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

Ladies and gentlemen, good day, and welcome to Century Textiles and Industries' Q4 FY '24 Earnings Conference Call hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Biplab Debbarma from Antique Stockbroking. Thank you, and over to you, sir.

Thank you, Steve. Good afternoon, everyone, and welcome to the Q4 FY '24 Earnings Call of Century Textiles and Industries hosted by Antique Stockbroking. Today, we have with us the management of the company represented by Mr. R. K. Dalmia, Managing Director; Mr. K.T. Jithendran, CEO, Real Estate Division; and Mr. Snehal Shah, CFO. Without further ado, let me hand over the call to Mr. Dalmia. Over to you, sir.

Thank you. Good evening, everyone, and welcome to the earnings conference call for the fourth quarter of the financial year 2024. Let me first take you all through the financial highlights, followed by the business-wise operational highlights. For the fourth quarter of financial year 2024, the consolidated turnover of continuing operation grew by 60% year-on-year to INR 1,542 crores. The EBITDA for the quarter grew by 81% Y-o-Y to INR 282 crores with EBITDA margin reported at 18.3%. The net profit on continued operation was INR 160 crores for the quarter. As you might be aware, on March 22, 2024, the Board of Directors of the company reviewed the operations of the Textile division and view of the unsatisfactory performance of the unit with continued operational losses despite attempts of possible turnaround as well as considering the adverse market conditions and nonavailability of viable orders to cover the cost, it was decided to discontinue operation of the process house after completion of the orders in hand. The net loss for the quarter for discontinued operations amounted to INR 140 crores. For the financial year ended 2024, the consolidated turnover of continuing operations grew by 19% to INR 4,570 crores. The EBITDA reported was INR 718 crores with EBITDA margin of 16.8% with net profit from continued operations of INR 304 crores. The net loss from discontinuing operations was INR 244 crores for the full year. Now let me take you through some of the key highlights across our 3 business verticals, starting with the Real Estate business. During Q4 financial '24, the Indian real estate sector, sales volumes in primary market have grown at extremely healthy rate. With Mumbai market witnessing the highest sales volume and Y-o-Y growth across all other Indian metros, owing to a robust economic growth and logistic consumer demand with a significant trend of rising demand for luxury homes offering the superior amenities and exquisite designs. Q4 financial '24, the revenue of Birla Estate grew substantially year-on-year to INR 668 crores with EBITDA of INR 204 crores, representing an EBITDA margin of 30.5%. This growth was driven by revenue recognition of 3 projects, which have initiated handover for well before the RERA time line, namely Birla Vanya, Phase 1 in Kalyan; Birla Navya, Phase 1 in Gurugram and Birla Alokya in Bengaluru. We achieved bookings worth INR 2,881 crores in Q3 financial '24 at our already launched projects, while our collection was INR 644 crores from all projects during the quarter. In Q4, we launched a new phase of our flagship project, Birla Niyaara at Worli in Mumbai called Silas, which received a spectacular response from customers resulting in the sale of 68 units worth INR 2,391 crores within a month after its launch. The show apartment for the project was unveiled by Ms. Ananya Birla in the presence of top luxury influencers, Bollywood celebrities and luxury designers. In other updates, Birla Tisya, Bengaluru received Safety Shield Award from National Safety Council, India. The only real estate developer to receive this prestigious award. Additionally, Birla Niyaara, Mumbai, awarded the winner of prestigious 15th CIDC Vishwakarma Safety Award '24 for the best HSE practices. Overall, the residential real estate market is expected to grow new heights in the upcoming financial year, driven by a surge in demand and a strong consumption record. We