Brigade Enterprises Limited (532929) Earnings Call Transcript & Summary

. Ladies and gentlemen, good day, and welcome to the Q4 FY '21 Earnings Conference Call of Brigade Enterprises Limited. We have with us on the call today, Mr. M.R. Jaishankar, Chairman and Managing Director; Mr. Nirupa Shankar; and Mr. Amar Mysore, Executive Director; and Mr. Atul Goyal, CFO; 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. Thank you, and over to you, Mr. Jaishankar.

Thank you, everyone, for joining, and good afternoon. We hope all of you and your loved ones are keeping well in these tough times. On behalf of the company, I would like to welcome you on the earnings call for the fourth quarter of financial year 2021. I'm joined remotely by our Executive Director; Ms. Nirupa Shankar, Mr. Amar Mysore. Our senior management team is also present on the call. Mr. Atul Goyal, Mr. Rajendra Joshi, CEO, Residential; Mr. Vineet Verma, CEO, Hospitality; Mr. Subrata Sharma, COO Office; Mr. Om Prakash, Company Secretary; and Mr. Pradyumna Krishna Kumar, Vice President, Investor Relations. Due to the current lockdown in Bangalore our people are connected to this call remotely from different locations. So if there is any kind of issue during the answer, kindly bear with us. We, in Bangalore, are currently under lockdown as the health care system is working hard to cope with the second wave of the Wuhan virus. Citizens of this country continue to struggle to find beds and oxygen, and we must do our part to break the chain by remaining at home, despite the cost to business. FY '21 was a difficult year that required us to be agile and change the way we do business. Despite a muted Q1, we are happy to report our company recorded its highest ever yearly sales of 4.6 million square feet in the Residential segment, resulting in a sale of INR 2,767 crores, a 16% increase over the previous year. This was mainly contributed by the Residential business that registered another record-breaking performance in Q4. We clocked over 1.66 million square feet of new bookings in a quarter for the first time having a value of INR 1,018 crores. We have also had our best quarter on the collections front at INR 840 crores in Q4, a growth of 58% from the previous quarter, driven by high sales and good construction progress. The key reason for our continued success is as a result of our core business proposition. That is, having the right projects in the right locations at the right prices, our quality and service that customers associate with brand Brigade, in addition to our innovative marketing campaigns and the high quality of our sales team. Our projects in Hyderabad and Chennai continue to deliver consistently high results, along with our projects in Bangalore. The key trends observed in Q3 have continued in Q4; that is, customers continue their preference for completed inventory and larger units, very high demand for homes priced between INR 50 lakhs to INR 1 crores, and larger players have shown high growth, further consolidating the market. The outlook for Q1 FY '22 and in the coming financial year is again muted due to the resurgence of COVID-19 second wave. However, we believe that the rebound for the market during financial year '22 will mirror what we witnessed in FY '21 as long as we are not affected, we are not affected by the so-called third wave of the virus. In our Office segment, the continued focus on collection of lease rentals has resulted in 99% collections. On the leasing front, while we were experiencing increased momentum in inquiries, RFP releases, which are request for proposal releases, and site inspections, the market has gone into hibernation mode since the onset of COVID second wave. However, robust hiring in IT and IT sector is creating quite a good amount of latent demand for real estate spaces. This sentiment is well exhibited among all of our ongoing discussion with prospective clients, and also among our major new tenants who are poised to start their operations in Chennai and Bangalore. As on this, our high probably key pipeline is around 1 million square feet, with Brigade Tech Gardens, Bangalore and World Trade Center, Chennai and BIFC, that is Brigade International Financial Center in the GIF City, Gujarat. The pipeline constitutes large, medium and small time inquiries. Inquiries and transaction momentum at the GIF City has increased significantly with the addition of multiple asset classes under IFSC, International Finance Service Center. We have concluded lease renewals of approximately 200,000 square feet this quarter and concluded lease agreements for Brigade [ Southfield ] a 345,000 square foot building in Whitefield, Bangalore, and Brigade Senate, a 177,000 square feet building previously [ strata ] sold to inverstors. These have been taken up by Fortune 500 companies. Coming to the retail vertical, we saw better-than-expected recovery trend to sales for many stores reaching 90% of pre-COVID levels by March 2021, primarily in our flagship mall, Orion Gateway. Rent recovery was at 96% for the quarter compared to Q4 of FY '20. Categories that did well were consumer electronics, cosmetics, [ sports ] and athleisure, fast fashion and fast fashion department stores. In our flagship mall, Orion at Brigade Gateway, the good news is that 17 new leases were concluded, accounting for 7% of the gross leasable area with an average increase of 10% in the rentals. There were another 20 tenants who renewed their leases with an average of 31% escalation in rentals accounting for 5% of the gross leasable area compared to the previous lease [ deeds ] signed. Despite the current lockdown, our focus continues to be on proactive tenant engagement and rental recovery so that once stores are allowed to reopen, tenants are focused on operations and prepared for the bounce back. Finally, in our hospitality business, we continue to see positive improvements in Q4. Our portfolio of hotels achieved an average occupancy of 43% in Q4 compared to 27% in Q3. However, average room rents -- the average room [ rates ] continue to be under pressure, having reached close to 60% of pre-COVID levels. Gross operating profit for the portfolio increased from 16% in the previous quarter to 22% for Q4 FY '21. The hotels continued strict monitoring of operating costs and other overheads to ensure that we protect our bottom line as far as possible without compromising on the quality of our services. But with the recently added lockdown restrictions imposed in the cities we operate in, we expect the hospitality industry as a whole to be under pressure until there is a relaxation on travel and movement of people. We continue to monitor the situation on a day-to-day basis. Based on the performance of Q4, we were extremely bullish for FY '22 and set ourselves an aggressive target. But the lockdown and impact of the second wave has created a dampener for the Q1 of financial year '22. We remain hopeful that with the government's plan to get the entire adult population vaccinated in the coming year, the business environment will become more conducive for travel and transaction, and we can focus on sales and strategy. Thank you for your patience. Now Mr. Atul Goyal, our CFO, will present the financial results in detail. Thank you, Atul.

