Brigade Enterprises Limited (532929) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Financial Results Conference Call of Brigade Enterprises Limited. We have with us today the management of Brigade Enterprises Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. M.R. Jaishankar, Chairman and Managing Director of the company. Thank you, and over to you, sir.

Thank you. Good afternoon, ladies and gentlemen. I hope you and your loved ones are doing well and not that affected by the third wave. I would like to welcome you to the earnings call for the third quarter of financial year '22. I'm joined by our Executive Director, Roshin Mathew, Pavitra Shankar, Nirupa Shankar, Amar Mysore and our senior management team: Mr. Atul Goyal, CFO; Rajendra Joshi, CEO, Residential; Vineet Verma, CEO, Hospitality; Subrata Sharma, CEO, Office business; Om Prakash, Company Secretary; and Pradyumna, Senior Vice President. We are happy to report that Brigade witnessed improved profitability in the last quarter. In the residential segment, buyer sentiment continues to be positive, as witnessed with the demand in our ongoing and completed residential projects with Brigade continuing to be the brand of choice for customers seeking to buy a new home. We registered net bookings of 3.13 million square feet with a value of INR 19,057,957 crores for the 9-month period ending December in financial year '22. And for the quarter of FY '22, net bookings of 1.08 million square feet, having a value of INR 680 crores, is done. This is a growth of 10% by area and 17% by value versus the 9-month period of FY '21. We faced some delays in plan approval, and therefore launches due to a Karnataka High Court order on the local authorities, which affected all developers. We are -- of course, some of the developers were able to launch the projects which were approved earlier than the Karnataka High Court order. We are hopeful that the recent resolution of the matter will enable us to resume our residential launches soon. On the residential collection front, we registered our second-best quarter so far of INR 842 crores, driven by continued strong sales performance and good construction progress at all project sites. Hyderabad and Chennai continue to be important markets for us, contributing 27% by area and 36% by value in Q3. In Bangalore, our key projects, Brigade Cornerstone Utopia and Brigade El Dorado, are the primary contributors in under construction projects and followed by Brigade Exotica and Brigade Orchards in completed projects. The leasing segment of the commercial business remains stable with 99% collection. Transactions in Q3 gained momentum, confirming our earlier positive outlook for the quarter. We transacted 0.4 million square feet, that is 400,000 square feet, which is consistent with our expectations. And also, we have a strong pipeline, in excess of 800,000 square feet or 0.8 million square feet. The trend is consistent with robust hiring across IT and ITeS and financial sectors and therefore, the need for additional space. In fact, the RFPs, that is request for proposals, for large requirements have increased besides the requirement for small- and medium-space offices. The retail vertical saw a bounce-back to pre-COVID sales consumption numbers in Q3. In fact, we achieved 100% sales consumption recovery over Q3 of FY '20, that is in FY '20, which is the pre-COVID period for like-to-like brands. Prominent categories were food and beverages, travel gear, anchored stores and athleisure. Multiplexes across all our malls achieved higher levels of occupancy and sales for November and December due to relaxation of COVID guidelines. There was good traction with respect to our mall leasing. Almost 23 units, measuring about 100,000 square feet, is under fit-out in all our malls. These brands will be operational by end of Q4 financial year '22 or, in a few cases, quarter 1 of financial year '23. Our hospitality business saw a significant demand revival across our portfolio in Q3 with a good segmentation mix of travelers. ARR, average room rates, have grown gradually to touch 70% of the pre-COVID levels. And even occupancy has reached 90% of the pre-COVID numbers, showing an encouraging growth trend. While corporates continue to operate in a work-from-home mode, our hotels did witness an uptick in demand from corporate travel, domestic corporate travel, with almost 25% of the room rate sales falling under this category. Another positive was the return of the banquet sales across hotels. Despite the restriction and number of guests we could host, over 200-plus social and corporate events in our hotels, we consistently remained GOP positive throughout the quarter 3. That brings me to the end of our business highlights. With 2.4 million square feet in real estate and 1.8 million square feet in lease rental planned in the next -- in this and the next quarter, we have a lot to look forward to. Of course, more projects will be planned and launched in the subsequent quarters of FY '23. Thank you for listening. I now request our CFO, Atul Goyal, to take you through the financial highlights. Take care, and stay safe. Thank you.

