Ganesh Housing Limited (526367) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Ganesh Housing Limited Q1 FY '27 Earnings Conference Call hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rajat Gupta from Go India Advisors. Thank you, and over to you, sir.

Yes. Thank you, Palak. Good afternoon, everyone, and welcome to Ganesh Housing Limited earnings call to discuss the Q1 FY '27 results. We have on the call with us today, Mr. Rajendra Shah, Chief Financial Officer; Mr. Neeraj Kalawatia, Vice President, Finance; and Mr. B. Ravi, Corporate and Financial Adviser. We must remind you that the discussion on today's call may include certain forward-looking statements and must be, therefore, viewed in conjunction with the risk that the company faces. I now request Mr. B. Ravi to take us through the company's business outlook and financial highlights, subsequent to which we'll open the floor for Q&A. Thank you, and over to you, sir.

Thank you, Rajat. Good afternoon, everyone, and a warm welcome to Ganesh Housing Limited's Q1 FY '27 Earnings Conference Call. Thank you for all of you for taking out time to join us today and for your continued interest, trust and confidence in our company. This quarter marks another important milestone in our journey as an organization. Over the last few years, we have consciously transformed Ganesh Housing from being predominantly a residential developer into a diversified real estate platform with multiple long-term growth engines. We have remained disciplined in capital allocation, selective in project development and focused on building assets that not only create near-term cash flows, but also enhance long-term shareholder value. The first quarter of FY '27 reflects the early outcomes of this strategy. While the reported financial performance like any real estate business continues to be influenced by project mix and the timing of revenue recognition. Operationally, the company has made meaningful progress across various strategic initiatives. More importantly, we believe we are entering a phase where years of patient investment in land, infrastructure and execution capabilities are beginning to translate into tangible business opportunities. I shall be talking about the numbers a little later. One of the defining characteristics of Ganesh Housing has always been our ability to anticipate energetic growth corridors and invest ahead of the market. This philosophy has enabled us to create one of Ahmedabad's largest fully paid land banks, strategically located across some of the city's fastest-growing micro markets. Today, with approximately 510 acres of land reserves, a strong execution pipeline and a healthy balance sheet, we believe the company is exceptionally well positioned to capitalize on the next phase of Ahmedabad's real estate growth. The macro environment also continues to remain favorable. Ahmedabad is steadily evolving into one of India's most attractive real estate destinations, supported by sustained infrastructure investments, improved metro connectivity, rapid urban expansion, the continued development of GIFT City and increasing interest from domestic as well as global businesses. The city's emergence as a preferred destination for technology companies, manufacturing enterprises and global capability centers is creating demand not only for premium residential developments, but also for world-class commercial infrastructure. The selection of Ahmedabad as one of the host cities for the 2030 Commonwealth Games further strengthens our confidence in the city's long-term growth trajectory. Against this backdrop, our strategic priorities remain unchanged. We continue to focus on 4 key pillars: firstly, timely execution of our existing residential developments; second, creating a sustainable commercial leasing platform to million mines; third, the disciplined monetization of selected land assets to optimize capital allocation; and finally, expanding our development pipeline through selective land acquisitions in high potential locations. We believe that maintaining the right balance across these priorities will enable us to deliver consistent growth while preserving financial discipline. Let me now discuss the progress of our key projects. The most significant development during the quarter has undoubtedly been the progress of Million Minds Tech City, which represents a transformational project for Ganesh Housing and the beginning of our commercial annuity business. Following the successful inauguration of Phase 1, the project has entered its final stages of completion. Fit-out activities are