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

Ladies and gentlemen, good day, and welcome to the Aditya Birla Real Estate Q1 FY '27 Earnings Conference Call hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] Please note that this call is being recorded. I now hand the conference over to Mr. Harsh Pathak from Motilal Oswal. Thank you, and over to you, sir.

Yes. Thanks, Shruti. Good morning, everyone. On behalf of Motilal Oswal Financial Services, I welcome you all to the 1Q FY '27 Earnings Conference Call of Aditya Birla Real Estate. We thank the management for giving us the opportunity to host this con call. From the management, we have with us today Mr. R. K. Dalmia, MD, Aditya Birla Real Estate; Mr. K. T. Jithendran, MD and CEO, Birla Estates; and Mr. Keyur Shah, CFO, Aditya Birla Real Estate. I now hand over the call to the management for opening remarks. Over to you, gentlemen.

Thank you, Harsh. Good morning, everyone, and thank you for joining us our Q1 '27 earnings call. India continued to demonstrate strong macroeconomic momentum in the quarter ended June '26, building on the 7.6% real GDP growth recorded in FY '25-'26. While inflation began to firm up with headline CPI rising to 4.38% in June '26, the broader economic environment remains supportive of sustained growth. The real estate sector continued to benefit from this backdrop and even as the composition of investors meaningfully during the quarter. Despite external headwinds arising from geopolitical tensions, resilient domestic demand with a steady investment activity continued to anchor India's growth outlook. From an industry perspective, the strongest demand growth remained concentrated in high-value housing, employment-led corridors, infrastructure-driven micro-markets. MMR continued to lead the market in terms of volumes, while sales moderated in Pune and NCR. Bengaluru stood out, delivering healthy absorption alongside an increase in supply. The commercial real estate market continued its strong performance with the office segment recording its strongest quarterly gross leasing performance, led by robust demand from global capability centers and flexible workspace operators. Overall, the sector's 2 key growth engines are now operating at distinctly different speeds. Residential demand is becoming increasingly selective with a greater emphasis on location, product quality and price discipline, while commercial office demands continue to reach new highs, supported by structural occupier demand from global corporates. Against this backdrop, we have sustained strong business momentum in Q1 FY '27. Collection remained robust at INR 713 crores, registering 31% of Y-o-Y increase overall INR 445 crores (sic) [ INR 545 crores ] in Q1 FY '26. This performance reflects strong collection efficiency, disciplined execution and continued customer confidence across our projects. Birla Taranya delivered an especially strong start. Within just first 3 months of receiving RERA approval, the project achieved booking value of over INR 1,000 crores, demonstrating strong customer acceptance and robust underlying demand. This performance further strengthened Birla Estates presence in MMR market and validates our strategy of creating premium, thoughtfully designed residential community in high potential locations. Our sustenance sales in Q1 FY '27 remained well diversified across region, demonstrating the depth of resilience in our portfolio. In MMR Birla Taranya, in the Thane micro-market, and plotted development at Birla Mrida in Boisar together delivered a strong sustenance booking value of INR 150 crores following their respective launches in previous quarters. Pune contributed INR 119 crores in booking value, supported by continued momentum at Birla Punya Phase 2 and Birla Evam. In Bengaluru, the response for Birla Trimaya Phase 4 has been particularly encouraging with 91% of the inventory launched within the last 2 quarters already sold. This strong absorption reinforces our confidence in Bengaluru as a key growth market for the business. We also continue to strengthen our position in redevelopment segment with the recent announcement of another redevelopment project in Vashi, Navi Mumbai, carrying a potential GDV of approximately INR 2,600 crores. With this addition, our total residential redevelopment portfolio has increased to approximately INR 4,300 crores. This represents another important step in scaling a business vertical that offers significant potential across high-demand MMR micro market, supported by trusted partnership and disciplined capital allocation. Our commitment to the core real estate business further strengthened by the successful completion of the divestment of Century Pulp and Paper to ITC. This transaction has enabled us to significantly reduce our net debt position to nearly 0, materially strengthening our balance sheet and creating greater financial headroom to pursue a larger and more attractive business development pipeline while maintaining our disciplined approach to capital allocation. Safety remains a fundamental priority across our development, the achievement of 15 million safe man-hours at Birla Niyaara, a significant milestone and testament to our collective commitment of our teams, partners and workforce to building a culture where safety is nonnegotiable and always comes first. As we look ahead, our priority remains clear: scale with discipline, execute with consistency and create developments that are defined by trust, quality and thoughtful design. We believe our strong brand, diversified portfolio healthy balance sheet, a customer-first approach position us well to deepen our presence across key markets and capture the opportunity ahead. As we continue to grow, our focus will remain firmly on creating sustainable value, not just through the scale of our business, but through the quality of every development we deliver and the trust we build with our customers and stakeholders. Thank you. Now we will now open the floor for Q&A.

