Brigade Enterprises Limited (532929) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '24 Earnings Conference Call of Brigade Enterprises Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. M. R. Jaishankar, Executive Chairman. Thank you, and over to you, sir.

So thank you. Good afternoon, ladies and gentlemen. Welcome you all to the Brigade Enterprises Q4 Financial Year '24 earnings call. I'm joined by our Managing Director, Ms. Pavitra Shankar; Joint Managing Director; Ms. Nirupa Shankar; our Executive Director, Mr. Roshan Matthew, Mr. Amar Mysore, Mr. Pradyumna Kumar, also by our CFO, Jayant Manmadkar who is quite new and also other members of the senior management team. I'm very happy to say that all verticals of the company contributed significantly to our growth in financial year '24, on the back of robust demand, with a strong pipeline of 22 million square feet of ongoing projects and at around 16 million square feet of upcoming projects, we are confident of sustained performance in the coming quarters as well. We continue to focus on Bangalore, Chennai and Hyderabad for suitable land parcels that are at par with our quality standards and our customer-first focus. Coming to the real estate segment, the favorable momentum in the Indian residential market continues, and the last quarter of financial year '23-'24 witnessed sales at an all-time high across all metro cities put together. In this context, our overall real estate business has also outperformed previous years with 7.55 million square feet area sold, at a value of over INR 6,000 crores, including land owners area share. Collections from the segment were healthy INR 4,243 crores in financial year '24. The average realization of units sold during the year has gone up to INR 7,970 per square foot, which is a 23% increase over the previous year or 31% increase for the same quarter previous year. Customer demand is strong, and there is willingness to pay for larger units, higher specifications and access to a more premium lifestyle. We have a pipeline of 12.61 million square feet of new residential launches lined up across the cities of Bangalore, Chennai, Hyderabad and Mysore, which will further consolidate our position in FY '24-'25. As regards leasing segment. First, I'll talk about Office. Our Office segment witnessed a strong performance in financial year '24 with net office space absorption of more than 1 million square feet in FY '24, of which 0.2 million square feet was achieved in Q4. With 97.5% occupancy across its leading portfolio, Brigade ranked among the top developers in Bangalore with 7% market share for '24. Brigade Tech Gardens has been in the spotlight achieving 100% occupancy with marquee tenants, despite the shrinking SEZ market post sunset of the regime. The office demand scenario is expected to be robust for financial year '25, and Brigade is poised to take advantage of this momentum. Demand is being driven by medium and large sales office space requirements, dominated by players from automobile, technology, engineering and manufacturing sectors. As regards to retail, during financial -- during the quarter 4 financial year '24, footfalls across our 3 malls grew by 10%, despite multiplexes across the malls clocking only 4% growth year-on-year due to limited movie content. [indiscernible] space is strong, especially by F&B players, family entertainment centers and fashion, lifestyle brands. Across our entire leasing portfolio, we clocked a revenue of INR 937 crores for the financial year '24, which is a 25% year-on-year growth. Collections remained stable at 99%, during the financial year. Now I'll talk about hospitality. In quarter 4 financial year '24, our hospitality SBU demonstrated consistent growth, witnessing improvements across both ARR and occupancy percentages. Revenue surged by 13%, primarily fueled by an increase of 11% in occupancy and AGOP of about 10% compared to Q4 '23. There was a revenue -- there was revenue year-on-year growth of 15% fueled by ARR growth of 8% and occupancy growth of 5%. There is promising growth in core revenue streams, particularly in F&B revenues. This brings me to the end of our operational highlights. CFO, Jayant Manmadkar, will now take you through the financial highlights. Thank you very much.

