Godrej Properties Limited (GODREJPROP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Godrej Properties Q2 FY 2026 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. Hello, everyone, and thank you for joining us on Godrej Properties Q2 FY 2026 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 risk. The outcome may differ materially from those suggested by such statements, and a disclaimer to this effect has been included in the results presentation. I'd now invite Mr. Godrej to make his opening remarks.

Good afternoon, everyone. Thank you for joining us for Godrej Properties Second Quarter Financial Year '26 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 robust quarter. We had our highest second quarter and half year net profit of INR 405 crores, and INR 1,005 crores [ effectively ] a growth of 21% and 18% year-on-year. GPL's quarterly bookings in Q2 have again crossed the annual bookings of financial year '22. Booking value for the quarter grew 64% year-on-year and 20% quarter-on-quarter to INR 8,505 crores. This is a 9th consecutive quarter of over INR 5,000 crores sales and the 3rd consecutive quarter of over INR 7,000 crores sales. This is achieved through the sales of about 4,500 homes with a total area in excess of 7 million square feet. In the first half of the financial year, our booking value grew 13% year-on-year to INR 15,587 crores, the highest [indiscernible] first half of value for the company. With this total property has now achieved 48% of its annual guidance for booking value and remains on track to reach this guidance of [ INR 32,500 ] crores for the full financial year. For markets Bangalore, Mumbai, NCR and Hyderabad each contributed more than INR 1,500 crores to the booking value in the second quarter, which is the first time GPL has achieved it. Sales in the second quarter were driven by strong demand in several key new project launches for which [ Regal Pavilion ] was a property second launch in Hyderabad achieved a booking value of INR 1527 crores. This takes our total sales in Hyderabad during the current calendar year to about INR 2,600 crores, marking a strong entry for the company into this [indiscernible] MSR in Bangalore, which was launched during the first quarter and saw additional areas being released in Q2, achieved a booking value of INR [ 1,032 ] crores, for which [indiscernible] another project in Bangalore, achieved a booking value of INR 877 crores. For this [indiscernible] our projects [indiscernible] achieved a booking value of INR 633 crores, and several other projects, including our first project in [ indoor ], which saw looking at INR 400-plus crores saw robust return. 12 new projects and sales launches happened across 8 cities and means had a total sales potential of over INR 10,000 crores during the quarter. Collections in the second quarter grew 2% year-on-year and 11% quarter-on-quarter to INR 4066 crores. In the first half financial year '26 collection grew 10% to INR 7,736 crores. GTL achieved 37% of the yearly guidance on collection. It does [indiscernible] sound a little bit low, but we are confident that we are fully on track to achieve our full year guidance of INR 21,000 crores of collections. And we have a slight anomaly this year where both deliveries and therefore collections and operating cash flow are slightly skewed towards the fourth quarter, but we've seen good construction progress during Q2 as evidenced by our construction spend is increasing rapidly, and we're very confident of a strong into the [indiscernible] deliveries and connections. In terms of business development, we have new 4 projects with an estimated saleable area of 5.8 million square feet and expected booking value of just under INR 5,000 crores in the second quarter. Taking our first half business development additions through 9 projects with a total estimated saleable area of 15 million square feet and expected booking value of INR 16,250 crores, thereby exceeding about 81% of our annual guidance. I'm happy to share that GPL was recognized as the global sector leader in real estate and ranked #1 globally in the score of 100 by 100 the global [indiscernible] sustainability benchmark in 2025. Godrej Property is also currently ranked #1 globally in the real estate and management sector on S&P Global Dow Jones [indiscernible] 2025 with a 89 on 100 as of 31st October 2025, which saw a significant increase from last year. For the quarter, our total income grew by 39% to INR 1,867 crores. EBITDA [indiscernible] by 118% to INR 614 crores, and net profit grew by 21% to INR 405 crores. For the half year, our total income grew by 16% to INR 3,460 crores. EBITDA grew by 45% to INR 1,529 crore, and net profit grew by 18% to INR 105 crores. 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 while continuing to grow our collections and operating cash flow. On that note, I conclude my opening remarks. Thank you all for joining us on the call. We are now happy to take any questions, comments or suggestions you may have.

[Operator Instructions] Our first question comes from the line of Puneet from HSBC Bank.