Thank you, sir. Thank you, and good afternoon, everybody. I think everybody and your loved ones are safe. On behalf of the company, I would like to welcome you on the earnings call for Q4 FY 2021. In Q4 and last -- it was almost open and showed a sign of all [ round ] recovery, it led to an increase in pace of recovery. In real state, especially in new launches and sales across our key markets, we witnessed a significant jump. Similar to last quarter, sales picked up due to all-time low home loan rates, stagnant residential prices, work from home. The consolidation in the sector has also played a big role. The easing of lockdown restrictions further aided in bringing buyers back to the market as [ sites' reach ] were easier to plan. On company side, this quarter, again, has been better than last quarter in terms of business performance. Let me give you some key highlights, though some material was already shared. We have recorded all-time high sales of 1.66 million square feet during this quarter vis-a-vis 1.53 million square feet during last quarter. For FY '21, the sales volume stood at 4.6 million with a total value of INR 2,767 crores, recording a growth of 16% over previous financial year and is also highest ever sales by the company. As demonstrated in our investor presentation, our real estate has been growing at a CAGR of 43% over the last 3 years. As of 31st March '21, Brigade had about 18 million square feet of ongoing projects and 1.43 million of upcoming projects, and we are confident to maintain this run rate in future as well. We have also seen significant [ improvement ] in residential collections and this was the best quarter in terms of collection totaling to yield INR 840 crores in Q4. Total collections were also higher in Q4 at INR 1,118 crores, 64% higher than last quarter. [ Incidentally ] this is the highest collection which company has done [ in retention ]. On the leasing side, we have been achieving 99% rental collection with gradual increase in new occupancy in the operational portfolio. On the retail side, we have the higher tenant occupancy and in the mall, consumption was about 90% of pre-COVID levels. We also saw a decent uptick in hospitality performance from September 2020. We have broken even in terms of operation in [ all ] hotel totals with average portfolio occupancy increasing to 43% in Q4 FY '21 from 27% in Q3 FY '21. GOP margin stood at 22% for the quarter. The company is confident of mitigating the impact of the second lockdown and strict monitoring of costs and plugging the [ deficiency ], if any, in hospitality further. On a consolidation level, there was an increase in operational cash flow from operating activities by 61% from last quarter and 83% from last year. We continue to have adequate liquidity and undrawn credit lines from the bank. Our average cost of debt has been low as it has been coming down consistently over the past few quarters and was 8.40% as of March '21 versus 9.57% as of March '20, a 117 bps reduction that would result in an annualized saving of well over INR 50 crores. Coming to consolidated financial performance for FY '21. The consolidated revenue for FY '21 stood at INR 2,010 crores versus INR 2,680 crores for FY '20, while the same for Q4 FY '21 stood at INR 821 crores versus INR 654 crores in the previous quarter, up 26%. The consolidated EBITDA for FY '21 stood at INR 532 crores. EBITDA margin stood at 26%, which we have been maintaining for so many years. The EBITDA for Q4 FY '21 was INR 218 crores versus INR 157 crores in previous quarter, up 39%. The Real Estate segment clocked a turnover of INR 1,525 crores at an EBITDA of 17%. The hospitality segment clocked [ Audio Gap] 13 crores and an EBITDA of 5%. The Leasing segment clocked a turnover of INR 371 crores and an EBITDA of 70% in FY '21. The interest and finance charges for FY '21 stood at INR 346 crores. Consolidated PAT after MI for FY '21 stand at minus INR 46 crores. Coming to the debt position, there was a reduction of INR 200 crores in real estate debt, which was driven by higher sales and collections. The cash and cash equivalents stand at [ INR 726 crores ] as on March 31, which is one of the highest the company has had. Company's net debt outstanding as of March 31, 2021 is INR 3,574 crores out of which [ Brigade's ] share is INR [ 26,504 ] crores. 75% of total debt pertains to commercial portion, of which 65% is backed by the rental income. We have credit rating of A with stable outlook, which has been assigned by both CRISIL and ICRA. Now I'll hand it back to the moderator for questions. Thanks.

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

The first question is on the residential business. Could you just quantify for this quarter what the percentage breakup of sales between Bangalore, Hyderabad and Chennai, if that is available?

So good afternoon, everyone. For the Q4, we had nearly 60% of our sales coming from Bangalore and the balance 40% coming between Chennai and Hyderabad.

Okay. Okay. And Chennai would be the WTC residences, right? That is the only project? Or Xanadu is also one?

Yes, 2 projects, Xanadu in West Mogappair and the WTC Residences at [ the park ] . So both these put together. The volume and value really came from Xanadu, Xanadu saw a very good uptick in Q3 and Q4.

Okay. Okay. And follow-up question is that since you've done such a good performance even under COVID in FY '21. So any range of guidance for the residential business, which we're targeting for next year?

