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

Thank you, Stephen. Good afternoon, everyone, and a warm welcome to the Q1 FY '21 Earnings Call of Prestige Estates. We have the top brass of Prestige. We have Mr. Irfan Razack, Chairman and Managing Director; Mr. Venkat Narayana, Chief Executive Officer; and Mr. Sarma, the CFO. Without taking too much time, I'll hand over the floor to the management for their opening remarks, post which we'll open the floor for Q&A. Thank you. And over to you, sir.

Thank you. Good afternoon to all. I'm happy that so many of you have joined in, in the call. Like compared then, we have Mr. Venkat, Mr. Sarma, Mr. Zayd Noaman; and of course, myself in the call. I'll ask Venkat now to take the lead and do the opening remarks.

Thanks, Irfan. Good afternoon, everyone. Thank you for joining the post results conference call of Prestige Estates. We hope you and your families are safe and healthy. I know these are unprecedented times, and people are trying to cope with uncertainties and various other things. Now coming to brief on our operational as well as financial performance. Q1 of this fiscal saw a full quarter. Given the COVID impact on our business, some other businesses primarily mall segment as well as the hotel segment, but for that largely played out in line with what we expected. Let me talk about the operational performance. We registered for this quarter INR 461 crores of new sales in spite of no launches. And just to give you the breakup, the -- predominantly, the sales have come from Lakeside Habitat, Golfshire, Prestige Tech Cloud, commercial projects, Prestige White Meadows. White Meadows and Golfshire contributed almost to the extent of INR 85 crores, INR 90 crores to the sales. These 2 projects, which are completed projects, moved very well in this quarter. And Finsbury, Jindal City, Edwardian, Song of the South, Falcon City, Prestige Elysian and the other projects that contributed to the sales of this quarter. Collections in spite of COVID impact have been quite good. We had overall collections of INR 731 crores during this quarter. And top projects that contributed to collections are Lakeside Habitat, Jindal City, Prestige High Fields in Hyderabad, Prestige Song of the South, Prestige Falcon City. And these are the top contributors, and of course, the money has come from various other projects as well. And rental income point of view or office rentals, we have collected almost everything that is due from an office point of view. As far as retail is concerned, as I mentioned, since malls are shut, so there's not much of rental income that's been recognized from that portfolio. And let me move on quickly to the operational performance for the quarter. On a consolidated basis in Q1, we had a total turnover of INR 1,296 crores with EBITDA of INR 461 crores and PAT of INR 20 crores. EBITDA margin is at 37%. And the top projects that came for revenue recognition during this quarter on consolidated basis are Kingfisher Towers, almost INR 255 crores has come from that quarter, that -- sorry, that project; and West Woods, Prestige Falcon City and Prestige Lakeside Habitat. These are the key projects that contributed. Of course, the other projects, almost 15 of them, have also contributed incrementally, but these are the top contributors during the quarter. Also, as you all know, we are following completed method of contracts and one of the trigger is the handing over of the units for the revenue recognition. We have close to 900 units under handing over stage where we have 0% use. And also around INR 600 crores of work units where less than 10% are due and ready for handover. So the reason why I'm highlighting is both of these will come for revenue recognition in the coming quarters because it's just a matter of handing over these projects. And in terms of spend, during this quarter, we spent close to INR 472 crores of money on residential and commercial projects meant for sale and INR 77 crores of money on commercial projects that are meant for rental, CapEx projects. And INR 42 crores of money with respect to the retail projects under construction and around INR 2 crores for the hospitality projects that are under construction. Overall, around INR 593 crores plus INR 44-odd crores for land refundable deposits and some unit buybacks with respect to landowner, et cetera. So this has been overall spend for this quarter. And with this brief, I would like to open the forum for question and answers from all of you.

[Operator Instructions] The first question is from the line of Adhidev Chattopadhyay from ICICI Securities.

Yes. My question -- first question is on your office leasing business. So now that we have seen 3 to 4 months of COVID impact, so how have you reassessed your CapEx plans and where you want to be in the next 3, 4 years in this business? That's the broader question. If you could elaborate on that.

