Godrej Properties Limited (GODREJPROP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Godrej Properties Q1 FY '26 Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kshitij Jain. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us on Godrej Properties Q1 FY '26 Results Conference Call. We have with us Mr. Pirojsha Godrej, Executive Chairperson; Mr. Gaurav Pandey, Managing Director and CEO; and Mr. Rajendra Khetawat, CFO of the company. Before we begin this call, I would like to point out that some statements made in today's call may be forward-looking in nature. The forward-looking statements are based on expectations and may involve risks. The outcomes may differ materially from those suggested by such statements, and a disclaimer to this effect has been included in the results presentation. I would now like to invite Mr. Godrej to make his opening remarks. Over to you, sir.

Good afternoon, everyone. Thank you for joining us for Godrej Properties First Quarter Financial Year 2026 Conference Call. I'll begin by discussing the highlights of the quarter, and we then look forward to taking your questions and suggestions. Godrej Properties delivered another solid quarter, registering continued momentum in bookings, cash flows and earnings. We've delivered our highest ever quarterly net profit of INR 600 crores in the first quarter, a growth of 15% year-on-year. The residential real estate sector in India has been strong over the past 4 years, and we believe the demand conditions remain favorable. Our business development additions with a future booking value of over INR 90,000 crores in financial year '23 at favorable terms continue to allow us to scale our bookings and, in turn, over time, our earnings. On the bookings front, GPL achieved a booking value of INR 7,082 crores from the sale of 4,231 homes with a total area of 6.17 million square feet. The booking value showed a decline of 18% year-on-year, but actually represented a 2-year compounded annual growth rate of 77%. This is the eighth consecutive quarter in which Godrej Properties has exceeded INR 5,000 crores of booking value. The sales in the first quarter were driven by strong demand in several new project launches, including Godrej MSR City in Bengaluru, which achieved a booking value of INR 2,426 crores. Godrej Majesty in Greater Noida, which achieved a booking value of just under INR 1,000 crores and Godrej Tiara in Bangalore, which achieved a booking value of INR 470 crores. Bangalore contributed more than INR 3,000 crores followed by Mumbai and NCR, both of which contributed over INR 1,600 crores to our sales. There were 6 new projects and phase launches during the quarter across 4 cities with a total sales potential of INR 8,500 crores. Collections in the first quarter grew by 22% to INR 3,670 crores, and operating cash flow slightly declined by 4% to INR 947 crores, largely on account of the relatively low deliveries we had during the quarter of under 1 million square feet against a full year target of at least 10 million square feet. In terms of business development, we started the year from a strong growth by adding 5 new projects in estimated saleable area of approximately 9.24 million square feet and an expected booking value of INR 11,400 crores. With this, Godrej Properties has achieved 57% of its annual guidance for business development for the full year in the first quarter itself. In the first quarter, our total income decreased by 3% to INR 1,593 crores, EBITDA grew by 18% to INR 915 crores and net profit grew by 15% to INR 600 crores. With a robust launch pipeline, strong balance sheet and resilient demand, we are on track to achieve our bookings target of INR 32,500 crores in FY '26 and are also on track to meet our guidance across all other operating parameters. On that note, I conclude my remarks. Thank you again for joining us on the call. We're now happy to discuss any questions, comments and suggestions you may have.

[Operator Instructions] The first question is from the line of Puneet from HSBC.

Congratulations on a good start to the first quarter. My first question is if you can talk a bit about the new launches, what percentage have you been able to sell? And in your total sales, what would be the share attributable to you?