Congrats on good sales. My first question is actually on the [indiscernible] side, when I look at your sales reported versus cost of goods sold, the gross margin seems to be [indiscernible]. I underspend the mismatch in terms of other things, but why should gross margins should be [indiscernible] can you shed some light there?

So Pune didn't get too much [indiscernible] into this quarter, whatever [indiscernible] we received a of JV project. Like earlier explained, JV projects, we do low structuring. So the reporting of those income keeps happening in those respective period. So when the project gets completed, you will not see that kind of a margin. That's why that -- normally, you will see when the JV projects get the occupation certified. So otherwise -- yes, it is like-for-like, yes. So as and when our own projects start getting into P&L, you will see a significant change in the [indiscernible] trajectory, which will you will see that sales minus the cost of sales would be the result and will be a significant net profit margin.

Okay. And what would be your share of sales in this quarter?

Around 87%.

87%. And you also highlighted collections are low and likely to be in Q4. Why should that be the case? Generally collection should be more even [indiscernible] right? Unless there are some schemes which have been going by?

Not really. I mean, just to share with you, typically, as you would know that these are linked to different milestones. Some of these are linked to tariff completion not linked to [indiscernible] and some of it is also linked to [ OC ]. So what's really happening for us is that the sales that have happened say, later part of the last year would have got into timely connections between them and last [indiscernible] that the Q4 and Q1 sales that you've done will start hitting some of the slabs in Q4. And then all the OC milestones that we're getting [indiscernible] January, February, March, respectively, all those completion milestones, which are reasonably between 10% to 20% for different stages of different types of projects, that will sort of kick in. So every quarter, you will see a marginal growth for sure, but I think quarter 4 is truly lumpy because there's a heavy [ OC ] calendar coming in that part of the year. And just to double call it, to give you a sense of lead indicator of what makes it slightly more probable and more confident where this continent is coming from is 2 lead indicators actually. One is that our labor strength has reached an all-time high. We were give or take 20,000, 21,000 odd laborers at the start of the year. And by the time we wrapped up H1, we need 32,000 labor, this has never happened in terms of ramp-up of our institution ever. And this has led to also great direct construction spend growth in Q2 by 82% Y-on-Y. So this massive uptake will lead to collectible milestones hitting us in the next few months.

Understood. And just on the construction cost side as well. If I add up all these [indiscernible] related project-related cash flows and line spend over first half, it is close to INR 10,000 crores. But when I look at inventory, end of H1 inventory end of the 31st March, it is about 14000. What would that gap be as alluded to?

Sorry, Puneet I didn't understand. What exactly you're alluding to?

So in your cash flow statement, if I add up all the construction cost, which is construction-related outflows, [indiscernible] outflows, land approval costs, advance to JV partners. It's about INR 10,000 crores of spend total in the first half. Which should [indiscernible] the gap between the end inventory minus the opening inventory. This is actually [ 14,000 ]. So just [ 3,000 ] gap there, where -- how should one think of that? Anything moving between [indiscernible]

Yes, Puneet certain of our joint venture projects, we have acquired the [indiscernible] partners stay due to which their inventory is now start getting consolidated in our control account. That's why you can see the from jumping the inventory from March to 30th September.

We have given [indiscernible] exits of our [indiscernible] profit sharing project. So when you give an exit daily projects start getting consolidated into our books of accounts. So the drop accounting starts happening. Earlier, only 1 line item used to keep coming in. So that's why you will see that shift happening as and when this change in the structure assets.

Okay. Understood. But lastly, just on the interest flow cash outflow, which is up from Q-on-Q, basis. Any color there?

Yes. So you will see an increased outflow in Q2 because we have the [indiscernible] interest payments come around quarter 2. If you see quarter 2 of last financial year, you will see a similar interest outflow happening. So there's an annual interest payment, which happens in quarter 2. That's why you will see that interest payment a little higher in Q3, Q4, you will all see this kind of an interest payment also.

Our next question comes from the line of Mohit Agarwal from IIFL.

Congratulations on good set of bookings. So it's heartening to see a comeback of the ROE target of 20%. Just wanted two clarifications. Firstly, is this target in respective of the capital base in FY '28? So that's the first question. Secondly, you're basically committing yourself to deliver INR 4,000 crore, INR 4,500 crores of PAT by FY '28. So how will it be kind of evenly spread between now and FY '28? Or will you see a step jump in profitability in 1 or 2 years?

