Prestige Estates Projects Limited (PRESTIGE.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Prestige Estates Q1 FY '26 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pritesh Sheth from Axis Capital Limited. Thank you, and over to you, sir.

Thank you, Muskan. Good afternoon, everyone. Thanks for joining in. We have with us management of Prestige Estates represented by Mr. Irfan Razack, Chairman and Managing Director; Mr. Zayd Noaman, Executive Director; and Mr. Amit Mor, the Chief Financial Officer. I'll now hand over the. Call to the management for the initial comments, and then we can start with the Q&A. Over to you, sir.

Thank you, Pritesh. A very good afternoon, everybody, and thank you for joining in today's call. We're very pleased to report that Prestige has commenced the financial year '26 with its strongest quarterly performance to date. It's a clear reflection of the sustained momentum and deep structural demand across our core markets. In the first quarter, we achieved a record-breaking sales of INR 12,126 crores, growing nearly 300% year-on-year, setting a new benchmark in our company's history. We sold 4,718 units across 9.55 million square feet, backed by strong customer demand and high-quality launches. Equally encouraging is our highest ever quarterly collections of INR 4,523 crores, growing 55% year-on-year, underscoring the disciplined execution and cash flow stability embedded in our business. The geographical sales mix this quarter marks a decisive milestone in our evolution as a truly pan-India player. For the first time, the NCR region contributed the largest share at 59%, followed by Bangalore at 21%, Mumbai at 12% and Hyderabad at 5%. We launched our four new residential projects during the quarter, totaling 14.94 million square feet, including our maiden launch in NCR, the Prestige City Indirapuram. The response was phenomenal with nearly 80% of the inventory sold at launch, setting the tone for our expansion in North India. On the completions front, we delivered 5.45 million square feet across five residential projects, including our first ever project completions in Mumbai, which were executed in just 3.5 years. This is a testament to our robust planning, execution, efficiency and commitment to timely delivery. Additionally, we completed the Prestige Turf Tower in Mahalaxmi, which enables us to move full steam ahead on the next phase of our marquee project, The Prestige, Mumbai. On the business development front, we added seven new projects across four geographies, Bangalore, Mumbai, Chennai and Hyderabad with a combined GDV of over INR 20,000 crores. Our annuity business continued their steady performance. In office, we leased 1.21 million square feet, maintained 94% occupancy and achieved exit rentals of INR 523 crores as of Q1 FY '26. We are on course to achieve exit rental for office in FY '26 of INR 819 crores. In retail, our malls recorded a gross turnover of INR 590 crores with occupancy levels of 99% and exit rentals of INR 271 crores. The first quarter has laid a solid foundation for the year ahead. The filing of the DRHP for our hospitality platform is a strategic step in unlocking value across verticals and setting path for our next growth. Looking ahead, we have a robust pipeline of launches planned across Bangalore, NCR, Mumbai, Hyderabad and Goa. We are confident that the momentum built this year will carry through the rest of the financial year. Thank you once again for your continued support and belief in prestigious journey. With this, I open the floor for questions, and we'll take them one by one.

[Operator Instructions] The first question is from the line of Akash Gupta from Nomura.

Congrats on the great performance. Sir, my first question is with respect to your presales guidance for FY '26. The guidance is close to INR 260 billion. Do we see an upside risk to the guidance? And with respect to launches, what launches are we looking at in the next two quarters?

Sorry, I lost you. What is the question?

Yes. Sir, my first question is with respect to your presale guidance for FY '26. Are we seeing an upside risk to that guidance considering we have already done INR 120 billion in the first quarter? And then I wanted to understand on your launch pipeline, what launches are we looking at in this quarter and in the next quarter?

We'll stick to our original guidance, which is between INR 25,000 crores and INR 27,000 crores. And we'll see how this quarter performs and then maybe we can review it further. Now launches for this quarter in Bangalore, we have the Prestige Greenbrook with a plotted development. We have Prestige Crystal Lawns with a plotted development. We have also Prestige Autumn Leaves which is a plotted development. Along with this, we are also trying to see whether we can bring the Evergreen at the Prestige Raintree Park, which is a fairly large development again in Whitefield, we are just pushing for those approvals, which is a process. It will come and RERA also has to come. But if we are able to get that, that will be the launch for this quarter, that is in Bangalore. In Mumbai, we are trying to bring in the Prestige Highland Park, which is Dahisar where we bought the land and that hopefully will happen in September. And then the other one , which is -- which we already have the RERA will be the third phase, Mayflower of the Prestige City Indirapuram, even that will happen in September. These are the launches that we have in the pipeline for this quarter.

