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

Ladies and gentlemen, good day, and welcome to the Prestige Estates Q2 FY '26 Earnings Conference Call, hosted by Axis Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pritesh Sheth from Axis Capital. Thank you, and over to you, sir.

Thank you, Muskan. Good afternoon, everyone. On behalf of Axis Capital, I welcome the management and participants to the call. From the management of Prestige Estates, we have 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 their initial remarks, and then we can open the floor for question and answer. Over to you.

Hi, everybody. Actually, I'll ask Zayd to give his opening remarks. After that, we'll take Q&A.

Good afternoon, everyone, and thank you for joining us today. FY '26 has begun on a very strong note for us. Building on the momentum of the last 2 years, we have delivered yet another strong performance this quarter, both operationally and financially. Riding on the sustained demand across our key markets and a healthy pipeline of launches, we achieved a record-breaking sales of INR 18,143 crores in the first half of this financial year. That's a 157% year-on-year growth, surpassing our entire FY '25 full-year sales in just 6 months. In Q2 alone, we clocked sales of INR 6,017 crores, up 50% year-on-year, with 4.42 million square feet sold across 2,069 units. Average realizations continue to strengthen with apartment prices rising 8% year-on-year to nearly INR 15,000 per square foot and plot realizations increasing 43% to INR 9,500 per square foot. Collections also remained very healthy at INR 4,213 crores in Q2, marking a 54% increase year-on-year, taking our half yearly collections to INR 8,735 crores, a 55% growth compared to last year. Our performance continues to reflect a balanced geographic mix, with Bangalore, NCR and Mumbai leading the way, together accounting for over 80% of sales this quarter. It's also worth noting that our NCR portfolio contributed a significant 45% of the half yearly sales, reaffirming our success in scaling up outside our home markets. On the development front, we launched 3.87 million square feet in Q2 with a GDV of nearly INR 4,000 crores, taking our half yearly launch to 18.81 million square feet with a GDV of INR 17,500 crores. Some of the key launches included Mayflower at the Prestige City Indirapuram, that NCR, plotted developments such as Autumn Leaves, Greenbrook and Crystal Lawns in Bangalore. We also achieved completions of almost 8 million square feet in the first half, including large-format residential projects like as Aspen Greens and Avalon Park at the Prestige City Bangalore. This quarter also was a very special one for us as we crossed the milestone of 200 million square feet of completed development since inception. This is a very proud moment that reflects the scale, the consistency and the legacy of our growth journey. On the business development side, we continue to build a strong pipeline for our future growth. During the quarter, we added 5 new residential projects, translating to a GDV of about INR 12,600 crores. This takes our total business development for the half year to around INR 33,000 crores across Bangalore, Hyderabad, Mumbai and Chennai, reinforcing the momentum of our expansion across our key micro markets. We also entered into a leasehold agreement with BIAL, that's the Bangalore International Airport, for 14.2 acres of prime land for development of world-class convention center with a luxury hotel, along with retail and office space near the airport. Turning our financial performance -- turning to our financial performance, in Q2, our revenue stood at INR 2,698 crores, up 11% year-on-year. EBITDA grew 57% to INR 1,176 crores with margins expanding to 43.6%. PAT nearly doubled, growing 95% year-on-year to INR 458 crores with margins at around 17%. For the first half of the year, revenue was INR 5,166 crores, up 16%, and EBITDA rose 31% to INR 2,231 crores. PAT for the first half came in at INR 769 crores, up 42% year-on-year. Across our annuity portfolio, performance was steady. In offices, we saw gross leasing at 2.3 million square feet during Q2 with portfolio occupancy at 93%. FY '26 exit rent is projected at INR 820 crores. In retail, our malls recorded a 10% increase in GPO, touching INR 623 crores, with footfalls of 4.8 million during the quarter and occupancy at a high 99%. Exit rentals for FY '26 are expected at around INR 275 crores. Overall, it's been a period of strong growth, geographic diversification and operational discipline. We continue to focus on executing well across our existing projects while preparing for a robust pipeline in the coming quarters. With this, I open the floor to your questions and suggestions.

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

Congrats on excellent performance. My first question, is that is there any update on the Prestige Hospitality IPO? What's the status there?

It's work in progress, Akash. We are working with the bankers, and we are trying to see that the book is fully done. And hopefully, it should happen soon.