I think there will be a little bit of a step up in FY '18, which was maybe sustain beyond that. And the reason for that is I think a lot of the overseas on newer projects in [indiscernible] will hit that. Of course, I think if you look at net profit growth has been considerable over the last few years. But of course, a lot of it is led with -- not lost with actual occupation certificate related profit, which I think you will see in FY '28. So I think there will be a reasonable profit between now and then, but certainly, we do expect to step [ off ] in that year specifically. Irrespective of equity raise, I think two ways of answering that. I think as of now, we certainly don't have any plans. I think it's highly unlikely, but there won't be any equity raise between now and then. So yes, in that sense. I mean there is some opportunity that we [ unexpected ]. Obviously, in this business, equity rates cannot generate a return immediately because of the nature of the industry. But I think it's highly unlikely that there would be any equity raise between now and then.

Perfect. And secondly, on the Worli project, if you could share some color what has been the initial response like? If you could share some thoughts around what has been the pricing? And also, I've seen the presentation that you changed the structure from a 50% profit to 73% area sharing. So the reason behind that, and obviously, it will get consolidated, but how does this change the IRR?

Firstly, we are very excited that finally, the [indiscernible] the project go to [indiscernible] hitting the market. On an item note, I know every investor call -- earnings call before the question asked to [indiscernible] there is this launch happening? So there's a lot of internal excitement. And I think in hindsight, there is such a massive upside you've seen from a market rerating of the location and the entire [indiscernible] loan is benefiting that micro market in such a big way that our top line growth has removed and some of the area share that we've changed is largely benefit our interest and get higher economic interest because it's also trying to control specific units to [indiscernible] inventory, which is always easier to do when you do sort of various rate structure. The first part of it one [indiscernible] on the second part. The first part of your question, what are we seeing right now? To just gave you a sense, we just recently got the data. And what is a little different here is that unlike a typical project that we have where the -- one, the inventory opportunity is limited and the pricing is also very homogeneous. This is quite different for this particular product. Why? Because we have 3 towers and each of these towers have their own strong value proposition. Thare are specific units, which gets you beautiful [indiscernible]. There are specific units, which gives you both the CPs view as the [indiscernible] and then there's some units which gives you more of [indiscernible] view. So it's a very unique proposition, which is why we've kind of done an inventory, but inventory pricing out here. And we also have released inventory gradually to sort of maximize the opportunity of profitability growth. That being said, any launch that we do is always has a very exciting number. So I don't want to comment on the number you want to [indiscernible] but this is more of a profit maximization opportunity because we don't see much of a competition. Early days, very frank to talk about pricing and all, but just to give you a sense, we will look at something like [ 80k ] onwards to [ 1.5 lakh ], right? That's a range. That's in the mind right now, depending on what inventory when we want to launch. There are some top set of flows, which we will hold for a while unless we see pricing offers coming directly of the range that we want to be in the life cycle of the project. But -- and I'm talking about death pricing, not including some of the best inventory that we'll hold for ourselves, in terms of data launches. So, I mean, super exciting. I've never got so many calls of references and influence to get inventory, but we've not opened the doors yet for our customers. just opened last weekend on customer engagement. We've done 3 [indiscernible] explain the product after data approval to our [ stand ] partners explain the strategy we want to go. And I think very, very initial days, but we've got some very exciting response. So fingers crossed. This is going to be something to watch out, not just for this quarter, but I think it's going to be an important page in the legacy we're trying to create for [indiscernible]

Sure. And on the structure change from profit share in the...

I mentioned that it is largely to take upside on controlling what inventory we would like to sell. And because as I mentioned, the price range is very, very diverse. So there is a set of inventory we want to have. So [indiscernible] has not benefited us. So we did like a win-win with our partners and sort of did an allocation with [indiscernible] and area shifts tend to give you slightly more upside.

I think it makes as it's easier to operate the project everyone can sell at the pace they are looking to at the time [indiscernible]. And also this single only, only we will be concerned with managing the project from an execution cost perspective. So that also can streamline decision-making.

Just to clarify, we control the inventory and we will sell that inventory. So we'll do [indiscernible] to double it in fact, make us some amount of fee or of it as the just to sort of give it complete color that we control all inventory and entire pricing.

Our next question comes from the line of Parikshit Kandpal from HDFC Securities.

