Brigade Enterprises Limited (532929) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '21 Earnings Conference Call of Brigade Enterprises Limited. We have with us on the call today management of Brigade Enterprises Limited. [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. Thank you, and over to you, sir.

Thank you, and good afternoon, everybody. We hope all of you and your loved ones are continuing to keep well as can be during these challenging times. On behalf of the company, Brigade, I would like to welcome you to the earnings call for the first quarter financial year ending 2021. I'm M.R. Jaishankar, CMD of Brigade Enterprises Limited. I'm joined by Executive Directors, Pavitra Shankar, Nirupa Shankar, Amar Mysore; as well as our CFO, Mr. Atul Goyal; our SBU Heads, Mr. Rajendra Joshi, CEO, Residential; Mr. Vineet Verma, CEO, Hospitality; Mr. Subrata Sharma, COO, Office Leasing; our Company Secretary, Om Prakash; and the team. As expected, not just for our company, but most in our country, the first quarter has been very difficult and the sharp change from the momentum we had been experiencing over the last 8 quarters. The severity of lockdown and the continuing spread of the COVID-19 virus, which I prefer to call Wuhan virus, has been deeply -- has deeply impacted all our lives of business, resulting in a substantial drop in revenues and profitability. However, it is very heartening to note that we reported a positive operating cash flow despite these challenges. During the course of Q1, our residential business showed good signs of recovery as presales in April went from a low of 15% of last year's monthly average to a fairly decent percentage of 65% in June ending the quarter at an average of 40% of our usual performance of 1 million square feet plus. In other words, we have done about 0.4 million square feet in presales. Sales inquiries and site visits picked up substantially in June '20, with a pickup of 155% and 137%, respectively, over May '20. We controlled marketing spends and were able to see high levels of conversion from those who inquired. Income uncertainty and fear of job loss have affected collections in Q1, but collections also improved substantially in June, helping us to achieve a value of -- a value in Q1 financial year 2021 almost equal to the tough Q1 FY '20. We would also like to share a few observations on residential segment that are becoming a trend during the new financial year. This is just for information. Customers preferred completed and near-completion inventory over under construction units. This has also been reflected in sales of other branded developers in Bangalore and other key markets. Contribution of overseas customers increased significantly. For Brigade, the contribution from NRI customers also more than doubled. Preference for long, larger units was also evident. Average size of the unit increased by about 15% in this quarter as compared to earlier quarters. Our previously initiated and ongoing efforts into digitizing the customer journey paid off during this quarter, Q1. We enabled our sales team with virtual apartment tours, online booking process, digital payments for booking and milestone payments and webinar for potential customers all over the country as well as our key NRI markets. This weekend, which is being our Independence Day weekend, 15th and 16th August, we are launching the Brigade Online Home Fest, an entirely digitally marketed and virtually hosted sales event in an expo format. This is the first of its kind in India by any real estate developer. Customers can browse through virtual stalls of our residential properties in Bangalore, Mysore and Chennai; experience interactive walk-throughs; attend video calls with our sales representatives; and also book their dream homes online. We expect this format to find good traction going forward. For our existing customers, we have held webinars to update them on construction time lines and answer any questions on payment, handover formalities and registrations, which may have been impacted by the uncertainty of lockdown. In our office segment, the focus on Q1 was collections of lease rentals, and our team achieved a very healthy 98% overall. While tenants reviewed their rental costs, we did not -- luckily, we did not have to renegotiate or provide any rental waivers for all lease deeds that we have with us, except in some stray cases we had to give some additional times for them to pay their rentals. On the leasing front, there was very little activity and site visits during the lockdown as well as postponement of decision since most occupiers were focusing on business continuity and pursuing the work-from-home model. We have an active leasing pipeline of currently about 0.6 million square feet in Bangalore and about 200,000 square feet in Chennai. We see opportunities of consolidation and tenants relocation away from typically high-priced zones, which make us optimistic about our leasing prospects at Brigade Tech Gardens in Bangalore. In Chennai, we have good traction from our existing tenants itself. The retail business had a very tough quarter 1 due to the severe lockdown imposed in Bangalore, where all our malls are located. The focus has been the retention and renegotiation of leases and collection of outstanding payments from our tenants. We have approached the situation fairly in a very reasonable manner and offered a 50% rental waiver during lockdown, since reopening malls across the city, ours included, have been grappling with low footfall of 20% to 25% of the normal figures despite stringent measures taken to protect shoppers. We expect this segment will take some more time to normalize and with some long-term structural shift towards online retailing that has been accelerated by the Wuhan virus. However, we are still confident that in the long run, there will always be a requirement for well-designed retail spaces in underserved locations providing a combined experience of food, entertainment and shopping. On the hospitality front, our hotels started feeling the impact of the virus from the beginning of March 2020 itself with a state of cancellations coming in. The nationwide lockdown and continuing restrictions in travel have caused havoc and occupancies to crash to single digits. All our hotels have since reopened from June 8 of this year, with business depending entirely and/or mostly on hosting repatriation guests required to self-quarantine and also some business from F&B sales. The outlook for next quarter, Q2, continues to be subdued until such time business travel restarts, opening up, and we also see large miles activities that may be allowed by the government. We continue to make diligent efforts to minimize costs, particularly on manpower and utilities and are also going for all available opportunities to garner business. Our objective is to at least ensure GOP neutral performance in Q2 for our hotels. And we are confident of that, at least for 2 of our hotels in Chennai and Kochi. There we're amongst the first 1 to reach breakeven and -- in business. The lockdown also brought work on our construction sites to a halt for large part of Q1. The workers strength, which had come down to as low as 30% after lifting of the May 4 lockdown, it has now gained to over 50% post unlock 1.0. More workers are willing to return, subject to travel arrangements, and we are helping them out in this regard. We hope to have the required workforce by end of next quarter, Q3. There is no shortage of construction materials or disruption in the supply chains, thankfully. In the past quarter, we launched 2 projects, 620,000 square feet of residential in -- an additional block in Brigade El Dorado, our affordable housing project near the Aero Park Bangalore Airport, and 1.3 million square feet of commercial space called Brigade Twin Towers on the land we acquired from SABMiller 18 months back or so. Both are in Bangalore. Over the next few quarters, we plan to launch another 2 million square feet of residential in Hyderabad, bit of Bangalore and Chennai and another 0.5 million square foot of commercial space in Bangalore. Now Mr. Atul Goyal, our CFO, will present the financial results in detail. After that, we can have a Q&A. Thank you.