Thank you, and good afternoon. On behalf of the company, we welcome you to the earnings call for Q4 FY 2024. Chairman have already shared operational highlights, I will be sharing key financial highlights for the quarter and financial year 2024. We are happy to share that Brigade Group has reported its highest ever listed sales of 7.55 million square feet for the financial year ended March '24. It also -- it is also the highest ever sales for the quarter with 2.72 million square feet. To start with the company's update for quarter 4 FY '24, the Real Estate segment clocked a turnover of INR 1,390 crores, an increase of 143% over Q4 FY '23, with an EBITDA of 20%. The Leasing segment clocked a turnover of INR 247 crores, an increase of 32% over Q4 FY '23 with an EBITDA of 71%. The Hospitality segment clocked a turnover of INR 126 crores, an increase of 13% over Q4 FY '23, with an EBITDA of 36%. The consolidated turnover -- consolidated revenue for quarter 4 FY '24 stood at INR 1,763 crores, an increase of 102% over Q4 FY '23. Consolidated EBITDA for Q4 FY '24 stood at INR 493 crores, an increase of 113% over Q4 FY '23. EBITDA margin stood at 28%. Consolidated PAT after minority interest for Q4 FY '24 is INR 206 crores. We achieved highest ever collections in Q4 FY '24, amounting to INR 1,838 crores, an increase of 26% over Q4 FY '23. Net cash flow from operational -- operating activities stood at INR 589 crores, an increase of 35% over Q4 FY '23. Coming to the group's performance for FY 2024. The Real Estate segment clocked at a turnover of INR 3,662 crores, an increase of 51% over FY '23 with an EBITDA of INR 510 crores. The Leasing segment clocked a turnover of INR 938 crores, an increase of 25% over FY '23, with an EBITDA of INR 684 crores. The Hospitality segment clocked a turnover of INR 464 crores, an increase of 18% over FY '23 with an EBITDA of INR 168 crores. The consolidated revenue for FY '24 stood at INR 5,064 crores, an increase of 42% over FY '23. Consolidated EBITDA stood at INR 1,362 crores, an increase of 39% over FY '23. EBITDA margin stood at 27%. Consolidated PAT after minority interest for FY '24 is INR 452 crores, an increase of 55% over FY '23. We achieved highest ever collections for the year amounting to INR 5,915 crores, an increase of 9% over FY '23. Net cash flow from operating activities stood at INR 1,575 crores. Coming to the debt and liquidity position. We continue to have adequate liquidity and undrawn credit lines for financial institutions to support growth plan. Our average cost of debt has been contained at 8.82% per annum. Gross debt of equity stood -- gross debt of entity stood at INR 4,663 crores. The cash and cash equivalents were INR 2,073 crores, as on 31st of March '24. Consequently, company's net debt outstanding as of 31st March '24 was INR 2,590 crores, out of which BL share is INR 1,908 crores. We continue to have 0 residential debt driven by higher sales and collections. Almost 82% of the debt pertains to the commercial portion, which is backed by rental income. Debt equity ratio stood at 0.62 as of March '24. I will hand it back to the moderator for questions.

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

Congratulations to the team on ending the year on a strong note. My first question, if I look at Slide #9 of your investor presentation, I see that the presales CAGR over the last 4 years, this has been largely driven by volumes at 15%, while pricing growth has only picked up in FY '24 and stood at around 9% CAGR over the period. Now as we look at next 3 to 4 years of evolution for your real estate portfolio and given the robust launch pipeline that you have in FY '25 and FY '26, how should one think about the growth? Will it largely be driven by volumes or because of [indiscernible] potential for pricing growth as well?

Yes. So regarding our portfolio, we are primarily looking at it more as the growth in area, is how we look at it in Brigade. So when we plan a CAGR or look for any sort of future growth, we are typically looking at area sold. But however, given the pricing appreciation that we've seen as well, we do expect to see the APR and also the revenues grow substantially more than what the area projections are. So while we continue to peg our growth based on area, we expect to see an additional amount come in, in terms of the revenue growth. So I'm not sure that was clear. But given the markets that we're in, we still intend to have to launch larger and many more projects in order to keep seeing the area growth.

Sure. Just a follow-up to that, Pavitra. Of the total 7.5 million square feet area sold in FY '24, is it possible to know the breakup from the new launches in FY '24 and sales from the existing inventory?

Yes. So in FY '24, including Q4, since predominantly most of our launches came in, in Q4. In Q4, the amount of sales, by contribution from area, was around 45% and value 50%. And similarly, for the financial year as well, it's about that much. Area is around 46% to 47% and by value, it's around 51%, the new launch.