As you know, we normally don't give any guidance numbers. But first quarter has definitely been muted, as Mr. Jaishankar pointed out because of lockdown in all 3 cities that we majorly operate in. We do expect that from Q2 onwards business will pick up.

Okay. Okay. Okay. Fine. And second question is on our mall business. Mr. Jaishankar alluded that we have signed up new leases and also you've done rental renewals. So with the [ target ] the lockdown again happening and malls being shut. Now could you [ give some valid ] on what is the sort of rental waivers or anything that we may have to give or is it too early [ in COVID to call there ]?

Yes, this is Nirupa here. See, basically, we followed a fairly fair pattern last lockdown where we basically -- based on the different kind of categories. Obviously, for cinemas, it was different, food and beverage, it was different, anchored was different [ rental assets ] was different. But basically, for most of the stores, especially the apparel stores, we were able to get some sort of -- maybe like between 50% to 25% of the minimum guaranteed of a rental. And what we did is we had our structure also like a [ slab ] structure for -- once the lockdown is over, we had a [ slab ] structure for that as well. So for instance, suppose the retailers did about 80% to 100% of their pre-COVID level sales, then we would charge them say 75% of the MG. If it was between maybe 50% to 80%, it would pay 50% of the MG. So we had different slabs for various categories. And we had come up with an agreement for all of us where the tenant and us signed off on that agreement last lockdown period and the post lockdown period. So what we are doing is we have proactively reached out to all the tenants this lockdown and said that we plan to follow a similar structure as last time, so that we don't have to reinvent the deal and waste time and effort on renegotiations. So our communication has gone out on most of them already, and we hope to sort of decide on the commercials during the lockdown period. So that once we open, everybody already knows what their dues are and they can focus on business.

Okay. Sure. And just a housekeeping question for last FY '21. For the mall business, what is the rent we would have lost or rather how much would you have collected had the lockdown not been there?

So actually, for FY '20, it was approximately INR 120-odd crores, and we did about 50% of that in FY '21. Had the lockdown not been there, then it would have been much more, obviously, because we look on annual growth. But we did about 50% of the previous year.

[Operator Instructions] The next question is from the line of Pritesh Sheth from Edelweiss Wealth.

Congrats on the great period despite the COVID. My first question is on -- firstly, you had a good launch in this quarter, [ being against the odds ]. So how much did that contribute to our overall sales?

Joshi?

For the new launches for the last quarter contributed about 30% of the total sales.

Okay. Okay. Fine. And looking at your pipeline for FY '22, it looks -- obviously, there's an uncertainty around sales, it looks a tad low. So where can the pipeline go if, let's say, things recover from Q2 onwards?

So if I understand your question correctly, you're asking where will the pipeline grow or...

Yes, the residential pipeline in terms of launches expected for FY '22.

Currently, what we indicated is where we have visibility on approvals. There are some more projects which are in the pipeline, which we intend to launch as and when we get approvals and also based on market sentiments. For the year FY '22, we have a fairly good pipeline.

Okay. So can we expect like the launch pipeline to continue to be around 5 million, 6 million square feet that you have reported over the last 3 years?

It will essentially -- see what we clearly see is that there is an inherent demand, which is there this time. The second feedback from the ground is that the customers are a lot more confident this time compared to last time. Because last time, it was the first time that we encountered this kind of pandemic and the customers were very unsure of their income streams, et cetera, which [ this year ] the uncertainty is much lower. But one has to wait and see how the pandemic will play out, particularly because this time it is lot more lethal and a lot more contagious compared to last time.

Okay. And just lastly, just on the follow-up. So [ Xanadu IV ], you had 1 minimal launch this quarter. And -- but I don't see in the pipeline shown here on in the FY '22 pipeline, which you have indicated. So any change of plans there? So I mean Xanadu -- are these doing good. So...

Yes. So there's 1 last [ cluster ] or phase that we have yet to launch. We are in the process of soft launch. So that will get into action once the lockdown opens.

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

Can you throw some light on how the construction activities are going on, on our various projects and as well as how customer inquiries, whether it's online or off-line?

Yes. See, as far as the construction activity is concerned, they are all progressing quite robustly. And we have about 11,000 workmen in various side. Only during the lockdown, I think there has been a gradual decline so far. But in spite of that, we have about 70% of the [ workmen ] working in our different sites. And I think once the lockdown is lifted, within a few weeks, the numbers will come back to the previous level, and it may even go up. And as far as the business scenario a lot of -- I think Joshi can add about our efforts on digital marketing and the rest.

Yes. Thank you, sir. So as far as the transactions and inquiries are concerned. Inquiries are concerned, they have been online. In fact, digital has been the main source of our inquiries for the last 3 years. But because of the lockdown in the last 2 to 3 weeks, a lot of transactions, [ wherever ] that was happening, has been online transaction because we are not operating our sales offices in most of the cities.

Okay. Second question on, sir, commercial office side. Can you share some detail on how the demand is there in the market? And along with this, if any detail you can share on the latest deal we've done on the commercial office side?

Yes. Mr. Subrata Sharma, our Office head will respond to this.

Yes. Thank you, sir. So as far as commercial segment is concerned -- see, we feel that there is a significant amount of latent demand because of the robust hiring that is going on in IT, ITES sector. Plus the sector is also growing, though not as vigorously as it was doing earlier, but there is a significant growth. Now we also experienced the same because when we started this quarter, we actually concluded 5 transactions. And we were actually hoping to grow more, do more, but because the lockdown again, everything became muted. So overall, we feel that based upon our pipeline, current pipeline of 1 million square feet and the kind of inquiries that we are getting, even today, we got an RFP. So there is a kind of significant latent demand. We are just waiting for the things to normalize. So unless and until the reoccupancies start happening, we don't feel that real estate discussions will happen in the company. So those -- as for the strategic orientations, all which -- almost all the companies who actually want to expand or take up phases in terms of discussions [ are on ].