[Operator Instructions] The first question is from the line of Karan Khanna from AMBIT Capital.

Congrats team on signing the Vashi redevelopment project yesterday. A couple of questions from my side. Firstly, K. T., if you look at Slide 4 of the investor presentation, how should one read this? Absorption levels have stayed very healthy for the quarter, even without much of launches at an industry level, implying healthy levels of sustenance sales. But if you look at your booking value of INR 3.3 billion, it indicates sustenance sales have been relatively weaker. So what are your thoughts on this? And what else can be done to really push up sustenance sales as a company? And as a follow-up, what needs to happen for the presales trajectory to see a material growth from what we've seen in Q1 for the rest of FY '27?

So we had about INR 327 crores of net sales. Actually, the gross sales was much higher. We had a few cancellations and a few terminations so people are not paying up. And notably, a couple of them -- a couple of little more of them has been from Birla Niyaara. So that is why there has been a kind of a dent in net sales. But I think otherwise, if you look at our performance in Pune in -- our both the projects in Pune and in Thane, Birla Taranya and even in Bangalore, we have had a steady performance. So -- and also, there has been price increases. So I'm not really worried about that, we will pick up. Of course, there was no launches. So therefore, the numbers are a little muted, but this is largely tempered because of a few cancellations. But we have -- let me assure you that these cancellations, we are booking at higher prices. For example, at Niyaara, we had 4 cancellations, but 2 of them we have booked at much higher prices with at least about INR 4 crores more per apartment.

And then just on...

Yes.

Yes. Then just following up on this and when you said that your launches -- you had no launches during the quarter. If you look at Slide 17, which is INR 9,600 crores worth of launches that are planned for FY '27, what's the current approval status for all these projects? And do you see a risk of slippage for any of these projects into FY '28?

So largely, we are more or less on track. Most of the launches are planned for Q3 and Q4. So currently, we're on track for all these launches.

Okay. And then second question, K. T., on -- now that you've received the proceeds of around INR 3,500 crores from the sale of pulp and paper and with Khar redevelopment last quarter and now Vashi that you signed yesterday with revenue potential of around INR 2,600 crores, should we now view redevelopment and JV-led projects as becoming a more important part of Birla Estates BD strategy? And when we look at, let's say, higher concentration of Mumbai, how are you looking at the market and the overall demand elasticity, let's say, over the next 12 to 14 -- 12 to 24 months, considering that most of the projects that are expected to be launched and most of the BD that you've signed so far is primarily in the MMR market?

Yes. So the residential real estate market continues to demonstrate strong resilience. Housing sales across India's top cities has grown by more than 8% year-on-year, which is actually reversing the decline, which was witnessed last Q1 2025. And more importantly, this growth is being led by premium housing, which is continuing to reflect a structural shift in buyer preferences rather than a mere cyclical demand. And so Mumbai, where else but Mumbai for premium housing. So I think the premium housing demand continues to be very stable, strong, growing both in price terms and volume terms. So we are pretty confident that we are betting on the right market. However, having said that, we are also looking very strongly into the NCR market, both Gurugram and Noida, prime locations in these markets. And also in Bengaluru, very premium locations. We are strongly following up on our BD acquisitions in Bangalore and also into Pune at the right location. So I think it's more micro market led. There are certain micro markets in each of these cities, which are showing very strong growth trends, and we'll be focusing on those.

The next question is from the line of Akash Gupta from Nomura??