Okay. And my second question is on your presales guidance. We have already achieved 70% of our guidance in the first half. And if I understand, your sustenance sales are already running at INR 30 billion to INR 35 billion per quarter. So just on sustenance sales, we'll achieve the guidance for this year. So is there any upside risk to the guidance? Like how are you thinking about FY '26 presales?

Yes. I mean we'll take it as it comes. We only answered it that my first tenant sales will give me another INR 6,500 crores for the next 2 quarters. So you've done the math. And then if you have some few launches which we are planning, it will obviously pick up the whole thing. Let's see how it goes. I don't want to either decrease or increase any guidance, which I've given you earlier.

Okay. And sir, like we have GDV of new launches in our PPT that we have disclosed that it's roughly at INR 273 billion. Like how much of these launches are we planning in the second half? Are we planning this entire launch pipeline in the second half? Or we are planning some percentage of this? Or like what are key launches in the third quarter or fourth quarter?

This is a function of getting the approvals and getting the RERA. Like I believe that 4 projects can get launched this quarter itself, which is the Marigold Phase 2, and then we've got Prestige City Fernvale as well as the Eaton Park, both in Prestige City Sarjapur. And then we have got in Raintree Park, the Evergreen component. So it will be Evergreen at Prestige Raintree Park. That's also a fairly large GDV. So these 3 residential highrise. And Marigold, of course, is a plotted development. I think this 3 plus 1, 4 should be able to get launched in this quarter itself. There could be a slip, in case there's any delay in approval. But all things are pointing out that we should be able to pull this off. And then we do have in Hyderabad, we have the Golden Grove in Tellapur, which is a fairly large development. It is about 9 million square feet. But then that's a function of approval. If it doesn't happen this quarter, it will certainly happen the following. And then we have also the Banjara Hills property. Finally, I think we'll get the approval [indiscernible] in a couple of days. And if I'm able to get RERA, maybe we can launch that itself. That is called Prestige Rock Cliff. But we spruce up that whole place and get our team, it's all work in progress.

Got it. And my final question, sir, is on the BKC and Mahalakshmi assets. Any update on the leasing demand? Or how is that panning out?

The leasing demand is actually very encouraging. In BKC, we have pre-leased over 1.6 million square feet. And so also in Mahalakshmi, there's quite a good demand. Now I have asked my team to go slow and not to commit any more because let the assets get ready. Otherwise, it will be a whole lot of pressure. Of course, we like the pressure. I think BKC should be ready for customers, to the occupiers to start fit-out in the calendar year '27. '26, the project should get ready. And in '27 calendar year, we should be able to give it for fit-outs. And similarly, for the Mahalakshmi, we should be able to get the project up and running in the calendar year in '28 or '29 beginning because that's a highrise, whereas BKC is not high rise, it's only 19 floors. And we are out of the ground fully, and I think work is going at a [ graceful ] pace.

The next question is from the line of Saurabh from JM Financial.

Congrats on a very good set of numbers. I just wanted to check a couple of things. Firstly, on the lease agreement that you have done with the Bangalore Authority, if you can share more details in terms of specifications for the development potential there, that would be helpful. And secondly, the Bangalore -- the lease agreement with Bangalore that we have done during the quarter.

It's a mixed development, Saurabh. You have any other question or you are finished?

Yes. Secondly, again, on the Hyderabad auction land, while you have outlined the residential portion in that project, how should one think about the development potential for retail and office?

Yes. Now the first on buyer, that's going to be a mixed use. We've done that in a hospitality vertical because that will be more of hospitality, convention and performance, art and culture. So it's going to have a [indiscernible] hotel. It's going to have a [ Marriott ] marquee, a big, huge convention center as well as support retail in terms of food and beverage and a bit of luxury retail. And leftover FSI will obviously be office. So that's how the overall master planning is in progress. We've got foreign architect called SOM that is doing the design. So once the designs are ready, we'll be submitting for approval. Then the -- you talked about Hyderabad, which we just recently purchased. Hyderabad, I think the development potential there is about 3 million-plus square feet. Out of that, 1 million will be residential -- 1/3 of it will be residential, that is the entire of the total development. And the balance 2 million will be office. Of course, again, the same thing, we'll have some support retail in terms of food, beverage and some support retail will be the part of the whole thing. And there will be some other stuff like city club and other things. So that's also under -- work under progress for design. We've got OMA as the architect, and we are pushing them hard to get us the design.