believe that financial '25 is poised to be a transformative period fueled by urbanization trend a blooming rental market and consistent property value appreciation. Customer centricity project had been outlined within 3 years road map. This will strengthen our differentiated position by -- and achieve customer experience and deepening customer engagements. Now moving on to the Pulp and Paper segment. During Q4 '24, paper, board and tissue prices continued to downward trajectory with average net sales realization down by 15% year-on-year, consistently reducing NSR, impacted sales turnover and EBITDA. Overall production volume increased by 6% year-on-year. However, they are 4% lower than previous quarter. Sales volume increased by 13% year-on-year. Sales turnover for the quarter decreased by 6% Y-o-Y to INR 859 crores with EBITDA at INR 65 crores, and EBITDA margin reported at 7.6%. Supply chain disruption in the Red Sea and Suez Canal have contributed to increase in prices of key raw materials. Increasing price of imported pulp and challenging in wood availability have also impacted cost of production. Board and tissues sales were better than Q4 '23 as compared to paper and CGP sales. Various cost reduction initiatives have been envisaged in pulp and recovery, power block, machine replacements, in PM3, which would help improve machine productivity and reduce overall cost. As a part of sustainability initiative, 80 nurseries have been developed in 11 districts to provide seedling and clones to farmers and total of more than 52,00,000 plantations completed in financial year '24. On the market outlook, writing and printing and copier demand is expected to improve post-election with government tenders opening in Q1 FY '25. Seasonal factors like expected to moderately revive demand with an increase in exports, offering improved realization and greater price stability. Tissue demand is expected to remain stable in FY '25. Domestic realization continued to be higher than in export market. However, our focus is more to prioritize growth in domestic market, while board demand is likely to improve in Q1 '25 with Pharma segment gearing up summer medicines with added price increase announced by international paper mills. Export demand from Europe, U.S. and U.K. markets is consistent and is expected to improve in FY '25. However, oversupply in market likely to continue in FY '25 as the market growth is lower than the capacity being added by domestic as well as international mills. Lastly, taking -- talking about Textile division. In the beginning of FY '24, the company took a decision to initiate the process of restructuring the company's textile business operation at Birla Century Bharuch plant. As a part of restructuring plan, spinning and weaving departments at the plant were discontinued. However, with a view to optimize the utilization of process house, it was supposed to increase outsource of specialized greige fabric from 45,000 meters per day to 105,000 meters per day. Simultaneously, VRS scheme was also implemented for the workers, employees working at the discontinued units, and majority of workers, employees at spinning and weaving department opted for that scheme. On March 22, 2024, the Board of Directors of the company reviewed the operations of the Textile division. In view of the unsatisfactory performance of the unit with continued operational losses, despite attempts of possible turnaround as well as considering the adverse market conditions and nonavailability of viable order to cover the cost, it was decided to discontinue the operation of the process house after completion of orders in hand. After careful consideration and deliberation, the Board approved the proposal to discontinue all operations at Birla Century Bharuch Unit except some minor manufacturing operations and other allied activities related to supply of yarn to Birla Advanced Knits Private Limited, a joint venture of the company of Grasim India Limited (sic) [ Grasim Industries Limited ]. With that, I now conclude our opening remarks, and we can start the question and answer session. Thank you.