Thanks, Puneet, for the question. Essentially, if you see most of our big launches have been in Bangalore, we launched this project by the name of Godrej MSR City in North Bangalore. And we were able to sell close to about INR 2,400 plus crores. I think INR 2,426 crores in the previous quarter. And if memory serves me right, in the first phase that we had opened up with some inventory we had locked, the total available was about INR 2,600 crores, INR 2,700 crores. Of which maybe about INR 100 crores, INR 150 crores, we had sort of blocked to do it at a slightly higher pricing. The next one was another project in Greater Noida by the name of Godrej Majesty. In this one, in the previous quarter, we've sold about INR 925-odd crores. And I think even in this quarter, we've already sold another INR 75-odd crores. And this is part of some towers that we have launched, and it's going very well on the track. The third big launch that we had in Yeshwanthpur. Yeshwanthpur approval actually came a little later. I mean, we got this approval 2 to 3 weeks before the quarter got ended, and we sold more than INR 400-odd crores, if I'm not wrong, INR 470-odd crores in the previous quarter. And it is continuing to sell as aggressive as that. I mean, if my memory serves me right, we would have crossed almost a similar number already in this particular last month itself. So again, going well on track. And then remaining have will be more or less like sales activations and all. So yes. So whatever we're opening stock between the towers that we open, the floors we open, give or take, between 70% to 90% is what we are selling. Consciously, we're holding some very, very prime inventory so that we can ride through some amount of pricing uptake, but we are seeing very strong demand, yes.

The key question was, the GPL share this quarter was a little bit lower than last year because of the large sales in Bangalore, in our JV project, so that was 78% for the quarter.

And secondly, if you can talk a bit about the environment in terms of deliveries, the deliveries was 0.8 million square feet. Are you seeing any challenges in terms of availability of labor, contractors, et cetera? And is there a risk for any account the slight pushback in terms of project completion and collections and so on?

That's a great question. If I were to give you a sense of the execution piece, I'm delighted to share with you, in the quarter 1, we were able to increase our COC run rate. Just to give you a sense, COC in Q1 of the previous financial year was about INR 750-odd crores. And the quarter 1 COC was about INR 1,170 plus crores. So we are seeing a very strong execution uptake. And yes, you're right, there have been a historical challenges on the labor side. But for the last 9 months, we've been working on a complete execution turn-on strategy, and we've worked on kind of bringing our labors into a digital infrastructure system, creating a sort of a road map to engage them better and also relook at some of our contractor base. And through these initiatives, today, our sites are able to consistently month-on-month exceed the target that we are setting for them from a labor point of view. So yes, there might be some pockets of opportunities of major improvements still, but I think give or take, in this quarter, we should be able to ensure that any gap on some projects from a labor strength also gets fixed up. So I think we might be an outlier and if we continue the drive that we are doing in the next 1.5 to 2 years, we will almost automate the engine. And we're also integrating a lot of tech initiatives to strengthen this overall execution piece.

But should it not show up in your construction-related outflows, which was INR 1,800 crores in 4Q and INR 1,460 crores this quarter?

I'll explain to you. See typically, our business has -- if you see our historical numbers as well, typically, quarter 4 has a lot of OCs that technically kind of come in. Quarter 1, we just had 0.8 million sort of square feet of OCs and we did a lot of launches in quarter 4, if you recollect, which is the initial days of construction mostly about excavation and piling works, which are not, from a COC spend, a very huge item. But from a labor intensity and activity, so the materials don't get pumped in; like steel, cement, doesn't get too much into excavation, but labor movement, truck movement is fairly high. So I think you would see that uptake in the coming quarter.

I think, Puneet, to put it in another way, we remain very confident of the guidance both on collections and delivery. Quarter-to-quarter, of course, there can be some fluctuations.

Fair enough. And secondly, on your BD front, you've been doing quite aggressively. If you can quantify balance to spend on what you've already acquired in terms of land payment dues, and how are you thinking about future run rates.

Okay. I'll take the first part, Puneet. Balance -- for the deals, which we have signed in this year, balance to spend is around INR 900 crores and around INR 1,000 crores or INR 1,200 crores for the earlier deals, which we have signed in '25 and '24, which are milestone-linked payments.

Okay. And this includes the -- INR 1,200 crores includes the Ashok Vihar as well, right?

That includes one installment of Ashok Vihar, which we will get due for this financial year.

And I think your second question was on the future BD, is that the question?

Yes, yes.

I think we remain very optimistic on the deal pipeline. So we would -- we endeavor to add projects especially in cities like Bangalore and Mumbai and also to some extent even in Pune. And NCR, we are acquiring a few projects mostly on the plotted side, like in Panipat, you would have recently seen an acquisition, and we've been very selective on -- currently on the NCR acquisition unless we find the valuation very attractive. So you would see definitely a very strong business development growth, but more calibrated more about where the take-up rate can be very fast from buyout opportunity to launch and churn.