Hello. Hi. Am I audible?

Yes, Akash, you are.

Congratulations on a resilient performance. My first question is with respect to margins for our redevelopment projects. Is this any different? Like what margins are we looking at for these type of redevelopment projects?

So Akash, we are looking at a very premium location for these redevelopments. So our margins are as good as any other normal projects. There's no worry for that. We are in the region of about 25% to 30%.

Understood. The second question is on the cash that we have got from ITC. So is this any tax implication? What is the post-tax cash inflow that we will get from this ITC?

So Akash, Keyur here. We have received INR 3,325 crores, which is approximately 95% of the consideration amount. The balance 5% will be subject to certain conditions subsequent and certain working capital adjustments, which had to be reviewed because it takes time for the working capital to be completed. So that's the balance 5% to be received. Yes, there would be some -- there would be a tax outflow on that. That is in the process of being worked out. So I'm not in a position to give you that number right now. But yes, this is what we have received so far.

Understood. And sir, just from a launch strategy standpoint, we have -- just on the Niyaara launch, what is the time line? Any thoughts on the kind of format that we are bringing -- just thoughts on that, please.

So Akash, as I mentioned, we are focusing on large formats, similar formats like what we did in Silas, but slightly modified with fungible options, et cetera. There's a lot of people who are waiting for combined options, larger formats. So that has been decided, and we are moving ahead with the approvals. Hopefully, we should get RERA by end of Q2 and kind of launch this early Q3 or mid-Q3. That's the current plan now.

Understood. And any feedback on the initial demand for the product...

Yes. As I mentioned, Worli continues to be a very, very strong market. In the premium segment, it is really commanding good premiums. We have increased our prices for Silas and Tower A. Market continues to show strong demand. We have a strong pipeline. Some of our existing customers and some other customers are waiting for larger formats, et cetera. So we are not worried about demand. It continues to be very healthy and strong.

The next question is from the line of Amit Srivastava from 360 ONE Capital.

Sir, my first question is on a medium-term growth prospect for the presales. In FY '25, when we first hit the INR 8,000 crores presales, we have indicated that while annual guidance we may not give. But over the medium term, next 2, 3 years, we'll reach towards INR 15,000 crores. But FY '26, we were at INR 8,000 crores. And this year, looking at the business development launches, we believe it could be in the similar range. So have we recalibrated our growth strategy or time line or we are confident of achieving the INR 15,000 crores over the next 2 years' time period?

So Amit, we are absolutely confident of our guidance and our long-term guidance that we have given. We are all aiming towards that. We are building up our BD pipeline and also showing up on phase launches. And we are very, very confident that we will be able to achieve that.

Okay. And sir, in terms of -- we were talking about last 2 quarters on our commercial real estate portfolio development plan. So can you update us what is the present progress we have made so far or any time line in terms of which project we would be like to prioritize first and start with?

So as I mentioned in my last interaction with you that we are planning to commence the commercial development from the Birla Niyaara project itself, first about 1 million -- 1.3 million square feet. Our attempt -- the design is in planning stage, and we are hoping to get the approvals and start commencement before the end of this financial year. I think a 4-year time is what we are looking at getting into the leasing stage. And given the current market conditions, I think it should be at least about an INR 800 crore annual leasing when it is fully stabilized.

This project can be launched parallel to our Birla Niyaara Phase 3. So no problem on that side.

Absolutely, no Srivastava. This is commercial. There's no -- we just take the approval and start building, start construction.

Right. So what would be the CapEx kind of assumption on this if we are 1 million square feet?

CapEx? CapEx is not because land is not that only had to pay for.

Yes. So construction spend, basically, if we look at...

Yes. That details are there that I can share you if there is too much -- I mean it's not something which is too big. And if we have also options of going with a partner, with a private equity partner. So we are weighing all of those options.

Sure, sure. Sir, last question is in terms of construction spend. Last quarter, we have guided for INR 1,000 crores for the FY '27, whereas we have already spent INR 440 crores in 1Q. So this would be in similar, same range of INR 1,000 crores for the FY '27 or it will escalate? And what would be collection guidance for FY '27?