Congratulations on a decent quarter. So first question is, now if I look at your [indiscernible] numbers, so you are already -- if I annualize these numbers, we are top in all the markets, not buying of INR 5,000 crores in H1, so maybe makes you the top developer there, MMR similar pain [indiscernible]. So I just want to understand from here trajectory-wise, how each of these markets are looking at growth in the near mid-terms? How does one look at these markets from your perspective?

I think the growth opportunity effect is really very strong in each of these markets. I think we've hopefully demonstrated through the group, we've been able to deliver across markets in recent years, whether you look at NCR [indiscernible] from [indiscernible] I talked about 10 years ago of INR 10,000 crores sales the last couple of years. Mumbai, which we thought was not performing up to potential a few years ago and now scale very nicely, and we're quite hopeful of crossing INR 10,000 crores in Mumbai in the current year. Bangalore similarly, off to a very good start in the first half. And our most recent market Pune ofcourse is another top performing market where we've been the #1 player over the last couple of years. One of the things we're very happy to see is the market entry in [indiscernible] and how that has gone for us. As I mentioned in my opening remarks, we've seen about INR 2600 crores of sales in 2 launches that we've done with calendar year. We think that in our first year makes us probably the #2 developer in that market by sales value. Of course, there's a lot of future growth potential there. So I think there is no constraint in that sense to the growth opportunity before us. As a company, if we look at residential sales on a national level, we are currently last year about 4.3% of total sales. So clearly, we think that gives us headroom for growth in no individual markets are really even at 10% of the market, which indicates to us that I think there is a strong opportunity for growth through diversification of the number of micro markets in each city [indiscernible], we were talking earlier now of something like Worli, which will be our first major launch in that micro market in a long while. We've also made good progress on our [ Bandra ] project which we hope still to launch in calendar year '26, and I think are very confident of that happening. That will give us, again, a new presence in big micro market. So similarly, we think if you look at the various [indiscernible] that were in and [indiscernible] share in the micro market that we're already in, and the number of opportunities they have to add new micro markets, I think you'll see that headroom for growth is very, very significant over the next several years. Beyond that, we, of course, also have the opportunity to enter new markets as we've just done on [indiscernible] There are still large markets that we essentially don't have a presence in a serious way like Chennai. We're also, as you know, through [indiscernible] entering in the next set of cities, which could over time become opportunities from a group housing perspective. So I think the growth plan of the company continues to be robust. I think generally indicated, we see a medium-term opportunity of 20% kind of growth rate. Of course, there will be different stages of the cycle, where we have opportunities that we've had over the last periods were much beyond that 20%. There may be some where it may be difficult to do 20%. But overall, I think over a long period of time, even from current scale, we would be hopeful of delivering that kind of growth.

Sure, sir. The second question is, I mean, though we have seen phenomenal growth on [indiscernible] somehow we when we read the data asset collections and lagging, delivery is somehow seeing, maybe, looks a little bit muted. And thirdly, the profitability -- the part of profitability has testing the shortfall there. So is it that -- I mean, those figures have been ahead. So we are somehow behind in terms of execution, and that's not reflecting in our numbers on deliveries and profitability. So are our projects largely on track from a [indiscernible] standpoint? Are there delays with finding challenges in execution, given that sales is running ahead of the estimates?

Well, if you look at it, we have seen drastic growth about all metrics. We put actually a slide in our investor [indiscernible] quarter that kind of show the booking value collections, operating cash flow deliveries and profit growth. Booking that rate that has been very fast at [ 65% ] compounded, but it's not that these other metrics have not been [indiscernible] you look at our collection compounded growth over those 3 years at 39% deliveries is 42% and operating cash flow 62% Net profit, [indiscernible] we can -- the deposit numbers are 58%, but I would agree with a lot of that is accounting related. And that's not something that I would pay much attention to in the short term because there are several dislocations for a company that's following the project completion accounting method, which not all of our [indiscernible] are. But for a project for a company that is growing for us and follow the project completion accounting, I think it's important to understand how some of this [indiscernible] in the profitability is being very badly hit in some ways, directly due to growth because of things like marketing costs being expensed South India, where you're managing revenue acquisition on deliveries of products were typically 4, 5 years old and typically in joint infrastructure. So we are quite confident that, that visibility will change considerably as we said, by FY '28 by when we expect the accounting numbers to catch up to at least some extent, and we expect to be able to deliver the 20% ROE we've talked about. That said, I would say that there are averages in some ways on the [indiscernible] side that we're doing everything possible to address I think a lot of good work is happening in [indiscernible] talk about that [indiscernible] But -- but there are external challenges, things like the NGT and [indiscernible], which essentially taken 3 out of 12 months in a year of construction out in some ways and make things quite challenging. So there are some issues like that, that we are dealing with. And there are some projects that have been delayed. But certainly, I think overall, we feel execution is very much on track. As I said, the growth in execution in terms of deliveries last year was up to [ 18 million ] [indiscernible]. We expect this year as well to be ahead of our guidance even though the first half has been a little bit slow. So I think the company has failed well on all parameters in our view. Bookings clearly comes first because you're first selling the project, but certainly, it's being backed up biographic growth in deliveries and collections as well, and we think we'll see more of that in the next couple of years as well. Maybe Gaurav want to talk a little bit about that?

