Brigade Enterprises Limited (532929) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '20 Earnings Conference Call of Brigade Enterprises Limited. We have with us on the call today, the management of Brigade Enterprises. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. M.R. Jaishankar, Chairman and Managing Director of Brigade Enterprises Limited. Thank you, and over to you, sir.

Thank you. Good afternoon to all of you. Firstly, thanks for joining this conference call and showing an interest in our organization. I know these are difficult times, but I'm happy to say, and I do hope -- before I say anything, I do hope you and all your family -- families and associates are all in good health and nothing of concern, I suppose. And I do hope the crisis for the country, the COVID crisis, will get over in the next few months, at least. So -- but life has to go on, business has to go on. We will continue to do that. So firstly, I'm happy to report that FY '20 has been the best year for Brigade group since inception operationally. We have done the highest ever sales of 4.3 million square feet in substantially more than 90% to 93% of -- comprised of residential and about 7%, 8% comprised of commercial real estate sale. And we have also done the highest leasing of 2.5 million square feet in Bangalore and Chennai and to a small extent in Kochi. And -- but revenue-wise, it is less than last year. It is primarily due to the accounting standard Ind AS 115, which recognizes only the registered area, which is the methodology we are following from the beginning and which we continue to follow. Naturally, the stand-alone performance has been better than the consolidated one. And the profits are lower than last year, primarily because of higher depreciation due to capitalizing a few hotels and office building and also increased provision for interest. What is the positive thing is our cash flows -- operational cash flows continuous to be positive like last year, which is a good thing. And there is visibility on the business in residential post-COVID also. Naturally, like us, I'm sure all of you are also concerned what the situation will be during this COVID and post-lockdown era. So this morning, I did mention in the CNBC interview, like the residential business is beginning to pick up. In the month of April during lockdown, we had about 15% of the regular business before COVID. And in the month of May, that has gone up from 15%, it has gone up to 25% to 27%. And in June, we are hoping it will go up to 35% to 40%. We still have a nearly 1/3 of the month available. So hoping that there will be further improvement. And as regards the office space, yes, during April and May, there were no inquiries at all. It was totally dull period. But in the month of June, there are green shoots available. So we do see green shoots, and there are quite a few inquiries that are coming, while we cannot be certain when the decisions are taken. As regards retail, as you would have read in the media, there is a lot of hustle, haggling going on between the retailers and the mall owners. And that is -- substantially arrangements have been -- we have come to understanding and arrangements with the retailers and the malls are open. Since the multiplexes are not yet allowed to be open, the occupancies are still in the range of -- maybe 60% or so is the occupancy. And the walk-ins are -- they're beginning to improve. It is not really the same as before. It is still in the range of 15%, 20% of the pre-lockdown era. So this is work in progress, and we need to hope that things will recover. The confidence will be built up in the minds of the customers. And -- I mean, it can't get any worse. It can only get better from here. We are assuming the worst is over, which was primarily due to lockdown. And coming to hospitality. I must say all our 4 verticals, residential, office, retail and hospitality, have all done well, much better than previous years, much better than FY '19. FY '20, all 4 verticals did very well. But FY '21 is going to be a challenge without any doubt. So hospitality is one of the worst affected verticals or segments of Real Estate business, particularly because there is no international travel allowed. And the domestic travel is also happening not in a big way, it is primarily -- currently people who are traveling or those who are returning to their home states or home cities as the case may be. And the business travel confidence is yet to pick up. And international tourism is unlikely to be there, as all of you would agree. But the domestic tourism, I personally feel will see a lot of improvement. If not in Q1, it may happen in Q3, Q4 is what we expect. And the international travel also is likely to be resumed by middle of July. So of course, we'll come to know what are the conditions or the details of unlockdown 2, which may only be announced on 29th or 30th of June by the Minister of Home Affairs. So that is something that we have to keep our fingers crossed and hope to do. So the entire business is -- it's become, I would say, tough [ seat ] at least with the lockdown and COVID crisis. So it is -- but we need to be patient. We need to be resilient, and that is the only way to move forward and tighten our belts. That is what, from middle of March, the organization is doing that, cut the flab and unwanted expenditure and review all processes and bring in more technology [indiscernible] [ ever ] we had before. These are some of the things we are conscious and mindful of the fact, and we are working towards these aspects. A lot of information has been shared in the press release and in the investor presentation. I'm sure all of you will have many questions. And in this difficult scenario also, we have planned some launches in Hyderabad and in Chennai and also 1 or 2 launches in Bangalore and additional blocks in existing projects. This is how we are looking at. But we are quite conscious of the market condition, not taking any -- not taking or not going to take any indiscriminate approach. So that way we are conscious and careful, conservative, is what I feel. We'll be happy to answer questions. But before that, our CFO, Atul Goyal, will give his detailed numbers. Thank you. I'll be here to answer your questions. And our senior management and executive directors are also here. So suitably, wherever they need to answer, they will respond. Thank you.

