Brigade Enterprises Limited (532929) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Brigade Enterprises Limited Q1 FY '27 Financial Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Pavitra Shankar, Managing Director of Brigade Enterprises Limited. Thank you, and over to you, ma'am.

Good afternoon, everyone, and thank you for joining us for Brigade Enterprises Limited's Q1 FY '27 Earnings Call. I'm joined by the management of Brigade Group, our Executive Chairman, Mr. M. R. Jaishankar; Joint Managing Director, Ms. Nirupa Shankar; Executive Directors, Mr. Roshin Mathew; Mr. Amar Mysore; and Mr. Pradyumna Krishna Kumar; and our CFO, Yogesh Patel. In Real Estate, Q1 FY '27 saw consistent performance coming off a launch-led Q4 FY '26. Although we did not have new launches in Q1, we remain on track for our FY '27 guidance, supported by a strong launch pipeline over the coming quarters as well as contribution from our sustenance sales. Pan-India, residential sales were down 6% year-on-year in the same April to June window per [ Anarock ], with Bengaluru and Hyderabad among the only major cities to hold sales growth in the quarter, a favorable backdrop for Brigade given both our core markets. For Brigade, Q1 FY '27 net sales were INR 1,061 crores, 5% lower against Q1 FY '26. Our realization though increased to INR 14,256 per square foot, a strong 21% year-over-year improvement, driven by disciplined pricing increases in our existing projects and a positive shift in our product mix towards higher-value homes. Our planned relaunch of Brigade Morgan Heights highlighted last quarter was impacted by the project's environmental clearance being revoked by SEIAA. We have refunded affected homebuyers. Our position remains that the project land does not fall within the Pallikaranai marshland We have approached the High Court, which in turn directed SEIAA, which is a state environment impact authority to file its counter affidavit and asked all authorities to maintain status quo. We are committed to the project and will plan the relaunch once the issue has been addressed. For the next 4 quarters, our launch pipeline stands at 16.4 million square feet, of which 12.4 million square feet is residential with a GDV of approximately INR 13,400 crores. Bengaluru accounts for 4.3 million square feet, Hyderabad, 4 million, Chennai 3 million and Mysore 1 million square feet. Of the 4 million square feet launch pipeline for commercial, Bengaluru accounts for 2.6 million square feet; Chennai 1.3 million square feet and Kochi 0.2 million. We also have 1,700 keys of hospitality inventory in the pipeline. This pipeline gives us confidence that we remain on track for our FY '27 guidance of INR 9,000 crores in presales with launches expected to be more back-ended into the coming quarters, similar to the pattern we saw in FY '26. On the business development front, for the residential segment, we added INR 2,400 crores of GDV across 2.7 million square feet in projects during Q1 FY '27, primarily in Hyderabad. We continue to monitor the macroeconomic situation in terms of the Middle East conflict and impact of AI, but believe that the core drivers of growth remain intact. Brigade Group's commercial office business continued to deliver resilient operating performance in Q1 FY '27 with an operational portfolio of 8 million square feet of GLA across Bengaluru, Chennai, Kochi and Ahmedabad and portfolio occupancy at 88%. The business recorded 0.22 million square feet of gross leasing during the quarter. Leasing demand during the quarter remained broad-based, led by industrial and manufacturing, flexible workspace and life sciences. At the portfolio level, GCCs contributed 58% of gross leasing with the GCC occupier base diversified across automotive and mobility, technology, industrial and engineering and BFSI. IT and ITES accounts for 26% of the overall portfolio mix, reflecting a diversified occupier profile across the commercial office portfolio. Commercial office revenue stood at INR 200 crores, while operating EBITDA margin stood at 80% and rental collections remained robust at 99%. The business had 0.9 million square feet of vacant lease-up opportunities within its operational portfolio. Turning to retail. As of Q1 FY '27, the Orion Mall portfolio delivered a strong performance with footfalls growing 11% year-on-year. The increase was driven by brand-new additions, mall-led experiential promotional events, along with a 20% year-on-year rise in cinema admissions. Retail sales grew 35% year-on-year, led by strong growth in destination categories. Across the malls, anchor retailers emerged as a key growth driver with a 64% year-on-year increase in sales led by new anchors, followed by F&B restaurants at 46% year-on-year and electronics at 33% year-on-year. Turning to hospitality. BHVL delivered a strong quarter despite geopolitical disruptions from the West Asia conflict by shifting focus to domestic demand. The company achieved 7% ADR growth, 2% occupancy growth, 9% growth in RevPAR and EBITDA and a 140% increase in profit from INR 7 crores to INR 17 crores. Domestic corporate travel, weddings and social events remained resilient, helping offset weaker international travel demand. While F&B revenues were impacted by softer MICE activity and event postponements, management views this as a temporary challenge. During the quarter, BHVL rebranded Four Points by Sheraton Kochi Infopark to Courtyard by Marriott Kochi Infopark and remains confident of continued ARR growth supported by strong demand and limited supply in its markets. Looking ahead, BHVL has a 1,700 key development pipeline, targeting 3,300 keys by FY '31. The company will launch Courtyard by Marriott Chennai WTC, 45 keys and part of the WTC Chennai campus in FY '27. Sustainability efforts continue to gain momentum with 61% of portfolio energy requirements now sourced from renewable energy. The current operating portfolio is entirely EDGE certified, a green building standard from IFC, the International Finance Corporation. With that, I will now hand over the call to Yogesh to take you through the financial performance for the quarter in detail.