Yes, the number I was trying to get to Pavitra is, let's say you sold 7.5 million square feet of area in FY '24. So what could be the breakup of this? How much of this was contributed from new launches that you did in FY '24 and how much of this was from your existing inventory that stood on the balance sheet as of March '23?

That's what I mentioned. And maybe the other basically -- so around 50% of the area sold in the financial year were from new launches. And maybe another way to put that forward is also, we launched around 6 million square feet in the course of the financial year. Of the 6 million square feet that we launched, we've already sold 68% of whatever was launched in the financial year.

Sure. That is helpful and that clarifies. Second question, if I look at the Brigade InSignia, that's a project that's expected to be launched in the next few months. Can you talk about the interest that you're seeing in terms of the EOI so far? And if the project sees a good success, would it pave the way for acceleration in launches in the same vicinity? And do you have enough land to sort of accommodate potential future projects triggered by this one success?

Yes. So InSignia so far, I mean we just got the RERA about a week-or-so ago. The EOIs are looking quite good. It's quite a hefty ticket size for Bangalore. It's coming in at around INR 3 crores to INR 4 crores ticket size. So from that perspective, the market itself is a little smaller for that kind of transaction, but we're still pretty positive. We just had a channel partner meet yesterday and all indications are pretty good on that front. Also, this project is heavily anticipated since there really isn't any kind of high-quality stock from Hebbal to the airport. So we're quite positive. But we're also just looking at what is the best strategy for this project. I don't think it will be fully driven by velocity. We want to make sure we are getting the right pricing for this project as well. In terms of the overall market, yes, I mean, we are positive about this part of North Bangalore. It's been a long time coming. But now with all the infrastructure in place, I think this is where, predominantly, we are seeing a growth in our portfolio, and also across the competitors as well.

Sure. And if you talk about your annuity and the hotel portfolio -- for the hospitality portfolio, in particular, what kind of partnerships are you looking at, given you've spoken about this in the past as well? And in the most immediate quarter, we've seen relatively sluggish -- or rather, I would say, muted rate growth in the fourth quarter versus industry expectations overall. So what kind of ARR one should pencil in for the industry for FY '25?

Yes. So for the hospitality portfolio, we -- as mentioned in the presentation, we are doing a few new launches, or we are launching a few projects this year. Both -- two of the projects will be with Marriott, with Fairfield by Marriott, one is with Holiday Inn or IHG Group. Last year, we had mentioned that we are setting [indiscernible] resort in Chennai, and that is partnered with the Grand Hyatt. And we will be doing another [indiscernible] in Neopolis in Hyderabad and that will be an intercontinental hotel brand. So we are [indiscernible] we've tied up with all these companies for those hotels. And in terms of the growth in [indiscernible], we saw a 10% growth in the average realization, and I expect this to continue for the year ahead, because there will be -- occupancy has also improved. So if you look at the RevPAR -- from a RevPAR perspective, the growth has been 15%-or-so. But we are expecting at least 10% growth in the ARR, and maybe a slight increase in the occupancies, because they're already trading at around 75%.

Sure. This is helpful. And lastly, on business development, you spent close to INR 2,000 crores in FY '23 and '24 towards land acquisitions. So how should one think about this number in FY '25 and '26?

Pradyumna here. So we have about INR 900 crores of cost to be incurred as far as our land bank, which is already committed. Naturally, we're looking at adding quite a bit in Bangalore, Chennai and Hyderabad. So across these three cities and maybe a couple of more Tier 2 cities, we should be spending more than what we did last year.

The next question is from the line of Pritesh Sheth from Motilal Oswal.

Congrats on strong numbers. Firstly, if you can provide a split of these launches, 12.6 million square feet between the 3 markets? And just in case of Bangalore, most of the sales this year came from that 7.5 million square feet. Do you think additional -- there would be decent growth coming in, in Bangalore or it's Chennai and Hyderabad, which would be contributing to this volume over the next couple of years while your ramp up launches in these 2 markets?