Now on the office leasing, I'm happy to inform you that we have managed to collect 99% of the rents. And the tenants are all secured, they are in place because I think we've got some good marquee tenants. And obviously, I don't think the demand will fall flat or anything like that. And the only good part is apart from one asset we've got ready recently, the other assets, which are under production, are quite far away from completion. It's a good 2 years plus, which will happen. And I think by this time, I'm very sure that the world would have come back to its old levels. And the -- because one thing for sure, the demand for the office space is not going to die down. It's only going to increase because the type of work that will come to India will be phenomenal. And in spite of whatever division that we are talking of between work from home, work from office, the opportunity is huge. And this is a time for us not to start going in the reverse direction, this is the time for us to go forward and forward properly. I mean whatever we have planned, we are not going to even go back from one of the things that we've planned. And obviously, the -- in the sense, the aggression, the speed, which may -- we may have speeded up some projects, that we will be taking it in a normal mode. And things will be -- I think -- I don't think there should be any difficulty whatsoever.

Okay. Sir, second question is referring 2 other Mumbai projects [ last ] at the Delhi Hotel. So I think that I asked this question last time also, but any rethink again on the plans? Or have you put that on hold for now?

No, no, there's no rethink. Whatever we have got with us is all marquee assets, whether it's Mumbai, whether it's Pune, whether it's Delhi. And those are -- in fact, the design development work is -- even during lockdown was going on. And it takes a long time for us to even get that and then get the approvals done and really break ground. So all these will happen, and they will be landmarks for that particular city, what we are working in.

Okay. So sir, when is the earliest? Because there are some things, some news on the launches or I think maybe in second half of this year or only it will get pushed over to next financial year?

Launch of residential projects?

Yes. Launch of residential projects.

We have a lot of projects that are lined up, maybe we should be able to launch at least 2 of them in this quarter, 1 in Hyderabad and 1 in Bangalore.

Waterford.

Primrose Hills and Waterford, 2 projects in Bangalore, Prestige Tranquil in Hyderabad. So the next quarter, Q3, we will have Smart City in Bangalore, Prestige Windsor Park in Chennai.

And Park Drive.

And Park Drive in Bangalore and Prestige Bougainvillea Gardens in NCR. So between Q2 and Q3, we'll have almost 7 projects lined up. We also have just prelaunched a project called Prestige Ocean Crest in Goa.

Okay. So sir for the year, what is the cumulative losses we are looking? Is that one time? It is the housekeeping question. What will be the size of all these launches put together which you have planned?

If you look in terms of projects, maybe if you go to that slide, the areas, we have given all the details.

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

Yes. Can you also tell a bit about what kind of contracts have now -- have you know finally negotiated with the retailers? And what amount of revenue have you recognized in this quarter? And what is the cash you received against this?

Yes. See, retail is a different thing because retail is all about trading and cash registers being active. So during lockdown, I think we took a decision and I believe that decision was right, that has actually built a huge goodwill with the retailers with us that we will not charge them anything during lockdown because simple thing is they're not trading and there's no money flowing for them also, because they are also under stress because the inventory is also locked up. Now what has happened is we have not signed any formal contract with any retailer changing the -- our current agreement because the stand that we have taken is that, listen, you have a contract and you have to follow it. Whatever we have done is, is only voluntary. And what we have done is it's only to support each other and to build a relationship and the goodwill. Okay? So the whole idea is the signal to the retailer that, listen, we are with you. In good times, you be with us; in bad times, we will be with you. So having said that, if you ask me after -- post lockdown, what is the stand that we've taken. The retailers have come. We've opened up almost 87% of the stores because the rest are -- the other stores that have not opened in a large format, which is cinema and also gaming. Apart from that, I think most of them have opened, except maybe again some beauty parlor and other stuff. And now we have -- in that today, again, we took a decision, listen, you have to pay us the rent and the rent, okay, for the first 2 months. That is June, July, August. It's 3 months actually. Please, we will give you a concession of up to 50%. And after August, it will be 75% of the rent until December. And then, of course, it will be back to the contracted value. That is basically the minimum guaranteed amount. Now if the retailer trades higher, then of course, we've got the revenue share with percentage already fixed, and that kicks in. And with a couple of retailers, we've also said, okay, why don't -- since we are giving you this concession on the MG, so give us something on the revenue share percentage a little higher so that we share the burden. That's what has happened, but we've not signed any long-term contracts with any of them for any change because we've told them, listen, in case you don't clear your arrears, then there's no choice, either you have to pay -- or there's one more solution that [ come in with the ] cash flows. As we've also said, we can burn the deposit because each retailer has got 6 to 8 months or even up to 10 months deposit with us. And we said, okay, whatever arrears are there, we'll reduce our liability. We'll burn the deposit for those 4 to 5 months, and then the rent will be paid fully. So that way, we are helping them also.