Thank you, sir, and good afternoon, everybody. On behalf of the company, we welcome you to the earnings call of Q3 FY 2022. To start with the company update. For Q3, we recorded real estate sales of 1.1 million square feet during this quarter vis-à-vis 1.3 million square feet during last quarter. We also saw a significant jump in collections in Q3 FY 2022, which totaled up to INR 1,095 crores in Q3 FY '22. In fact, we have crossed our collection in 9 months what we had collected in last year. So that has been a very good collection by the company. Our lease rental vertical also maintained its traction, where 4.4 million square feet was leased during Q3 FY '22. We have an active pipeline of 0.8 million. On retail side, we achieved 100% sales consumption, as MD said, on like-to-like brands. Multiplexes have performed well due to new releases during the quarter. Our hospitality portfolio showed strong signs of recovery with the occupancy reaching the pre-COVID levels of 62% in December '21. Hotel portfolio achieved AGOP of INR 167 million during Q3 FY '22, an increase of 99% from Q2 FY '22 in absolute terms. Restriction in January '22 is likely to have a short-term impact. However, we continue to be optimistic with increased vaccination coverage and uptick in air travel. On a consolidated level, there was an increase in cash flow from our operating activities by 60% from last quarter. We continue to have adequate liquidity and undrawn credit lines from banks. Our average cost of debt has been coming down consistently over the last few quarters and was at 7.81% as on December '21 versus 9% as on December '20, a reduction of 119 bps. Coming to consolidated financial performance for Q3 FY 2022, the consolidated revenue for Q3 FY '22 stood at INR 933 crores versus INR 776 crores in the previous quarter, up by 20%. The real estate segment clocked a turnover of [ INR 750 crores ] and EBITDA of 22% in Q3 FY '22. The leasing segment clocked a turnover of INR 167 crores and EBITDA of 58%, which is mainly because of some one-time expenses which has come this quarter. The hospitality segment clocked a turnover of INR 62 crores and EBITDA of 29% in Q3 FY '22. The consolidated EBITDA for Q3 FY '22 stood at INR 270 crores. EBITDA margin stood at 29%. Consolidated profit before tax for Q3 FY '22 is INR 75 crores. Coming to debt position and its breakup. Again, there was a reduction of around INR 52 crores in real estate debt, which has been driven by high sales and collection during Q3 FY '22. The cash and cash equivalents stood at INR 1,312 crores as on 31st December '21. Consequently, the company's net debt outstanding as on 31st December '21 is INR 2,790 crores, out of which BEL share is INR 1,856 crores. Almost 78% of debt pertains to the commercial portion, of which 74% is backed by lease rentals. We have a credit rating of A+ with a stable outlook, which has been assigned by both CRISIL and ICRA. I now hand over back the mic to the moderator for questions.

[Operator Instructions] The first question is from the line of [indiscernible] from Goodwill.

I just wanted to get an understanding of our commercial assets. What is the average lease duration mark-to-market that we have of the current rentals that we are getting and the kind of expiry we'll see in the next 1, 2 years? Hello, can you hear me?

Yes, yes, yes. So this is Subrata. In terms of the lease tenure, it's normally 5 years. And in many of the cases, it is 5 plus 5. And so far as the renewals are concerned, this year, we have already achieved 98.5% renewal. There are almost like 4.68 lakhs square feet renewals that have come up. So we have renewed almost everything. And with regards to mark-to-market, all these renewals have happened in terms of like the normal lease tenure that's much like agreed upon. So there was no discounted renewals that were offered.

Okay. And what -- can we hit like 90%, 95% occupancy rates in the upcoming future, like in a couple of years? Or do you think that we don't?

What you're asking, like in terms of renewals?

No, in terms of occupancy of the asset.

Occupancy, we are quite hopeful. So basically, currently, we have approximately 2.4 million approximately to be leased. And the way the market is shaping up, last quarter has been very good. And the outlook is also very good. We hope to actually cross 90%, 95% within the next 3 quarters at the max.

Okay. And what will be the per square feet rentals that you are expecting in these properties?