So yes, of the 12.5 million or 12.61 million that we planned for FY '25, 7.5 million square feet is in Bangalore, 3 million in Chennai and 2 million in Hyderabad. So that's what we have planned for the upcoming year. Even in our land bank and over the course the coming few years, about 57% of that is in Bangalore and 33% in Chennai. So we have been steadily adding to our land bank in Chennai. Hyderabad is also where we're looking aggressively. But in the current land bank, this is sort of where we are seeing the geographical distribution. So given the market dynamics in Hyderabad, whatever supply also we are putting into Hyderabad, we generally expect to see that move pretty quickly as well. Same goes for Bangalore. For Chennai, we are yet to sort of see -- maybe how quickly we can move the inventory. Again, different projects have different strategies. Maybe we will look for realization versus velocity depending on each project. So yes, this is sort of the picture going forward. We do have a couple of new projects coming up in Mysore and so on, but these are very small and don't necessarily add to the scale.

On the question on market contribution. So Bangalore, you do expect equal amount of volume growth that you're expecting in Chennai, Hyderabad or growth should be lower there and Chennai, Hyderabad would, obviously, add to the growth?

So overall, we still expect Bangalore, if you only took Bangalore by itself, you would still see substantial growth. But since the overall pie is increasing, we would probably see Bangalore as a percentage of the total sales next year, maybe come down. In the past year, it was 90% or more from Bangalore, because it's a kind of inventory that we had. But considering we'll be launching at least 5 million square feet in these other 2 markets, then I expect the share of Bangalore in terms of sales to reduce then from a 90% in FY '25.

Sure. And with this launch is ramping up, right, your volume growth guidance earlier have been around 15%, 20%. Would you still stick to that guidance or with this 12.5 million square feet, we could do much higher in terms of growth over the next couple of years?

Yes. I mean that's always the intent. It's always dependent on approvals, I would say. Today, we have the projects in the land bank to launch. It is about approvals coming in, and maybe getting them substantially early on in the year so that we can make those kind of growth numbers. Yes, that said, the base is only getting larger. So then naturally to keep growing at rate is also -- does become more and more challenging. But we do have the right projects in the right locations. So I'm quite positive that we'll be able to meet those good numbers. If the question of, does it come in the same financial year per se or does it go a quarter here or there.

And any slipover do you expect in this 12.6 million square feet like we had last year with Chennai Mount Road or you're confident in moving see through all these launches in this year itself?

So yes, so we are confident of it. I don't think we expect any slippage.

We are launching now.

So we don't expect any slippage in terms of launches when compared to what you were referring to last year. So we will launch, say, the Mount Road project in this quarter itself. And the other projects also which were lined up in Q3, Q4, et cetera, we are confident of having it launched in the same period.

Sure. And just one last on your commercial launch pipeline. We saw higher number last quarter, but that's come down to 3 million square feet versus 5.5 million square feet last quarter. Just -- those project launch have got pushed out or any change of plans in those, just your comment on that?

Yes. So in terms of how we looked at our launch pipeline, I think we just got a little more clear in terms of how we're going to document commercial launches in our numbers. For residential, it's very clear. Like as soon as we expect RERA to happen and it hits the market for sales, that's what we deem as launches. For commercial, we now looking at it as wherever construction will begin. So it's -- I think previously the numbers were just sort of including what was there in our land bank, and what had recently been acquired in that land bank. So now we are a lot more clear in terms of when design approvals, et cetera, will happen and when the construction can begin. So whether that project eventually goes for lease or sale, it doesn't matter. For commercial, we'll be showing launches as when the construction begins. So that's why those numbers are finessed a little bit this quarter, but they are still in the land bank and this will be following the same timeline per se.

[Operator Instructions] The next question is from the line of Prem Khurana from Anand Rathi Shares and Stock Broker.

Congratulations on good set of numbers. So I mean when I look at presentation, what I observe is that we've converted a part of our twin towers from rental asset to kind of a single and we want to sell a Tower B now. Why would this change be there? Because I mean ,we've been leaders in this. When I look at it over the last 2 years every year, we are able to do more than 1-odd million square feet of area. And the outlook again seems to be pretty good for leasing environment, but it seems that the part of...

Sorry, Pradyumna here. You're not too clear. So if you can just be a little slower and a little louder, please. Closer to the mic.

Is it better now?

Better slightly.