Thank you, Pavitra. Good afternoon, and a warm welcome to all once again. To start with the highlights of group's financial performance for Q1 FY '27. The consolidated revenue for the quarter gone by stood at INR 1,179 crores with an EBITDA of INR 425 crores. The EBITDA margin stood at 36% as compared to 28% in Q1 of FY '26, an improvement of almost 800 basis points, primarily led by increase in real estate margins. The Real Estate segment clocked a turnover of INR 707 crores with an EBITDA of INR 150 crores, an absolute increase of 45% from Q1 FY '26. The Real Estate EBITDA margin improved to 21% as compared to 12% in Q1 of FY '26. This improvement is led by recognition of revenue from projects with better margins as was expected to. The Leasing segment clocked a turnover of INR 328 crores, an increase of 9% over Q1 FY '26 with an EBITDA of INR 230 crores. EBITDA margin stood at 70%, which is same as what we clocked for full year FY '26. The Hospitality segment clocked a turnover of INR 144 crores with an EBITDA of INR 45 crores. Consolidated PAT stood at INR 216 crores, a year-on-year growth of 37% and a quarter-on-quarter growth of 14%. PAT after minority interest for this quarter is INR 200 crores. We have had an exceptional item in the quarter, a gain of INR 36.6 crores at PAT level. This is due to reclassification of our investment in a subsidiary upon investment from Bain Capital. The said gain has only been consolidated at PBT and PAT level and does not impact the EBITDA measure as has been detailed earlier. Touching upon cash flow performance. Collections for the quarter were steady and stood at INR 1,856 crores, a growth of 7% year-on-year. We remain confident of sustaining healthy cash flows in the coming quarters as well. Collections from the Real Estate segment stood at INR 1,346 crores, an increase of 8% over Q1 FY '26. Leasing segment contributed INR 343 crores, a growth of 10% over previous year and the balance of INR 167 crores came from Hospitality segment. Net cash flow from operating activities stood at INR 354 crores, which is also a growth of 10% from Q1 FY '26. Coming to debt and liquidity. We continue to have adequate liquidity and undrawn credit lines from banks and financial institutions to support our growth plans. Our average cost of debt for June '26 stands at 7.61%. As of June 30, 2026, the gross debt of the group stood at INR 5,305 crores, while cash and cash equivalents were INR 3,087 crores. The company's net debt outstanding as of 30th June 2026 was INR 2,218 crores, out of which Brigade Enterprises share, I mean, excluding the JV owner share would be INR 1,541 crores. About 86% of this debt pertains to the leasing segment, which is backed by the rental incomes from itself. The debt equity ratio at the end of the quarter stood at 0.26. We will continue to have our debt equity ratio well under 1x, accommodating for all the current CapEx commitments and projected business development spends, given these will be serviced through a combination of internal accruals prior to accessing debt. I will now hand it back to the moderator for questions.