Thank you, sir. Good afternoon, everybody. On behalf of the company, we would like to welcome you to the earnings call for Q1 FY 2021. As we know that business has significantly impacted because of the COVID-19 lockdown. So our performance needs to be seen keeping in mind the impact. Total collections for the quarter across the segment was INR 376 crores, with a positive operating cash flow of INR 82 crores. The decrease in revenue is mainly due to impact of COVID on economy, lockdowns, uncertainty and weaker consumer sentiment. Hospitality segment was the most impacted segment. However, efforts are on, as CMD said, to make it operationally breakeven. We have undertaken various cost rationalization during the lockdown period. Overheads were brought down by 54% with major reduction in fixed and semi-variable costs in hospitality and office maintenance and residential areas and residential segments. We're expecting more business to pick up with the revival in economy. Recent steps taken by the RBI, like rate cuts and along restructuring of loans, are steps in the positive direction and should help business. On the operational side, we have launched 2 project aggregating to 2 million square feet during Q1 FY '21, out of which residential is 0.6 million square feet of affordable housing segment and a commercial project of 1.3 million square feet. Further launches to the extent of 2.6 million are planned, office and residential space aggregated 2.1 million, retail space totaling to 0.5 million square feet. Coming to the sales performance of Q1 FY '21, we have achieved sales of 0.4 million square feet, which is 63% less than 1.1 million square feet sold during the same quarter ending last financial year. The sales value of the area sold during the year stood at INR 250 crores, a decrease of 58% compared to sales value of INR 593 crores for the same quarter last financial year. The average price realization was INR 5,956 per square feet for the area sold during the quarter, an increase of 14% for the same quarter last financial year. In commercial segment, we have realized around [Technical Difficulty]. We have started receiving leasing inquiries post lockdown, which is a good sign of recovery and revival. In hospitality segment, average occupancy rate was 11% as all hotels except Four Points, Kochi and Holiday Inn, Chennai remained shut for most of the lockdown and all hotels commenced operations on 8th June 2020. Coming to consolidated financial performance Q1 FY 2021. The consolidated revenue for Q1 FY '21 stood at INR 214 crores versus INR 717 crores in the same quarter ending last financial year. The real estate segment clocked a turnover of INR 121 crores, and EBITDA of 8% in Q1 FY '21. However, revenue recognition was lower in real estate due to lower registrations, as registrar office were closed during the lockdown. The hospitality segment closed a turnover of INR 10 crores and an operating loss of INR 12 crores. The leasing segment clocked a turnover of INR 82 crores and EBITDA of 74% in Q1 FY '21. The consolidated EBITDA, including other income for Q1 FY '21, stood at INR 58 crores versus INR 191 crores in Q1 FY '20. We have been maintain -- we have been able to maintain our EBITDA margin at around between 20% to 27%. The EBITDA for Q1 stood at 27%. The interest and finance charges for the Q1 FY '21 stood at INR 89 crores. Consolidated loss for Q1 FY '21 was INR 87 crores compared to profit of INR 73 crores for Q1 FY '20. Coming to debt position and its breakup, INR 692 crores is the debt in the real estate segment; INR 543 crores in hospitality segment debt, in which INR 421 crores is GOP securitized loan and INR 122 crores in CapEx loans; and INR 2,850 crores in the leasing segment debt, in which INR 1,521 crores is a securitized lease rental loans and INR 1,338 crores in CapEx loans. We have been telling and again reiterate that we have not taken moratorium in all the loans. Only moratorium mainly has been taken in hospitality as well as the retail loans, which are there. The cash and cash equivalents stand at INR 461 crores as on June 30, 2020. [Technical Difficulty] the company's net debt outstanding as on June 30, 2020, were INR 3,624 crores, out of which BEL share is INR 2,874 crores. The company's effective cost of debt remains steady at 30th June at 9.56%. The same was 9.71% at the end of Q1 FY '20. We have a credit rating of A with a stable outlook, which has been assigned by both CRISIL and ICRA. Our net debt to equity stood at 1.2x as on June 2020. The company, I will say, has a strong balance sheet, is in a good position and has adequate liquidity to meet operation and other business commitments, including debt. I will hand over back to the moderator for questions.

Thank you.

[Operator Instructions] The first question is from the line of Adhidev Chattopadhyay from ICICI Securities.

All my questions will be on the rental business. Sir, firstly, our rental revenue has declined around 19% quarter-on-quarter to INR 82 crores. So if you could give us a breakup on how much of that is because of waivers given on mall rental. That is one. And secondly, because of the interest moratorium you availed on malls and hotels, so what is the saving on interest you had for the quarter? Hello?

Yes. On the reduction in rentals, it is entirely due to the waivers given by the malls. It's -- nothing connected with office space.