So how different this particular deals are from the pre-COVID level? Like I think in the first quarter, you have done a deal with [ Atayla Pharma ]. So how would that particular deal be different from the pre-COVID deals that we used to do? Is the [ end tenant ] pretty much larger on this type of deal, what we are doing currently?

Typically, what is happening is, if you ask me based upon our experience, wherever the deal size is huge, okay, then companies would actually take more time to understand how the market [ phases pans up ] so that they can plan their manpower resources, movement or deployment of their CapEx, et cetera. But so far that we are seeing, the gain in momentum is ratably come from the [ midsize ] so far, like 1 lakh to 2 lakh square feet of transactions, wherein companies want to actually gain the cost advantage. And we have seen slight significant momentum in our [ GIF City ] just yesterday because of the various [ asset classes ] getting included under [ IFS ]. So we saw more transactions getting closed there. And we have done a sizeable deal in terms of like the [ IFS Chennai ] Then we also saw quite a good number of employment at top and midsized companies asking for spaces in our [ Brigade Center ] in Chennai. So the momentum is majorly as on date from the midsize and so far 1 lakh to 2 lakh of [ Brigade packet ]. But at the same time, we are in discussion for very large sized transactions, but that we feel will take time.

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

Congrats on a great quarter in terms of the sales. So my first question is now the last 2 quarters, we have done 1 million and 1.5 million now. So if I annualize it, maybe be in the ballpark somewhere about 4 million to 6 million annually. So if I see your overall pipeline, so we have about 7 million of unsold launch projects and about [ 13 million- odd feet of land bank ]. So from the business development piece, so we have about 5 to 6 years of land bank. My first question is out of the 75 million, how much can be brought into the market or be ready to launch in the market if you bring it? And second would be again on business [ development ]. So this will also sustain the strength in land bank over the next few years in the land pipeline. So if you can just highlight [ the different ] efforts both on land acquisition and maybe the [ new ] opportunities in context of standard volumes which we are doing right now?

Good afternoon. While as earlier mentioned, we have not wanted to give the guidance, but it is the desire of every company to do better year after year. That is our objective also. As I said, as far as Q1 is concerned, since it is muted, we will not be in a position to estimate for the rest of the year till other things improve, but we hope sales will settle down, in the coming months [ good sales ]. And having said that, other than the 1.4 million, which is with approvals that are ready to be launched, we have nearly [ 2 or 3 million square feet ] more that should be -- we should be able to get the approvals, as I said either soon or within the next 2 quarters and be able to launch that. And of the 5 to 6 years stock that we have, so these are all very, very doable and there is -- they are also in different stages of design development and also the -- it depends on various permissions, considering some of them are large projects. So it may take a little bit longer in order to get the environmental clearances and other related [ things ], but I think we are at it, and naturally, acquiring more properties is an ongoing process that the exercise will always go on.

So last year, we invested close to INR 185 crores in land. So do you think this will be succeeding on an annual basis the next few years, about INR 200 crores investment?

This is probably yes, but it all depends whether we end up signing joint development agreements or we end up signing properties to purchase, if the project depends on that. But I think that trend as an estimate is not wrong. We have to keep that in mind.

My next question on the commercial business now. So we sometimes you want in about [Technical Difficulty].

I can't -- we can't hear you very clearly.

Is it better now, sir?

Yes, yes.

So the second question was on the commercial leasing business. So now we had seen a [ decent ] start for the fourth quarter and 5 transactions were concluded. So just wanted to know what is the total quantum of these transactions and which project? And second thing would be on BTG. So there what is -- what kind of RFPs we are seeing for the BTG projects? And when do we see really the leading start kicking up there from which quarter it may be financially [ year ] where we start hearing some positive developments in that part?

Yes. Subrata Sharma will respond to this.

Yes. So as far as the transactions are concerned, so as I said, these are like mostly small- and medium-sized companies that we've concluded. So overall, it would be somewhere around 0.1 million. But having said that, we have high probability pipeline. We will also intend to actually are focusing on another about 0.5 million of transaction in this quarter. In fact, that was the outlook like before this lockdown. Having said that, the majority of the pipeline that we have out of 1 million pipeline, almost 75% of it actually pertains to Brigade Tech Gardens. And as I was mentioning just a while ago, that RFP that we receives, that is also focused on a micro market. So going forward, we feel that there will be quite a lot of inquiries of Brigade Tech Gardens majorly because of its strategic location. And in [ Brigade intevan and also that in go ] micro markets having very less vacancy. There was a lot of expansion consolidation that will actually be sought after like by companies, and they will find it a very good value proposition. So that's why we are quite confident of the marketability of the property going forward.

So when do we see one of the bigger ones of these deals materializing in, by which third quarter of this year, or of the quarter financial year [ after October ]?

Actually, so, so far as the bigger deals are concerned [ these companies ] they will certainly take more time to actually think on the strategic expansion route, how they actually plan their CapEx, et cetera. So that is something that will take time. And we feel that once things actually normalize, around 3 months from that phase I think these companies will actually start acting on those. So we have like -- see, to give you an example like we have [ 3 ] transactions over -- it's kind of 1 lakh square feet [ range ]. They have been discussing with us for the past 1 year, okay? And because of most of the IT companies have actually gone -- they have actually accelerated hiring. So they want their manpower to come back. So these discussions are happening. And we feel that as soon as things normalize, I think these companies will start taking decisions. So as you rightly said, 2 quarters from now, I think that would be a fair estimate.