First question is from the line of Karan Khanna from AMBIT Capital.

A couple of questions from my side. Firstly, Pavitra, of the 10 million square feet launches that are planned, just a clarification, is this for remainder of FY '27 or for rolling 4 quarters? And secondly, can you provide some color on quarter-wise timings for these launches? Is there a risk of slippage here due to approval lag delays or any other reasons? Because even in 1Q, you were targeting 1.5 million square feet of launches which didn't come through. And does that 3 million square feet in Chennai also include Morgan Heights?

Karan, so the 12.36 million square feet that we mentioned is a rolling 4 quarters. Yes, there is a slip over into Q1 of next financial year. So for the remaining 3 quarters of this financial year, we're looking at 9.36 million square feet in FY '27. And there is a 3 million square feet that will move into Q1 FY '28. The launches in Q1 was partially because of Morgan Heights itself. We were planning to relaunch the project based on all the favorable movements that had happened in Q4. But since then, we were -- as mentioned in the opening remarks, we have not been able to get that clarity. Hence, we have removed Morgan Heights from any of the launch numbers that we have previously communicated, and it is not part of the 3 million square feet to Chennai as well for the next 4 quarters. Q2 we are hoping to launch around 2.36 million square feet. And therefore, the remaining 7 million for the financial year will come in H2. There is always that risk of approvals coming in on time, but this is what we're going for. 2.36 million in Q2, the remaining 7 million in H2 and another 3 million in Q1 FY '28. And none of that will include Morgan.

Sure. And just as a follow-up with Q1 sales at INR 1,050 crores in your guidance of about INR 9,000 crores. How should we think about sales velocity? Is the expectation that volumes will accelerate from here with upcoming launches? Or should we expect pricing mix to remain significant part of the presales growth?

So we do expect more sales velocity associated with the launches. And since we are expecting those launches to come starting from Q2 itself, the run rate per quarter will definitely be increasing.

My second question to you, Nirupa. And if you look at Slide 29, you launched around 4 million square feet of commercial properties across Bangalore and Hyderabad. Given the amount of CapEx still to be deployed across the commercial pipeline, can you give some visibility on the leasing time lines, occupancy at completion and when these projects will start becoming meaningful contributors to the rental EBITDA? And as a follow-up with all the expansion plans on the leasing front, what does steady state revenue and EBITDA look like and leverage here?

Karan, thank you for that. So the properties that were launched, about 4 million that we have launched in Q1 will take some time to come over the next 2 to 3 years. If I look at how the launches are coming to the market, we can expect about 2.5 million or so to come into the market by FY '28. As of now for FY '27, we have about 3.89 million ongoing, of which 2.85 million is Brigade share. And we still have some of it in the sale and in the leasing portfolio. So as I was saying, for FY '27, we have about 3.8 million ongoing, of which 2.8 million is Brigade share. In '28, we can expect about 2.86 million to come into the market. In '29, a smaller -- maybe some smaller properties, so about 650,000 and the bulk of it will come in FY '30. So almost 6 million square feet will come in FY '30. So we do have some runway to lease these assets. Typically, we would like to lease assets within the first 6 to 8 quarters of them of getting the OC. That's typically what we would take. In terms of -- yes, the spend, of course, for these CapEx items will be over the next 4 to 5 years. And in terms of the revenue, the way in FY '26, we had a total commercial, just the office leasing at around INR 765 crores. In FY -- and I would say over the next 5 to 6 years, we can expect a CAGR for the leasing revenue to increase by about 20%, and that's how we see the portfolio growing. By FY '32, I think we have mentioned some numbers earlier.