Sure. And just last one more bit. Of the 24 million square feet ongoing commercial project that we have, although we have done quite a good progress on leasing, just wanted to check, how much of this 24 million square feet is pre-leased so far?

So it's all work in progress. I think finally, by the time the product gets ready, we will be leased out. In fact, we are not leasing out everything in one go because then it will be quite a lot. So see, we are on the job, and I believe that there is a good traction, good demand. And once the product is ready, it will be leased.

The next question is from the line of Parvez from Nuvama Group.

Congratulations for a great set of numbers. A couple of questions from my side. First, I mean, you mentioned about the 4 project launches that we expect to happen in Q3. Would be great to hear your views on some of the project launches that we're targeting for Q4. And also, what is the status of approvals on those products?

So Parvez, I just mentioned that we are going to launch the Prestige Raintree Park Evergreen component and Prestige Fernvale as well as Eaton Park both in the Prestige City and Prestige Marigold plotted development. All of these will happen in this quarter. And the following quarter will be the Golden Grove. And we'll also have the Rock Cliff in Hyderabad. So this is a work in progress. This is how it will pan out. If 1 or 2 other approvals do come, we'll also put that in.

Sure. Secondly, our business development has been very strong in H1. I think we have already added projects with a GDV of about INR 33,000-odd crores. So what kind of -- I mean what's our philosophy in terms of quantum of BD you want to target? Is that -- is there a fixed number that we want to achieve for FY '26, '27? Just want to get your views on that.

See, we want to definitely build up a robust pipeline. At the same time, we are not going to picking up something which doesn't make business sense. It has to be viable, it has to appeal to the market as well as it should also protect the bottom line of the company. You've seen our bottom line now of late. So we are very conscious that while we are doing what we are doing, it should also benefit the company. We are not looking -- not only looking at cash flows or top line, we are looking at the bottom line, too. And I think, to that extent, whatever BD that is done, we shall protect not only our landowner's or joint developers' interest, but we will also protect the company's interest. And yes, whenever a good opportunity does come, we will always explore it.

And lastly, your views on Jijamata project, and what's the status there? And when can we see maybe some first...

That's nice. Actually, Jijamata is work in progress. See now, all these days, we were saying work in progress to clean up the land. Now fortunately, the land is totally clean. Now my first focus is to build EWS that we have to build almost 4,041 homes. And those will be the first focus. But however, once that -- while that is going on, we have engaged SOM as architects for this. They have come up with several iterations. We've gone through many, many iterations on the overall business plan. And we -- I think within maximum a month or so, we would have closed out the entire planning. And after that, it's just which process that happens, getting in the plans approved and everything else. I think even there, we should be able to go to market in about 3 to 4 quarters.

The next question is from the line of Puneet Gulati from HSBC.

Congratulations on great performance. On the leasing side in Mumbai, can you talk about what kind of rentals are you seeing currently for the area that you've leased?

It's all upwards of INR 400, Puneet.

Okay. Secondly, on the construction side, the spend has gone down a bit on a quarter-to-quarter basis. How should one think about the second half of the spend?

No, it's all work in progress. Sometimes you have a slightly -- the graph goes up, sometimes it is -- the things stabilize. But I think it's a steady spend that will happen.

Just to add, Puneet, in the first half, during the March quarter, most of the contractors, they raised their [ bills ], which gets paid off in the Q1. After that, it tapers down. So for the entire year, we are estimating close to INR 7,500 crores to INR 8,000 crores on the residential business.

Understood. That's very helpful. On the price growth side, are you still seeing price growth in the market? Or do you see price growth slowing down a bit and the focus will be more to sell volumes than value?

No, no, there is value, of course. But the thing is that price can go on infinitely higher. We've reached certain peaks. And I believe while my whole endeavor will be to make sure that the price doesn't go up more than this because then it's counterproductive. As long as the company's bottom line is properly protected, I wouldn't want the price to go up because then we are only shooting ourselves in the feet. The thing is the demand will just drop and affordability basically drops, and we can't afford that.

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

Congratulations on a good quarter and half year. So my first question, I need some data points. So out of the total INR 17,500 crores of new launches in first half, so what was the contribution to the presales?

See, the thing is while Amit gets the numbers, what happens is we are very low on the old inventory. So whatever we've launched only is what has given us the numbers. So it is basically all new launches only that has brought us the numbers.

Around INR 11,000 crores.