Okay. Just lastly on the [ presales ]. This quarter, you said will be muted. So muted like this could be 50% of or less than 50% -- so 50% to 100% in that range, or less than 50% of the fourth quarter's number?

Joshi, [ address it ].

Thank you, sir. So very difficult to estimate at this point in time because we still don't have clarity as to when the lockdowns will get lifted, et cetera. If the lockdown gets lifted, we should see a better June, but it will be very difficult to estimate a percentage at this point in time.

The next question is from the line of Amandeep Singh from AMBIT Capital.

Sir, you did mention about construction being impacted given labor issues and lockdown restrictions, especially in Bengaluru. But will it be possible to quantify how much delay would you expect in terms of ongoing construction across your portfolio?

See, at this point, then, if you ask me, the lockdown is lifted by end of the month or earlier, it will mean 4 to 6 weeks like that [ I mean ] like that, or maybe sometimes even 8 weeks, because the labor has to come back. I think only when lockdown is lifted we will be in a position to assess this. Last time in the lockdown, then it was almost -- it is a very strict national lockdown and with a lot of migrant labor went back where, it was lot of difficulties, encountering a lot of difficulties. So for that to subside it took almost 4 to 5 months' time in terms of activity revival. But this time, I don't think it is going to happen like that, primarily because it is not a total lockdown unlike last time. Construction activities are still allowed, but maybe the extent of activity is, as I said, it is down by 30%, 35%. We will [ be able to ] give you estimate once work resumes.

Sure, sir. And sir, secondly, with respect to your commercial portfolio. Will it be fair to assume that increased area of Brigade Gardens and recently added WPC Chennai would start yielding rentals [ 1Q ] FY '22 onwards? And consequently, what should be the exit annualized rentals at current occupancy for the entire leasing portfolio? Any sense on that?

Yes. See [ that is more land bank ] but as far as Brigade Tech Gardens the first phase of the 1 million square feet is yielding rent already. And as far as World Trade Center, the second phase should also start, some rents will start in Q2 and the same with World Trade Center, Chennai. It will start -- beginning Q2 it will start. It's a graded approach, of course, [ until it is signed in total ].

Sure, sir. That's helpful. And sir, as a follow-up to this, so could you help us understand how much of your existing commercial portfolio would be up for renewal in FY '22? And if you are expecting any exits?

I think [ Visye ] can answer...

As far as our capability of retaining tenants has been like impacted like last year also, so we could actually retain the entire 100% of the tenants. And this year also, we have approximately 5 lakh square feet coming up for renewal. Out of that, 4.9 lakh is sure, and they have actually already gone ahead with the discussions of our renewals, and we are doing the formalities. 10,000 square feet is under discussion, but that also will get renewed for sure. So that's all we have like [Technical Difficulty] capability in terms of closing almost 100%.

Sure. And will it be possible to give any sense on this 4.9 lakh renewals? What would be the escalation of re-leasing spread approximately?

So the escalation normally, it's at 15% every year for most of the tenants. So if we take a 5-year actually renewal time are 5 or 10 years, so ultimately, it would be somewhere around 10% to 15% on an average.

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

Sir, just I wanted to understand on your excellent collections. What is the reason being for jump in collection? And what would be the breakup of that collection, like how much from residential, how much from other?

Joshi and Atul?

Yes. See, the collections are higher is also because of the consistent sales which have been happening for last 4, 5 quarters, and of course, construction has been at good pace. So we have been able to raise demand. And based on that, we have been -- the collections have been coming. I think if you want break up for Q4, as I said, INR 840 crores is from residential. Commercial sale is INR 61 crores. Commercial lease is INR 60 crores, retail is INR 32 crores, hospitality INR 96 crores and our maintenance side PMS is around INR 29 crores. So that adds up to INR 1,118 crores.

Okay. And the second question is on your rentals, office rentals. I -- from the previous questions, I understand that not all the leased property started generating rent. So if you assume that there is no incremental leasing in the office space, whatever the lease area, if they become fully operational, what would be the total quarterly rent from this leased area in the office space?

See, right now, the rental has not started, but next year, I think we should be -- since it will be a partial rental from WTC, and it depends upon retail as to how the retail rent, we should be -- we should touch around [Technical Difficulty] both the property get leased and retail get leased, we have INR 750 crores of rental, which will come maybe on '22, '23.

No, no, sir, my question was [ everything ] whatever you have leased out, if all of them start generating income, what would be the rental income from the office only -- on the office property?

Subrata can answer?

[ Annual leases ] you were asking?

No, sir, quarterly. Any 1 quarter. So whatever without incremental leasing, whatever you have leased out and all of them started [ generating rentals ]. So what would be the total rental from the [ gross ] office space in a particular quarter?

It should be the range of INR 80 crores to INR 85 crores.

Okay, sir. And one final question. Sir, the negotiations in general for the renewals you have done, do you see any escalation in rentals? I mean [ all of this beginning leases ] do you see significant escalation in terms during general negotiations or no?

Yes. So this is Subrata, so I'll take this question. So see, again, it depends upon the property and the micro market, okay. In a property like our World Trade Center in Bangalore where the vacancy is very less, okay? And there the demand is highly preferred property, okay, in this case like we are at a better stance or position. So we will get the escalation that is for sure. In certain other properties, there might be the negotiations that will be going on. But we still expect that on average, we should get 10%. That is for sure on a weighted average basis.