Got it, sir. And sir, on your commercial leasing, particularly for the Bombay portfolio, which is the Prestige and Prestige 1O1, we have roughly 9 million square feet, I think, of leasable area, and we have leased roughly 1.5 million square feet. I wanted to understand like what kind of demand are you seeing this for your BKC commercial portfolio?

Demand has been extremely good. We have already leased 50% of our portfolio in BKC (X), and that's a good sign because pre-leasing in the Mumbai market is nonexistent. Now if we have managed to do that and have some great numbers, I think the team has done a wonderful job. But I've also told them to go slow because let the product get ready. Product gets ready only in '27, '28. And then we'll -- closer to our product getting ready, we will be pushing more for this, because we also want our customers to get the confidence.

Got it. Got it. And sir, one final question from my side on the Jijamata development. So I think we have already done the land clearing and everything. So just wanted to understand like what kind of product positioning are we looking at here? And when are we planning to launch this project?

Yes. See, it's a mixed-use development. It will have retail, 1 million square feet of premium and luxury retail. Apart from that, we'll have office of 0.5 million square feet. Then we are having the Hilton plus the Waldorf Astoria and conferencing center that will be one tower. And sitting right on top will be the Waldorf Astoria branded residences. And then we have two towers of residential, which will be for sale.

Okay. And when are we planning to launch this project?

This is all work in progress. We need to get our design in place. It's -- as we speak, the team is working hard on the design. Once the design gets frozen, then it's approval, then it will be -- we'll have to time the launch properly.

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

Congratulations on great performance. My first question is, if I look at the potential salable value and the margin that you've given for upcoming projects, it comes to about 52%. Is that broadly how we should think about your newer projects and the new additions as well?

Puneet, it is all about opportunity that keeps fluctuating. We will be happy with around 35%.

52%, Puneet, is basically because we would have spent on land parcel. The slide you are seeing is a free cash flow slide. So we've already spent on land cost. So we'll getting that cash flows. So 52% is the free cash flow we'll be getting but the margin is in the range of 35%.

Okay. Margin would still be 35% because that you haven't spent much on land there so far as I see, right? I mean it's a small, okay, that is not disclosed yet.

We go along.

Okay. Fair enough. And secondly, if you can also talk about your new acquisitions which you have done almost INR 20,000 crores worth. Have you paid for that already? Or is there still some bit of balance to pay there?

Two major ones are on RD. The one in Hyderabad is again RD not a significant payout. The balance like the one in Chennai, again, we have a land payment plan, land of which we have paid INR 100 crores. The balance INR 300 crores will be paid over a period of time.

So in all consolidated, how much is balance to spend on just land payment, including maybe the previous business development that you may have done?

Around INR 500 crores.

Sorry, INR 500 crores?

Yes, INR 500 crores.

Okay. That's helpful. And lastly, how do you think about peak debt? Your CapEx run rate should ideally pick up given that you're looking at completions for large projects in FY '28. So where should we see debt ending for end of '26 or end '27?

See, if you see our cash flow during the quarter, we have almost about a gross inflow of around INR 5,000 crores. If you see the paying run rate as the entire year we'll expanding closely existing around INR 18,000 crores to INR 20,000 crores of which we'll be spending around INR 8,000 crores on construction and around INR 4,000 crores on overhead land owner payments and all that. So from the operating activity, we should have free cash flows of around INR 7,500 crores to INR 8,000 crores of which in the investing activity it will be INR 3,000 crore to INR 3,200 crore on the CapEx up to guidance and INR 4,000 crores on business development. So on a full year basis, I think so debt should increase by INR 1,000 to INR 1,200 crore if we don't do any further long diversion plans.

The next question is from the line of Yash Gupta from Prestige Estates.

Yes, Yash Gupta. Referring to Slide #8, we reported the completion of five projects in Q1 FY '26 with cumulative GDP of around INR 5,000 crores to INR 5,500 crores. However, as per Slide #13, the residential revenue recognized during the same quarter stands at INR 1,573 crores. Could you please clarify the reason for the variation?

Again, the revenue recognition is not just based on project completion, it is also based on handover to the clients. So we have completed those projects in the current quarter but the handovers are still happening. So those generally a handover of large project takes six to nine months, so in next three to four months we should be completing those handovers and the revenue recognition will happen....

And anything on the -- for the complete year, what revenue we are looking to recognize in the residential business for the complete year FY '26?