[Operator Instructions] The first question is from the line of Dhananjai Bagrodia from ASK Investment.

Congratulations on a fantastic set of results again. I believe for FY '24, we have outperformed what our initial estimates were. Just to ask you now going ahead, with now we've delivered in terms of this FY '24-'25, like how is land prices coming along, going ahead to, a, purchase them to have a next leg of business? And how are we looking at other aspects of real estate in terms of commercial and maybe anything else we're thinking of?

Dhananjai, thank you for your questions. So yes, the land prices have become much firmer. It's getting more and more pricey, if I may say so. So yes -- so that much more difficult it has become to conclude deals. But we are looking at quite a few number of parcels in each of our targeted regions and pretty confident that we are getting some good deals either on our outright or JV model. So from that point of view, we are pretty hopeful that we will be able to conclude a few good deals though the prices of land are continuously climbing up.

Okay. So would we still look at outright purchase? Or has it been a combination of...

Yes, yes, we are still looking for both outright and JV. Why outright, because otherwise, it would be too opportunistic. So in our targeted segment where we think the price -- the land prices still makes sense, we are open to concluding deals.

Okay. And how are we thinking of ex-residential for other projects? How are we planning on thinking? Are we looking at any other avenues in terms of either malls? Or how is that coming along?

Yes. So apart from the residential, we are pretty -- we remain focused on residential. I think that's still the best bet for leveraging the brand and also strengthening the balance sheet and also very sharp margins. But however, we are also opportunistically open to looking some commercial deals in the market. I think the commercial market is also pretty firm, at a good time, if you have the right product to look for commercial opportunities also. It will be largely on the back of raising some funds, which we are in the process of. We are following up on that. And apart from that, even plotted development, I think, is a good opportunistic play for quick turnaround. So we are on the lookout for these 2 segments also in addition to the residential.

And how is it competition in terms of competitive intensity now in terms of more and more players coming into the market? Are we thinking...

Yes, I think it's quite competitive now. A lot of top players are all looking for -- we faced that, and we are going for a particular piece of land. There is more than 1 player who is after the same land. So the landscape has become quite competitive, to tell you the truth. But we are pretty hopeful that given our brand, given our execution capabilities, and our pricing power, I think we can -- we'll be able to secure a few good deals for ourselves.

Okay. And would you have any targets for the next few years? Or that's too early to say?

Yes, I mean, we have targets. We have about INR 15,000 crores to INR 20,000 crores of new projects target. We did about INR 16,000 crores this year. Hopefully, we do a similar number or close to about INR 20,000 crores in the coming year.

The next question is from the line of [ Abhishek Gitam from Alpine Tesco ].

Sir, my -- the first question evolves on [indiscernible] MMR. So as you also highlighted that you're looking for some land parcel [indiscernible]. So my question is how do you see given there's a lot of projects coming up, a lot of demand also there, but a lot of suppliers are coming up. So do you -- how do you estimate that demand supply going ahead?

I think the demand at this point of time is far much more than the supply. I think there is quite a few demand. That's what we have seen personally in the markets that we are operating. Every market demand is far outstripping supply. Supply is constrained because the number of players are much fewer than what it used to be. And land prices, as I mentioned, is pretty -- gone pretty sharp. Also, the regulatory rules also puts a lot of constraints on many developers in terms of having financial backing, the discipline of getting all the approvals. And I think from that point of view, supply is still pretty constrained compared to the demand. Demand is very, very robust on the back of several fundamental factors, tracing to the Indian economy and the current affordability price. Suppose, there is going to be a sustained demand over the next few years.

Another question was on paper. So earlier, I guess our guidance stood at 15% operating margins in the division. Currently, we are at 5%. We understand the current issues. And then what's the outlook ahead for FY '25?

So Abhishek, basically, last year, we had a little bit of a cost constraints. And 1 of the reasons for our low margins in last year was certainly the cost constraints we had, particularly on the procurement of wood as well as on the power costs that we have. We have a lot of CapEx planned to overtake all these issues that we had in the bottlenecks. And we can safely give you a guidance that we will be -- if not 15, we'll be close to about 12 next year. I think the -- it is not percentage, it is INR 15 per kg of paper is the margin that we are aspiring for. But the guidance right now is around INR 12 to INR 13.

Understood, sir. And just 1 last question. Sir, we've booked loss from discontinued operations for INR 150 crores on net realizable value of INR 174 crores. So can you give some more light on this? And is this expected to roll over in the next few quarters also?

Your question is that we have already -- whatever impairment we have to take, we have already taken that impairment this year. And whatever is realizable value is left, we are hopeful that, if not more, we will at least be able to achieve that realizable value. So we don't expect anything more in the next year other than some write-offs, may be not more than INR 25 crores.

[Operator Instructions] The next question is from line of Deep Mehta from Bank of India Mutual Fund.

Congratulations for a very solid number. My first question is regarding our real estate business. It will be very helpful if you can give launch time line for next year. So in which quarter or which month are we planning to launch each of these projects?