Okay. So you're expecting escalation even in this -- during [ this period ]?

Yes, so the only reason why I'm actually telling this because in all our properties, whatever the new leases that we have actually signed, in spite of dearth of the pipeline in the market, we have not gone below our rentals, weighted average rentals that we achieved. In fact, we have gone above, okay? So that's why we're thinking that we wouldn't actually go lower on the interest, particularly for the renewals also.

[Operator Instructions] The next question is from the line of Parvez Qazi from Edelweiss Securities.

Yes, congratulations for a great set of numbers. Couple of questions from my side. First, just wanted to get your outlook on the realization side. Have we seen any kind of improvement as far as realizations are concerned on the residential side? The second is what would have been the rental contribution from BTG this quarter? And lastly, when do we expect rent from the WTC Chennai to come?

Yes, Joshi will answer the first part and the second part, Subrata will answer.

Yes. So in terms of price realization per square feet for FY '21, we saw almost 11% jump. The increase was nearly about INR 400 to INR 500 per square feet because of the new launches that we did in Hyderabad and Chennai. So overall, there has been a significant price increase that has happened in FY '21 over FY '20.

So with regards to the BTG rentals, it was INR 18 crores per quarter. And as far as WTC Chennai rent commencement is concerned, it will start from Q2, in early Q2.

The next question is from the line of [ Swagato Ghosh ] from Franklin Templeton.

Sir, a follow-up on the realization question like-to-like. Were there any price hikes taken during December or March quarter?

Yes, Joshi?

So on the price side, we did take some price hikes in our ongoing projects in Bangalore and in Chennai. We did see some price hikes. But what also contributed to the higher price was Hyderabad where we did launch a project. And there also, we took price hikes in the last 6 months that we've launched the project. Yes, there have been price hikes in the last 6 months.

Okay. And so this price hike was an exception versus history? Or was it like in line with what it was historically? I just want to understand the strength of the market in the last 6 months? And how do you expect the price hikes to pan out in the next, say, 2 years after the second wave is over?

Yes. So the price hikes compared to the previous financial year were better in FY '21 second half, once the situation was kind of getting back to normal. What we see, as our Chairman has pointed out, there is a consolidation in the market. And therefore, for larger developers like us, in good locations we are able to command a better price. That's what we see.

Okay. Okay. That's helpful. And second question is Karnataka [ stamp duty part ] I guess that comes into effect from April. So how much of our inventory would be benefited from this cut? Would be eligible for this cut?

Yes. And I'll take this question again. So this was really for the affordable housing for up to 45 lakhs. So therefore, from our portfolio, only about 6% to 7% of the total would be within this right bracket. And most of that inventory, what we have is also not getting registered, it's not ready for registration. So it will be very minimal impact on our set of projects.

Okay. So one last question, if I may. It's from a strategy perspective, is we are very confident of residential upcycle then doesn't it make sense to be really aggressive in business development right now before the cycle actually kicks in?

I would, as I mentioned earlier, see business development is certainly an ongoing process at any given point of time. Currently in sales, we are in the process of negotiating or having discussion for not less than 7 million square feet currently and in the different locations. And some have -- they have come to an understanding, so the due diligence and [ disclosure ] are in progress. So it is -- we are mindful of the fact. We will bear it.

The next question is from the line of Ritika Agarwal from Value Quest.

Sorry, I was on mute. First question is on, like you said, escalation pressures depend upon the micro market. So what percentage of your portfolio is in pressure on rentals or escalations?

Subrata?

I was not exactly -- what was your question once again, please?

What I'm trying to understand is what percentage of our commercial portfolio, we are witnessing pressure on rentals or escalations?

So as of now, we are not experiencing any pressure as such. So what I actually wanted to convey for the renewal call was, like we are reviewing everything and almost like 100%, and we haven't actually come across such a pressure from our rentals. So as of now, because of our strategic locations and the quality of the property, we have not experienced rental pressure. We have been able to actually go above the weighted average of the past transactions.

Okay. And we are in line with having escalations of around 5% every year on our existing commercial portfolio?

The rate is 15% every year. In some of the cases, we have 5% per annum as well.

Okay. And we are in line with that? We are not seeing any pressures on that?

No, as of now no. Though there will always be ask whenever you go for renewals there will be asks, but because of our properties and the kind of occupancy that we have. We have not actually, we haven't reduced the rentals as such.

Okay. And the renewals which you said has been happening at the current weighted average rate for the portfolio?

The renewals are happening as per the respective terms of the contract. So say a tenant takes having certain percentage of escalation and certain rentals they are actually currently on. So that same terms will actually continue for the renewals. Normally, the terms wouldn't be changed.

Okay. Understood. Secondly, on the hospitality portfolio, we were looking to divest part of it or completely? Any talks on that?

Not at the moment, because as we mentioned in the last call, whatever discussions we were having in FY '20, because of the lockdown and COVID, that investor kind of decided not to go ahead with it. This year, we have received some requests to discuss. But then it doesn't make sense at the kind of valuations that we are currently receiving. So we have the ability to kind of withstand this second wave because we are somehow managing paying back all our interest, loans and things like that. So we will look at it when there is an investor who is ready to give a decent valuation. And probably when the timing is more apt for this kind of a deal. Otherwise, we would not be keen to kind of divest it as of this time.

Sure. Lastly, what is the target for the debt reduction in the medium term?