Sure. And then lastly, on hotels, can you talk a bit about what are the near-term trends that you're seeing in the hotels business? And incrementally, do you foresee occupancies or ARR as the primary driver of growth for FY '27? And with Kochi Infopark Hotel now being rebranded to Courtyard by Marriott, what kind of improvements in occupancies as well as ARR do you anticipate over here?

Yes. In terms of hospitality, we did see some impact of the West Asia crisis. So while we increased our ADR by 7% compared to Q1 of FY '26 and the occupancy increased by about 2% from 74.5% to 76%. So we saw a total revenue increase of about 9% but we did see a hit on the F&B aspect of it. So while we managed to increase our EBITDA by 9%, we managed to increase our PAT by 140% from INR 7 crores to INR 17 crores. We did see some loss of business. When we track that business, we saw almost 10% reduction in business just because of the West Asia crisis. This was due to cancellations or postponements of a lot of events that were supposed to have taken place in the city. We think that this business will come back a lot stronger in H2 of this fiscal year. So we are able to increase our ADRs. What we did from a strategic perspective is because we anticipated the reduction of foreign travel. We managed to displace a lot of the foreign travel business through domestic -- with domestic business, but some of the larger MICE businesses could not be replicated. We don't see any major cause of concern. This quarter is actually quite encouraging, and we're seeing some good bounce back of MICE, like I said, in the third quarter. So hopefully, it's not a huge cause of concern. But like I said, there was some impact in Q1. I'm not seeing any -- I do see the ability to keep the rates quite...

Sorry to interrupt, ma'am, you are not audible.

Am I audible?

Yes, ma'am, you are audible now.

When did you last -- will continue. What I was saying was that while we saw some impact in Q1, we expect a lot of that business to bounce back in Q3 of this fiscal year. In terms of Four Points by Sheraton in Kochi, yes, we rebranded it. We saw a blip in terms of the occupancy in the first quarter of rebranding. I think 2 reasons for that because we displaced some of the crew business. There was rebranding, so the systems had to identify a new hotel in place. But we are expecting -- but the bounce back in Q2 has been quite good. Our occupancies are back to the 70s, I would say. And because of the rebranding, we can expect at least a 15% to 20% increase in ADR.

[Operator Instructions] Next question is from the line of Pritesh Sheth from Axis Capital.

3 questions. Firstly, in terms of the H2 launches, I think we had 2 larger launches this year scheduled for Q4. One is Hyderabad Neopolis 2, and the Whitefield-Hoskote launch, which we are planning again in Q4. So the time line still remains Q4? Or has there been some advancements there? That's my first question. And second, on the leasing status for WTC Bangalore. We did see some 30,000 square feet out of leasing this quarter, but how should one think about getting back to normal occupancy there?

Yes. On the residential launches, the Hyderabad launch, we are planning to advance that. I think it's looking quite likely to come much earlier than Q4. Definitely Q3, if not sooner. And the Whitefield Hoskote launch as well is looking like a Q3 launch for Bangalore.

Good to know. And on the leasing part WTC Bangalore?

Yes. On the leasing side, of course, WTC is a building that's about 1.13 million square feet. Brigade has about 7.19 million square feet of that. We have leased about 50% of that space. And what we have left is about 375,000 square feet of space. While we were expecting 1 or 2 large clients to come in and take up the space, what we have realized is the -- as the client that was existing there left, we were also hit by the West Asia crisis. So that has delayed some of the larger companies making large demand. So a lot of the RFPs that we saw for 2 lakh square feet, 1 lakh square feet kind of disappeared or have been postponed. So what we are having to do now is to do smaller leases of 20,000 square feet or a floor rise of 40,000 square feet. So this is how I think we will have to continue with the leasing because that's the kind of demand that we are getting right now. So we are taking whatever business we get. The good news is that we are able to increase our rentals. So we are able to get that mark-to-market increase of at least 10% to 15%. But we believe that there is strong demand. We believe there's strong demand, and the idea is to close out the leasing in the next 3 to 4 quarters.