Okay. Okay. My second question is on -- related to Slide 9, where you talk of total developable area. So if I look at Q4 versus Q1, that area is down by roughly 4.5 million, 4.8 million square feet. Is there some projects which you have taken off from your total pipeline?

The total area is there?

Yes. Total developable area, which is 83.4 million or 88.2 million in 4Q.

Okay. Yes. Some -- one of the projects which we've completed, which was meant for sale that was there, we thought we'll hold it and capitalize, one project has gone out. And the second is the inventory -- completed project inventory where we have cleaned up a couple of projects that is also out of it.

Okay. But there's nothing that you've discontinued from the prospective pipeline?

Nothing, nothing, nothing. See what has happened, a lot of projects, wherever there is some stock of units or wherever everything is sold, but money has to be received, okay, that continues to be there because receivables are there. Now the moment the receivables come, that is going out of this. Like, for example, completed projects, as I said, it's sold, but we have received, with respect to almost INR 600 crores worth project, less than 10%. So the moment that money comes in, the equivalent area goes out of this because there is nothing to collect from those projects.

Okay. Excellent. And my last question is, so what has been the completions this quarter?

No completions during this quarter.

No completion this quarter. Just one more. So some of the peers seem to be suggesting that there are some cancellations or inability to collect dues from apartment that's sold. Are you anticipating there or any [ cancellation ] projects?

There are a few here and there, some places where people have locked, they have not been paying money. We are cleaning up. There are some places where people have expressed their inability and canceled. But whatever sales that we are reporting, that's net of cancellations.

Okay. And that number is not material?

Not too material. I mean see, given the situation, there are some people who want to rethink, but that number is very limited. So in some cases, where knowing that they will not be able to go ahead with that transaction, we didn't find it meaningful to continue it as a sale. So therefore, we have cleaned up wherever this kind of issues are there. The sales are net, but that number is not too significant.

Sure. And you always report net in rent when you report net of sales?

Yes.

Okay. Okay. That's something...

We report the net sales.

[Operator Instructions] The next question is from the line of Kunal Lakhan from CLSA.

So my first question is on our sales run rate this quarter. We have generally been the largest in terms of retail run rate in South India. But in Q1, our pre-sales have kind of lagged to, say, one of your direct peers. What would be the reason behind this? And also secondly, can you talk a little bit on the online channel strategy that we have incorporated? Or anything on the online strategy front we have done to ensure that sales happened during the lockdown or during the social distancing era?

See, two things. One is we have not resorted to any offers, discounting, any desperate measures. So I do not want to comment on other peers of mine and their strategies. And what we have done is whatever sales that we have reported are real sales, secure sales and net of cancellations. But what I'm happy to inform you is that the teams have adapted very quickly online. Virtual, we've had already 1 virtual launch. We're going to have another launch -- virtual launch next weekend. And now that's the order of the day. So all information, everything is available to the customer, walk-through is available -- availability is there and then the overall virtual sort of interaction with the customer. So even payment gateways have been made, so there's no need for a customer to physically give you a check. So all these have been adapted. And of course, this was a work in progress even before the pandemic. So it was pretty good and pretty easy for us to adapt and also initiate quickly. Another thing, happy news, is during this current quarter, starting July onwards, actually, the sales volumes have spurted and they are doing well. Like Venkat said, we are going to do a new launch this quarter in Hyderabad. But we've also got EOIs which have really, really, in fact, 1/3 of the project is like almost sold. So the demand is there. In Bangalore, even the high-value projects are selling. Chennai, we do not have any inventory of any size to speak of. So really, we're not getting numbers from there. But we have just got 1 project which got approved, and then it has to get the RERA number. So that also could either happen this quarter or next quarter. And then we'll see how the response comes, it should be good. So all in all, I think whatever sales numbers we've got in this quarter, our sales numbers in the current quarter, I mean in the June quarter, this current quarter will definitely be more than double of what we've given now. It will cross the 4-figure mark. So that's where we are and that we are very positive. There's nothing wrong in whatever our teams are doing. And the only happy thing is that there are no desperate measures being taken because certain times, you take certain desperate measures, thinking that that's the way that we order. But that comes to bite you later and it either bites you on -- between having problems with customers or bottom line gets hit. So this is what I want to tell you.