Again, it depends upon the micro market. So essentially, like if it is like east of Bangalore, we are achieving INR 60-plus. If it is north of Bangalore, we are achieving INR 75-plus. Chennai, we are achieving INR 85-plus. So again, it depends upon like which property, which micro markets. In most of the markets, we are achieving a premium, okay? Like in east Bangalore, we are achieving almost like 3% to 4% premium over the what the weighted average rental of the micro market.

Okay. And you had mentioned that you've got some unsolicited -- you keep getting unsolicited offers for these assets time and again. So around what yield would the market be willing to buy these assets at?

So again, it depends like on what kind of tenancy, what kind of property, normally anywhere between 7% to 8% cap rate.

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

Sir, my first question, you alluded to some Karnataka High Court order for which there has been a delay in the launches. Could you help us understand the reason? And has this been resolved? Or what will it take for the matter to be resolved? Just wanted some clarity on that.

Sorry, the issue is resolved. So due to some application repetition of some applicants, the High Court said that the local authority should not collect almost 80% of plan approval charges they were collecting. So the local authorities stopped approving the new plans because 80% of the plan approval charges means it ran into hundreds or few thousand crores to the local authorities. So the matter got, I would say, sort of resolved by the -- a fresh government order by the Karnataka government overruling the Karnataka High Court order, so it is back to normal. And we -- by and large, the recognized developers did not challenge it. It's only straight case if somebody challenged and a stay order, which resulted in this conclusion. The issue is resolved.

Okay. Sir, and if I heard correctly during your opening remarks, this 2.4 million square feet of launches may either happen in this quarter or the next quarter. Is that correct?

Yes, correct. It's a -- bulk of it, we'll try to do this quarter. But sometimes, some RERA approval and things like that, if it takes time, it may get pushed into the first quarter. Otherwise, these are all plans where we have approval. And in some cases, out of maybe 50% of 2.4 million square feet, we have RERA approval also. The balance is under -- we are seeking RERA approval.

Okay. Half, they already have the approvals in place, for 1.2 million square feet. Okay, okay, okay. Second question is on our rental, as Mr. Subrata, I think, alluded that this balance, 2.4 million square feet, you are hoping to lease everything, if I heard correctly, by September. Are you going to just help us understand which properties you're expected to see more traction? And what is giving us this confidence? And that's it.

So basically, what I meant was 95%-plus occupancy over the next 3 quarters. So the way we are seeing the pipeline has leveled up, okay? The max pipeline is that Brigade guidance, where we have the maximum vacancy as on date. But at the same time, [indiscernible] and the kind of average size of the transactions that we are getting and we are actually closing, that's like significantly large. So that is on the top of the list. Plus Chennai market has also started shaping up. So in Chennai, the large-sized pipelines are still like not as significantly large as in Bangalore. But a lot of mid-sized companies have actually now gotten quite vibrant. So essentially, it's like BTG on the top of the list, followed by Chennai. And then we have like BIFC, in any case, Gujarat is doing fantastic. Over the last 2 quarters, we have done quite a good number of transactions.

Okay. Sir, just sorry for a follow-up, this 90%, 95%, obviously, you get the leasing done once. I mean, they will take 4 to 6 months with the fit-outs, right? So I think earliest the rentals may start by then, by January of '23? Or could you just help us understand how the occupancy level commences?

From the closing date, you can take on an average 6 months because the [indiscernible] as for the rent-free period has increased because of COVID fit-outs are normally slow. So we can expect around 6 months of rent-free period from the lease commencement date.

Okay. So definitely, by March of next year in, say, '23, we should be more or less done with the leasing. That is your internal target.

Yes, that's what we are also like targeting and we expect, okay, the way pipelines are actually trading. In fact, it has actually -- it was going on quite well. Because of the Omicron, the physical site inspections were subdued a bit. But the requirements are there in the market.

Okay. And sir, just last question for Atul. Sir, if you could just share the numbers for Tech Gardens and WTC Chennai, for the 9 months, what has been the rental income from these two properties, gross?

So gross rental income in Tech Gardens has been INR 76 crores. And in [indiscernible], it is INR 84 crores.

Okay. Sir, any increase expected in run rate from the fourth quarter, a quarterly run rate, like Tech Garden, INR 25 crores?

It will continue because it's a straight lining method how we are recognizing the revenue. So we don't anticipate any increase right now. But if there is an increase in leasing, definitely the run rate will go up.

