Eldeco Housing and Industries Limited (523329) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Eldeco Housing and Industries Limited Q4 and FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Bhatt from EY Investor Relations. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, for joining us on the call. Before we proceed to the call, let me remind you that today's discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with the business risks that could cause future results, performance, or argument to differ significantly from what is expressed and implied by such forward-looking statements. Please note, the results and presentation are available on the exchanges and our company's website. Should you need any assistance to receive that, you can write to us. We'll be happy to send them over. Today, we have on the call, senior management of Eldeco Housing and Industries Limited, which is represented by Mr. Pankaj Bajaj, Chairman and Managing Director; Mr. Manish Jaiswal, Group COO; Mr. Sanjay Aggarwal, Group President, Accounts and Taxation. We'll begin with the highlights of the quarter followed by Q&A. Now I would like to hand over the call to Mr. Pankaj Bajaj for his opening remarks. Over to you, sir.

Thank you, Abhishek. Good afternoon, everyone. Happy to have you all at our earnings call for Q4 and FY '24 to discuss the company's performance. So the residential real estate sector that now remains robust with a clear shift towards premium properties and the market consolidation that favors larger and well-known developers. These trends are gaining [ attraction ] in the city, mirroring broader industry movements. FY '24 has been a standout year for our company with significant milestones achieved. During the year, we have reported all-time high area book, plant acquisition and booking value, reaching the highest levels in our history. This performance reflects our company's growing strength in the market and is a result of years of consistent growth. Moving on to operational highlights. For the period under review, I would like to highlight the stellar growth we have achieved during Q4 and FY '24. During the quarter, our construction payments have seen a growth rising to INR 34.7 crores from INR 22.9 crores in the Q4 of FY '23. It is the area book which has experienced a remarkable surge, rising from approximately 50,000 square feet in Q4 '23 to an all-time high of 4.6 lakh square feet approximately in Q4 '24. This growth was primarily due to the successful sale of 275 units in Imperia Phase 2. We were, in fact, able to sell almost the entire inventory at Imperia 2 within a couple of weeks of launch. The booking value for the quarter was also at an all-time high at about INR 250 crores, compared to INR 25 crores in Q4 FY '23. This was again largely driven by the successful launch of Imperia Phase 2. On an annual basis, our construction expenditures stood at INR 97 crores with a year-over-year growth of 12%. The area book for the year was 7.8 lakh square feet approximately with a value of INR 388 crores. Both the numbers are the highest in the company's history. Another area where we had a good year was land acquisition. We acquired approximately 61 acres of land across 3 different sites in Lucknow, where we continue to aggregate more land. We anticipate launching at least two of these projects in the fiscal year '24/'25. Moreover, we are preparing for the debut of our luxury development, Eldeco Trinity, which will be launched in the first quarter of FY '25. For these upcoming projects, we aim to meet or surpass the historic sales figures set in FY '24. Moving on to our financial performance. The consolidated revenue from operations was INR 49.2 crores in Q4 FY '24, compared with INR 38.7 crores in Q4 FY '23. During the financial year '24, the revenue stood at INR 112.7 crores, compared to INR 129.1 crores in FY '23. The company's consolidated profit after tax stood at INR 11.7 crores in Q4 FY '24, as compared to INR 14.9 crores in Q4 FY '23. During the financial year '24, the PAT, profit after tax, was INR 33.9 crores compared to INR 44.4 crores in FY '23. Additionally, for the financial year '24, the Board has recommended a final dividend of INR 8 per equity share, which is the same as last year. With this, I would like to open the floor for questions and answers. Thank you.

[Operator Instructions] The first question is from the line of Bharat Gupta from Fair Value Capital.

First of all, congratulations for the successful launch of Imperia Phase 2. Sir, a couple of questions from my side. So in your previous con calls, you have been highlighting that the land availability continues to remain a key challenge in Lucknow. So if I talk about the long-term view, like from 3 to 5 years, how are we ensuring that the growth trajectory remains on [indiscernible] side? And like are you also excluding land acquisitions in the new regions if the Lucknow market continues to remain under threat?