So Amit, INR 437 crores includes construction cost of around INR 226 crores. Balance are other costs like approval costs, design costs. So overall, the construction cost is INR 226 crores for the current quarter. And yes, around INR 1,200 crores to INR 1,300 crores would be the overall construction cost for the current financial year.

Okay. Sure, sir. And just some clarity on Birla Niyaara Phase 2, where the cancellation has happened in 1 quarter, we got 4 units which got canceled. So any specific reason for that, sir?

We had 1 cancellation in Tower A and 3 cancellations in Tower C -- Tower B. But 2 of them have already been booked in the last quarter. One, we have again booked it this quarter. So these happen. People are not paid up. They have struggled payment schedule, somebody they have a death in one family, financial constraints, they don't want to continue, et cetera. The good news is that we have been booking it at much higher prices. The rebooking has been at much higher prices. At least every apartment we have sold at INR 4 crores more.

So what is the current ticket size, sir, on an average?

In Tower B, Niyaara?

Yes, Tower B.

INR 40 crores.

The next question is from the line of Pritesh Sheth from Axis Capital.

Just a couple of questions. First, on the BD, I mean, just in case you want to just indicate what sort of pipeline do we have right now in terms of advanced discussions? And would be helpful if you can provide the split across cities as well. Yes, that's my first question.

So our BD pipeline continues to be very strong. We have more than about worth term sheets and advanced deals worth about more than INR 60,000 crores in the pipeline. These are reasonably split between NCR, Mumbai, Pune and Bengaluru. Of course, because of the push on redevelopment, we have a slightly stronger pipeline in Mumbai. So otherwise, we have even very strong proposals going on in NCR market, Pune, Bengaluru. So in all markets, our focus remains equally strong. I think all these markets in the right micro markets, there is very strong demand for premium housing, and that's where we are focusing on.

Sure. Any targets in terms of completions in next 1 or 2 quarters because probably that would set the tone for next year's growth. So out of this INR 60,000 crores, how much do you expect to complete in this quarter, next quarter?

Quarterly things in BD is not possible. Whenever we get the right deals, we will consummate it. For example, the deal that we concluded Vashi that moved very quickly within about 6 months' time or less than 6 months' time, we could conclude it. There are deals which we are negotiating over the last couple of years also. So this is very difficult for us to really predict a quarterly basis. On an annual basis, I've guided in the range of INR 10,000 crores to INR 15,000 crores what we are aiming to do in this financial year.

Got it. Got it. And with that, I mean, at least you are confident that FY '28, we will have a growth in terms of presales, at least we have reached that stage in terms of business development where we can be confident, slightly confident about next year's growth.

Yes. So I'm not currently commenting on next year. I'm confidently commenting on the 3-year plan. I think that's what I would rather like to tell you...

Sure.

That INR 15,000 crores in 3 years' time is what I can guide you for.

The next question is from the line of Biplab from Emkay Global.

My first question is on the cancellations in Niyaara. So can you give us some numbers? And if you exclude those cancellations, what would have been our gross sales this quarter?

Gross sales have been more than INR 700 crores, INR 700 crores plus. But there have been because of these cancellations, partly Niyaara, partly in Arika and some of the other projects, it is what it is, what we have stated here. But as I mentioned, both in these markets where almost our full inventory is sold, like in Arika, I think, these are more like a cleanup situation. People are not paid. So they have been either terminated and some of them are canceled. But I can -- but they are getting rebooked at higher prices.

So these numbers will be reflected in the subsequent quarters.

Yes, yes, yes. Yes, yes, yes, yes, absolutely.

So we don't have to worry or lead between the lines.

Not at all. Not at all, not at all. All these cancellations been healthy, they only improve our cash flows and also our top line.

Okay. Okay. Sir, coming to business development. So you have -- last year also, you had a decent pipeline. And yes, you have closed 2 deals, but you have almost INR 60,000 crores GDV pipeline and similar kind of -- if I'm not mistaken, you had a similar kind of pipeline. How probable are you that you will be able to do, say, probability, I'm talking INR 15,000 crores, INR 20,000 crores of GDV of business development this year. And what are the challenges you have been facing in business development? I mean, Yes, that's the second question.