Thank you, sir. Good afternoon, everybody. On behalf of the company, we would like to welcome you to the earnings call of FY 2020. To give you a brief business update, though CMD has already given, we have launched 12 projects aggregating to 5.3 million square feet during FY '20, out of which residential was 4.16 million square feet, including 2 projects in affordable housing of 1.28 million and commercial projects of 1.12 million. Further launches to the extent of 4.49 million square feet has been planned during this year, of which residential space aggregates to 2.65 million square feet, office and retail space totals to around 1.84 million square feet. Sales performance. As you know, we have done robust sales in last year. Our Real Estate performance for the quarter crossed 1 million square feet with an average price realization of INR 6,176 per square feet. We have maintained this momentum of 1 million in last 5 quarters. And we have achieved sales of 4.3 million square feet in FY '20, which is 44%, more than 2.9 million square feet, which we achieved in FY '19 and highest ever sales for the full financial year for the company. The sale value of the area sold during the year stood at INR 2,376 crores, an increase of 45% compared to sales value of INR 1,644 crores for the last financial year. The average price realization was INR 5,572 per square feet for the area sold during FY '20. In commercial segment, also the FY '20, we have pre-leased 2.5 million square feet, which is estimated to give annual rental of INR 237 crores. If we include hard options available, the area leased goes to 3.2 million, which is one of the highest for the company. In Hospitality segment, average occupancy rate has also increased to 67% from 64% year-on-year, excluding, of course, Four Points, Sheraton and Grand Mercure, which are new hotels and are still ramping up. The revenue in Hospitality segment has increased to INR 25 crores, around 8% year-on-year and EBITDA by INR 8 crores, around 9% year-on-year. Coming to consolidated performance. The consolidated revenue for FY '20 stood at INR 2,682 crores versus INR 3,027 crores in FY '19. The Real Estate segment clocked a turnover of INR 1,974 crores and EBITDA of 20% in FY '20 versus a turnover of INR 2,398 crores and an EBITDA of 23% in FY '19. The decreases in revenue, as CMD said, is mainly due to disparity in revenue recognition criteria as per the Ind AS 115, which is being followed by all real estate companies. City segment. Plot turnover of INR 334 crores [Audio Gap] versus a turnover of INR 309 crores and an EBITDA of 26% in FY '19. The leasing segment clocked INR [ 373 crores ] with EBITDA of 62% in FY '20 versus turnover of INR 321 crores and an EBITDA of 66% in FY '19. The decrease in EBITDA margin is on account of recent capitalization of CapEx projects, Brigade Tech Gardens 1. One of -- once these projects get fully leased, then I think EBITDA margin will get restored around that. The consolidated EBITDA, including other income for FY '20, stood at INR 713 crores versus INR 844 crores in FY '19. EBITDA margin, including other income stood at 27%, which is marginally dipped by 1%. So more or less, we have maintained our EBITDA margins during the year. The interest and finance charges for FY '20 stood at INR 340 crores. Consolidated profit before exceptional item, which is the impairment which we have taken in 2 of our properties: one is small impairment in hotel and one in our office property, which is vacant, it's still vacant. Consolidated profit before exceptional items and tax for FY '20 is INR 180 crores compared to INR 426 crores for FY '19. The major dip in EBITDA in Q4 is due to impact of Ind AS 115, which is because of the grossing up and accounting of land owner shares in the books as per Ind AS, which is -- which we have to account at 5% margin. So that generally affects the EBITDA. And also, we have done a good CSR expenditure in March in relation to COVID. And of course, there was some reduction in hospitality because March was bad. Actually, cancellations started coming in, and we had lost some revenue there in hospitality in March. Coming to debt position, which is INR 692 crores in the Real Estate segment and INR 539 crores in the Hospitality segment and around INR 417 crores is GOP securitized loan and INR 122 crores is its CapEx loan. And in leasing, it is INR 2,725 crores, of which INR 1,268 crores is securitized leased rental loans and INR 1,457 crores is CapEx loans. The cash and cash equivalents stand at INR 437 crores as on March 31, 2020. Consequently, the company's net debt outstanding as on March 31, 2020, is INR 3,518 crores, out of which BL share is INR 2,831 crores. The company's effective cost of debt remains steady at [indiscernible] 9.57% per annum as compared to 9.62% at the end of Q3 FY '20. We have a credit rating of A, and I'm very happy to say that, that credit rating has been maintained by both CRISIL and ICRA, even after the advent of COVID-19. I also wanted to share some leverage ratios. We have interest coverage ratio of around 2.09x and net debt equity of 1.17x as on March 2020. The net EBITDA stood at 4.94x for FY '20. The return on equity was 3.8% for FY '20. I'll hand over it back to the moderator for question and answers. Thank you.

[Operator Instructions] The first question is from the line of Parikshit Kandpal from HDFC Securities.

Congratulations on decent performance in the tough time. Sir, my question pertains to the commercial business. So what has been the rental collection efficiency if you can highlight for the month of April, May and June? Hello?

Subrata Sharma?

So in terms of rental collection percentage, we are somewhere around 96% plus.

For April, May and June, sir, as of now?

Yes, for April, May, June. June is ongoing, okay? So March, April and May, we are 96% plus. And in fact, in June, we are poised to achieve 97% or 98% approx.

Okay. Sir, any of your clients have invoked force majeure in the office portfolio?

No, none of them. In fact, they were requests, okay, but we actually negotiated the request well. And finally, people are paying. And that's why we have a healthy recovery percentage.

Okay. Just on the mall, sir. So now you're gradually opening up the malls, so if you can highlight what kind of consumption levels the tenants have reached on an average if you can?

No, as I mentioned earlier, the walk-ins and the sales are currently at about 15% to 20% -- walk-ins are in the range of 15%, but the sales are, I think, in the range of 20%, but the correct figures we'll come to know only at the end of June. Because the -- only on 10th of June, the retailer started opening up in our malls. And almost on an everyday basis, retailers are opening up. So it is a bit premature for us to give a clear indication. But going by what we see in the walk-ins and generally talking to some retailers, so it is going to be in that 15%, 20% range. But maybe by 1st week of July, we should get a clear picture what the trend is going to be. Naturally, the window shoppers are not many. It is reasonably serious buyers are coming. So as I said, the -- in Karnataka, there is a restriction on closure of restaurants by 9 p.m., which is difficult, which means people have to get back home by 9 p.m. means we need to close the restaurants by 8 p.m. And then the sale of liquor, food, everything will get affected. So that way, the restaurants are affected much more than the retailers and the multiplex guys are not yet allowed to be opened.

Okay. Sir, my last question is what kind of relaxation you have given? If you can just give a framework for the mall tenants, like from grocers to departmental stores so to the kind of multiplexes. So what kind of relaxation? If you can just give a framework because you said that you have arrived at the negotiations with the tenant and those shops are gradually opening up?

See, on a general basis, we had given 50% exemption of rent during the lockdown period. And on a graded basis, revenue sharing with the minimum guarantees -- with reduced minimum guarantees till September and then a higher guarantee and higher revenue share going forward. So it is -- there is no one rule fits everybody. There have been some changes based on the retailers' requests and retailers' proposals, et cetera. But I think on an average, you can say, we have exempted 50% of the rent during the lockdown period. And then I think going forward, the retail, as I mentioned earlier, it is a bit premature to say how much of revenue will come. Up to September, it is going to be a challenge.

[Operator Instructions] We take the next question from the line of Adhidev Chattopadhyay from ICICI Securities.