Okay. And that is -- also includes the reduction in the CAMs, right, which would have anyway fallen because the malls were shut. Is that correct?

Not reduction in the CAM. It is primarily connected with rentals. And maybe you can say a small portion of the CAM is there, but it is substantially reduction in rentals.

Okay. Sir, I didn't get that -- the number. Is it 98%, you said, collection and offices rental for the quarter?

Yes. Correct. 98%. See, it is like this. If you see only June 30, it could be 95%. But when we have said 98%, it is -- we've also taken the 3% of the collections, which has come in July.

Okay. Sure. Sure. Sir second, on the same part of this year, what is the savings from the moratorium you have taken for malls and hotels, the interest costs we have saved in this quarter?

Yes. From malls, it will be around INR 25 crores. And from hotels, it will be around INR 12 crores or so.

Okay. And this is accrued in P&L, but will be payable by the end of March '21. Is the understanding correct?

You are right. It will -- it is accrued in P&L and have been added into the loan balances in our debt portfolio.

Okay. Okay. Okay. So you're saying the net debt position reflects that, what you have stated the...

Yes, definitely it reflects that. We have around INR 34 crores or so of interest, which has been added there. That is INR 25 crores.

Okay. So our debt would be relatively flat had this -- okay. That way if you look at it...

Yes. It would have been relatively flat, except for payments, which we -- loans, which we have taken for both the GIC for Tech Garden and WTC, where there adequate loans are there and construction is going on.

Sure. Sure. And the second question on the office leasing, sir, you mentioned your 0.6 million pipeline in Bangalore, 0.2 million square foot in Chennai. So sir, does that exclude the hard options you have mentioned in the presentation? Or does that include the hard option?

It excludes the hard option. It excludes the hard option. It's a new pipeline.

Okay. Sir, just if you could just give us an update on both Chennai and Tech Gardens. Like all the new tenants, so when do you see the rental start to come in? And even for hard option, have they actually exercised the option yet? Or when will we get clarity on that?

See, we expect the Chennai rentals to start mostly from, if you ask me today, it is expected to start by 1st of January or middle of January or so. And we have 3 major clients there, which you may know: Amazon, Caterpillar and McKinsey. I think it is depending on days, it will start sometime during January. And in Tech Gardens, the new rental commencement is limited as compared to Chennai. That should also happen maybe in Q3. In Q3, it should happen.

Q3. Okay. Sir, just following on Chennai, so this includes the hard option area also. The one you're saying from January? Or it is...

No, it does not include hard option. It does not include hard option.

Okay. But this should be the same tenants, right, who would have opted for this hard option, right? The mix you mentioned, among them, it would be the...

I said yes and no and...

Okay. Sir, clarity will come you're saying in 3, 4 months on that from the hard option? Or it is ascend to owner?

It is expected like that. It can be 6 months. I think in the current scenario, it may be -- one has to take 6 months' time. And we also need to be slightly flexible during this period, at least till some normalcy returns. Otherwise, like, naturally, we'll be keen to lease them as early as possible. At some stage, if there is other serious interest, we may request the client to exercise the hard options or make it a FRR.

The next question is from the line of Yash Gupta from Angel Broking.

Yes. My first question on cash flow too, sir. Can you give breakup of total collection of INR 375 crores? How much rent we have received from INR 82 crores? And what collection we get for 0.4 million in residential sales?

So residential was around INR 282 crores, leasing was around INR 82 crores and hospitality was at INR 12 crores. So this is a breakup of INR 376 crores of collection, which is there.

No. So my question is for residential, how much was the new residential that we have clocked, the 0.4 million new residential sales we have clocked? So how much from that new residential we have received?

No, see, new residential, since it is only 0.4 million so it will not be much. But for earlier on, whatever we have done the sales in last quarters, it will -- you can say around 20% or so.

Sorry, 20%?

No, it will be around INR 20 crores or so.

INR 20 crores. Okay. Second question on the demand side. In the last quarter and the current quarter, have you seen any change in the customer demand for residential and commercial? How flexible we are towards that change in demand from customer?

No. Can you just repeat it? Flexible...

Yes. I will repeat my second question. Second question is on the demand side, sir. In the last quarter and the all current quarter, you have said in the opening remarks also that NRI customers demand side has doubled almost. Sir, have you seen any change in the type of demand that customers placed pre-COVID and the post-COVID?

Our CEO, Mr. Joshi -- CEO of Residential will respond to this.

So one key -- a couple key changes that we've seen in demand for residential units is that the demand for the larger units has certainly gone up. As Mr. Jaishankar mentioned, the unit size -- average unit size has gone up by about 15%. Second is the demand from the NRI customers has definitely gone up, and this is more towards the completed and nearing-completion inventory. So those are the 3 key things: one, larger unit sizes, NRI customers and demand for the completed or near-completion projects. Those are 3 key trends, which are different from -- prior to COVID, it used to be largely new launches, new projects that used to see a lot of traction. Overall, for us, for -- in Q1, the demand for -- or the sales for the completed project went to close to about 30% of our total sales, which used to be in the 15% to 20%.

Okay. And is there any other change for the commercial or the commercial it's same pre-COVID and post-COVID?

Subrata Sharma will answer.

So in commercial, we are seeing a kind of requirement from tenants who want to migrate or who want to consolidate while reducing. So they are wanting to move from the pricier market to the low-cost markets. So that's what we are seeing, but site visits are still very limited, but there has been inquiries for managed office, but midsized segments have become more active now.

The next question is from the line of Biplab Debbarma from Antique Stock.