So Biplab, yes, I mentioned INR 10,000 to INR 15,000. So I'm pretty confident that we'll be able to achieve that. No reason to believe any other way. As I've always mentioned, the challenges are the right pricing, right location to get the right product with the right title and prudent risk management -- prudently risk-managed projects. So prices have, of course, it's gone up. It has to be in tune with the market and our return expectations, et cetera. And also, it has to be relatively risk-free. So that challenges always remain. It's a question of the right opportunity coming at the right time. As I mentioned, we are chasing several opportunities. Some of them are high potential opportunities, but it take a lot of patience to bring it to the right level. So work is going on, on some of -- on cleaning up some of the challenges that we have faced. This has always happened in the past also. Somewhere it is competition, overbidding, all of that. So it's a mix of both, the right clarity of location, sizing, market demand, competitive bidding. It's a mix of all of that. So we will continue to pursue business development with full rigor, but with full risk management within our risk management framework. And I'm sure the opportunities will come. We have to be a little patient.

One final question. Sir, I know cash has never been a problem when it comes to business development. But still when you have a cash in your bank, it gives you a lot of strength and confidence. And so sir, would you see now since we have paused, this paper sales business and our focus has entered to invest in real estate. So would you see a strong uptick in business development more so in outright purchases because you have significant amount of cash now?

Yes. So we always have -- if you look at our entire portfolio, the bulk of the deals are outright only. There has been a decent share of joint ventures, but largely more than 50% is outright development. So our focus will continue to be that just because we have surplus capital will not push us to be careless or rash in any way. It's very important that we become very careful because coming under pressure and putting capital in a slightly reckless way could be very detrimental for us in the long run. So our framework of risk management will continue. And I'm sure when the right opportunity comes, we'll strike.

The next question is from the line of Jaya Pathak from Motilal Oswal.

Harsh Pathak this side. Yes, first of all, congratulations for the new business development in Vashi. My first question is around that. So I think we have an affiliate partner in this project. So what would be the exact arrangement in this? And what is our economic interest in this project?

So our economic interest is 90%, 10% goes to the partner. Partner has been responsible for handling the around 500 society members and dealing with them, executing the negotiations and agreements with them, managing the vacation of them, getting the existing structure demolished, barricading, grubbing, and all of that, making the site ready for us to move in and clear and also helping tremendously in getting our municipal approvals.

Okay. So what will be the margins that we'll be getting on this project net-net?

Around 25% to 30% is what we -- because a very high margin, very high, very premium location. Extreme with the creek-view and all that, very, very premium from Vashi point of view. We expect to sell in the range of about INR 38,000, INR 40,000 per square foot. So therefore, it's a high-margin project.

Great. And what is the exact situation in the project? When can we aim to launch this? Have we received any...

We are looking at a Q2 launch.

Q2 of FY '28?

Yes.

Okay. Okay. Understood. And sir, my next question is on your cash flow statement on Slide #29. So there is this INR 282 crores of outflows towards land approval, capital outflows and deposits. What would this exactly be?

Yes. So Harsh, we've made some land payment of around INR 125 crores out of that. And there is a net deposit outflow of INR 150-odd crores. And there is some INR 7-odd crores of CapEx. Now the deposit is a net number. We have also adjusted some deposits from some of the projects. So that is the total summation of INR 283 crores.

Understood. And this INR 150 crores of land outflow would be towards which project?

So INR 125 crores land outflow is for the Thane project, INR 125 and deposit is INR 151 crores. So we've also given an earnest money deposit for land auction in Noida. So there is a deposit of that. Then we had to give a deposit for one of the redevelopment projects in Khar. And there has been an adjustment of the deposit given in some other projects. So the net deposit outflow is INR 151 crores.

The next question is from the line of Jay Shah from HDFC Securities.

So I have two questions on the new redevelopment that you have entered in Vashi. So what would be the carpet area for this?

So our salable area is about 1 million square feet.

Okay. 1 million square feet.

Yes.

Okay.

1 million square feet of salable area.

So around net-net -- so then -- so that implies to around INR 55,000, INR 60,000 of per square feet, right?

Yes.