The next question is from the line of Karan Khanna from [ Vido Capital ].

This is Karan from Ambit. So my first question is we know that you expanded land bank across Chennai and Bangalore during the quarter. So any thoughts on when do you plan to launch here? And also, can you give us some sense on the development that would be happening in Hyderabad?

So in Hyderabad, we'll be adding a residential space of maybe 1 million square feet per-plus, 1 million to [ 1.3 million ] square feet. And some of the -- in Chennai, it will be a combination of residential and commercial, altogether maybe in the range of 4 million to 6 million square feet. But they're in design stage. And some of the projects are in design stage and a bit of due diligence, final due diligence stage also. Bangalore also, the major project to be launched, the Cornerstone Utopia Phase 2, which is actually almost 7 million square feet. There are some approach road issues, what we call here as CDP road, the development plan road issues near the entry. That is almost resolved. But that may also take about 9 to 12 months -- 9 to 10 months or so for launch. And overall, I feel we are in the process of tying up or tied up about 15 million square feet of new projects across these 3 cities.

Sure. And continuing on your real estate business, so far for 9 months FY '22, you're seeing 6% price hikes. So how much more pricing do you think will be required to factor in the entire inflation in raw material prices seen over the last 12 months? And secondly, when do you see the organic ASP hikes happening for the industry and yourself? At what point in the cycle do you see that happening?

Probably you have to assume a somewhat similar price hike in the next few months. Because post budget, again things have started going up. The price of cement and steel have further gone up in the last 2 days. So that way, I do expect inflationary pressures are also there. And it is -- bankers expect the interest rates to go up marginally. And all those factors to be seen. But any such price increase, we expect that we will be able to pass it on to the consumer.

Sure. And then secondly, on your retail portfolio, you mentioned that the consumption is now back to 100% of pre COVID. So consequently, can you help us with what is happening on rental normalization across your tenant categories? And also, how do you see the impact due to Omicron?

Yes. This is Nirupa here. So Q3 was very good for pretty much all of the retailers. By and large, what we see is our collections have been very good. So if you look at it, by and large, we are expecting the rental collection to be maybe 70% of what it was pre COVID, between 70% to 75% of what it was pre COVID. We had given a lot of rental relief to many retailers. I would say 85% of them no longer have any COVID relief. So most of it came to an end December 31. So from Jan, Feb and March, 85% of the retailers are back to paying what they were paying in the lease deed. Of course, because of Omicron in the month of January, there was a lot of disruption because we had weekend curfews. We had restrictions on night curfew. So business did take a beating then. Many retailers have understood its part and parcel of doing business. There are a few requests. But by and large, we're going to stick by the lease deed and as per the terms agreed because now most of the restrictions have been lifted. So in short, I would say we can expect for FY '22 about 70%, 75% of lease rentals compared to what we received in FY '20, which was pre COVID.

Great. And then last question on your hospitality portfolio. So you mentioned that our corporate bookings now are at around 25% in the last quarter, but your ARRs are closer to 70-odd percent of your pre-COVID numbers. So what -- at what level of the corporate bookings are you saying that the ARR recovery should be closer to 100% of pre COVID? That's my last question.

This is Vineet here. So as far as corporate bookings are concerned, they continue to be under stress because of the international travel not starting. And as you would have read the news today, that would expect to start only after this Omicron wave subsides. Having said that, we have been getting about 25% of our hotel bookings are coming from corporates, mostly domestic. In terms of ARR, unfortunately, we expect that to go back to pre-COVID levels only in the next 11 to 12 months, not before that. Because it is a highly competitive market and all hotels are striving for the same piece of the pie. So I guess, we'll have to be a little patient when it comes to reaching the ARR of pre-COVID levels.

[Operator Instructions] The next question is from the line of Yash Gupta from Angel Broking.

First question is on the announcement regarding the GIFT City in the budget. How you are seeing the things to be panned out in next 1 or 2 years from now? And is there any change in our strategy?