Yes. So we are pretty optimistic in the current year. We are coming up with as many as 9 launches. And these launches will be spread across each of the quarters, starting from this quarter itself. We are looking at Walkeshwar launch, the Bangalore, RR Nagar launch, then Trimaya Phase 2 launch, then launch in Pune, launch in NCR, further launches in Bangalore. So pretty upbeat about this -- for this current year. Yes, so at least about 9 launches we are planning.

So with more than INR 8,000 crores of launches planned this year, do we expect to grow our presales from the last year?

Yes, we at least expect to double our performance -- sales performance from what we did last year.

Sure, sir. This is very helpful. And my second question is regarding our total debt. We have roughly around INR 2,500 crores of debt as on FY '24 end. How should we look at this number? And how will collection help us to manage this number?

Deep, Snehal here. What debt you are seeing INR 2,482 crores is the consolidated debt. Against that, we have about some mutual funds -- liquid mutual fund investments and some HO balance. So our net debt right now is somewhere around INR 2,050 crores. So our -- based on the current launches that we are going to do of our existing projects, and the ongoing projects that we already have, we expect the debt -- additional cash flow requirement by the real estate business to be somewhere around INR 300 crores, INR 400 crores. So that is where we expect our debt to go to INR 2,500 crores net debt or whatever we are talking about. Now the only question is Mr. K.T. Jithendran just now gave a guidance that we might be doing new acquisitions to the extent of INR 15,000 crores to INR 20,000 crores. So maybe roughly around INR 2,000 crores additional debt might be required. Maybe half of it will be financed by the parent and half will be financed through either raising construction finance on our existing projects or some sort of financing arrangement with the joint financer. Is that -- does that help you?

Yes, sir. That is very helpful. And just last 1 question with a very strong response in Niyaara Phase 2. Do we expect to launch Niyaara Phase 3 in this year itself?

Too early to say that. We may look at launching it in Q4 of this year or we may think about it next year. Yes, it's too early because we'll continue to observe how Niyaara 2, the Tower 2, which is called Silas, performs. So far, we have done more than 72, 73 bookings. So once we do about 80% to 90% of the booking, then we may think about it. Right now, our focus remains on maximizing from Niyaara 2.

The next question is from the line of Rohan Shah from Valcore Capital Advisor.

Hello. Yes, am I audible?

Yes, yes, you are.

Yes. Okay. Sir, so just a few questions on the real estate front. Could you help me with the presales of FY '24, if you can give me a number?

Pre-sales, FY '24, the last year, that was INR 3,985 crores.

Okay. INR 3,985 crores. And we hope to do twice of it in this year, as you said earlier, right?

Yes.

Okay. Okay. Sir, the second question on the line of the paper business. We see a great dip in EBITDA. So could you help us with why the dip in EBITDA considering quarter-on-quarter?

Ladies and gentlemen, we have lost the management line. Please wait for a moment while we reconnect. Thank you. Ladies and gentlemen, we have the management line reconnected with us. Thank you.

sorry, Rohan.

So sir, my question was regarding the paper business. So during the quarter 4, we see a good dip in the EBITDA. It's nearly INR 30 crores. So could you help us why such a dip because that would have been viewed, this business would have given us free cash flow, which would have financed our real estate so any specific reason for the dip?

No, the specific reason is that the NSR -- actually, we were expecting some improvement in the NSR, which actually didn't happen. And we have continued to have some cost disadvantages, as I mentioned earlier. So basically, we lost close to about INR 117 crores just because of price difference. And we had little less volumes also because we were having some difficulty in pulping capacity, and therefore, we could not produce more and sell more. So we consider that as a blip. We hope that the demand is going to increase post -- certainly post the election results, et cetera, because now everything in the government tenders, et cetera, has stopped. And therefore, there are no tenders for the paper business. Hopefully, the FMCG and Pharma business will pick up, which will result into some increase in the board. Tissue, we are reasonably okay. And the demand is pretty buoyant. We also had some tough competition on the pricing front from imports from China , Indonesia. These 2 countries. So that also put a little bit of a pricing pressure in the market. So -- I mean, overall, we are hoping to do better, but still, we were able to manage to provide some cash flow to the business -- from the business.