The next question is from the line of Abhinav Sena from Jefferies India.

Pirojsha sir, my first question is to you. So in the opening comment, you have mentioned that demand conditions are pretty strong. And I guess, even your sales should be higher this year. Plus we have seen some other developers also report very strong numbers in first quarter. But -- however, the industry data seems to be flattish to down, so how do we square these 2 things?

Yes, I think the demand conditions do remain quite strong in our view. I think comparing it to a time where perhaps the demand conditions are quite euphoric may not actually give the best picture. I think we're following so far pretty much exactly what one would expect to see in a typical real estate cycle, assuming this is kind of year 4 or year 5 of that cycle, which is, you do have the couple of years of kind of extraordinarily fast pricing growth. We've seen some of our launches, people have been lining up at 1:00 in the morning and so it's a music concert or something like that. So I think those are not conditions that are going to sustain indefinitely nor probably should they sustain indefinitely. So I think we've now entered a period where prices have reset to a higher and quite attractive level. We're continuing to see strong demand at these levels. But I don't think at this stage of the cycle, we're going to see very sharp pricing increases or volume jumps from here. So I think it's more about steady growth from here, that seems to be playing out in the -- most of the numbers we're looking at. So I think, as of now, certainly, we're quite happy with the response we're continuing to see across the country in all our new project launches.

Okay. Sir, secondly, on the BD side. So I noticed that this quarter, you have done a couple of area share agreements, and this sort of comes after a while, right? So -- where you were earlier doing almost all projects as buyout, so is this like a conscious shift in strategy?

I think, yes and no. I think some amount as we get closer towards the mid to end stages of the up cycle, I think rebalancing a little bit towards JVs will make sense. So I think these, frankly, were more driven by kind of deal-specific requirements of the landowners, which are always a factor in deal structures. And we're seeing continued opportunities for outright purchases. So I think this year, again, most of our acquisitions are likely to be outright.

In fact, if you see the transaction like the Panipat is a completely 100% buyout transaction. And the pipeline that we currently have is a mix of both area share revenue share structures, but a lot of outright transactions. So I think it will be a very opportunistic basis. But the interesting part is, whatever we acquire agnostic to structure, our return metrics are intact, which means that the PAT margins that we always target as the main metric. And of course, IRR is exactly the same threshold that we maintain for any reconstruct.

Right. Gaurav, can you help us with some of the large launches to expect in the next couple of quarters?

Actually, we have a crazy launch pipeline. It depends on how much we actually can squeeze in. But just to give you a flavor of a launch pipeline, we will be very soon having a launch in Gurgaon. This is a 3.6 acre of land in Sector 53 and a very exciting project developed on a sort of a Japanese theme. Then we will be launching the first time a retail product, a new asset class and a very sizable one in Greater Noida. This is part of a very successful project of ours called Godrej Golf Links. We endeavor to launch maybe within the next 3 months. It could be within this quarter or early next quarter is the Worli launch. Things are going very strong on that. Approvals are more or less on track and we hope to secure that one very soon. On the Versova, this is an acquisition we did last quarter, delighted to share this will hit this quarter as a launch, one of the first fastest turnaround for us in Mumbai zone. We are also looking at finally launching one of our acquisitions of Indore. There is a lot of excitement in Indore market for Godrej properties entering, and this should be a blockbuster within this quarter. Then we have some launches being planned in Panvel city. We are also opportunistically looking during the year something in Sanpada. We will hit a very big launch in, like Pirojsha was mentioning, in Hyderabad. This was an acquisition we did in a very interesting market like Rajendra Nagar. And this has a very large booking value potential. We'll be launching one large phase within this quarter and will be a very sizable number. Then in Pune, we will look at launching Keshav Nagar. After a long time, we're going to reenter that micro market. We have some launches here and there in Pune like Mahalunje. In Bangalore, we have a launch in likely, if not this quarter, the next quarter in Thanisandra. And further from there on, likely, we will be able to launch either the next quarter or the quarter after the Panipat recent acquisition of previous quarter. The approvals are going very fast. So it is planned for Q4, but I wouldn't be surprised if it hits even Q3. Then we have a 7.5 acres land parcel in Gurgaon, which should also hit within this year. We have a Greater Noida parcel that we had done an acquisition that is going very well on design and approval stage now. So that should also happen within this year. We have a Kharghar acquisition, if you remember, bought from -- in auction that will hit this year. Then we might be able to pull off. I mean, very early to say, but there are 2 Upper Kharadi transactions we did, which had a cumulative booking value locked in of INR 7,300 crores. We would endeavor to at least try and launch one of the phases of one of the land parcels. Then we have a launch coming up in Evergreen Square during the year. Something in Raipur, the plotting development. We're trying internally to push it for a Q4 launch. And hopefully, also within the year, you'll see the Ahmedabad launch. Then we have some residential opportunities in GGL, next to the retail plot. And then opportunistically, we might even launch more phases of Bannerghatta. Basically, we'll enter Bannerghatta, but the MSR City might open before. Well, as you can see, it's a humongous pipeline that we've built for ourselves and which gives me a sense that we should -- if we hit most of them well, we should comfortably exceed our guidance. But if we do -- if we are able to get more of this like the pipeline mentioned, then we might wait for a good surprise.