If you see we have unrecognized revenue of more than INR 50,000 crores. In the current financial year, some of the projects in TPC Sarjapura should get completed and the revenue should start flowing through that. So we expect close to INR 8,000 crores to INR 10,000 crores of residential revenue to happen in the current quarter -- current financial year.

Okay. Just referring to the same slide, Slide #24, we are saying that we will book around INR 57,000 crores of revenue could we say in next three to four years down the line. So roughly INR 15,000 crores to INR 20,000 crores of revenue every year. And if we compare the same thing with FY '25, in which we have just about INR 1,000 crores to INR 4,000 crores. Is this understanding correct that we are looking to book INR 15,000 crores to INR 20,000 crores of revenue in maybe FY '26, '27, '28 and then thereafter?

Yes. We're increasing revenue recognition as we move forward. So as I mentioned around INR 8,000 crores to INR 10,000 crores of revenue guidance for this financial year from the residential segment, okay? But this will pick up with projects getting completed in financial year '27. And most probably in '27. Now the residential revenue contribution through these two INR 15,000 crore to INR 16,000 crores and it will keep increasing year-on-year.

And anything on the margin, what like 35% EBITDA margin?

Yes. On a portfolio level. Our margins are like 35%, yes.

The next question is from the line of Abhir Pandit from Old Bridge Mutual Fund.

I wanted to understand specifically the fact that, sir, and going ahead, the free cash flow generation from your residential business is going to be major in a huge amount and is going to outstrip the requirements in the commercial business. And also seeing the fact that the hospitality business is -- I mean, it's going for an IPO. So there is going to be a large amount of free cash flow generation. So how do you see the allocation of this free cash flow? Will it be towards land? Or how are you looking at it?

As I mentioned, this financial year, we are budgeting close to INR 7,500 to INR 8,000 free cash flows from our operating activities. Of this around INR 3,200 crore we're planning to deploy for CapEx and the balance will be for business development. Because, we're [indiscernible] stock and we need to repay the stock by doing all. [indiscernible] So, yes, significant portion of our CapEx outflow will be financed from residential business. But still we will be maintaining about 60% internal accruals and 40% from debt from out capital [indiscernible]. And actually it depends on [indiscernible] requirement.

Okay. Okay. Sir, my second question would be, sir, since the industry is now looking towards luxury projects in majorly all micro markets. So and since the real estate cycle is possibly in the third or fourth year, how are you looking at the entire real estate cycle?

Depends on what you define as luxury. If it's all projects above INR 25 crores or INR 15 crores or whatever and so on and so forth, that I would define as luxury. Luxury is a very, very niche market. It's not that we want to sell this every day to everyone. These buyers are all few and far between and these are all [indiscernible] buyers. So we have to target that audience correctly. And we don't have too many of them. So if you're trying to do too many of the luxury project it will be getting hard.

Okay. Okay. Sir, last question from my side. Sir, just an update on the Prestige Pallavaram Gardens. It's been more than a month from launch. So could you give us a status on how is the offtake on this project?

It's done extremely well, and it's still work-in-progress. And this month also we have [indiscernible] in spite of that because Chennai is that different market where a lot of frustration and things happen but then I believe for whatever we have done within the month, it's really picked up well and done extremely well. We'll report that in the next coming quarter.

The next question is from the line of Biplab Debbarma Antique Stockbroking.

First question is on that annuity slide that you have. I just noticed that the commercial portfolio, Slide 27, the projected annuity income step-up say, for FY '26 and '27 has changed from what you projected in previous quarter. So my question is, is the delay in any of the projects that were supposed to start operation in FY '26, '27? What was the reason of this shifting of annuity income step up?

Biplab, actually there's no delay on any of the commercial projects, all are progressing are as per plan. What we have mentioned actually in FY '26 what projects completed up to Q1 '26. So there were three projects basically your DIAL project, your Lake Shore Drive and Tech Forest, which are planned for completion in the current financial year. So those rentals have not come, we have actually revised the presentation and uploaded in the website. So if you see for entire financial year -- at the end of financial year '26, our exit rental will be INR 8,200 million.

In FY '26?

'26. The INR 5,200 was basically for projects completed up to quarter 1. After factoring completions in Q2 up to Q4, my exit rental will ramp up to INR 8,200 crores.

So at the end of FY '26, our exit rental will be around INR 8,000 crores or so. Is that correct?

Yes. Yes, yes.

Okay. Perfect. That's right. Also the projects that you have mentioned that we are planning to launch in Q2, what would be the GDV of the project launches planned in Q2, put on GDV, approximate.