Great. Sorry, I missed you in between. So just confirming that you said that in September quarter, the pre-sales run rate would be double of -- that are done in June quarter.

Yes. Definitely, more than double. It will be -- that's a 4-figure market. It will cross the 4-figure market.

Okay. Okay. That's very helpful, sir. My second question is on Slide 12 of our presentation. The rental income potential from the ongoing projects has increased by about [ INR 130 crores ] from what was past quarter's presentation despite the number of projects and area being the same. Can you just help us understand like where this delta is coming from? Like last quarter, we had estimated the rental income of about INR 1,530 crores from the 12 projects, whereas this quarter, it's about INR 1,662 crores.

Yes. You're talking about Slide 12?

Correct. The incremental rental near term of INR 1,662 crores. This -- last quarter, this number was INR 1,530 crores with the same number of projects and area.

Yes. So the only difference is in the existing yielding portfolio, whatever the increment that may come up in next couple of years based on the contractual arrangement have also been considered, okay? And some -- number one. Number two, some projects which are completed where the leasing has not happened, the rent commencement has not happened, those also have been added. That's the primary. The difference is not so big.

Sure, sure. My last question is on the media article regarding like Blackstone buying stake in our annuity portfolio. Firstly, can you just elaborate a little on that and give us some color on what -- where we are on this transaction?

We've been -- we have built this yielding portfolio. Kunal, if you look at from the time we got listed to now, almost, it's grown by 8, 9x, both in terms of retail as well as office assets and we have got a lot many more projects under construction, just now we spoke also. It's got a potential to go to INR 2,376 crores, office alone, if you look at what are -- whatever other projects are under construction. So we've been looking at unlocking value capital churning, rest of the yielding project. And towards that end, we've been evaluating, we've been getting a lot of proposals, a lot of private equity guys also have been showing interest to participate in this transaction. We've been evaluating some of the options...

How to unlock...

How to unlock the value. And whatever you've been reading, maybe more of people wanting to write about some strategy or the other. As far as we are concerned, we will keep you posted if there is any material significant event with respect to these subjects.

Sure. But just to understand, like what kind of stake sale, if we may, we'll be looking at? And what kind of concession we'll be looking at to raise from the stake sale?

Anyway now, this is just like hearsay. See a discussion doesn't always end up in a transaction. So when we are close to probably having a transaction -- the whole idea is in case we do have a transaction, is to try and see how we can mitigate any risks, number one. And also see how we can clean up the balance sheet and make it positive cash flow without any debt in the balance sheet. So the endeavor is that. But then there's nothing that's happening at the moment in the sense there's nothing that has happened, which is of significance. There is some discussion that's happening, but if it does happen, it will be good for the company. It will make the company stronger, and there will be enough cash in the company to do more jobs because like the previous questioner asked also told me 30 million square feet we have, which is in the pipeline. So we'll be having fresh assets, newer assets. But this is all work in progress. There's nothing at the moment which is of significance that we can share just now.

The next question is from the line of Swagato Ghosh from Franklin Templeton.

Sir, I wanted a couple of clarifications on the sales number. Firstly, were there any commercial strata sales this quarter?

There is commercial and I think the breakup will be given [indiscernible]. There's one project especially -- 1 or 2 projects, I will just share the numbers.

Okay. Okay. And while you pull up that number...

Around INR 42 crores.

INR 42 crores? Okay. Okay. And sir, the next clarification on the sales number or the cancellation question that was asked. If I look at the stock that we have, the data that you give periodically which is there on Slide 9 this quarter, if I compare it with the last quarter, it seems like because there were no new launches, it seems like the cancellation number is actually significant because if I just take last quarter's numbers of ending stock, then I know the sales number this quarter and I also know the ending stock for this quarter. It actually gives me a decent cancellation number, especially in the mid-income projects.