See, the announcements are all positive. But overnight, we cannot expect any big change to happen in a quarter or 2. I expect it may all start happening in 2 to -- 2 quarters or more. Particularly, if someone has to establish a foreign university. It is a very big decision. And also, any such university will also require a lot of approvals, even if it is GIFT City. And the arbitration center also should happen, that may happen faster than the university. Overall, it is moving from strength-to-strength, I would say. But it is the pace of progress is still not as great, still lot of -- as Subrata said, a lot of new transactions have happened in GIFT City. But generally, the average size or ticket size, average ticket size or average area size, is a bit -- is much less compared to an IT sector requirement. This is in the financial sector. These are all in the financial sector. So that way, compared to IT, the space requirements are low.

Okay. Second question on the residential market, so can you give some ballpark number regarding the launch pipeline for FY '23? And the second question on the residential market is that we have taken a price hike as our raw material prices have went up and you are saying that in next 2 to 3 months, another rate hikes will be there. So what -- I just want to understand when are we going to see a price hike regarding the land parcels that we are having.

So the first question, Yash, was on the launch pipeline for FY '23, right? So we normally don't give any guidance. But as Chairman had alluded in the previous comment, currently, we have got 2.4 million between this quarter and next quarter. We do expect that we should be able to launch another 6 million to 7 million square feet if all goes through in the subsequent quarter. That is what we currently are expecting. But all of it depends on deal closures, approvals happening, et cetera. And on price hikes, currently, because of the cost pressures, we did take price hikes in the Q3. We will continue to take it. The quantum, what we typically do is, we don't take huge price hikes. We take small, incremental price hikes every 2, 3 months. That's typically our set of operations. Because of the current cost pressures, we do believe that we will have to take price hikes as we go along. Also, we've been seeing market consolidation and robust form around branded players. We feel that we will have a higher pricing ability compared to [ small players ].

Next question is from the line of Venkat Samala from Tata AMC.

Sir, my question is just kind of a follow-up, and I think partly, you answered this. So if I just look at the total inventory which is available, which is unsold, at around 5.8 million square feet, that is kind of lowest in the last maybe 5 to 6 years. I understand the fact that maybe because of a delay in launches, so the number of sales are higher and then it could not be replenished by launches. Therefore, this is looking lower. So I'm just trying to understand that moving forward, how are you thinking about launches? So I think you partly spoke about it that you're looking for 2.4 million square feet in the next 2 quarters and thereafter, 6 million to 7 million square feet. So that 6 million to 7 million, does it include new land bank that you would be acquiring? Or is it from the current development potential itself?

So the 6 million to 7 million square feet that we are talking of will be a mix of what we already have and what we will be getting in the process of acquiring or will get done in the next few months. That's what we are talking about the 6 to 7 million in the next FY. But the question that you are alluding in the first part as to...

No, sir. It is that we were speaking about 15% to 20% kind of annualized growth, right? And this year, we are most likely to miss it. So therefore, how are we kind of setting ourselves up for that kind of a growth moving forward for next year and the year thereafter? So that is my only concern.

Yes. So what I'm saying is that we continuously are working towards new land acquisitions [indiscernible], et cetera. The pipeline is quite robust at this point in time. A lot of them are deals in progress. But what we clearly see is that with our ability to acquire land and launch in a quick time, I think we are very well geared up to handle the demand that's coming in. We are very clear that the demand is very strong and robust, and we expect that, that will continue. So with the area of about 29 million square feet that we already have and the others that would come in, I think we are very well geared up to take up the growth, which will be much better than what we've probably seen in this financial year.

Understood. And I think last quarter or last, last quarter, you did mention about being on track to sort of utilize the QIP capital by Q1 of FY '23. Any change to that?

See, I think we should be able to. As I said, the money we need is much more than the QIP, what we have raised in QIP, which will be met by -- there are internal resources also. So that way, we are confident at meeting. But as I said earlier, we have sort of further tied up or in the process of due diligence for almost 15 million square feet. So that may require a funding much more than INR 500 crores raised. So I think we don't -- by and large, we don't see any challenges in that.

Right. And just as a follow-up, sir, so then you are kind of comfortable to kind of increase your net debt on your residential piece, right? Because if you just look at maybe last 4 or 5 quarters, you've been throwing very good cash, right?

Correct. So we are throwing good cash and we are garnering good cash. And we also have unsold -- completed and unsold stock that also will release. More than that itself, it's INR 500-plus crores that also should get released in a couple of quarters. And while the intention is not to unnecessarily raise the debt, but I don't think we should be shy of raising debt of residential, which is currently at 0.14:1 debt/equity, so which is probably one of the lowest in the listed companies.