See, we have already been reducing our debt continuously in residential. So I don't hope that any debt increase -- major debt increases happen in resi or hospitality. In hospitality, whatever increase is there is on account of ECLGS loans. Of course, there will be increase in debt in commercial section, where all that construction and when the leasing happens in Tech Gardens and WTC, that will get converted into LRD in future. So the major chunk of that increase will be in LRD, that is a conversion from construction loan to LRD.

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

Sir, 2 questions. One was, is it possible to share how the market share changed in the case of Bangalore? Because as I see it, looks like the growth that we've seen during the year is eventually because I mean the Chennai as well as Hyderabad obviously have done [ seriously ] going forward, which is where there's Y-o-Y growth. And I'm assuming Bangalore, otherwise, would have been a little slower. So if you could share your thoughts on the market -- the way the market share has changed for us during the year in Bangalore? And what number do you see is possible for any single entity to be able to go to, in terms of market share in any of these markets, especially Bangalore?

Joshi?

Yes. So as you correctly pointed out, a lot of our growth for FY '21 was driven by Chennai and Hyderabad. In Bangalore, in FY '20, we had a substantial part contributed from Bangalore because we had 2 new launches, El Dorado North Bangalore and Utopia in East Bangalore. So therefore, the contribution of Bangalore did come down. But from a market perspective, I do see that Bangalore is quite vibrant because Bangalore also has moved up the chain. And therefore, the demand for larger units, more premium units and from branded developers like us is continuing to increase. We do see increased demand for larger sized units for the 3 BHK, 3-bedroom units, et cetera. So I do not see so much muting of demand in Bangalore. It is just that in what stage of the project life cycle, we are there and we have new launches, et cetera. I think that would depend on the traction from Bangalore. But otherwise, I do see traction from Bangalore to be continued.

Sure. Possible to share any number in terms of percentage quarter on market share today and what are we targeting?

Our markets are difficult to estimate at this point in time because there is no 1 accurate agency unlike in commercial space to give an accurate prediction. But we do think that in Bangalore, we are #2 player in the residential space.

Sure. And the second was -- so when I look at the balance sheet, things when we're trying to conserve cash, I think which is how you explain, I mean, the higher cash balance of the buffer that we've created. But at the same time, when I look at our launch pipeline, I get to over the last 2 quarters or rather 3 quarters we've seen launch pipeline in terms of CapEx properties go up from 0.8 million square to 1.8 million square feet. So how do I marry these 2 entries, on 1 side trying to conserve cash and hospitality as well as trying to generate more cash and where the EBIT on the margin side, we are willing to take a more CapEx property, which is where you would have to spend money now?

Yes. So we are not taking more CapEx property only now since the WTC and Tech Gardens have got completed at this time. So we have capitalized it. That's why in balance sheet, we are looking at higher investment property number. So it's mainly because of the capitalization of Tech Gardens and WTC, where not much CapEx is remaining to spend. We, of course, now there is 1 big project, which is Twin Towers and we have a sufficient financing lines to support that project going forward.

The next question is from the line of Adhidev Chattopadhyay from ICICI Securities.

We just see now on a debt level side, we brought it down almost our share around INR 300 crores in a single quarter. So going forward for next couple of years, where do you see the debt level overall head for the company considering that our residential cash flows are pretty strong and peak of our CapEx cycle is behind us with Tech Gardens and WTC in Chennai being completed?

So as I said, Adhidev, it will be mainly in LRD where the debt that will remain and it will get increased because we'll be converting that construction -- some loans into LRD. So I don't see a major change, maybe next year because of the WTC, we may have around INR 300 crores of LRD again coming in. And of course, Tech Gardens in LRD will be -- will happen only if we are able to lease it in the right time.

Yes, sir, this is I understood. But I am saying as an aggregate for a company for the next couple of years. So considering our cash flows for [ resi ] should we see a consolidation going down further, the net debt [ in our share ]?

So see, our share, I think, if you see consolidated net debt, it should be around -- it's around INR 2,654 crores now. It should be around [Audio Gap] crores also.

Sorry, sir, I lost you. I lost the call.

Oh, so our exposure of BEL right now is INR 2,654 crores. It may go to around -- if every LRD gets converted, it should be maximum INR 3,000 crores, INR 3,100 crores.

The next question is from the line of Pritesh Sheth from Edelweiss Wealth.

Sorry, I was on mute. Just 1 clarification. We are not opting any discounts on the CAM income that we collect from the tenants for our commercial tenants, right?

There are 2 things. One is, in the case of our tenants, there is no reduction in CAM because in every way the properties are maintained and because they are also operational, if 100% of the people may not be there, but all the systems, et cetera, are all operational and the limited staff will always be there. And the electricity consumption of all these -- the people leasing are quite high as before people, I would say, the lockdown or the work from home concept, they still consume 70% to 80% of the electricity. As regards the retail thing, we have offered them a 25% reduction where we can during the lockdown period by reducing various the expenses. And the benefit of that will be passed on to the clients.

Right. Okay. Okay. And lastly, on your -- the [ Southfield ] property 0.5 million square feet. So that will be completed in Q1 and then commencement will be from Q3 onwards?

Yes, the rent commencement is from July 1 [ until it's ] completed, our tenants are doing their interiors.

The next question is from the line of Venkat Samala from Tata Asset Management.

Sir, you did highlight without giving any number that currently, you are under discussions in various stage of about 7 MSF of pipeline. So I mean, given the fact that you have a very limited development potential left in Hyderabad and Chennai, would it be fair that incrementally in terms of pipeline addition, your focus would be in these 2 markets?