Okay. Which numbers are you referring to?

Slide 9, Slide 9.

Where is the total? Our 83 million one or...

No, no, no. 13.35 is the stock, 13.35 million square feet, which was 13.5 million square feet after March quarter. And if there were 0.7 million square feet of sales, then the numbers should be less by that much, but it is a much higher number. So I'm trying to understand -- I'm trying to reconcile this.

I think Venkat should reconcile and give it to you. But the thing is during the lockdown, the team did some amazing work in the sense, it was not only that this cancellation happened because of lockdown or anything, there were -- a lot of cleanup was done where customers had paid 10%, 15% and not going further ahead and not paying the balance, the property was ready. We could have easily sold it to somebody else. So what they did is they took some hard decisions, made sure that this sort of inventory got cleaned up and it got resold. And significantly, a lot of it has been resold also. So I believe that if you ask me as a ballpark number, what would be a value of cancellation during this quarter, maybe close to about INR 100 crores. But then that got resold also, so that sort of negates the overall impact. But that's the thing that was there, and this is what was historically sitting there. And somehow or the other, it wasn't getting done. And I was also telling my team what a time for you to do the cleanup at is when we have been searching for numbers. But it's -- actually, it's better to be realistic than try to look good in somebody's eyes when we are not so that good. So honestly, it was a good exercise. And that's where the numbers that you're seeing are absolutely numbers which are totally real.

Okay. Okay. No, that's fair, sir. And probably, I'll get the exact numbers from Venkat sir later. My second question is, sir, on that Golfshire and White Meadows...

Yes. So one of the reasons is also the ongoing projects, Lake Ridge 2 has been added. A new project has been added, it's the other phase, Phase 2 of Lake Ridge got added. So therefore, the ongoing mid-income project number of the area has gone up.

Okay. Got it. And sir, for Golfshire and White Meadows, were there any activation schemes led to the sales?

Sorry?

Which led to the higher sales from these 2 projects?

Golfshire and White Meadows, yes.

Well, that's a high-value item. So -- and that's what I said, the surprising thing is that things like Golfshire and White Meadows have really kicked up the sales. Even in the month of July, we had some very good sales in Golfshire as well as in White Meadows. And we are hoping that this trend will continue and be able to clean up the inventory.

Okay. So there were no special discounts or anything like that?

No, no, no, not at all. Not at all.

Okay. There is a usual little bit of bargain that happens in the -- in this highly high-value property. So there is some -- we also have some rebate. So the customer also, they feel good that we got something, and we are also happy that we've done the deal.

Got it. Got it. Okay. And one last question from my side is, as reported in the media that we might actually sell down entire stake in our completed annuity portfolio. So I'm just asking you a hypothetical question at this point. How difficult would it be to scale up again if we actually then have to again start from 0, so to say, because we'll then have no completed projects, we'll have all ongoing or planned projects?

It's a very good question, and it's hypothetical also. Let it happen. If it happens, we will not start -- be starting from 0. We'll be starting from when we listed the company, the rental yields that were there. And then I think to ramp it up, we are getting 2 malls ready, 1 in Kochi, 1 in Falcon City, almost immediately within a year's time. By this time, trading also will happen. And then we are doing a lot of office projects all across Pune, Mumbai, Bangalore, Hyderabad. So all this will come in, in the next 3 to 5 years. So by this time, even the atmosphere will be very different. And maybe we'll ramp up to INR 2,000-plus-crores rental revenue by this time.

In 3 to 5 years?

3 to 5 years, not more than that.

Thank you. So before we move on to next question, I just wanted to address what Kunal had raised about the rental income going up to INR 1,600-plus crores from INR 1,500-plus crores of last quarter, number projects being same. Kunal, what has happened, in a project in BKC, our stake has moved from 23% to 50%. So therefore, accordingly, our share of rent also has gone up. That's also one of the reasons for the difference. I just wanted to clarify that to you. Please go ahead with the next question.

[Operator Instructions] The next question is from the line of Abhishek Bhandari from Macquarie.