So good questions, you have been following the company. So I'm happy to report as I reported in the opening remarks also, we have been able to break that log-jam. And we've been able to acquire fresh projects in Lucknow. These are 3 different locations. We are not disturbing the locations within Lucknow right now because further aggregation is going on. We have, in fact, received preliminary approvals in one of them already. And another one, we have applied -- we are applying for approval, I think, in a couple of days. So the issue of the pipeline has been resolved. So I'm very happy to report. With these acquisitions, I think it will approximately add about INR 1,000 crores to our gross [ developable ] value in the next 3, 4 years. And we are looking for more -- there are some more deals in the pipeline. So I don't think that's a burning issue right now. It was an issue for a couple of years. But with our efforts on this front, we've been able to break this problem.

Right. And the recent land acquisition stats pertains only to Lucknow market, not to other markets which we were, I think, discussing earlier?

Yes, because we were not able to get our hands on proper developable land [indiscernible], but we are finally being able to do that. So at the moment, we are focusing at Lucknow because we think that being the capital of the most popular state and undergoing a significant infrastructure transformation. Lucknow is well [indiscernible] to be the next city which makes the transformation to a big urban space, like Pune and Bangalore. So we don't want to get distracted right now, and we are going deeper into at the moment.

Right, sir. Sir, also with demand outpacing supplies and because of the infra boom, which is happening across the Lucknow market, so in terms of the industry side, if you look about what kind of inventory levels can the industry [ surface ] needs on the current demand trend? And what kind of a demand-supply mismatch is there in the Lucknow market as of now?

I don't have exact numbers on the demand side because nobody has a number. A lot of demand in real estate tends to be latent. It tends to be [indiscernible]. So it surfaces only if you give them a good product, otherwise, it will remain hidden for a long time. So at the moment, whatever you supply, because the supply is so constrained, whatever you supply is getting lapped up. So I told you about our Imperia launch, it got lapped up in a matter of a couple of weeks. But if we add 2 more Imperia or 3 more Imperia, even they would get lapped up. That's the kind of demand there is, not only in Lucknow, but in many cities across the country right now. So demand is not something -- demand-supply mismatch is not something we are worried about at the moment, that's not a constraint. The constraint is on the supply side, how you get the developable parcels of land at reasonable prices so that we can deliver a reasonable products to the market. And I'm happy to report that with the 60 acre of acquisition across 3 parcels and with the upcoming launch, Trinity, I think that issues also solved for the next couple of years, at least for our company.

Sure, sir. Sir, last question from my side. So is there any kind of a vertical development projects other than Trinity, which is there in the pipeline for us? And how does the realization vary between the horizontal and vertical development in the Lucknow?

We have -- we are just finishing Twin Tower project, which is a small project, these are 10- or 12-story development, a small one. Latitude 27 is another [indiscernible] project, total area is about 4.5 lakh square feet, [indiscernible] [ 5 lakh ] square feet. And we have a few others mentioned in our investor presentation, there's something called [ GH-4, Group Housing-4 ]. So we are going to be submitting that for approvals. And with the upturn in the market, even in the new acquisitions, we might have some [ group ] volume components. So we will have a significant amount of Group Housing [indiscernible] market is maturing very fast. In terms of realization, it was more or less per square foot wise, Group Housing and horizontal. If you look at our -- we've disclosed that number, we have -- earlier, we used to be historically per square foot realization would be around INR 3,200 square foot. Then the last couple of years, we stepped over INR 4,500 per square foot. But this last quarter, it has been the highest in terms of per square foot realization. I think it was INR 5,500 per square foot. So -- that's another metric on which is the highest ever.

Right. And going forward, with Trinity being there, like which will be coming in FY '25, does the realization range will be in the upward trajectory, right?

Trinity is definitely a much higher-priced product. I do -- I would not say we'll probably get sold at the same pace at which the lower-priced products were sold. But it is definitely [indiscernible] a good margin. It's a luxury product, luxury gaining attraction all over the country. It's good for our brands. So it's a launch that we are looking forward to with the expectation. But you're right that the per-square foot realization in Trinity would be much higher.