progressing well, and we remain on track for lease rentals to commence during the fourth quarter. This will mark an important milestone as recurring rental income begins to complement our traditional residential development business. Regarding the leasing portions, we have continuously gained momentum. We are pleased to share that approximately 60% of the leasable area is already under active discussions. To further elaborate, the total LOIs already executed are to the tune of about 43%. That's about 2.64 lakh square feet, an additional 15%, 20% of the area is under various stages of negotiation and conclusion. Only some portions of the SEZ part remain, and we are confident that the full leasing will be completed in the next 2, 3 months. And that's the reason why we have guided that the full rentals would start from Q4 of FY '27. The interest and the demand is primarily coming from GCC, technology companies and managed co-working spaces. These discussions have further strengthened following the inauguration of the project and the increasing visibility of Ahmedabad as an emerging technology and innovation hub. However, we believe that the significance of Million Minds extends far beyond the leasing of a single commercial building, spread across nearly 65 acres, as you know, with a long-term development potential of about 15 million square feet, Million Minds has been envisaged as an integrated technology across its ecosystem, primarily consisting of commercial offices, residential development, hospitality, retail and supporting social infrastructure. Moving to our residential portfolio. Construction at Malabar Retreat continues to progress as planned and has now reached approximately 83%. It now complete 83%. We remain focused on timely execution and expect the project to be completed in line with our planned schedule. Customer response continues to be encouraging as the project moves closer to delivery. And we believe the premium residential segment in Ahmedabad continues to benefit from healthy end user demand driven by rising aspirations and improving affordability. In terms of numbers, the total booking has been about 73 units. That's almost 45% of the total units. The sale value is about INR 183 crores, which is again about 45% of the total sale value. Now on the One91 Thaltej project. During the quarter, we undertook a strategic review of our One91 Thaltej project. As you know, it was a commercial project, which we wanted to commence. We got a compelling offer to sell this land rather than developing it and taking the risk of both construction and sale of this multistory building over the next 5 years. After evaluating prevailing market conditions and opportunities for capital optimization, we decided to undertake land monetization rather than development. In NPV terms, we have realized by developing it. However, we will not be able to reveal much more details of that at this point in time because the buyer is also a listed entity. This decision reflects our long-standing philosophy that every asset should be evaluated based on its highest value creation potential rather than a predetermined or premonitored development model. Monetization land under favorable market conditions enable us to accelerate cash generation, strengthen liquidity and redeploy capital into opportunities that can deliver superior long-term returns. Unlike many developers who are compelled to monetize assets due to balance sheet constraints, our approach is fundamentally different. As we highlighted in our previous interactions with investors, land monetization forms a part of our capital allocation strategy and not a response to liquidity requirements. Our land bank continues to remain one of the greatest competitive advantages. Today, as said, Ganesh Housing Limited has got 510 acres of fully paid land reserves, including the Godhavi Township of 411 acres and the 65 acres at Million Minds. In addition, we continue to evaluate new land acquisition opportunities in emerging corridors, several of which are currently under discussions and not yet reflected in our existing land bank. This disciplined yet proactive approach ensures that our development pipeline remains robust while preserving financial prudence. Now let me take you through the financial performance for the quarter. Sequentially, we have performed better, reflecting the improved situation in the real estate market. During the first quarter of FY '27, the company reported a revenue of INR 280 crores, which is a growth of 130% on a sequential basis and 86% on a year-on-year basis. The growth in revenues