My first question is, so what is happening on the leasing in both Tech Gardens, Bangalore and WTC Chennai? So Chennai, we are sort of fully leased, I think, during my last call and Tech Gardens, a lot of discussions are on. So could you tell us when the fit-outs will start and have any leases being canceled or is everything on board? Yes, that's it.

Yes. Subrata Sharma will take the question.

So in terms of Chennai, as we said, it's mostly leased out, only 1 floor we are actually keeping it for managed office or incubation spaces. As far as BTG is concerned, it's a C cluster, we are now seeing people are actually taking over the premises, and they are just starting the fit-outs. There are marginal cancellations. It's somewhere around 2 lakh square feet. But having said that, since May 4, we are seeing quite a good number of site inspections that are happening, okay? And a lot of discussions are also happening. So I think going forward, it will mature more, and we see like positive signals in the market.

So this is for Chennai, you said, around 2 lakh square feet has been canceled, is it or...

No, no, no, it's for...

It's for Tech Gardens.

It's Tech Gardens.

Okay. Tech Gardens. Okay. No, sir, so just to -- just -- sorry for interrupting. On Chennai, so the 95% odd space we have leased out, so everything is on track, if you have to understand correctly?

Everything is on track. And in fact, in Chennai, our existing tenants are asking for more, okay? So Chennai, that way is very positive, and we are completely secure. BTG, we have the inventory that we have to lease out.

Okay. So in Chennai, when do the first rentals start coming in for us?

So we will be handing over after the lockdown period because Chennai has another round of lockdown. So it will be somewhere around 15th of July onwards. And post which, approximately the rent fee [Audio Gap] 4 to 5 months to 6 months, okay? So if we can take 5 months from, say, August 1.

So fourth quarter of -- from January '21, first quarter of rent, you'll be getting.

Yes, yes, yes.

January '21 onwards, right? That is how it is? And sir, Tech Gardens, what is the area leased? I believe 50% was leased, right, pre-COVID, around 1.5 million square feet out of the 3 million. So are you still at the same level? Or you're saying 2 lakh has gone out of that?

Yes. So 2 lakh has gone out of that. And what I said is like site visits are happening. So basically, in the next 1 month, we will see, like 1 or 2 transactions we are hoping to close over there.

Okay. So sir, just for -- again for housekeeping purposes, we had, as of March '20, 1.3 million square feet is leased out with the balance still to be leased?

Yes. Yes.

Yes.

And rental, sir, when do you expect them to start again over here, the first rentals?

It has already started substantially. It has started almost from the month of January itself. January 2020 itself, it has started. So that whatever has been leased, the bulk of the rents has started in Q4 of FY '20.

Okay. Sir, Q4, our rental income includes the entire like 1.3 million square feet...

The entire -- see, the thing is it is graded, something has started in January, something has started in March, so that way. But there is no significant addition into that. But from April onwards, it is there.

Okay. And sir, whoever comes in now would again get this -- only start paying from Jan. Is it a correct understanding now? If they would sign, they would do the fit-outs and -- the new guys, I'm saying, in Bangalore, you really started again...

No, it can vary. See, for medium-sized office space, if the conclusions happen, a normal rent-free period is about 3 months. As the size of the office space conclusion increases, it can become 4 months, 5 months like that. And also during this period with poor labor availability, there are various other issues. So that way it may be wise to consider it is about 4 months and in large spaces 5 months.

Okay. Fine. Sir, and the second question is on our debt level, debt across segments, especially in hotels, the GOP securitized debt. So how are the lenders looking at it? And for the hotel business, specifically, how are you managing costs? And do we see an operational loss in FY '21? What is your outlook for that?

Yes. So yes, we have taken moratorium in all our hotels and banks are very supportive right now. And we don't have any issue on that. In hospitality, yes, definitely, some support will be done by Brigade Enterprise Limited, but we'll have to see how operationally hotels perform during the year. It's very, very difficult right now to predict as to how hotels will do. But our effort is that whatever hotels are in operations, we'll try to do it operational breakeven and then try to improve on the performance of the hotels.

Sure. Sir, what would be the threshold for breakeven, like around 30%, 35% occupancy is a threshold across our hotels or...

Yes. As I mentioned, Vineet Verma, the CEO, will respond to this.

What we have actually done is that we have arrived at breakeven points for our respective hotels. As you know that our hotels vary from 5-star Deluxe right down to 3-star. So for every hotel, we have worked out a breakeven point, comprising essentially, let's say, about 60% coming from room revenue and the balance 35% to 40% coming from F&B revenue. So based on that, for each hotel, we have worked out certain projections, and our target is to achieve a breakeven in the coming few months. So for every hotel, we have a different breakeven point.

Okay. So what will be the broad range? I'm not asking the exact figure, but what's the occupancy...

Yes. Normally, you can look at anywhere between 35% to 40% occupancy if we achieve in rooms, with about -- roughly about 25%, 30% coming in as F&B revenue, we should be achieving a breakeven. That's a broad average, if you can say.

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

Sir, to continue on that hospitality, is there any promoter, personal guarantee or holdco guarantee on the hospitality assets? I mean I just wanted to know, can the hospitality have any claim on any nonhospitality assets or on the holdco company?

See, there is no personal guarantee to clarify. But in 1 case, there is a corporate guarantee of Brigade Enterprises for part of the hospitality loan.

1 asset, for 1 asset.

Yes. 1 asset, yes.

Okay. Okay. And the second question is on the residential collection. Sir, I mean, there was a lockdown. And still, I just wanted to know till date, is there any delay in collections in -- any default in residential collection in this -- till date in the last 2, 3 months?

Yes. Our CEO, Rajendra Joshi of Residential (SBU) will respond to this.

Yes, there was a drop in collections in April. But I would say that it was at about 50% to 60% of our collections of the corresponding month last financial year. In the last month, in May, it has improved to about 70%. For the quarter, we expect to touch about 80% to 90% of our collections what we had done in the first quarter of last financial year. Is there a slowness in collection? The answer is yes. But I think [Audio Gap] forming quite well.

The next question is from [ Yash Gupta from Angel Broking. ]

My first question on the Brigade Tech Gardens. Brigade Tech Gardens, Phase 1 has some hard options, which need to be exercised before 31st March 2020. And the second phase needs to be completed before 31st March 2020 for some tax benefit. Can you share some detail about that?