My question is on your EBITDA margin on the rental assets. So I think the EBITDA margin has increased for the rental assets significantly. It was in 60%, 65% for the past few quarters. Now it has jumped to 74% in this quarter. So just wondering, what would be the reason for such sudden and significant jump and -- which is good and whether such margins are sustainable or not? This is my first question.

So see, the 74% increase is mainly because maintenance income has been very, very low because there was a lockdown. So all EBITDA contribution is coming from the leasing segment. So that is why that EBITDA margin has increased. But yes, future [Foreign Language] as and as revenue increases, we may achieve this EBITDA margin, but not quarter-on-quarter until we reach the full revenue potential in leasing segment.

Okay. Okay. Okay. And just another questions on your -- the same. I was a little bit confused with the Bangalore and Chennai office projects. Sir, just wanted to know about the Tech Garden and the Chennai World Trade Centre project. How much in each of these assets leased till date? And like how much started generating rental out of those lease states? So I just wanted to know the leasing status. What -- how much has been leased, including hard option in both of these? And how much of -- out of this, how much have started generating rentals and remaining leased area would generate rental from when? That is my second question, sir.

Yes. So as far as Chennai market is concerned, WTC Chennai, we have 2 million, out of that, almost 1.67 million has been leased out. So the availability is 0.34 million. And as far as Brigade Tech Gardens in Bangalore is concerned, in the first phase, that is B cluster, we have availability of 0.3 -- 0.49 million, out of which 0.3 million is hard option. So it is only 1 point -- 0.19 million out of 1.24 million.

1, sir, sorry, 1 point?

So basically, to make it easy for you, it is -- total is 1.24 million in B cluster. Out of that, 0.49 million, that includes hard option, that is 0.19 million is available for leasing, new leases. And in the C cluster, we have 1.76 million, out of which 1.55 million is available for leasing.

The next question is from the line of Mohit Agrawal from IIFL.

Sir, my first question is on the residential side. You clarified that this quarter, you did not take any moratorium on the residential bit. And despite that, we saw that there was no increase in debt. So clearly, it was net cash flow. I wanted to understand, firstly, you said that collections in June, if I heard correctly in the initial comments, collections in June are now back to normal levels. Firstly, is that correct? And second part to that question is that how do you see the residential business from a cash flow perspective for the rest of the year? Do you see any -- do you envisage any increase in the debt for the remaining year?

So see, in June, we have achieved around 80% of the resi collections, which were there. Yes, we have not taken much of the moratorium in resi business, and we have been [Technical Difficulty] well as there are sweeps in all the loans. So we have been reaping the loan also very, very promptly. That's why you can see some reduction in loan in residential segment. What was your third question?

Sir, how do you see the residential segment from -- like, do you see any -- anticipate any increasing levels for the residential segment for the rest of the year, considering collections are back to [Technical Difficulty] normalcy?

No, see, debt -- if you see the debt numbers, it is mainly in the leasing, which the debt increase is happening. And resi, there will be some debt increase, but it will be very minor because collections will be there. And hospitality, we don't intend to increase any debt right now. So mainly, the debt increase will be in leasing segment for our CapEx project, which is going on right now.

Sure, sir. Sir, my next question is linked to that on the overall debt number. So assuming resi won't see an increase in debt and also hospitality not significant, I see a total CapEx requirement in the -- that you have shared for leasing and hospitality, total requirement is about INR 1,000 crores for all the projects. Now assuming that you'll incur that in next 2 years, is it fair to say that your CapEx for FY '21 could be around INR 500 crores?

Yes. Yes, you are right. It may be to the tune of INR 500 crores. But there are new launches which are happening, and we may be taking loans there. And if you see once we launch the project in resi, initial construction is through loans. So there may be increase somewhat in that loan. Once the sales is online then resi -- then that loan gets -- start reducing down. So there may be some increase in residential, but mainly because of the new launches.

Okay. Okay. And sir, my last one, sir, is on the numbers that I see on the WTC Chennai. Sir, I remember last time, you said that the project is nearly 95% leased out. I see -- was there any cancellation that you saw during the quarter? Because when I see the number right now, it's a little lower than that, so.

Yes, Subra.

Your question is correct. So there has been backout, backout by 3 tenants. Mostly they were affected because of the COVID scenario. But having said that, here we have like 0.3 million, that is to be leased. And since we have like the tenants which are market tenants, so we have like an internal requirement of approximately 0.2 million. So we are pretty safe here.

The next question is from the line of Parikshit Kandpal from HDFC Securities.

Sir, my first question is you said that you have -- your back to the June was -- presales was almost 65% in the residential segment. So how -- if you can give valuation trend for this quarter, say, in July, August, how is it looking in this quarter? And how has been the trend basically first on the residential side?

See, overall, the market seems to be continuing the same trend as in June. However, the uncertainty due to COVID and income uncertainties and job losses continue in the market. So we have to be cautious at this point in time. We expect the same trend to continue. If there is a substantial improvement in economy and other indicators, probably we will see here an uptick overall.

Okay. So just coming to the different businesses, hospitality, leasing. So now one side, we see the retail business and hospitality segment, which has been hit hard. So where it may require -- once the moratorium gets lifted by this month end there could be some support which could be required from the parent company. And on the other side, we have 2 projects, BTG and the Chennai project. So both are getting advanced stages of leasings. Chennai is almost leased out, but rentals will start flowing in from Jan, but our CapEx that will now -- the servicing will start. So if you can highlight how will you match the cash flows on both the sides in the interim for the next 6, 7 months till the situation normalizes?