Sure. Just a couple of more on -- again, on the residential side. So I think we have 2, 3 larger projects in Bangalore, which are obviously not part of the current 12 months launch pipeline. So just want to know the status of that. First is the Cornerstone Utopia 2. Then have a 75-acre land parcel at Devanahalli and we have large land parcel at Kengeri in Bangalore. So if you can just provide the status of that in terms of when should one expect launches? Would it be next year or it might still take time for those to get unlocked? Yes.

So on the Phase 2 of Utopia, that is something that's positive movement, and we will look at launching that hopefully in Q1 of next financial year. Although those numbers are not mentioned in the rolling 4-quarter projection that I gave. It's something that we're trying to work towards. When we have much further clarity in terms of approvals, we'll start incorporating those numbers. The second one that you mentioned was our 75-acre parcel KIADB allotment. The residential component of that is substantially smaller than what we had previously thought because of changes in the bylaws. So that will come in later in this financial year, but the component is much smaller, only around 3 to 4 lakh square feet that we are looking at. And finally, on the Kengeri land parcel. This is not in a position to be launched as yet. There is some ongoing litigation there. So the landowner is dealing with that piece, and we will eventually bring that to the portfolio. But right now, that is not forming part of any of the earlier numbers that I mentioned.

Sure. Got it. And one last on the 4 million square feet that we've launched this quarter on the commercial side, what would be the rental potential? And are we all going to held -- hold those assets in our balance sheet? Or we are planning to sell some of those?

Yes. So in terms of our launches, we've launched Brigade HRC Atrium. That's still a while away. So we need to see what the rentals will be like closer to the launch of that. But then we have an industrial block, then we have Brigade United and Cauvery and the Orion Mall at Hyderabad. So all of these we plan to hold and none of these are for sale. In terms of the rental that we can expect to get, I think we have to wait closer to the market and when they are launched, maybe at least 1 year before that they launch and then we can share those details.

[Operator Instructions] Next question is from the line of Abhishek from Kotak Securities.

I just had one question. Of the 2.4 million square feet of projects that you have for total, could you give us the list or name of the projects for us to track?

So in terms of the Q2 launches, it's -- there is a project in Hyderabad. That's the Neopolis 2 project. There is a project in Mysore called Misty Green, which is already launched. And there is a very small project in our Brigade Meadows township. It's just -- it's a senior living project or a senior-friendly project that has -- we're waiting on the RERA for that as well.

How large is the Neopolis project in Hyderabad? Is that...

The Neopolis proect is -- that is about 2 million square feet.

Okay. And just to confirm, is this likely to come in the next few days? Or could we be hitting the end of the quarter for this one? If you have some sense on the time lines for that one, some clarity maybe?

It is this quarter. We are in the final stages of approval. So we are working on doing that within this Q2 itself.

Got it. One more clarification. When you say 12 million square feet of launches for the next 4 quarters and then you also give a land bank of about 56 million, 57 million square feet. I just wanted to confirm, is there any other development potential that you own? Or is this sum total of all of the development potential that is there on Brigade's balance sheet as things stand today? Does that include all of the BD that you've ever done?

Yes. So whatever we are mentioning in the land bank is the entire development potential of the company. And we've given the detail in terms of market as well as segment in our investor presentation.

And the planned launches are also part of that? Just to confirm, the 12 million square feet?

Yes. Yes. They're part of that.

Okay. And the third...

What happens -- sorry, the way we do it is whatever is in the launch pipeline, we are communicating it is in the pipeline. As soon as we have RERA and launch or declare the launch from a commercial standpoint, we remove it from the land bank. So the land bank keeps -- there are reductions based on what gets launched and there are additions based on BD.