Yes. I'm happy to say we have received the completion certificate or occupancy certificate, what is called in Karnataka for both Brigade Tech Gardens and World Trade Center Chennai to be within the sunset clause of 31st March 2020, as per SEBI rules. So both the projects we have got the clearances. So that is something we are to be happy and proud of the achievement in spite of the lockdown impact in the last fortnight of March. And as far as hard options are concerned, due to the lockdown impact of 2.5 months, so we have -- at this stage, we have orally agreed to extend the hard option exercising period, also everything by about 3 months to 4 months like that. And it is a subject under discussion. But a minimum of 3 to 4 months extension will be given.

Okay. Can you share some detail about the deal for the [ stick-through ] in the hospitality division? And a follow-up on that, as of now, hospitality sector not in favor due to the pandemic. So are you thinking about any other way for decreasing the debt levels like monetizing the land bank?

See, for the time being, I think we have to just stay put and not talk about any kind of private equity for hospitality. Yes, in Q4, we had come to an understanding with a large fund. For whatever reason in the final stages, it did not happen, primarily because they got involved in a much larger deal and they wanted to look at this deal or conclude this deal in Q1 of FY '21. But post lockdown from March 25, the issue neither they spoke to us nor we spoke to them. We thought there is no point in talking about a transaction during this difficult period. And for the time being, we are not planning to make an immediate attempt to get a partner. Because due to the difficult times, people will think it is a distressed deal, which is not going to be with us. So we will, as I said, tighten our belt and try to focus our effort on improving the business and wait for a more opportune time hopefully in this financial year, if not in the next financial year. As far as monetizing the land bank, currently, we are not planning to explore any monetization of land bank. On the other hand, there are certain small nonperforming assets, et cetera, are there, that we will look at encashing if the price [Audio Gap] But they are not -- nothing major.

Okay. Last question on the Bangalore market. Bangalore is IT development -- after the pandemic, several companies are planning to move work from home on permanent basis. So what's your view on this? And how you are seeing this situation emerging in Bangalore?

See, so far, all existing clients, as Subrata Sharma said, there is no problem of receiving the rent. And a whole lot of people, they are also examining, there's a lot of media talk on some companies wanting to exit maybe office space and the work from home, et cetera. How much of it is true? Nobody knows. Some of the companies without getting into the name, they are using it as a strategy. Such statements are released as a strategy to get better deals from new leases. It's more like a -- they're using it as a threat and try to negotiate better. But at the same time -- I'm not saying work from home as a concept will go away fully. But at the same time, it is not going to become a permanent feature for everybody. So maybe some days in a week, people may do work from home. And there could be various strategies depending on the nature of business of each. And I would say, data security and various issues are to be considered. That's the reason I said the nature of each one's activity. Another important thing which many developers and many social psychologists are also saying is that life is not just about work, it is also about social interaction, and man is a social animal. So that way, we all need to interact with each other, and that is when new ideas will crop up and people need to brainstorm and the thing is about agile working groups and cross-functional teams, et cetera, all these things are there. So from that angle, it is not going to go away fully. And 1 more important aspect to be considered is with social distancing to be maintained, many companies need to lease larger office space if they are interested in the safety and well-being of the people than compared to 65, 70 or 80 square feet per person, which IT companies are used to. They're used to packing people like sardines. So that way they need to be much more be conscious for their own responsibility and give sufficient space to the people. So if that is there, there is more requirement of office space will happen. And -- but in order to mitigate that additional cost, some of the companies may start this partial working from home. So that way they may end up balancing. But on the whole, like these questions keep cropping up every crisis we face, whether it is 9/11, whether it is global financial crisis in 2008, 2009, there are too many dooms this year, saying that the entire business may collapse, et cetera. But there are other people in -- during this period in 2008, the McKinsey estimate of Indian software exports was $50 billion. But the sector achieved $50 billion in 2006 itself. And currently, we are at about $180 billion to $190 billion is the size of IT sector and which is still less than 10% of the global IT sector business. That -- whatever dent India has made is quite marginal. And like post Y2K, post global financial crisis, new areas of business crop up. So now there could be COVID-related businesses may come. So that, I think, some estimates in international group had estimated that itself to be in the range of $450 billion as the new areas of our business. So there are new opportunities. Like 1 year back, the fad was coworking. So we don't know whether coworking will survive or not post the coronavirus from Wuhan. We don't know what will happen. So let us wait and see. Let's be -- we are positive and people -- some many funds who invest in office space, they are also quite positive about the business opportunities that are likely to come up, if not in 2020, it can happen in 2021. And for that, we need to gear up now. Real estate is something we can't produce it overnight. We need 24 to 36 months, if not more. So that's way we are not overly pessimistic.

Sir, last question, when [ they were made ] the Orion Uptown seems to be a mall and a hotel. So residential is backside of the mall or some changes in the plan?

No, no, no change in the plan. It is an integrated project of which the first phase was the residential, which was completed, and it's called Brigade Golden Triangle. It is completed and fully occupied. Then we have an office block. And we also have a retail cum hotel block. We -- Orion Uptown, it is complete. In fact, it was to be -- I would say, soft opening was to happen on March 27 when the lockdown was announced. Now we are planning soft opening sometime end of July. And there is also 134 key, Holiday Inn Express hotel. That hotel also is ready, and we have received the completion certificate in the month of March. So we will do the soft opening by end July, early August.

[Operator Instructions] The next question is from Mohit Agarwal from IIFL.

Sir, my question is on the leasing front. So according to you, what would be a reasonable time line where you see the BTG asset getting fully leased out? So -- why I'm asking this is your FY '21 projections right now assume that by the end of FY '21, the asset will be fully leased up. So what is -- what according to you when you can reach that milestone?

So basically, because of this COVID scenario, even now, I mean, just we are saying that site inspections are happening. But again, if you ask me the real momentum in the market, we are expecting somewhere around next quarter onwards, okay? So if I take that signal as our potential to lease out, I think there will be a spillover by approximately 3 to 6 months of a limited amount of inventory in BTG.

So mid-FY '22, will that be a...