Venkat, I have one question. On media recently, there was article around Prestige Office Ventures where you have appointed Juggy as the head. Could you just help us understand what does this new business vertical do for us? What is the intention? And is it a [ complete high rise ] also? The current setup of the business, that will be...

Sure. So as you know, we have 5 different verticals in which we operate, residential, office, retail, hospitality and property management. And the way, the manner in which each of these businesses are done and science behind running these, putting up these leasing requires different kind of exposure and expertise. Now given the fact that our office portfolio is being built across so many cities now including NCR, Chennai, Hyderabad, Bangalore, Pune, Mumbai and all these places. So we thought we need to have a separate focused team to do this. So that's how Juggy has come on board. We had a similar team -- we have similar teams already in place for the last 8, 9 years for the retail and -- where our COO, Ali, takes care of entire operational issues, and of course, project inputs of the project. Likewise, we have separate management for hospitality. Now we have got one for office as well so that there is a focused approach and growth given the kind of plans that we have. You can see that in the form of under construction as well as upcoming projects. So that's the whole idea behind that.

Okay. So the intention is to venture out into more number of cities beyond this or focus on the number of cities...

No. There are the cities primarily. I mean this is where majority of the office leasing happens. We're there in South India, we're there in Mumbai, Pune, we're there in NCR. So a predominant amount of leasing happens here. So therefore, the focus as of now is these cities.

Okay. Sure. And Venkat, second question is on also joint ventures again with DB, the space becoming what they are after COVID. Do you see any kind of funding risk which needs to be addressed, especially given that the other partner's ability to get money or bring money to the people, both for the large hotel in Delhi and some of the projects in Bombay, is very limited?

As far as the Bombay projects are concerned, we've carefully evaluated what are the outstanding issues, what are the risks that we will get in those projects. And we look at the mitigation strategy and put up a lot of CPs before the bidding and start the work on this project. Now these are, in some form, joint development. So therefore, the entire responsibility of putting up a construction is on us, and they don't need to put in money for JV projects, that's what I was referring to. One of the key issues in BKC has been about some foreign institution investors, those who are present, and there were some issues between the existing shareholders and the financial investors, which was an NCLT. So we came in and ensured that those investors have been given proper and fair exit. So therefore, we become shareholders. Now it's about drawing up our plans and starting the construction with respect to that project. As far as other projects are concerned, 1 more project where final product of clearing up, there are a lot of CPs that is tough overly. Once the CPs are done and all outstanding issues are cleaned up, that's when we get into the project. So we know what you're saying, so we are taking very calculated and cautious approach into this. And given the location of these lands, and of course, we've been sharing good rapport with the partners also. They have been coming forward and cleaning up the properties and doing what is required to be done. And most importantly here, the construction obligation is -- responsibility is ours, and they don't need to put in anything. I think it will be a smooth [ close ] once outstanding and current whatever issues that are there in these projects are cleaned up. That's about Mumbai. As far as Delhi is concerned, DIAL project, it's a JV. So as far as the JV is concerned, there is X amount of money that's been already spent. And there is -- the financial project has been done there, undrawn amount from the bank, and we had agreed to put in INR 405 crores of money, of which INR 105 crores we have put in, and the balance money will be put in over a period of next 2.5 years in proportion to the bank disbursement. So with that, that project should get done.

So just a follow-up on this, Venkat. What is the total CapEx for Delhi Airport? And what is the mix of debt equity, our contribution?

So we need to contribute into that project of INR 405 crores, of which INR 105 crores has already been put in. And there is INR 300-more-crores that need to be put in proportionately for the next 2.5 to 3 years. There may be a small reduction in the area. If that area reduction were to happen, even this number will further come down. As far as the balance to draw money is concerned from the banks, we do have another INR 1,500 crores of money that needs to be drawn. So with that and this money that we are going to put in, that project should get done.

So roughly around INR 2,200 crores, INR 2,300 crores peak investment when the project completes on the Prestige balance sheet?

Overall, for the SPV.

And our stake would be 50% in that?