Yes. So I was asking, I mean, when I look at our twin tower project, there was supposed to be 3 towers, right? We still see A and C as a part of the CapEx pipeline, but then Tower B seems to have been converted as meant for outright sell. So why would this be the case? I mean, given the fact that we've been leasing seriously over the last 2 years, on an average, we are able to lease out almost 1-odd million square feet of area. And the outlook, again, seems to be pretty good for leasing, right? So why would you convert -- I mean, does it mean you want to kind of somehow reduce capital intensity to get the money back to a certain extent and then use that money to kind of have some more growth in some of these other verticals?

See, as developers all along commercial projects, we have seen both for leasing and sales as real estate thing. Historically, if you see also, we have done maybe 60% of the commercial buildings on sale and only about 40% is retail. So in this case also, all our projects we will see what the demand where the demand lies and there is a healthy demand for end users who want to buy. So one tower, we have kept it as for sale. And these things we need to decide before the occupancy certificate is received. There are various other issues connected with GST, et cetera. Based on that, we reclassify this one tower for sale and another tower for leasing.

Sure. And sir, where are we in terms of, I mean, leasing inquiries for twin tower? Have you started engaging with the clients? Because I mean, it's nearing completion now, so what sort of interest do you have in place?

Yes, it is happening. It is slightly less than the desired pace, put it that way.

There's also a lot of end users that are looking at in that market. While there are RFPs in the market, that particular Northwest Bangalore area, there are a lot of end user-driven requests, and that's also another reason why we decided to keep one tower for sale because of the end user occupancy.

Sure. Okay. And the second question was on our growth plans in resi. I mean, we've already become fairly large. I mean, as far as Bangalore is concerned, we will be one of the largest player now. And I'm not sure, I mean, if we have any more micro markets within Bangalore, be able to explore in terms of wherein I mean we've been -- we would not have been there, right? It seems like the growth, I mean -- and I think in your initial remarks as well you said, I mean, the growth -- large part of the growth that you envisage now would be because of Chennai and Hyderabad. So I mean, given this situation, is it fair to assume, a year down the line, you would have started looking at beyond Chennai and Hyderabad as well? Because to be able to develop any new market, generally it tends to take you some time to be able to understand, acquire, experience with the first pilot project and then start building more for future growth. So any -- I mean, possible to share any geographies that would be on your radar, in terms of wherein you would want to go and try and build more in terms of portfolio, which would drive growth beyond Hyderabad and Chennai.

We are still focusing, as mentioned earlier, a large part to Bangalore, Chennai, Hyderabad, and we also have exposure to tier 2 cities like Kochi and Mysore and to smaller extent in Trivandrum and Ahmedabad. But if your question is saying, are we expanding to Mumbai and other NCR? For the time being, not yet and we need to see. As we have always felt we have not fully tapped the markets in Hyderabad and Chennai, which have got good potential. And within Bangalore, we have tied up a number of new projects, even a large office space thing near airport, like that and the industrial park. Some of these things will be announced at the appropriate time. That's how it is. But I think these 3 cities have great potential. Not that others don't have, they may have bigger potential also, but we would like to focus on these 3 cities for the time being.

Sure, sir. This is really helpful. And one last on my side on the hospitality side, I think we were planning to open a partner. So where are we in our efforts to be able to kind of get in a partner?

It is, I would say, work in progress. It is under various discussions. In fact, office -- I mean, hospitality portfolio also, we are -- we have big plans to increase, and for like even doubling of the overall key count. So naturally, it requires a lot of additional funding. So we are looking at partners. It is bound to happen at the right time.

Sure. Is it possible to confirm whether we're looking for a strategic partner or a pure-play financial partner? I mean, would you want someone to be...

Those are all various options that we have before us. But as I said, the appropriate decisions will be taken by the Board based on various proposals we receive.

[Operator Instructions] We have the next question from the line of Parvez Qazi from Nuvama Group.

Congratulations for a great set of numbers. So a couple of questions from my side. First, of our resi projects that we plan to launch in FY '25, the 12.6 million square feet, what would be, let's say, the approximate GDV of these projects?

So we are thinking around INR 13,000 crores would be the approximate GDV at the top line.

Sure. And by when do we expect our Neopolis project in Hyderabad to get launched? Will it be in the first half or second half?