See in hospitality, yes, we have kept the war chest that, if required, we'll definitely pay all the interest, which is required to be paid for hospitality, and we'll be servicing all our loans. And of course, you are right. We have to give that support to hospitality. Right now, they are doing some operational loss of around INR 3 crores per month. So -- and this may -- since now the lockdown is open and your occupancy is increasing, it may reduce to a great extent. So operationally, we may not require to fund much in hospitality. But yes, for interest, definitely, we'll have to support them. But yes, we are also waiting for the restructuring. If the restructuring comes and I think hospitality and retail will be the segment where the RBI or the committee will also look into it. If there is restructuring, we'll definitely like to go for the restructuring in hospitality and the retail business.

So total retail and -- so hospitality debt I have is INR 500-odd crores, INR 540 crores. So what will be the retail debt?

Retail debt is around INR 600 crores.

So total put together, almost INR 1,100 crores. So that is...

Yes, INR 1,100 crores to INR 1,200 crores. Yes.

So INR 100-odd crores of interest needs to be serviced and -- this year, and also there could be some repayments coming. So what will be the repayment on this INR 1,100 crores of debt basically?

See, repayment for during the year is around INR 295 crores, which is there, out of which -- since we have not taken moratorium in other loans also [Foreign Language] we have already repaid -- around INR 44 crores, INR 45 crores of repayment has already been done. But having said that, I would only like to say [Foreign Language] repayment cannot be told today because I don't know how after moratorium banks are going to adjust their payment plans because they are also working on it and if the restructuring -- how the restructuring works. So it is a fluid situation. But what I'm telling you the number is as per the loan schedules, which were there pre-COVID.

So the last -- so the funding requirement for these 2 businesses will be how much for this year without restructuring, say, what kind of budgeting you have done?

Yes. So for both the SBUs we may require around INR 80 crores to INR 90 crores to support them, which we are already prepared to do that.

And nothing is required for the office business, right? Because I think these 2 assets getting commissioned and in between if the servicing start, so there could be some pressure on you to also service until the time the rent will start flowing?

No. So there is no issue on servicing of interest there. And leasing is happening. We have already taken LRD on the first phase of Tech Garden. And we are also pushing equity into our PREPL -- WTC Chennai venture.

The next question is from the line of Utkarsh Punkhia from Axis Capital.

Sir, would it be fair to assume that our total debt repayment during the year will be around INR 1,000 crores this year?

No. I said it is -- it was INR 295 crores for the debt repayment. But now after moratorium, there will be a change in the schedule. So it will be much less. But out of that INR 295 crores, we have already paid INR 45 crores.

We are generally refinancing this amount every quarter for the past 3 quarters. So how are we looking to do this for the rest of the year? Are we going to still keep refinancing it? Or are we looking at equity raising...

I couldn't get you. We have not been refinancing our debt. I couldn't get your question.

Hello?

Yes. Please go ahead.

Yes. So would we be looking at any equity financing this year?

Right now, there's no -- we have just taken an enabling resolution, but there's no plan right now. We are still looking at it, and if there is any decision, we will definitely come back to the market.

The next question is a follow-up question from the line of Adhidev Chattopadhyay from ICICI Securities.

Yes. Sir, again, just again a follow-up question on the rental income for quarter. So for this 50% waiver, what I understand we have INR 110 crores of annual rental income from the malls as of Q4. So I'm guessing around INR 27 crores would be the quarterly run rate. And -- so for this quarter, we have lost around INR 13 crores, INR 14 crores on the mall rental or more than that? I mean how is the accounting work? Is it on an accrual basis or on the terms you have agreed with the tenant?

You can see in our notes also, which auditors have put, we have been very, very conservative in accounting the revenue in retail. And wherever -- yes, we have given concession and what you see, the drop-down in revenue is only because of that. We -- what -- the process we have done is wherever retailers have confirmed that this is the rental they are going to pay, we have only taken that revenue into our Q1 numbers.

Okay. And the pending, whatever you would have now reached in July and August, those will get reflected in second quarter. Is that understanding correct? Just wanted to understand.

Yes. Yes. That is correct. That is correct.

Okay. That's why it's a little lower than what it would have been normally. That is -- I just wanted to get up on that. Sir, retail now is multi -- so how are the rental renegotiations processing like? Obviously, multiplexes, food courts and all that is the most affected segment. So when you say 50% waiver, this is only -- this is excluding multiplexes in those areas? Or it is for the overall area in your malls?

No, come again on your question, please.

So what I was trying to understand, sir, so let's assume 20% of my mall area is for multiplexes of the overall area, multiplexes, food courts and gaming, whatever, entertainment zones. So I am saying the rental waiver of 50% is for the entire area or only for the 80% of the stores which can reopen? I just wanted to get some idea. Is multiplexes also -- have you reached an agreement?

Yes. Yes. So it is -- whatever rental concession we have given is for the retailers who have come back and opened the store. Of those retailers who are yet to be approved for operations by the local government, that is multiplex, entertainment and some bit of restaurants as in bar, they don't include in this. So their rentals are not been taken into consideration.

Okay. Sir -- and those discussions are still -- will be done at a later date, right, only once they are reopened, right? When there is possession, right?

Yes. Yes. Since there is an uncertainty, neither the retailer, nor we are in a position to conclude anything.

Sure. Sure. Sure. So fine sir. That is clear. Sir, on the residential business coming, do you have any revised target or guidance for the year in terms -- or the range you'd like to give in terms of what sort of sales you'd like to achieve?

We normally don't give any guidance on the forward sales. The only thing I would say is that sales definitely has impacted, as you have seen in Q1. And as I had mentioned earlier, we do expect the uncertainty to continue, and therefore, we would be cautious at this point in time. As and when the economy picks up, we expect that the demand will come back a lot more aggressively than what was expected.