See, in Chennai, where we have finalized 1 million square feet for residential development potential. It is in a due diligence. And another 1 million square feet in commercial after World Trade Center. We have -- that is also in the design stage and approvals should take time. As far as Hyderabad is concerned, we are in active discussion with 2 parties. And I would say all this second wave of virus has slowed down the discussion process. And the other large [ place ] is in Bangalore. In any case, 70% or more of our business is in Bangalore.

Sorry, I lost you. You said 70%?

70% of our business is in Bangalore.

Right, right, understood. Understood. And sir, without giving any number, you did launch about 6 MSF in FY '21. Should it be fair that, assuming that lockdown starts opening up from next month onwards, we should expect a similar number? I mean, given the optimism that you have that at this point in time, that consumer sentiment will reflect into better sales hereon?

I would say we are working towards that. The exact number is difficult to say because of the approvals of some of the projects. So generally, things have slowed down even in approvals and the work in the government and civic authorities. So I think once that happens, we are very certainly by Q2.

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

Sir, I just wanted to understand your EBITDA margin. Although we are seeing price rise in residential, do we -- when do we expect this EBITDA margin to improve? Do you see a significant jump in the next 2, 3 years, the margin to go to, say, 25% [ maybe 30% ]? What would be the margin that you would be looking for in the next 1, 2 years?

So I would say that should -- as you rightly pointed out, in the next 1 to 2 years, which should happen, because of the repeated impact of COVID first wave and second wave, there were some challenges. And -- otherwise, it should improve. And also, there is cost escalations and all those aspects are also being phased, whether due to steel price increase or any other metal price increases. So in the financial year '22, we do expect a substantial jump in prices, whether one likes it or not.

Okay. So you expect significantly 22% -- just ballpark. I just wanted to understand what, when you say improvement in EBITDA [ it would be to ]?

Yes, it can happen. [ We don't know but it can happen ].

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

So just a follow-up on the land, 7 million square feet. So what could be the FSI cost now in the current market? What would be the FSI cost ballpark?

See, it all depends on location of the project. It can vary from 1,000 square feet to 2,000 -- INR 1,000 square foot to -- FSI cost and go to INR 2,000 and even more, depending on the location of the overall project. In some cases, it can go to INR 3,000 FSI also, but it all depends on that.

Let's say for 7 million, even if you take the base cost of INR 1,000, it's about INR 700 crores. So how will the payment be staggered?

If you buy [ if you secure ] the same 7 million if it is on joint development, it may require only INR 70 crores to INR 100 crores.

So any breakout of this, how much of the 7 million could be outright [ and what you put on out in the interim ]?

[ If it is several thousand ] then as and when the development, we will tell you, certainly.

So because you have enough headroom on the residential side, you hardly have any debt on residential business. Also, how will you [ account ] this? So this INR 200 crores number which you earlier told, so that could be on the higher side in terms of annual land acquisition cost?

No, I think that is a fair estimate, fair estimate combination of some purchase, some joint development, et cetera. But as you rightly said we have headroom. So depending on the situation, we will take the right call whether it's a [ property to purchase ] or it should be a joint development.

Any view on this 1 million of acquisition you're planning for commercial in Chennai? So will it be outright or it will be a startup or it will be...

That's on joint development -- that's on joint development basis and it is on the Pallavaram-Thoraipakkam road, what is called the PT Road, it is already signed and we have design development and approvals, [ final stage applying for approvals ].

That was in with Prestige and the other developer, which you were earlier saying, same thing or different?

It's on the same road.

But not the same project...

It's not what we have jointly done. No, that is OMR road, that is for a mall.

Okay. Okay. And what is your CapEx? This is your joint development, right? No money outgo as such?

This is a joint development, joint development.

And for lease, not for sales, not for [ strata ]. [ This is for lease, got it ].

Yes, for lease, for lease.

Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Nirupa Shankar for the closing comments.

Thank you, everybody, for your participation. I hope we've been able to answer the questions to your satisfaction. This pandemic has brought about an unexpected change to the way we do business. It has set off the trigger for project adoption and investment in real estate as well. Brigade's real estate accelerated program, called REAP, saw 11 startups, raised a sum total of $4.5 million in the early stages of investments in the post-COVID era, 2 more Brigade REAP startups in the data analytics and VR space, or Virtual Reality space were acquired by square yard in the same period. We have also witnessed a global interest in Indian prop techs with a start AD and accelerator in New York, selecting Brigade REAP to manage its prop tech program in UAE. While many of the technologies we have come across are cutting edge and will certainly pave the way for doing business more efficiently in the future, we must take a moment to deal with the crisis currently at hand, especially one that has hit home so hard. Brigade, through its CSR foundation, plans to spend close to INR 10 crores this year towards health and COVID-related initiatives. Along with starting the construction of 100-bed hospital, we will be donating health care equipment such as patient monitoring systems, ventilators, ultrasound machines, bypass machines and oxygen concentrators to a number of charitable hospitals in Bangalore, such as the Baptist Hospital, the Chinmaya Mission Hospital, Sri Shankara Cancer Foundation and St. John's Medical Hospital. We are also supporting various COVID care treatment centers like SPY in Mysore, which serves the tribal areas of Mysore and neighboring districts. Lastly, we have provided COVID-related emergency expenses to frontline workers such as food, medicines and [ PPE kits ]. We hope that by the time we speak again next quarter, we would have overcome the worst of this virus. Till then, wish you all to stay safe and stay healthy. Jai Hind

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