, the best inventory is the kind of traction we are having initially or we can't expect that to happen now, we used to sell 400, 500 in the first few months. Now we are selling close to about INR 100 crores every month because that's the inventory which is left. So now and then Tower B gets launched, we'll again get a surge hopefully during the launch time.

Okay. And one final question is on the -- for the delivery of -- I don't know, I might have missed whether you mentioned about the project delivery in Kalyan, Gurugram and Bengaluru. When are we expecting this delivery of these projects -- ongoing projects?

So first phase of Kalyan, entire Birla Alokya in Bengaluru and first phase of Birla Navya in Gurugram, all are slated for delivery next year.

Next year by around what -- first half or second half?

In the latter half of the year. All of them come in the latter half of the year, ranging from September -- August, September till March.

[Operator Instructions] The next question is from the line of Smitesh Sheth from Raedan Securities.

Sir, just now you mentioned in the call, Birla Niyaara Phase 2, there are some new dynamics and new thinking going on. So could you slightly elaborate on it? What does it mean? And what are we planning, please?

Thank you, Smitesh. So what we are thinking is just creating more variety in the product mix. We don't want to bring in the same product mix what we got into Birla first tower. We are bringing more variety in different product mix. That's all.

Okay. And can you just suggest sir, when would the expected launch date would be? Maybe by June, July next year -- I mean this year for Phase 2 pre Diwali?

Smitesh, I think it would be post Diwali.