Next question is a follow-up question from the line of Yash Gupta from Angel Broking.

My first question. What's the percentage of collection we've received for the residential?

Percentage in the sense, I think, in our collection, maximum collection is there from the resi business only. Out of INR 376 crores, INR 282 crores have come from the residential.

No. What I'm trying to get is that like suppose we had called for INR 350-odd crores from -- for the residential sales. And out of that customer has paid us INR 280-odd crores. So is that correct understanding?

No. See, collections goes -- it's a rolling thing. So we have done more than 4 million and even 1 million last to last quarter. So all those collections are coming in as and when construction are happening, and we are demanding. We have already told you that INR 20 crores were out of that for the new sales, which has happened. Rest is all collection, which has been done for the demand raise. Yes, it may be low because there was a lockdown. People were not able to take loan, but this will definitely -- sentiments will improve in the coming quarter.

Okay. And my second question, do you think the NRI demand will continue for the rest of the year? What you're seeing from the -- sense from this -- that NRI demand will going to be a continuing process?

We do think that the NRI demand will continue because the 2 locations, which contribute significantly to the Indian real estate market are the GCC and the U.S. Given the overall uncertainty in GCC, which was there even pre-COVID, COVID only contributed to it, we do expect that the demand from the NRI customers will continue because I think a lot of them are looking for a place to stay when they come back. I think that's what is driving the demand right now.

The next question is from the line of Prem Khurana from Anand Rathi.

So most of my questions have already been answered. Just 2, if you may please. So 1 was essentially on -- so somewhere in your remarks, you said there's rising preference for larger units now. I mean given the fact that there is rising demand, if you could please help us understand if it is as if -- I mean when you say there is rising demand, it is in absolute terms? So let's say, I mean pre-COVID you were selling 100 a month, now it's become 110? Or do you -- when you say rising, it is essentially in terms of proportion? So let's say, I mean if you were selling 200 and 100 were your larger units, now it is -- the overall sales have come down to, let's say, 100, and you're doing 60 of larger units now? So is it proportion? Or you've seen absolute number go up there?

What we mentioned is that in absolute numbers the unit size that we were selling prior to the lockdown and this one, there is an increase in about 15% in terms of the unit sizes, which we also said is that during the lockdown there seems to be demand for larger unit sizes across all our projects.

Sure. No, why I've asked this question is because, eventually, there could be a situation wherein, let's say, I mean if there was a buyer who was looking for a 2BHK, given the fact that, I mean -- let's say, I mean that he started his career very, very recently, his career very, very recently, and they want to kind of buy their own property because these people would be more susceptible or would be, I mean, not exactly sure of how the things would pan out in terms of their career. There could be a situation wherein they would have either deferred the plan for the time being or are not planning to go ahead with the decision now and people who are in -- who have been in the service for, let's say, 3, 4, 5 years, have savings, given the fact that the market conditions are such that I mean these are in a position to kind of come and negotiate. These guys are there in the market to kind of negotiate and kind of buy larger units because they have savings as well I mean they are at a position wherein I mean they're less insecure in terms of losing their jobs?

You are absolutely right in terms of the segment of the buyers who are in the market now. They are people with assured income streams. And we are also seeing that the age profile in this quarter has slightly increased because those are the people who are with income assurance much more than the younger ones who are just entering the income stream. So your assessment is correct.

Sure. And also, I mean, we've recently done this -- launched Jasper, right, El Dorado. What made us go ahead with this launch at this point in time, when I mean the situation still seems to be kind of fluid? And should it be taken as if you would go ahead with all the launches, irrespective of the market conditions? The idea is to launch as and when the approvals are in place? Or how has the response been for the Jasper, the new phase that we've launched at El Dorado?

Well, in this particular project, this particular tower has slightly larger units. This is largely an affordable housing project. So we had felt that there is a demand for slightly larger units in this location, which is why we went ahead with the launch of this specific tower. To your question on how has the launch gone, it has gone on our expected -- expectations post the COVID. Pre-COVID, it would have been a lot better. But post-COVID, looking at the current scenario, I think the launch has gone on expected lengths.

Sure. And how about the new launches? I mean these would be launched as and when you get the approvals? Or you would try and understand the market better and then only come to the market?

It will depend on the market situation. This we've already launched. But for the upcoming launches, we will take it based on market situation.

The next question is from the line of Rajesh Ranganathan from Doric Capital.

Since there is so much flux with respect to the rental business in the sense that when will actually clients begin paying rental and so forth, could you please update what is your current thinking in terms of, say, what was the rental run rate fourth quarter from office and retail of last year? And then, say, fourth quarter of this year, that is the Jan-March quarter, what do you expect it would be based on what you've currently already leased? And then, obviously, future leasings, the rental only will start from, I guess, next year. Would it be possible to share that information?

You are asking about the percentage of rentals or the new leases?

No, no. I'm asking the absolute number. So for instance, let's say, the run rate of rentals was X in fourth quarter last year. What do you expect it to be fourth quarter this year after whatever we have leased already, they start occupying and they start paying us? I assume they start paying us from January, but I don't know what your internal forecast is.

Rajesh, we will give you that number, I think, off-line and then we will take forward.

But currently your expectation is that whatever you've leased they'll start paying from January?

Yes. Yes. Yes. Actually, in WTC, yes, if you're asking that.

And Tech Gardens as well, right?

Tech Garden, it's already leased. There are some more rental -- there's some more leasing which has been done. And I think some part will happen also in around October, November.

So you're saying for Tech Gardens, they will start paying from October already?