The next question is from the line of [ Priyam Prada from Value Equity ].

Sir, this is just a bit of as an extending your previous part of [indiscernible] questions and your reply. So as mentioned -- as we can clearly see, this is with regards to the realization. As you have mentioned that we have attained INR 5,500-plus average realization during the last quarter, which seemed to be highest in the last 5 quarters. So just wanted to understand that would we be able to maintain such kind of realization on an average basis in the coming years? So if we also check it out, that we have been growing our average realization by 8%, like comparing the FY '24 to FY '23. So can we maintain that trend?

It's very difficult to predict market. It also depends on the kind of product mix you have. So a couple of projects could be at a lower per square foot realization, like I think one of the new parcels rate be at about INR 3,500 or INR 4,000. But then the major ones are at all at INR 5,000-plus. And Trinity is much higher. So on a weighted basis, I think this does seem to be the new normal. And I think that the market keeps supporting us, then it may increase on an annual basis also. So difficult to say, but INR 5,500 does seem to be the new normal.

That's really nice to hear. And secondly, what would be the aspirational revenue that we wish to be in the zone? Like you can share any range, that would be great. But any aspirational about top line that you are garnering for -- that you are targeting for FY '25, '26?

We're always very conservative in giving guidance. So last year, also, I then put a number to it except saying that it will be much better than the previous year. And here in opening remarks, I concluded by saying that I would like to -- with historic numbers that we achieved last year, we would definitely want to surpass that this year. Beyond that, it all depends on when we get the approvals, when we were able to launch the project. For example, the 3 new acquisitions we have made, if they all hit the launches within this financial year, then definitely, we are going to increase our booking under this. But approvals do take time, and that's why I was slightly conservative and I said that I hope to launch at least two of the three. And the two of the three along Trinity and Latitude 27, I think we should be able to surpass the numbers [indiscernible] last year. And again, I hope this is a new normal for our company. So INR 388 crores is the highest ever number. Earlier, our highest was INR 250 crores. So I don't want to go below what we have already achieved. This is a high watermark and we should only increase from here. And we have the number of projects to be able to do it. Whether we will be able to do it this year, FY '25, we hope we quickly get the approvals, it does take time. But if we are able to get approval by, say, Diwali, then our number will be much higher. So I'll have more clarity in the next con call.

Okay. We'll then wait for more clarification.

[Operator Instructions] The next question is from the line of Priyank Gupta from [ Gardia Advisors ].

Congratulations to the whole team for an excellent quarter. We have been waiting for this day probably to see that this log-jam is broken, and it's very heartening to see that. The small question I have is we have got all the comments on the realization. Would we be able to sustain the margins which we have been having for the last few years? If you can comment on that.

So this question has come a lot because our margins are much higher than the industry. And in almost every call, I've been answering about margins. So historically, our margins have been in the region of 40%. That does look like a very abnormally high margin to sustain. I always said that I do expect it to come down a little bit. I think 30% would be more like it. And of late, it has come down to 30%. But definitely, I would not like -- I don't see it falling below 30%. In a few projects, it could be a little higher also. So 30% to 40%, depending on what product mix that's recognized in a particular quarter. This particular quarter has been bad in terms of margins because of the kind of projects which got recognized for revenue. But generally, 30% is something I can safely say we will be able to maintain.

Best wishes to the whole team.

The next question is from the line of Aryan Sharma from [ Infinity Group ].

So my question is regarding the Lucknow market. How do you see the demand compared to last year? And what is the outlook on this market?