Right. That is what I was asking. I mean, with the kind of cash flow that we are generating in the residential business, we should be a little comfortable now to kind of lever up a little more than where we are, right, if we are seeing the right opportunity.

Right. That's it.

The next question is from the line of Parvez Akhtar from Edelweiss.

So two questions from my side. The first one, if it would be possible to break the segment-wise split on the collection during the quarter?

Can you please repeat the question?

If it would be possible to get a segment-wise breakup of the collections during the quarter.

Yes, sure. So the collections for Q3 for real estate was INR 840 crores. Around commercial lease was INR 96 crores. Retail was INR 38 crores. Hospitality was INR 78 crores. And maintenance PMS was around INR 46 crores. Total collection was INR 1,095 crores.

And the second question is when we look at the Q-o-Q business, then the area which needs to be transacted in the [indiscernible] has gone up. So have there been any cancellations during the quarter there?

So the area went up only because of the release of hard options, which were actually earlier tied up with one of the major tenants. So they're released because we also have uncertainty with regards to when employees will be back to office. But having said that, we have like major clientele over there, and we are actually hopeful that one of those clients will come back for certain amounts of space. So that's what we are hopeful of. [indiscernible] withdrawn, it was mainly due to the hard option.

The next question is from the line of Samar Sarda from Axis Securities.

Congratulations for the third quarter. Mr. Jaishankar, you mentioned around about 15 million square feet is probably the pipeline or visibility on the projects you're adding up or discussing. Could you just give us a little more color about, if at all, there are projects which are outright purchased in this or most of them are JDAs? And what is the breakup, like how much from Bangalore, Chennai and Hyderabad?

See, at this stage, we may not want to give the breakup fully. But I can say it is a good mix of purchase and JDA. But in one case, I did -- I sort of gave the answer also about 1.5 million square feet of area in Hyderabad and about 4 million to 6 million square feet in Chennai and the balance will be in Bangalore. So these are all what we have entered into term sheets and the due diligence is in progress. And in a couple of cases, we have entered into the joint development or agreement to purchase also.

Okay. And the land parcels of the JDA you've added in Chennai in the last quarter, like would you be launching that in the next fiscal? Or like is it still some time away?

Next fiscal should -- 90%, 95%-plus probability, it should happen in the next fiscal.

A small bookkeeping question for Atul. Atul, could just help us with the projects which are completed in this quarter, in the third quarter?

Yes. It's around 4 lakh -- around 8 lakh square feet which has got completed. And we have also sold around 1 lakh square feet from our finished stock.

Okay. Sorry, which was this project which were completed?

This is 7 Gardens and Plumeria Lifestyle.

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

My question is, sir, we are going to build a mall with Prestige in Chennai, where we had a minority stake. So any update on the progress of that project, when that construction is supposed to be started?

After the approvals are received. But I suggest kindly ask this question in the analyst call of Prestige Group. So that they are the senior partners in that. So it may be they will be in a better position to answer. But if you ask me, in the next financial year, it should [indiscernible].

Okay. Sir, next question is on Twin Towers. So have we started looking to pre-lease that tower over there? Any movement on the leasing? Or it is still some time away?

So I would say it is still some time away. There are -- we are responding to RFPs. They're responding to RFPs. But the general sentiment currently, particularly for under construction projects, is lower than completed projects. So that way, I expect to see if there is no fourth wave, the thing should come back sooner than later.

Okay. Sir, what would be the market rate of rental in that locality right now, market rate for office renters?

And in that locality, it is anywhere between INR 70 to INR 80, in that range.

INR 70 to INR 80 [indiscernible]

[Operator Instructions] The next question is from the line of [indiscernible] from HDFC Securities.

Parikshit from HDFC. So I have just one question. On the 15 million square feet pipeline, so by which quarter or by which half of next year [indiscernible] closes? And how much of cash out will happen on closing date?

I would say we expect to close the transactions maybe in 2 quarters or so, before September, before September quarter. I mean, [indiscernible] there are -- because there are a dozen transactions, each one will take different timelines. But everything, hopefully, should happen in -- before the September quarter. And overall requirement, I did mention, it is INR 500 crores-plus and -- which we are able to fund from the internal resources and the QIP.