Yes, that should be a reasonable thing. But again, if you ask me, like going forward, in 3 months, I think we should get a better signal. Likewise, like when the transactions happen, okay, we might get a big ticket transaction done and 1 block might get fully leased out, just like it happened in Chennai. So if those kind of 2 or 3 transactions happen, we might actually be even able to, what you call, lease out everything in this financial year, but a reasonable target should be a spillover by 3 to 6 months.

Sure. Sir, what is also the update on the SABMiller project, we were about to find construction there? And also in general, what is your outlook on future CapEx, both in the annuity and the hospitality business? Like would you -- will you maintain the momentum? Or would you like to kind of watch the market and then go ahead for any new CapEx?

Sure. Yes. I'll answer this question. So one is the SABMiller. The project is called as a Brigade Twin Tower. So that -- we had just started the project in the month of March. Then naturally it had to be held up. Now we have restarted the project. We are going ahead with the project because it is something which is likely to take 30 to 36 months. So we are talking about FY '23, FY '23 only when it will get over. So at that time, the market conditions are also -- according to us, it will be very different and will be positive. And the financial closure has taken place. There is no PE or any partner there. It is 100% Brigade project. And the second question was concerning additional investments in hospitality, no? Actually, in reality, we had 4 projects. One was a hotel near the Bangalore International Airport, where it was at a very, very, very preliminary stage of earth excavation, that we have put it on hold. And another was a 3-star hybrid style project in Mysore, where the structure is coming up. That also we have put it on hold. And there are 2 more projects which are in progress. One is Novotel Suite, which is part of Brigade Tech Gardens. That was in the reasonably advanced stage of construction. So we are going ahead with that project, and it is not a very large one. And fourth one is Marriott Residences, which is part of Brigade Residences at World Trade Center Chennai. That at this point of time, that work also is in a very early stage of excavation and et cetera. That work may continue only in the month of July since Tamil Nadu or Chennai is in second lockdown. So even that, we don't anticipate any issue because that's also going to be 3 years later. So that way, we feel we are okay with our decisions and not looking at new hospitality projects, at least in this financial year, unless we know what the market is likely to be.

Great. And sir, last one, if I may. What percentage of your commercial portfolio is coming up for leasing in this fiscal? And have any of the tenants in the -- on the commercial side come back to you with any negotiations for rentals? You mentioned, some of them are using the work-from-home thing as a strategy to pull down the rental. So anybody who has come to you and asked for a lower rental or something like that?

Thanks. See, what is coming up for leasing this year is primarily Brigade Tech Gardens -- primarily the Brigade Tech Gardens, which is what Subrata Sharma said about the C-zone of Brigade Tech Gardens will be -- in reality, we will be good to be in operational mode only from October or so onwards. And thankfully, we have no clients trying to renegotiate. So that is, I would say, luckily we are...

Even in the existing portfolio -- sir, even in the existing portfolio, nothing significant has come in for...

No. Absolutely, no renegotiation. The only very small concern that was there was in World Trade Center Kochi, where -- we have just 3, 4 clients who are smaller-sized clients of less than 10,000 square feet because the Government of Kerala announced rent-free for 3 months -- 3 months for clients in their government-owned buildings. There are some discussions going on with the 3 to 4 small clients we have in that building. So we may show some marginal concession and take it forward.

The next question is from the line of Alpesh Thacker from Motilal Oswal Financial Services.

Congratulations for a very good set of numbers, sir. Most of my questions have been answered. So there are like a couple of ones that I may. So one would be on the -- the impairment loss that we have taken this time of INR 205 crores, so can you throw some light on that, sir?

Yes. So as per the SEBI requirement and as per the guidance by the institute, auditors were supposed to value all the properties and then see what is the carrying value, whatever is the W.D.V. value, whether that is fit based on the stressed asset test in times of COVID. So we had passed that test in all -- in -- mainly in all our properties. I think in -- already in Racecourse, we have taken a minor impairment of around INR 6 crores. And there was a property called Broadway, which is still unleased. There, we have taken an impairment of INR 15 crores, but we are very, very confident that these properties will do well and maybe impairment may go away in 1 year, 1.5 years. So we'll -- let's see, but we are confident.

Okay. Okay. Got it, sir. And sir, second one is, sir, last year, we had like -- we wanted to get into coworking space via BuzzWorks. So are we targeting to increase it from like -- we were targeting to increase it from 200 to 2,500 seats in FY '20. So what is the status on that?

See, thankfully, we never got into coworking in the way it is understood or it is being done by, say, WeWork. 1 seat, 2 seats, 3 seats, et cetera, we have never got into that thing. The coworking with the modification we got involved was more, I would say, managed offices. It's furnished offices with a lot of services. For larger companies, maybe for 50 seats, 100 seats, 300 seats like that, which we have done maybe to the extent of 2,000 seats. Yes, 2,500 seats, we have done that. And going forward, we don't hesitate in doing similar things in our buildings, which are getting completed now. But overall, I think we will take a wait-and-watch look before we get into any kind of expansion because coworking is another area due to social distancing and all such issues. People are a bit skeptical to -- whether to occupy a coworking space or not. So that only time will tell. Thank you.

Okay. Okay. Okay. Got it, sir. And sir, 1 last question, if I may. Sir, on the moratorium part. So can you just help me that on what all business segments -- the loan in the business segments, have we taken moratorium for, apart from hospitality...

So we have taken moratorium very, very selectively. We have not taken moratorium in all our loans where we are, like Subrata said, that we are achieving 95% to 96% of rentals. So we have not taken moratorium in office assets. We have taken moratorium, mainly in Retail and Hospitality segments where there is a stress, and we are continuing with that moratorium. There are some or 2 other loans -- small loans where maybe a resi or in BCV, which is our 50-50 joint venture, there also, we have taken loan moratorium.

Okay. So what would be the total ballpark figure on which we have taken the -- total loan on which we have taken the moratorium?

It will be around INR 1,200 crores or so.

The next question is from the line of Murtuza Arsiwalla from Kotak Securities.

A lot of the questions have already been answered. But if you could give us some color on what the impact of the current lockdown and crisis has been on pricing in general, ARRs for hotels, residential pricing or even the rentals in Bangalore, et cetera? Some color on that.