INR 3,500 crores, excluding the Evergreen Park. If you include Evergreen as well, it will be INR 8,500 crores.

Okay. So Evergreen is a big project, INR 5,000 crores GDV project?

Yes, yes.

Okay. Okay, sir. And my final question is on your increasing footprints in MMR and I was just passing by Jijamata Nagar project, excellent boards are there. It has been cleaned up and excellent location. So my question is, see, it seems that most of your projects in MMR is with alliance with DB Realty or Valor Estate and its promoters. Should we expect new acquisition in the MMR region through other partnership or independent channels? So that is my last question.

So thank you for the appreciation on the work that's happening. Firstly, we would like to say that we are very agnostic when it comes to the kind of opportunities we look at. We are not tied up with anybody or we don't have any exclusivity. But we'll go on an opportunity to opportunity basis based on the merits of the development, we'll look at the opportunity. But I think I hope that answers your question. But yes, our strategy overall across the country to grow so fast is to work with developers who have land already tied up, have certain level of approvals because it makes things easier.

The next question is from the line of Parikshit Kandpal from HDFC Securities.

Congratulations on a great quarter, sir. So my first question is on the leasing in BKC. So you said that 50% is leased out in Tower X. So we had benchmarked the rate at about 325. So by the time these towers are ready, do you think that we'll be reaching that rate? Or what rate you have locked in for now?

No. Actually, our leasing rate is above 350. So when we completed it, I think it should go above 400. But right now, what we have achieved is above 350, around 370 is the rate that we have.

Okay. And the carpet rate will be almost double of this?

What I'm talking about is super built, not carpet. It can be double. My way of calculating carpet to super built is 0.65 now.

Okay. Got it. But great. I mean, so 400 is what you are looking to achieve with this and rates will go up higher as you lease further because half of the building is already. So what kind of blended rate do you think by the time it's ready, it should trade at? So by the time the building is ready, sir, and the entire leasing is done, what kind of weighted average rate can we expect from this now?

We take it as it comes. We'll have to see what the market is each time. So at the moment, we are pretty happy that we've got some good companies who have committed the space. I can't reveal the names just now, but they are top-notch companies, and that is what gives us the sort of courage.

Kind of mix, like is it more financial or IT/ITES or GCC? So what kind of tenants, I mean, at least the sector, at least you can highlight?

Corporate. It's basically corporates. And then there are also some what we call co-working spaces also that have committed in the space.

Okay. And my second question is on the Prestige business base, sir, so INR 7,000 crores GDV addition. So is it a commercial project? So what do you want to do here? Just wanted to understand what is the nature?

[indiscernible] sale we are looking at there is a vacuum in the market for smaller offices, and we felt it was a great opportunity. location was good. The High Court is coming next door. So there will be a lot of the smaller businesses, smaller requirements for smaller offices. So we haven't done startup for a long time. And in Mumbai, we haven't done at all. So we believe this was a good opportunity. So basically, what we are making is galas and selling it.

And this is in partnership -- JDA project or like is it entirely our project?

Sir, as of now, there is some understanding we have, but the company is handling this project totally on their own. But there is some -- because of the work done by our partner, they will be getting a certain percentage of the profits, the top line.

Okay. And my other question is basically, in this quarter, was there any further consolidation of stake between the promoter and the company in this quarter? And if yes, then what was the quantum?

That's all the thing of the past. There's no further changes that are likely to happen or will happen. All the consolidation, whatever that was needed to be done is already done.

Okay. And just the last question on sustaining sales and now with the inventory which we have, so what kind of sustaining sales can we expect on a quarterly basis? Because launches mostly for us has been a significant portion has been a sellout. So what kind of sustaining sales we can expect on a quarterly basis now?

See, we have guided for 27,000 for the year. We have done 12,000, but then we have 20,000 inventory with us. So I believe from the inventory that we have, we should be able to sell about 25% of the inventory. But we have to add up new inventory to get other numbers. So at the end of the day, with the new launches and the sustenance sales, we should be able to do much more than what we already talked about. But as of now, I want to be guarded on this. I want to still stick to my 25% to 27% for the year.

Okay. And Forest Hills Phase 2, you did not mention in the launch. Is it going to happen in second half? Because this quarter, you did not name it?

No, Forest Hills, we've been selling every week after week.

No, Phase 2, sir, next two towers I was talking about.

No, we haven't launched those. You see my strategy first, since we've opened one tower, there are 600-odd units in that tower. We want to clean up the inventory there and then look at the second tower and the third tower. We don't want to open up everything and make a mess.