Around INR 11,000 crores. So sustenance is running. On average, it is about INR 3,500 crores, INR 4,000 crores. I think Irfan earlier told that INR 6,500 crores is what you're looking at in H2 without any major new launches. So is my understanding correct, like INR 6,500 crores is what I think Irfan told earlier?

That's where the inventory is. Whether I do a launch or not, that's what [indiscernible]. So all the launches will be multiplier, which will be the plus, plus.

So I think, sir, the launches which you highlighted, I think GDV, I calculated, is around 10,000. So if we sell, whatever percentage of that, that adds to that guidance of INR 25,000 crores, which takes you to a number of INR 30,000 crores plus on presales. Is it the right assumption?

I'm not giving any guidance on that.

Okay. Sir, the question is not that. The main question is that this year, we had sales of INR 8,300 crores coming in from NCR, which is largely our Indirapuram project. So this doesn't seem to be -- I mean, you don't have any major land banks for the next year to make up for this big boost we got this year. So how are you thinking on the business development side, especially on NCR, given that Noida has given such phenomenal numbers and we don't have any major land bank beyond the 2 projects? So do you think that over the course of next 12 months, we can add up new projects, new land bank there and maybe supplement this sales which we had seen in this year?

No, no. See, it is work in progress. There are too many offers coming from all over the place. So I can't tell you on the call what are the things that are happening. But if we do close up, we have some very, very hot prospects, and those are closed out -- because basically, we are looking at not at deals, but we are also looking at what makes financial sense. I can't tie up property at optimistic levels and then market changes, we are caught in the wrong side. So I think -- but there is a huge -- I mean, huge opportunities that are there. And I believe NCR also, Noida, Gurgaon, all these are presenting us with many opportunities. And I'm very, very sure in the next 2 quarters, there will be a lot more things that will be tied up, and that will come in for the next financial year.

Sure. Just last question is the same thing for MMR. So MMR has given -- I mean, I think the bold decision which you took during COVID and with the major expansion in Mumbai, which helped us a lot. Now on the revenue side, we have significantly run down our inventory, except Jijamata. So all the projects have done relatively better than the market. So now on the business development side, how does one look at MMR beyond Jijamata Nagar project? What are the other projects or any other -- I mean, what are the -- directionally how the business development one should look at here to supplement the sales we have seen in the last 2, 3 years for Mumbai region?

Yes, Mumbai region, it has to be work in progress, and I'm very happy to say that we are almost on the verge of closing up something big in Thane. And then we are looking at other new Mumbai also, Navi Mumbai. And obviously, we've got, within town itself, many opportunities. But those are high-priced properties. But this will not give me volumes. they'll give me huge value. But then it is there. The opportunities are there.

And last -- and the data centers, with the announcement which we have done with the Maharashtra government, what exactly are we trying to do? Are we going to build data centers, invest in data centers? So what exactly will be the business model here?

See, we -- our thing is land is now available. We've got the expertise to build the data center. And we would like to partner with someone who will be able to run the data center also. It's a great business. We are looking at it very seriously, and I believe it's a big opportunity that we are sitting on.

So this will be on a CapEx model?

It will be CapEx only. Ultimately, we see now today, whatever we are doing, whether on retail malls, on office or data centers; it will be more on CapEx and then taking it to a REIT in terms of exit.

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

Congratulations on the excellent performance. My first question is on the presales. I won't be asking guidance. But sir, just wondering, would you consider holding back some launches once you cross, say, INR 25,000 crores, INR 26,000 crores increases and roll these new launches over to the next year?

No, I think that will not be really necessary, we believe in [ earning ] cash flows. And when the market is good, we would also like to see that the product comes in. And that will also give us the opportunity to do more in the next year and the next year. So it's not -- it's counterproductive for me if I've got the approval, if I've got all of it, not to launch. If I believe market is not good, then we have to wait and watch. But today, the market is good, everything is going well. So why not -- why hold back? I don't think we'll ever -- we never held back. And here also, we won't hold back.

Okay. That's great to know. And sir, just that you have a CapEx to be incurred of around INR 14,000 crores in commercial and retail. And I'm just wondering how to see it because in the event of a slowdown in the residential cycle, which doesn't look likely, but suppose it happens, how would this impact your CapEx spend? I mean, how do you intend to fund this INR 14,000 crores over the next 3, 4 years? And what kind of pressure it would have on your balance sheet? So just if you could give us...