So I don't see where this [indiscernible] where is the demand, what's the actual depth of the demand because there's not enough supply. I would know that what the demand is once we supply the market with enough stuff. I don't think the market is getting supplied enough stuff. So it's not selling -- so I think in a year about 3,000 to 4,000 [indiscernible] sold in Lucknow. But I think the market can take much more if there was enough supply for that. So demand is not something that I'm worried about for Lucknow, for many years now. And you see in the kind of stage that maybe Ahmedabad was 10 years ago or Bangalore was 20 years ago or Hyderabad was. So it is one of the new generation cities, which is going to see a [indiscernible] growth in the next 10 to 15 years. And I think the market size is also going to really increase in Lucknow. So the kind of -- Eldeco is a leading developer of Lucknow, and these numbers will look nothing, I think, 5 years or 10 years down the line when we look back. So I think the size of the market is a constraint. Where exactly that number is right now, the total population is about 3.5 million. Now why are we selling only 3,500 houses there? Why are we not selling 20,000? I think that's because they're not getting supplied, Otherwise, there is demand for it.

The next question is from the line of Varun Gupta, an individual investor.

I have one question on this Lucknow market, like Eldeco Housing is having a very good balance sheet, but the company is restricted to Lucknow market only. So is there any plan to go in other markets because the parent company is there in the Gurgaon market also, which is a hotspot market in India right now. So is there any plan to have a partnership agreement with the parent company where we can tap the other booming market?

So it has been clarified many times and I'll clarify once again, Eldeco Group has 2 companies. One is the listed company, Eldeco Housing, which works in Lucknow. And the other is an unlisted company, the unlisted company, EIPL, Eldeco Infrastructure, which works in the rest of the country is not the parent company of Eldeco Housing. They are entirely separate companies. They share the common brand. I still happen to be the promoter of both the companies and then make sure that the 2 companies do not compete with each other, [indiscernible] like geographically, they're not going to compete with each other. So that there's no conflict of interest at all. The moment we start -- Eldeco Housing starts going out of Lucknow, then the conflict of interest question will start coming in. So as of now, we are keeping it separate. There was a temptation for Eldeco Housing to move out Lucknow when we were not getting enough projects in Lucknow and cash was getting accumulated on the balance sheet. But as I said that in the last year, we've been able to solve that problem and tie up more projects in Lucknow. And there are now even more projects in the pipeline. So that issue is solved for the movement. But at the same time, I have maintained that being restricted in Lucknow at the moment, Eldeco Housing, we should not -- the company should not suffer for that. So if it is not getting enough opportunity, that's a discussion that we can have. But at the moment, it's not a relevant discussion because we are -- the pipeline is very strong in Lucknow for the next year or 2 years. But when the time comes, unless [indiscernible], we will look at going out. But of course, we'll have to have some kind of arrangement with the sister company whenever that happens.

My question is like now the average realization price is than INR 5,500. But in [indiscernible] cities like Gurgaon, Mumbai, there -- the big developers are there from India like DLF, OBEROI REALTY. The average selling price nowadays is INR 30,000, INR 40,000. So I think the opportunity is very big. And currently, the real estate industry is booming. So do you think it is the right time to tap the metro cities also apart from Lucknow? Because Lucknow, I know you are explaining these, say, untapped market, there is a lot of opportunity. But if you see the balance sheet strength of the Eldeco Housing, the leverage is just hardly any leverage in the balance sheet. So we can basically use this opportunity and we can use this time currently where the real estate industry is booming and there is a demand in metro cities and also in smaller cities. So that's what I just want to highlight.

Thank you. Your point is taken. I think I already answered the question.

[Operator Instructions] The next question is from the line of Rohit, an individual investor.

Phenomenal set of numbers. And I mean, I've been an investor for a while now, and I'm quite optimistic about the prospects of the company in Lucknow. So my question is a little different. I am curious you have a [indiscernible] which is quite larger and you have this entity[indiscernible] in Lucknow. So what was the rationale for listing this entity because it looks like we [indiscernible] given the strength of the brand and [indiscernible] in particular and [indiscernible]. So what is the rational for us remaining listed? And I'm just curious to know your thoughts on a long-term strategic basis for this company in particular.

Your line is not clear, you'll have to either repeat it and keep it short. I can't get much of the question.

Sure. Sir, my question is, what was the historic rationale for the company, this company to be listed, particularly given it doesn't look like we have much capital requirements? So the long-term strategic intent for you with relation to this company, given you have a larger company, [indiscernible] company.