Yes, for the new leases. Old leases are already paying.

Already paying. Okay.

Yes. Yes. We are getting around INR 9 crores to INR 10 crores of lease rental income.

And on the pipeline, I think, we have roughly about 1.5 million square feet yet to lease total, ballpark. What is the pipeline currently looking like?

Overall, the inventory that we have will be approximately 2.5 million spread across all the projects. And the pipeline, as Pavitra said, that currently, we have like positive pipeline of 0.6 million total. But having said that, there are a number of inquiries from our existing tenants also, which we feel will mature over a period of -- because now the occupancy in the offices are hardly any, okay. So that's the reason. Otherwise, it would increase significantly once people start operating from offices.

Okay. And for the retail, when will you start charging 100% rental?

100% rental, I think it will take -- it will be a very evolved process. But I think it will all take about March this year.

Okay. But is it sequentially increased based on some share of revenue and stuff like that? Hello?

Ladies and gentlemen, it seems we have lost line for the management. Request you to stay connected, while we reconnect them. Thank you. Ladies and gentlemen, we have the line for the management connected. Over to you, Mr. Ranganathan. Request you to please repeat your question.

Yes. So the rental will increase sequentially based on the revenue share that you'll be getting from them apart from the fixed rental?

Yes, certainly, certainly.

The next question is from the line of Parikshit Kandpal from HDFC Securities.

Sir, my earlier question is continuing on that. So you said there were some LRDs which were raised in the BTG project, right?

Yes.

So how much will be the headroom for -- further headroom for raising LRDs to understand how much funding can come in from there because I think part of it also will get converted -- CapEx will get converted to LRD. So what could be the incremental beyond the CapEx, which we can raise from both the projects put together?

So both the project put together, we have LRD potential of around INR 2,200 crores. So CapEx now left in this -- both the projects are around INR 393 crores. Some -- yes, repayment will happen, around INR 575 crores in WTC Chennai and around INR 500 crores also in Tech Gardens.

It will start showing in, right, the INR 2,200 crores. And on the existing rental, how much can you lease which is already being packed up...

Yes. So existing rental, we have already taken INR 400 crores right now LRD. Rest will depend upon the leasing. WTC Chennai is already leased. So once that possession starts happening, then maybe we can raise LRD somewhere in Q4.

And what's going to be that amount because I think you told that January onwards the revenue will start coming in. From -- so WTC, as of now, you've not raised any LRD as of now?

No. Because rentals have not started so we cannot raise it. But yes, we are in the process of getting the loan sanctioned.

How much could be like from 4Q, how much LRD potential can this have, the existing leasing?

It should be around INR 1,000 crores to INR 1,100 crores.

Wow. That again needs lot of shortfall in your cash.

Yes. And I would also like to clarify that out of INR 400 crores, we have already -- we have only utilized around INR 250 crores or so. Rest is still there.

So large part of your shortfall in the hospitality and retail business can be met from raising from the fund flow from these LRDs, right, sir?

Yes, it can be met from LRD, and we also have internal accruals. Both options are there. We look at the appropriate time as to how we have to fund hospitality.

Okay. So now given the 2.5 million inventory across, I could say this, to be leased and other things. So does it include Twin Towers also? Or is it separate? Because I could match the number like 1.55 million in the BTG and 0.2 million left in Chennai. So that's around 1.8 million. So balance is...

No, it doesn't include Twin Towers.

So balance will be the existing projects, right, so which are already posted.

See projects, see basically WTC Kochi, we have approximately...

Yes, yes, yes. So what was the sense of building this Twin Towers because I think in this time, when people are looking at postponing CapEx and you started already building out the Twin Towers? So if you can just highlight treating this 1.5-odd million in Bengaluru market?

See the thing is the Twin Towers will be ready -- the earliest it will be ready by, you can say, end of 2022 or so. And we have to be future-ready in our business. And if you don't build in '20 now, we don't -- we will not have anything to lease in 2022.

This will be entirely on our books?

The market is not -- it is not that the market is dead. The market is hurt currently, but I think it will recover with all the medication, vaccine, balms that we will get that market will recover in the next 9 months.

Okay. Sir, 1 point you did touch earlier that high pricing markets, the financial start to get consolidation towards low price markets. So -- but for our projects, how are we positioning ourselves? So what will be the market positioning in terms of pricing for our projects?

So basically...

It will be like mark-to-market or so how much down our rentals will be relative to the high market -- high-end market, if you can just give some sense on that?

In this case particularly we have a huge opportunity in [Technical Difficulty] Tech Gardens. It is in Whitefield. And Whitefield is kind of significantly lower priced than Outer Ring Road, the major micro market of Bangalore, okay? And Outer Ring Road also doesn't have huge vacancy and plus the rentals over there have now reached anywhere between 85% to 95% whereas Whitefield is at around 55% to 60%, okay? So we would see a lot of companies which are actually strained during this COVID scenario. They are actually looking forward to -- and who are out of lock-in in those markets, okay? They are wanting to actually migrate to Whitefield because that will not actually also result in significant displacement of their existing workplace because both micro markets are very near. And we are actually seeing those kind of inquiries coming by, now that the lockdown is vacated. Site visits have increased. But we see that these numbers will increase significantly, such requirements.

And sir, these inquiries, you touched upon, so what could be the size or quantum of like these in average -- these individual inquiries? How big these could be?

See normally, we are saying -- see, as on date, we are saying mostly the small size and midsized companies because they are majorly hurt, okay, in these scenarios. And those who are out of lock-in, they would be open to actually migrate to a low-priced market, okay? Because one is they will be getting a new premises, okay? And maybe like many of those such transactions will be kind of fitted out premises. So those things will come into play.