reflect continued execution across our project portfolio. EBITDA for the quarter stood at INR 110 crores, while PBT was about INR 105 crores. PAT for the quarter stood at INR 42 crores. On a sequential basis, that is for between Q4 of FY '26 to Q1 of FY '27, both EBITDA and PBT have risen by 12% and 10%, respectively. The EBITDA and PBT on a Y-o-Y basis are slightly lower. However, the income tax on sale of this One91 Thaltej land led to higher onetime tax burden, leading to a lower PBT both sequentially and Y-o-Y. Just to explain, the income tax applicable was higher because this land which was sold was introduced into the company as a result of amalgamation, which we did in 20 -- I think around '20. Amalgamation is a tax-neutral arrangement and hence, while calculating tax from sale of land, we need to consider cost of acquisition of land of amalgamated company for calculating income tax applicable. Hence, tax payable on this land sale is higher, and that's the reason for the PAT being lower. While profitability during the quarter moderated compared to the exceptionally high margin business witnessed in the certain previous periods, it is important to appreciate that quarterly earnings in the real estate business are significantly influenced by project mix, stage of completion and the timing of revenue recognition under Ind AS 115. Accordingly, quarterly margin should not be viewed in isolation, but rather in the context of underlying execution project life cycle. Our balance sheet continues to remain one of the strongest in the industry and provides us with a significant competitive advantage. We continue to maintain a prudent capital structure and a low gearing profile, supported by healthy internal accruals. As we indicated during our previous interaction with investors, the borrowing undertaking during the last financial year was primarily in the nature of lease rentals discounting. This facility was backed by the commercial lease potential of Million Minds. Now for the FY '27 guidance. Looking ahead, we believe FY '27 represents an important inflection point in Ganesh Housing's growth journey. For the first time, our business is being supported by multiple complementary engines, growth engines. Residential development continues to progress well. Commercial leasing is set to commence to Million Minds. Strategic land monetization will further give additional capital flexibility and our extensive development pipeline positions us well for future launches. Moreover, the lease rentals from Million Minds will also start flowing from Q4 of FY '27. Thus, we feel that for FY '27, we could register a revenue of about INR 1,000 crores to about INR 1,200 crores and a PAT of ranging between INR 300 crores to INR 325 crores. While the revenue could increase substantially, the PAT could rise by about 10% or could just be maintained only because of the exceptional onetime tax hit in Q1 of FY '27, which I just explained. On the new project, we expect to launch Phase 2 of Million Minds in Q3 of FY '27 and Phase 1 of residential projects of Million Minds in Q4 of FY '27. Over the next few years, our strategic focus will remain centered on 4 priorities: firstly, ensuring timely execution and delivery across our ongoing projects while maintaining the highest standards of quality and customer satisfaction; second, accelerating leasing momentum at Million Minds and establishing a strong recurring annuity income platform; third, maintaining our disciplined approach towards capital allocation, whether through development, leasing or land monetization, everything will continue to be guided by our objective of maximizing long-term returns while preserving financial prudence; and fourthly and finally, we'll continue to strengthen our project pipeline through selective acquisitions of land in strategic important growth corridors. The broader outlook for Ahmedabad also continues to inspire confidence, continued infrastructure development, the rapid development and evolution of GIFT City, favorable government policies, the emergence of Gujarat as a preferred destination to GCCs and the city's selection of the venue for the 2030 Common Wealth Games are expected to create sustained demand across both residential and commercial real estate over the medium to long term. We believe developers with a high-quality land bank, execution capabilities and financial strength will be the primary beneficiaries of these structural trends and Ganesh Housing is well positioned to capitalize on this opportunity. With that, we leave the floor for question and answers. Thanks you.