Yes. Generally, as far as residential, first I'll answer. So in Bangalore and South Indian markets, as you know, the prices are, by and large, very reasonable and fair, and they are not highly priced products. On an average, the city prices are maybe below INR 5,000 square foot for the city. And Brigade's, our own average pricing is about INR 5,600 per square foot, except in the Q4, we have achieved higher which is based on the product mix, et cetera. So there are no great pricing pressure as it's made out to be by some of the industry bigwig's in the country. Like, whatever discounts that may be there, they are marginal in nature, certainly not 20% or anything like that, which is unlikely to happen, unless people want to exit the business, which are stray cases, they may give it at whatever price and get out of the market, that is different. And as you know, post -- or almost all listed developers in South -- Bangalore, we all work on fairly small margins. Generally, PAT is all at single digits in most cases. So there isn't much leeway. As far as office is concerned, as I said earlier, existing clients, there is no renegotiation or anything that we have come across. But going forward, I think it's a question of overall demand-supply situation and it's also -- within micro markets, within the city to also be seen. But I think there is no one rule fits all. It is on a case-to-case basis, people will take it the call based on the completion period of the building, based on when the leasing starts, what kind of rent, what is advance, everything, the combination of 4, 5 factors that will drive the rental. But there is no serious concern.

Sure. And then hotels, sir, the ARRs for hotels?

Yes. Mr. Vineet Verma will respond.

As you know, that the hotels have actually literally been shut down for business from the time on 25th of March. In fact, we started feeling the impact from the first week of March itself with a number of cancellations coming in. So in terms of... [Audio Gap]

Participants, please stay connected. We seem to have lost the line for the management. Please stay connected while we reconnect them. Participants, thank you for patiently holding your lines. We have the line from the management reconnected. Over to you, sir.

So may I continue? Yes, as I was answering in terms of your question on ARRs, unfortunately, the ARRs for our hotels have been decided by the respective state governments. As you know that whatever little business that our hotels are getting, which are essentially all in single-digit occupancies, the government has fixed rates for us that we can only charge such rates because most of our guests who are staying with us are all quarantine guests. So let's say, the State of Karnataka, the government has fixed a rate of INR 3,000 plus INR 1,100 for the 2 meals. So essentially, it's INR 4,100, all-inclusive, including taxes. So in terms of that, the ARR averaging across all our hotels is around INR 3,000.

The next question is from the line of Pavan Ahluwalia from Laburnum Capital.

Just a question on the debt situation and the discussions with banks. So if we were to do some sort of stress case and say, look, over the next 12 months, malls come back to normalcy and maybe over the next 12 to 24 months, hotels come back to normalcy, what is the ongoing discussion with banks? Because in cases where we've LRDed some of these assets out, do we have a sense of what the breakeven level of cash flow is likely to be to allow us to service interest? And in the event that there's a little bit of a mismatch or a delay where during the ramp-up period, the flows are not enough to cover the interest payments, are banks open to sort of restructuring these loans? Or would do you see banks maybe trying to step in, I guess, start some sort of NCLT process, try and take over the property? How are those discussions playing out?

So there are 2, 3 questions interwinding on. So I'll reply, see moratorium has been announced by the RBI. So if restructuring, if you're saying it has to come from RBI or the government, banks cannot do restructuring from their part. So that we'll have to see. We are assessing the situation, both in Hospitality and Retail. I think we -- in holding company in BL, we have good credit lines as well as internal accruals where we can [Audio Gap] loans, if required by the holding company. We have that [Audio Gap] available, and we are already -- we have kept that intact. Third question is about the breakeven. So it's a very -- it's very difficult right now to predict what will be the breakeven, but we have been doing sensitivity analysis at each and every level. So in retail, if I get at least 70% of the rentals which we used to get, I think then we'll be able to cover our interest and repayment costs. So that we'll have to see how the retail rentals go ahead. [ Hospitality, ] yes, there is a challenge. But I think if -- in Hospitality, I think 40%, 45% was what -- 40% what Vineet was saying for the breakeven, but that will not cover any interest and principal repayment. So obviously, we, as Brigade Enterprise, will have to fund that -- the interest and the principal payments.

So the real risk then is that even on a 3- to 5-year horizon because of an economic slowdown and maybe some overcapacity in areas like Retail and Hospitality, rentals stabilize at a sufficiently low level where you can't actually make the interest payment. Is that the main risk that management is looking at?

Yes, definitely. See, we'll have to -- see, because these are uncertain times. But definitely, Retail, I think, should -- we are very positive on Retail. I think the mall which we have are very, very conveniently located, and they are all prime locations where these malls are located. And I think -- and we think that we'll have that rentals soon because a lot of the retailers who are not opening in their malls, they have opened in our malls because of the sales they were doing in these malls. So malls, we are confident. Yes, Hospitality [Audio Gap] have to look into it. It's a very fluid situation right now. So we'll take step-by-step and see as to how we have to handle that debt in future.

The next question is from Vishal B from Aviva Insurance.

Sir, you're looking at some kind of equity infusion in terms of rights or QIP. Any update on that? And some perspectives on the borrowings that are pending conversion?

See, the -- as far as warrants are concerned, they're already subscribed. So there is time almost till February 2021 for the balance for payment. Any other equity infusion is just the SEBI or the government has come up with the new guidelines and they may come up with more clarity in the next week or 2. So we will keep that in mind and have an open mind. There is no decision taken. And it is just you can say work in -- I won't even say work in progress, it will be just have an open mind, and we will see how it -- thing. And as I said, from now to September, things are very fluid, and it's very difficult to predict which way the business will go and which way the government support, as you know, is next to nothing. So that way, Atmanirbar is the fashion word now. So we all have to stand on our own legs and our own efforts.

Sure, sir. There is no plan currently for preponing the inclusion on the volume side?

Preponing, no, no. I think you see the -- whoever have subscribed for warrant, they're also getting a wrong end of the stick. So it's -- early subscription is not going to be there.

The next question is from the line of Alpesh Thacker from Motilal Oswal Financial Services.

Sir, just on the Hospitality part, I just wanted to understand, so are we getting any queries or prebooking for at least 4 months, 5 months, 6 months ahead from here? So any level on that for our assets? And second thing is, in case the travel doesn't come up in a big way and Hospitality doesn't see the occupancy level, so are there any plans like focusing on the F&B segment like delivery of food and stuff like that to revise the business. So any color on that would be helpful.