Okay. Just last thing, sir, on the NRI sales. So of the sales which we have done this quarter, so what would the proportion of the NRI sales in that?

Earlier, in this quarter, the NRI contribution was 25% for residential.

And what has been our average usually?

It used to be about 12% to 15%. Last year it was about 12 -- around -- it was a little over 12% but usually it was about 15% in the previous.

Next question is from the line of Biplab Debbarma from Antique Stock.

Just wanted to understand in your residential collection, in the last 2, 3 months, including this month, including July, how is the collection in the sense, those who have bought, what percentage of them are paying? I mean -- and is there any default significant that we should know? And if there is default in which category, like INR 40 lakh, INR 50 lakh, INR 60 lakh, INR 70 lakhs or more than INR 1 crore? In which category defaults are happening, if it's happening?

Okay. Is there a stress on the customer side? Yes, definitely, there is a stress. The salary cuts and job losses have increased the stress on collections. And therefore -- and essentially the customer's ability to pay. Currently, we aren't seeing huge amount of deferments. Yes, there are delays because customers -- one of the significant things which has happened in Bangalore is because it is the tech capital, a lot of people who were from outside the state have moved back to their locations. So that is actually putting a lot of pressure in loan processing, leasing payments, et cetera. So currently, we do not see any huge stress in terms of cancelations. Are there cancellations? Definitely, yes. But we don't see a huge set as of now.

But there are delays.

There are definitely delays. A lot of them, as I mentioned, are logistical delays, which we hope we should be able to overcome.

So there is no cause for concern in terms of cancellation per se right now -- as of now, right?

We don't see it in the immediate future.

Okay. And just, sir, you have launched 2 projects. That's what I heard, residential projects. 2 or 1, anyway. So just wanting to understand these launch projects. When you launch these projects, typically, in a ballpark number, I just wanted to understand that when you will launch a project earlier, pre-COVID, what percentage of projects gets sold in the first 3 months vis-à-vis now in this launch project, in Q1, what percentage got sold? I just want that comparison. Is there any impact on -- because of COVID on sales of new launch projects? That's what I just wanted to know.

So typically, pre-COVID and particularly in the last 12 to 18 months before lockdown, we used to see in the first 3 to 4 months about 15%, 16% getting sold. That definitely has reduced in the 1 project that we have launched in this quarter because of the COVID impact. So we believe that it will improve, but definitely compared to the pre-COVID scenario it will probably take a little longer for us to reach that 15%, 20% mark.

[Technical Difficulty] deter you -- I mean, obviously, it's a very fluid environment. But that based on -- obviously based on just 1 project, we can't draw that conclusion. But nevertheless, it will deter you in launching new projects in the current scenario, right, sir?

We will -- as we had said earlier, we will look at market conditions and the markets that we are launching, the new projects. So yes, we are -- we will be careful in launching. We will assess the demand -- estimated demand, and then we will go ahead with launches. Currently, we are planning, but we will definitely watch the market.

Okay. One final question, sir. Just in that Brigade Tech Garden, the rental that you are getting, I heard, is INR 8 crores or INR 9 crores rental. That rental is out of how much leased area? INR 8 crores, INR 9 crores, you said that you had...

That is 0.7...

0.75 million.

So basically, 0.75 million of Bangalore Tech Garden has already started generating rental income of INR 8 crores, INR 9 crores per quarter, right?

Right.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to Ms. Pavitra Shankar, Executive Director, for closing comments. Thank you, and over to you.

Thank you very much. Despite a tough Q1, our organization has had many bright moments that we celebrated. We're happy to say that Brigade was ranked number 43 in India's Top 100 Best Companies to Work For in 2020 by the Great Place to Work Institute and The Economic Times in one of the largest workplace studies conducted in India. The recognition this year was made even more special as it marked the tenth year in a row that we have received this award. Our subsidiary, Brigade Hospitality Services Limited ranked third among India's Great Mid-size Workplaces in 2020 also by the Great Places to Work Institute and The Economic Times. We initiated a number of relief measures for COVID-19 in Q1, which we have continued in Q2. Among these, we count donations of ambulances, ventilators and prefab ICU modules to various hospitals; dry rations and meals to the needy; construction worker support and engagement through meals and allowances; and support to The Chief Minister's Relief Fund. Another proud moment was the inauguration of the St. John's Health Centre in June at Brigade Meadows, a 60-acre integrated enclave on Kanakapura Road, Bangalore. This not-for-profit initiative is a joint effort of the Brigade Foundation and the highly reputed St. John's Medical College and Hospital. The health center commenced services on June 25 and caters to all the primary health care needs of families, not just in Brigade Meadows but in the entire neighborhood and will eventually become a full-fledged hospital. Let us not ignore the importance of arts and culture when needed the most during our darkest times. The Indian Music Experience Museum, supported and founded by Brigade, has had a challenging time due to the pandemic, but has adapted to the changing times with a new partnership with Google Arts & Culture. To commemorate Independence Day, over 100 artifacts from the IME, India's first interactive music museum, can now be viewed and experienced by people all around the world and especially curated digital exhibit titled Legends of Indian Music and Memorabilia. The lockdown and all its challenges have made all of us at Brigade introspect and reevaluate many things, but we remain committed to our core values, QC FIRST, which stands for quality and customer fairness, innovation, responsible socially and trust. They continue to be our guiding principles whether times are good or challenging. We know that better days will come, and we plan to be ready for them stronger and more resilient. Thank you all for taking the time to hear from us today. Stay healthy and stay safe.

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