[Operator Instructions] The next question is from the line of Girish Choudhary from Avendus Spark.

My first question is on the business development. Now that you're running ahead of your guidance for the quarter. I was more interested to know on the land spend. This quarter, you did around INR 2,000 crores of land spend, so how should we look at this number for the year as a whole? I mean, last year, we spent close to INR 9,000 crores. And also how should we look at the debt numbers for the year?

So actually, to be very frank, it is very -- the strategy on the business development side is, as we mentioned, even when we are releasing the guidance is not really driven by a targeted must-have guidance, right? It just happens that the deals need a metric, and we are very confident of them being available for immediate launch and I say immediate meaning next 6 to 12 months, is when we typically go about it. As a rule of thumb, if I were to say that for every, say, INR 1,000 crores worth of inventory, you can assume between 15% to 25% is your land acquisition cost in an outright, and it can be far lower if you do an area share revenue share. So it depends on the deal construct. It depends upon the type of opportunities we get to see during the year. And this could be a number, which for a quarter, you may not see certainly a lot of transactions, like in Q1, you saw a lot of transactions. So really difficult to predict an absolute number because for us, having them is not necessarily critical to maintain booking value growth. As you know, we have acquired a series of projects. I'm delighted to share with you that in the last 3 years or so of BD that we've logged in, we still have close to INR 60,000-odd crores worth of inventory to sell. And from a historical inventory, we are close to INR 114,000 crores of inventory. So BD, logically, what we're looking at is more about opportunistic fast turnaround and in micro market where we see a huge potential and depth. So this will essentially drive, and most of it -- because we have a very strong operating cash flow pool in the -- even in this quarter, we see -- we had like INR 947-odd crores of operating cash flows in spite of almost INR 400 crores of extra COC spend when I compare Y-o-Y. This is going to fuel our future growth in the coming quarters. So difficult to put a number, if I were to be very specific. But yes, we will acquire a lot of opportunity, but based on very strong deal metrics.

On the debt, how are you looking at the debt from here on?

Yes. I think, again, it will depend a little bit on the quantum of business development we've done. But I think if you look at it, last year, we did about INR 7,500 crores of operating cash flow on collections of about INR 17,000 crores. We've guided this year for INR 21,000 crores of collections. So of course, hope to see operating cash flows also at a very healthy level this year. So I think a lot of the business development should be funded by that. From a debt perspective, we've laid out an absolute cap that we'd like to look at for net debt of INR 10,000 crores. So we do have a fair amount of room and even that would only take us to about 0.5 or a little bit above that range. So I think that there is more than enough sources of cash, both between operating cash flow and room to borrow a little bit if we see the need to in the short term. But I think the decider of exactly where debt ends this year will be how much beyond this INR 20,000 crore guidance we are able to do on business development. And that is honestly something that we don't have a -- it's not that internally, we have -- we must do at least INR 30,000 crores. I think, broadly, we'd like to see a kind of replacement value business development, so roughly in line with our sales. And I think operating cash flow should be able to fund most of that.