Good question. Vineet here. So as far as the occupancy forecasting is concerned, we are actually looking at basically for the domestic and international travel sector, the flights to start. Because unless that begins, it's going to be very tough to forecast what the business is going to be. However, we are getting a number of inquiries for our hotels as the part of the BCP or the business contingency plans for the large MNCs and IT majors, where they're making inquiries for housing some of their staff to operate out of these hotels. So those are ongoing discussions, but I guess everybody is just waiting for the travel sector to really open up. So going forward in the next 4 to 5 months, I do believe that a lot of domestic demand will come up, not so much as international. I think international, as far as that is concerned, we are looking at beyond October, November. But in terms of domestic travel, I think some amount of green shoots are seen already. Domestic tourism is something that is picking up quite substantially. So we are expecting a lot of these new concepts like staycations or workcations, these are picking up. So I presume that starting maybe August, I'm not so much sure about July, but from August, we should definitely start seeing some domestic business coming in for the hotels. Having said that, we're also aware of the fact that we may still have some spare occupancies because demand may not be substantial. So we have been looking at alternate innovative ways of augmenting our hotel revenues. So a number of them are also, like, for example, none of them has really been finalized as of now, but there are active inquiries for some of our hotels where we are converting some of our suites into offices, small offices for start-ups and some other consulates, et cetera. So those discussions also going on. As far as home delivery and takeaway of food is concerned, that has actually fortunately been continuing throughout the lockdown stage because government has permitted takeaway and home deliveries and that has been continuing. But you must understand that, that is not a very large part. But however, we have tied up with food aggregators like Swiggy and Zomato and everything. So that has been -- there has been an uptick on that as well. So this is essentially what it is as of now. We'll have to wait and watch next month what happens.

Okay. Just 1 last question. Sir, on a normal year, so what would be the segmentation between the domestic tourists and the foreign tourists in our hotel assets?

See, as far as our 5-star hotels are concerned, take for example, our Sheraton Grand here, nearly 60% of our business actually comes from international travel. And that actually applies to most of the 5-star hotels across the country. Nearly -- anywhere between 55% to 60% business comes from international travel. Rest of it comes in from domestic travel. But for lower class hotels like 3-star hotels and business class hotels, the ratio is just reverse, where we actually get about 60%, 65% domestic business and 30%, 35% comes in from international travel.

The next question is from Parikshit Kandpal from HDFC Securities.

Yes, sir. So what -- of the total office portfolio, how much would be the mark-to-market potential as of now?

Mark-to-market potential.

I couldn't get the question properly.

Sir, of the existing office portfolio, how much would be the rental right now should be? And what -- versus the market rental, how much we'll be at a discount?

No, in our case, discount -- see, basically, as on date -- again, discount, as MD said, that it is also a function of demand versus supply.

No, no, I'm not asking that, sir. I'm saying your existing lease on office space, say, is it that some rentals of, like, say, INR 60 to INR 70 average, so what will be the market rentals for that portfolio suppose if it comes for renewal? So I'm asking mark-to-market...

Okay. Okay. So basically, again, it depends upon the various micro markets that we are in, okay? So if I consider the North Bangalore, say, if something [Audio Gap] higher.

Sir, I missed. What was the number?

15%, 1-5.

15%, okay.

So this is basically here in North Bangalore particularly our WTC and WTC, the rental appreciation has been significantly higher. It's like much higher than the average Bangalore rental increase.

Okay. So our current portfolio rental will be, say, 15% lower -- 15%, 20% lower than the market rentals?

No, no. Basically, you cannot say -- I mean, take the weighted average of the current portfolio. It again depends upon which property we are in, okay? So what I was mentioning in North Bangalore, particularly the rental appreciation of our property, like it has been significantly higher than the other properties in the market. And any renewal that comes up, okay, renegotiation or if any vacant space comes up, it actually gets marketed at a significantly higher price, at least 15% higher than the ongoing market rentals.

Okay. For us, we are on the higher side of that because of the properties are much -- we are on the higher side of the market?

Yes. Yes. And apart from that [Audio Gap] or the East Bangalore is concerned, it almost kind of matches the market, except for those transactions, which were actually -- which took place almost like 8 to 10 years before. That also, if some vacant space comes up, it again will be marketed at, at least, 10% higher than the market.

Okay. Okay. And you mentioned about there have been some initial walk-ins in the BTG. If so, if you can highlight what kind of size? As you said because maybe next month, we'll have some more clarity, and if we can close something. So but what kind of size would these opportunities be -- individual opportunities be? Can you give some color on that?

The size which is that we are actually experiencing in BTG, particularly, it is in the range of 1.5 lakh and below. And whatever the bigger-sized transactions that we were actually discussing before the lockdown, those are in dormant stages. But none of -- those transactions are debt transactions. So all might actually take shape after 2 to 3 months. But as on [indiscernible] that is happening on the prices that are happening that are around 1 to 1.5 [ million square meters. ]

And pre-COVID, you said these dormant opportunities were how big?

Those are significantly large, like around 4.5 lakhs, one was 2.5 lakhs. Those are significantly large clients.

So are you looking at 6 to 7 kind of types of numbers of these opportunities to basically ease out the entire portfolio?

Yes.

Just lastly, on the safety and the health part. So what kind of initiatives on the CapEx you have taken for your malls and offices going by the COVID pandemic? There has been increased focused on safety and health so what kind of initiatives you have taken? And what kind of investments you would have incurred?

See, what we have done is that we have, of course, while we have been guided by the Ministry of Health and Family Welfare and the Ministry of Home Affairs from Delhi, we have also developed our own set of SOPs for the lockdown -- exit lockdown -- exit strategy, where each and every mall property of ours and even hotels, all of us have really worked out the entire marking of the spaces, social distancing, the various SOPs, sanitization, disinfestation, thermal screening and everything has actually been essentially put in place and all our staff trained on it. We went a step ahead. We actually held webinars with all our retail tenants, with all our hotel customers and clients basically sensitizing them to the requirements that are -- when they come back into our properties, these are the steps that are going to be followed. And it's been really appreciated all across.

And what sort of investments you have done?