Okay, sir, yes. That was helpful. Sir, my next question is on the line of the presales for next year. So sir, as you said, we would be doing around INR 8,000 crores of presale next year. So where do you see it coming from like new launches, existing launches or from which geography, if can help us?

So we are, as I mentioned, we are coming up with 9 new launches next year, new -- either new project launches or new phase launches. So largely coming from these and, of course, the balance sales from Niyaara 2 and the Niyaara 1 and the balance inventory left over from Kalyan, Birla Vanya. This will be the largely. Except for Birla Vanya and Niyaara, most of the other projects are almost on a sold-out situation, whatever phases we are launched. That has still all come from new phase launches.

Okay. Okay. And sir, could you give us an amount of the launches like any crores, how much would the value be of the new launches?

About INR 12,000 crores of launches will be there, roughly.

[Operator Instructions] The next question is from the line of Dikshit Doshi from Whitestone Financial Advisors.

My first question is, I think this quarter, we have recorded a revenue of INR 668 crores in the Real Estate division. And we started the delivery of 3, Vanya, Alokya, and Navya. So can you help me with the -- how much revenue has been recognized in these 3 projects separately?

So we have recognized revenues of around INR 687 crores across the 3 projects. And the balance would be recognized in the coming quarter. You would like the detail project wise?

If possible?

Yes. So around INR 260 crores -- INR 264 crores in Kalyan, around INR 200 crores in Bangalore and around INR 222 crores in Gurugram.

Okay. So I think Gurugram is a 50-50 JV. So we record the entire revenue in our books and then we will...

Yes, in the profit sharing, we record the whole thing here. If it would have been a rev share, 50-50, would have done only 50-50. But in a profit sharing, the entire top line is fully recognized.

Okay. And their share will come in the cost line?

That's right.

Okay. So my question was, let's say, these 3 projects is -- total value is around INR 2,700 crores plus. So almost INR 2,000 crores can come in the next 1 or 2 quarters.

No, that's not correct. As far as Bangalore is concerned, yes, the full project is -- we got -- received OC for the full project. So that is right. And as far as Kalyan is concerned, we have received OC for 5 out of the 7 buildings. The 2 buildings are still expected. So yes, that between this quarter and next quarter, the rest will be recognized. Of course, there is a lot -- a few more about 20% of sales also balance. We have sold about 1,000 apartments. We have about 1,200 apartments. About 200 apartments have to be balanced -- left for sale in Kalyan, that's the position. Whereas in NCR, we have recognized revenue only for the first phase. This is the first 2 blocks, right? There are many more blocks left, which will be recognized over this year, next year and a couple of years. So -- because this is only about INR 600 crores of -- roughly about INR 600 crores in Phase 1, which had got OCs. The rest is all work in progress. Our sale is 100% -- sorry, yes, what I'm saying is that NCR, we have whatever phases we have launched, we have sold almost 100% of the inventory, which is about INR 1,500 crores, of which what we have got OCs is only Phase 1. The other phases will get OC over this year and next year.

So how much will be OC received, which will be...

Roughly about -- OC NCR, it's about INR 600 crores, of which -- I think, 228 units of which about 170 units we have got the OC, another 52 units is balance, which we have received the OC, but we are still doing the billing, et cetera. So we have not recognized revenue. So that revenue also will be recognized this quarter. Rest all will come up in this year, end of this year, next year, et cetera.

So you are saying that this NCR, which we show INR 1,600 crore booking value, only INR 600 crores is OC received which, let's say, INR 220 crores we have recognized this quarter and balance will come over next few quarters.

Yes, 228 units, 170 units we have recognized. So roughly 170, and another 50, 60 units will come up.

Okay. So in terms of value, let's say, even in Kalyan and Bangalore, Alokya...

I'll give you more -- yes, yes. I lost you, Dixit.

Yes, yes. Can you hear me? Hello?

Now I can hear you.

Yes. So what I'm asking...

Dixit, Can you hear us?

Yes, yes. Can you hear me?

Yes.

Yes. Can you hear me now?