[indiscernible], just to give you a bit of a sense like 1 year, 1.5 years back, we kind of started working on the diagnostics of how do we scale up the execution muscle so as to support and kind of take benefit of the presale growth. And internally, we identified about 14 modules through which this construction speed can be scaled up. And maybe I'll just go light on some of them, otherwise can be quite a bit of a session itself. But to give you some insight, like something as simple as how do we solve for the labor issues in India. And I'm sure you would have read some of the largest engineering EPC companies how [indiscernible] do we do differently? And we kind of deep diagnose and created our own digital infrastructure system. So today, give or take, we have almost like 1 lakh [ laborers ] on a digital sort of interface through which we are able to kind of do predictive understanding of which labor are at high attrition risk on what even how to quickly replenish it. And how do we ensure that we are able to create an environment for more labors to feel [indiscernible] workspace for them? So moving from blue collared workforce management thinking process to more of how employee centricity led [indiscernible], what most companies think of there for white collar job. So through that, I think we've seen some clear recognizable and real outcome. So I gave an example some time back that the labor force has increased from 31,000 [indiscernible] labors to 32,000 labor. And many business after the scale that we built in the last 20 years to bring 50% sort of a growth in 6 months, comes out of some of [indiscernible] changes that we've got in. The second thing is bringing more world-class contractors supply chain systems. And we've been very actively working to increase our strength on that. First see some of our recent projects construction contracts have gone to a much larger vendor base than what used to have, say, 3, 4 years back. So last example is we have now [indiscernible] working in safe project like reserve when we've got [indiscernible], that we've got [indiscernible] contracts, you [indiscernible] some of the big boys are now working with us. We've also changed how to buy procurement in bulk. So we're standardizing many things in terms of time systems profit and all of this is kind of giving us both economies of scale and predictable supply chain. And then comes finally, it's all about getting your value chain right. And I think to give you sort of a number metric. All this has led to an 82% Y-on-Y growth in Q2. If you read the report for the last 2, 3 years, you would see the growth annually, in typical construction flows have been more 5% to 10%. And this pivot that we are trying to see in this year [indiscernible] has been very encouraging. So yes, there has been some amount of noise, some ray rightfully so coming out of issues. Also, these are some of the projects which were launched before COVID [indiscernible] we lost 6 months or so not to do anything. And we did not have a strategy to bring levels immediately back [indiscernible] because we are unsure that tenant to contamination and risk when the acquisition was not there, all of this is behind us. And this is a new strategy. And to give you a sense, next 6 to 9 months, we'll deliver about 4,000 homes in [indiscernible] alone. So yes, I mean reasonably confident to say that this is a problem they're understood. And is a problem we've not elected to some sort of a situation we're taking head on and we will deliver results [indiscernible] what you see, not just this year, but even on the outside project, which is why after gross part consideration is when we put a net-out engage a 20% ROE indication for FY '28.

[indiscernible] Elaborate. This the last question for Rajendra. Sir, just on the OC base revenue recognition this quarter, so what was the gross margin? I just like to like I'm asking that, including the partner of JV share whether the total [indiscernible] the total cost against that? Just want to understand the bite margin there? And also, if you can help us understand the current pieces what we've [indiscernible] margins?

There are 3, 4 projects, why don't we take it offline [indiscernible]. Maybe Satish can help you with the details.

Our next question comes from the line of Akash Gupta from Nomura.

Congrats on a good set of results. My first question is on your thoughts on the real estate demand in Gurgaon, Mumbai and Bangalore. How are you thinking about pricing [indiscernible] and conversions? That's my first question.