INR 500 crores will be the cash outgo. And how much is the gross value which we need to add here?

I will tell you subsequently. Yes, I will tell you subsequently because it is the nature of product, everything needs to be decided, it is in the design stage. It is based on that, we will have to arrive it.

[Operator Instructions] The next question is from the line of Kushagra from Old Bridge Capital.

This is Kushagra. A few questions, most of the questions got answered. First, when you're talking about building up the pipeline, how much cash you are probably thinking of spending towards project acquisitions, land acquisitions over the medium term? Second, a related question to it. Since you're talking about raising debt in the residential part of it, what are the comfortable levels in terms of debt to equity in the residential segment?

As I said earlier, it is -- the requirement is upwards of INR 500 crores, more than what is raised in the QIP. And I did say we are able to meet the requirements in internal resources -- from internal resources. And if required, we will be able to raise some debt also. Currently, it is 0.14:1 is the residential debt. If you ask me, even if it is 0.5:1 or 0.6:1, it is considered very, very acceptable as many developers who are only in residential, they have a much higher debt-to-equity ratio of even probably 1:1 and more. So that way we are okay.

Sure. Okay, got it. So -- and got it. And second question on any update on your hospitality -- selling of the hospitality segment?

As soon as the interest levels go up by interested funds, if there is another wave of COVID, so then everything comes to standstill. So we are waiting for the right opportune time. It is to dilute the equity. So whenever it is -- thankfully, the -- all the hotels are performing fairly well in Q3. Of course, January, it has taken a bit of a hit and -- but I think within a week, it has started showing a marginal improvement and this can only go up. And generally, if there is international travel, like January, February to June is one of the best periods for hospitality business.

[Operator Instructions] Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Ms. Pavitra Shankar, Executive Director, for closing comments.

Thank you. Thanks all for listening in. Here are a few other highlights from our end. The Brigade Group celebrated its 35th anniversary in October 2021. Brigade Towers, a 14-storey commercial building on Brigade Road in Bangalore, was the first project started in 1986 as a partnership company. Since then, we've come a long way from a single-project firm to a multi-product, multicity developer with many landmark projects and recognition, incorporating as a private limited company in 1995 and going public in 2007. We would like to use this opportunity to thank all our customers, investors, associates and all other well-wishers for the trust they have placed in us over the years. We stand committed to our mission, vision and value that have brought us to where we are today. We will continue to live by each standards. We also think it's fitting to touch upon the recently announced budget. We believe it's unique in the sense that this is the first time a government has laid out its vision for 25 years. It leaves a lot of emphasis on infrastructure and it's forward-thinking with respect to climate change and the digital rupee. Although not much for our real estate sector and the middle class, the Emergency Credit Line Guarantee Scheme, or ECLGS, is a welcome relief to much affected MSMEs and the hospitality sector. Coming to an interesting initiative from our end, I'm sure you're all aware of Brigade's flagship CSR initiative in arts and culture, the Indian Music Experience museum, or IME, in Bangalore. The IME is coming up with its latest offering, an exhibition called [ Bird Song ], which, for the first time, brings together music and ecology via the world of birds. The exhibition opens in April and comprises both the physical and online components, do visit if you can. The latest exhibit is also in line with Brigade's core values of being socially responsible and in line with our commitment as an organization to sustainability by creating environmental awareness and action. Our Real Estate Accelerator Program, Brigade REAP, set up India's first PropTech syndicate fund on the LetsVenture platform. Strawcture, which is a REAP startup working and creating sustainable construction material using agri waste, raised 30% of its total fundraise via this platform. And it was successfully closed in just 30 minutes. Despite the sudden surge of the third wave over the last few weeks, it's good to see the Omicron variant is already waning. We hope the work is behind us with respect to COVID, what with booster shots getting rolled out, the variants decreasing in their severity and many countries removing their COVID restrictions entirely. I can speak for everyone here when I say let's look forward to a year filled with hope. We will work towards realizing our goals, and we look forward to healthier and happier times. With that, we now wrap up our Q3 FY '22 analyst call. Thank you all for taking the time to hear from us today. Stay healthy and stay safe.

Thank you. On behalf of Brigade Enterprises Limited, we conclude today's conference call. Thank you all for joining. You may now disconnect your lines.