[Operator Instructions] The first question is from the line of Prit Nagersheth from Wealth Finvisor.

Now the question I had is that the South land sale, by which quarter do you see this [indiscernible]? The Stage 1 land sale by quarter should we expect to see this get done, this completed?

It's completed. It's already completed.

So the numbers that reflect this quarter, they already contain Stage 3 details, realization from selling Stage 1?

Yes, yes.

And so would you be able to share the details of what -- how much realization you got specifically for that?

We would have to wait for the buyer also who is also a listed entity. We both have to do that at the same time. He has not yet told you. So we are at this point in time, constrained to talk about the trade, but we should do that eventually.

And the full payment has been realized. Nothing is outstanding there, right?

Payments are -- I think at this point in time, along with the sales, normally, most of the payments come in. But I think those are the details of both how much money and what rate and all that we'll be telling you as soon as we are -- both have got the clearance to say so, both the companies.

Got it. Okay. The second question was regarding Godhavi. So how much land -- so the -- okay, let me phrase the question properly. So of the INR 1,000 crores to INR 1,200 crores revenue that you're projecting for FY '27, how much of that is expected via land sale and how much of it is going to be via development?

See, this particular one which we had done One91 Thaltej. I would always term it as a project sale because it's the seizing of the opportunity instead of project doing it as a land is one of the same thing. As I said, we don't categorize it as a land sale per se because all of them are one of the important verticals. Having said that, if you still consider that as a land, then most of these revenues are going to be coming from projects because we will be completing the Malabar Retreat, which has got a sale value, as you know, about over INR 450 crores. And this one which is completed is already INR 250 crores and odd, let us say, which will mean that we already have about INR 700 crores of project sale. And balance is the Godhavi one or any other opportunity which might get. Of course, the lease rentals will also start coming in from Q4. So that will add to the revenues again. So all these, in my opinion, including what we already have said in terms of Godhavi land proofed all project sales. But if you really have to say that this is other than projects like the housing one, then yes, they could be around INR 500 crores to INR 600 crores of -- INR 550 crores, INR 600 crores of land and about INR 450 crores of -- INR 470 crores of project.

Okay. Wonderful. So this INR 500 crores to INR 600 crores of land, you will basically see a combination of Thaltej One as well as the Godhavi land sale?

Yes. The Godhavi land is coming up. Yes.

Yes. That might come your way. Okay. I see. Okay. And what kind of -- I know it may be a little bit early here because you've just received guidance for '27. But clearly, the top line has grown, bottom line is in line with last year. But what kind of growth can we pencil in, say, for FY '28? Do you have any kind of visibility over that?

No. At this point in no, as I said in the last call, too, we would actually -- we are putting a master plan into picture. But better to give guidance year-on-year rather than for 5 years because many things -- many times things change in the market, and those guidance don't work beyond maximum a couple of years. So maybe if we do see a lot of traction in the coming 6 weeks, we might be able to tell you something about FY '28 also. But I would prefer to go year-on-year. And we shall be giving you the guidance for the next year also and maybe in the fourth quarter or the first quarter of FY '28.

Okay. The other question I had is that because now that the company is moving more into project-based work and not just pure land sales in terms of revenue, you will not be able to show the entire value in terms of top line and bottom line, right, because of project completion methodology.

Correct.

So the metrics is that I think most other companies use is what GDV or gross development value that we have sold. So is that a number that you will start publishing in your reports that gives an idea?

Yes, Prit, actually, you have touched a very, very important part of it. What I always have been maintaining that in such kind of situation, it is not the sale which -- or the revenue which is reflected, it's the cash flows. So what we talked about, we can talk about GDV, but more important than GDV is the cash flows that are coming from year-on-year. And in that, we shall definitely be able to give you guidance -- not guidance, we probably will be reflecting hence those values, both cash flows and the GDV. And that's exactly what we have been doing in the last 3 years. We'll continue to do focus on these cash flows irrespective of the revenue which is there in the books or not. So that is something which will be long term and sustainable.

So can you share what GDV and cash flows you are looking for FY '27?

See, most of this -- or the entire revenues will be barring which might happen in the last quarter, will all be realized. So therefore, the cash flows very close to that INR 1,000 crores or INR 700 crores will be realized in terms of the cash flows itself in this year. And the project sales, what we are talking about is the cost of all these things. That I have not worked it out, but we can always work it out. And we can have an offline call on this, please, and we can give you that. No problem.

The next question is from the line of Arvind from Equity Ventures Capital Advisors.

First of all, congratulations on the revenue front, sir. I would like to have a clarity with regards to the revenue mix itself, although you have clarified to a certain extent, but there is still some confusion from my end. So the revenue mix is that of Malabar Retreat and Thaltej. Am I right?

For the current quarter, you're talking about?

For Q1, yes, for Q1.

Yes. It is a mix of One91 Thaltej.

It is largely land and old projects.

And existing -- some partial amount is also from the old projects.

Old completed projects.

Completed projects. Some inventory from the old projects.

All right. So none of the revenue from Malabar Retreat has been recognized, right, in Q1?