See, there's no additional investment, except for purchase of the basic equipment like thermal scanning, cameras or handheld thermometers. So it's not significant. However, the effect has been pretty good. Typical thermal scanning camera costs are just about INR 3-odd lakhs. So we have invested in those basic equipment, not -- nothing major. But however, what has been more important is sensitizing and training our staff, our security, our housekeeping staff on the processes.

Okay. Just on the LRD things now, we have -- as we highlighted earlier, there could be some challenges. I mean, till the end of this year on Hospitality and on Retail side and you are continuously evaluating the breakeven point and want to have liquidity on your side. So now since the Chennai property is ready and rentals will start tripling in from the fourth quarter, so how much of LRD space you would have there once you convert that CapEx into LRD? So could be additional funding you can raise, which could support the short-term liquidity shortfall which you may face in other businesses?

Yes, sure. So you are right, we have a potential of around INR 1,300 crores to INR 1,350 crores of LRD, which we can -- which we can take [Audio Gap] property. And after repayment of loan and the balance equity infusion for completion of the project, I think we will have a substantial money which will be shared by both the partners. So yes, definitely, that money will be used for all contingencies or maybe for repayment of the loans that we'll see as and when we take that LRD and what is the situation at that time.

We have 1 last question in queue. We take the last question from the line of Adhidev Chattopadhyay from ICICI Securities.

Yes. Just a follow-up question on the rental collections for offices and malls. Sir, malls, how much have we collected in -- till now for whatever -- have we collected the entire 50%? And what is the status on CAMs, both for offices and malls, are we collecting the entire CAMs also from the tenants?

Yes. Adhidev, Pradyumna here. So with respect to malls, we have just about started the rental collection. We have nothing really much for the month of April and May as yet. But we've just started the collection activity. CAM also, the activities have just started. And I think in the course of the next month, we will be getting the CAM payments out. As far as the rental arrangements that we placed for the lockdown period, the 50% that we're collecting, that we will get it over the course of the next 3 to 4 months. It's like a deferred thing that we have planned with the retailer, so that even their cash flows can be eased out for the lockdown period.

Sure. And...

And in terms of -- just to add, in terms of office portfolio, there is no challenge with regards to collection of CAM. So CAM is 100% collections are happening.

Okay. So 96%, 97% is the overall, including your rental plus CAM or whatever is the...

No, no, no. CAM is separate. CAM is 100% because CAM, we don't have any challenge per se. In rental, we are at 96%, 97% only because of the tenants from Kochi that we discussed who are wanting a kind of discount all those things. But CAM, there is no challenge.

Okay. Sure. And just 1 last housekeeping question, how much debt is up for maturity in FY '21 on an aggregate basis?

Yes. See, it is around INR 290 crores of repayment of debt, which will happen in the current year. But we'll have to see based on how the things move because wherever we have taken moratorium, so how banks will -- are going to adjust whether they'll increase the [indiscernible] or the time limit for the EMI payments. EMI -- installments may increase. So that all depends. If those increases, definitely our repayment will be less. But right now, as per our calculation, it's around INR 290 crores.

Okay. And just a follow-up on that. So the BTG asset, right, so banks who have funded the project, they are finally funding the balance CapEx, right, over there. There are no issues?

Yes, yes. Yes. So in BTG, actually, for first phase, we have already done the LRD. We have taken around INR 400 crores of LRD there. INR 200 crores we have already taken, around INR 230 crores. INR 200 crores construction loan has been repaid. The balance money is still to be drawn in BTG. So there is no challenge there.

This is reflected in March '20 number in the presentation, the LRD.

No. It has been done in first quarter. That's why it's not coming in March.

Okay. It has happened. Okay. So you have still been able to do that LRD even after the COVID...

Yes, yes.

That was the last question in queue. I would now like to hand the conference back to the management team for closing comments.

Good afternoon. This is Pavitra Shankar, Executive Director. In terms of closing remarks, I would just like to say that definitely this past quarter has been unprecedented for our business, and I'm sure everybody else as well at a professional and personal level. We are definitely still finding our way in terms of how to address the challenges post by COVID as well as the resulting lockdown. But what we would like to also say is we realized that in every crisis, there is an opportunity and our teams are focused on looking for the new trends that arrive out of lockdown and seeing how best we can hold that into our existing businesses and make the most of the challenges that have risen. We feel that until September, there will be some time for us to figure out how to react to the sentiments whether it is the residential customer or the office tenant or the retail tenant or the mall goer or whether it is domestic or international travel. So for the next quarter or so, [ we ] will be finding our feet on that front. But overall, we are still bullish about the growth for the organization, especially as we are a diversified business. During the lockdown, we had the chance to revisit our existing cost structure, to revisit our existing business processes and to upskill our team. And this work is still ongoing in terms of trying to figure out how [Audio Gap] efficient in the current environment. So the outlook for each business will surely depend on the sentiment over the next quarter, but we hope to be properly poised for growth in all of this. As you know, our mission is to be the preferred developer in each of our spaces. So while they may be changing requirements for real estate across each of these sectors, our goal is to still continue to be and have an selective approach for projects where we can really create value in each of the different sectors. We have also [Audio Gap] in terms of COVID-related relief efforts and initiatives. This has also been in our -- been -- included in our investor presentation. We had about 10,000 migrants [Audio Gap] and constructions workers at our sites, who we have supported fully during the lockdown with dry rations actions and money to their Jan Dhan bank accounts. We provided over 3,65,000 meals during the lockdown period to migrant workers and economically weaker section of the society. For our own workers at construction sites, we made sure that they were properly engaged during the lockdown with counseling, exercises, aerobics, yoga, et cetera, to keep them mentally and physically fit. In Chennai and Bangalore, we have distributed truckloads of dry rations to multiple families, bread loaves through our Brigade Hospitality and our own employees have made financial contribution voluntarily. So during these tough times, we have all learned that there is some level of sacrifice at the personal and at the organizational level. But I think the team has learned that we will pull together -- we will pull through this together and we are focused on making sure that we make the best of the coming quarters. Thank you so much for your support. We really appreciate so many of you logging into the call this quarter and we wish you all the best and to stay safe. Thank you.

Thank you very much. On behalf of Brigade Enterprises Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.