Sure, sure. My second question is on the construction outflow run rate. Like you earlier mentioned that you're running ahead of the COC run rate. So but I mean, basis your expected cost to complete, what can we assume the run rate for, let's say, the -- I mean, for fiscal '26 and '27? Last year, we had spent close to INR 5,500 crores.

Yes. I mean, I would say that probably last year, our COC spend was about INR 3,500 crores, INR 3,700 crores, something, if my memory serves me right. I think we should hit between -- I mean, it depends on how efficient we are able to capitalize on some of the start of construction because when we do an estimation for the year, it also kind of picks up our approvals coming for H2 launches, right? So depending on how quickly we can get those approvals on track, give or take INR 5,500 crores to INR 6,500 crores...

Last year was around...

No, no, I'm talking this year. I'm talking this...

No, last year was higher, around INR 5,500 crores.

Last year -- this includes what all, Rajendra. Just one second. This includes all the development costs or just the COC spend?

All the development -- COC spend basically.

COC spend. So give or take 30% to 40% growth on the base value we should have.

[Operator Instructions] The next question is from the line of Parvez Qazi from Nuvama Group.

So my first question is on the pricing front. Now you did mention that demand remained strong, we are able to sell 70%, 80% of our launch inventory pretty soon. So what would have been, let's say, the like-to-like price increase that you would have taken in Q1?

So in most markets and, of course, there are some exceptions of some projects where we may not have increased prices, but most projects in North, we've been able to increase price between 2% to 3%. We've been able to increase between 1% to 2% in Bombay, marginally basically less than 1% in Pune market and about 2% to 3% in South market. This is what I'm saying like-to-like projects, projects which had already been launched and we were doing sales. And our sustenance sales, as you know, is about close to INR 2,750-odd plus crores in the last quarter.

Sure. The second question is, I mean, over the last 2 years, obviously, demand has been pretty good. We have seen an increase both in land prices as well as the price realization on the various projects. So in your estimation, I mean, an IRR for a project acquired recently, how will it compare with, let's say, BD deal that you would have done 3 or 4 years earlier? Will the IRR be same, higher, lower? Just wanted to get your views.

I think the projects that we had acquired in the initial stage of the cycle, so let me clarify. The underwriting standards when the cycle was starting up to its peak as well were exactly the same that we had even in pre-COVID. We were always underwriting in -- on conservative sort of basis. That's been more like a governance principle that we've set when we buy land. So those have, of course, seen a very dramatic uptick both from an IRR perspective, overall PAT profile and even PAT margins, right? And the deals that we acquired even in the 6 months, at the moment, more or less most of the deals we are seeing an uptick in IRR. Now the deals that we will continue to acquire, the endeavor is going to be that whatever we've been underwriting agnostic to market cycle, we should maintain and improve upon that. So to put it very simply, we're not really -- when we look at a deal, we don't really go aggressive and underwrite basis aspirational life cycle numbers. We do what is like a launch scenario as we call it, basically today, rate, if this rate does not increase for next few years, what is the margin profile in IRR looking like? And that's how we underwrite. And if the market supports, you improve upon it, market doesn't support you, you at least, for the very minimum, try and maintain those margins to whatever extent possible.

[Operator Instructions] The next question is from the line of Ashish Mendhekar from JPMorgan.

[Technical Difficulty].

Sorry to interrupt, Mr. Ashish. May I request you to use a headset to ask a question.

Okay. Is this any better?

Yes, please go ahead.

Yes, I understand the completion trajectory of FY '26 -- so shall I ask all the questions in one go or like...

Go ahead, please go ahead.

But your line is not clear, maybe...

Did you ask for completion for this year? Is that your question?

Yes, completion trajectory for FY '26?

Sorry, not able to understand.

Sorry, the line is not clear at all.