One thing about that is not just hotel. It's got close to 7 lakhs -- 695,000 square foot of office, which is split into 2 parts. One is office leasing per se, other is small representative offices because most of the funds used to operate at the hotel before. So some office space of smaller size that's been part of design. So we can take a call of even selling this office space and, therefore, we don't need to deploy so much of capital. Given the rental values in that area, I think that will be a significant amount if we were to liquidate 7 lakh square foot of office space.

The next question is from the line of Abhinav Sinha from Jefferies.

Yes. First question on where the construction stands today in terms of workers who are back on site. And...

Abhinav, I couldn't follow you.

In terms of the workers who are back on site, where will you be on construction versus peak level?

That's actually a very comforting news. We slowly ramped up, all the contractors have managed to start getting back to labor. And if you ask me in terms of percentage how much of labor has come back or deployed as compared to pre lockdown, it's around 65% to 70%. And I believe by end of September, we'll be running the full sales, maybe 100%-plus itself because the pressure is on the contractor as well as on us to see that we bring back the projects on track and see that deliver on time. So that way, I think one of our major contractors, [ L&T ] and JMC and along with that [ MCPL K2K ]. I think they have done a good job on that. And I don't see any stress in getting the work done or work completed.

Sir, for the cash flow should also be back in line with similar numbers, what you used to see...

Yes. Because that's -- see, we've historically done INR 1,000-plus crores cash collection quarter-on-quarter. And if you look at the numbers of June itself, because of April being a complete washout, we still have done INR 700-plus crores. And I think the September quarter will be back to INR 1,000-plus crores. So I don't think there's any problem on the cash flow mix much.

Okay. Sir, second question is, last call, you had mentioned that you would have availed moratorium for the retail and hospitality, some of the projects. What is the status there? And are you planning to do some restructuring of loans or exit the moratorium? Can you please help us with that?

No. We did get the moratorium for the installment payments because all my loans on the retail, basically, were EMIs and we were very, very comfortable pre lockdown because we used to have a surplus on the EMI and the team has also sensitized that look, this asset we have needs a minimum of this cash flow to support the EMI, and we used to exceed those targets. And historically, we used to have about INR 10 crores to INR 11 crores surplus in all the 7, 8 assets which we are managing -- I think 8 plus 1, 9 assets of retail. And of course, since after lockdown, since there's been no cash flow, there was no choice but to seek for the moratorium. And now the malls have opened, and we're slowly limping back onto the billing as well as making sure that the clients pay up. The bigger clients are paying. The smaller clients are where the slight pain is, and I think it will -- it's just a matter of time that we'll be back on track. So I don't think we've asked for any restructuring. Venkat can add a supplement from what I'm saying. And on the hospitality front, again, it's the same thing. It was the interest servicing that we had to do month-on-month. The EMI there. I mean 2 assets are there on that. The rest of it were all taken care of properly, there's no issues whatsoever. One asset is along with the office asset, so there's enough cash flow to pay the EMI and then other asset is along with the mall. So 2 big assets is the Conrad and the Sheraton Grand, which are brand-new assets and very well built and huge potential for it. But at the moment, because of lockdown, we are not trading. Only thing that we have done is we've reduced our costs substantially and, hence, there is not significant loss, but then there is an operational loss and there is depreciation and interest to add up to that. And until and unless we don't bounce back and which we will, hopefully, in the next month, I don't see it happening in the next quarter or the next quarter. Maybe the quarter after that, we should be back to normal trading and then life should be renewing. So that's the hope, and that's the confidence we have. And then we have the Oakwood Premier residences. Fortunately, there's no debt on that. Again, because it's being serviced residences, it's not 0 occupancy like in the other 2 hotels that I mentioned. We do have a significant amount of occupancy, not to the peak because serviced residences normally is 88%, 90% occupancy. This is -- we have between that 35, 40, so we've not had any operational losses. And then there's no debt over there, so there was no problem as far as servicing that property. So that's the overall picture.

[Operator Instructions] The next question is from the line of Parvez Akhtar from Edelweiss Securities.

I just wanted to check, what are plans for construction spend this year?

For what is it? Sorry, couldn't hear you. Construction spend?

Yes. This FY '20.

Construction spend during the quarter, did you say that?

No. During this year. What are the plans for FY '20?

Plans for the year. Okay. So we have various projects, residential, and different stages of construction. Some of them will get ready in the next 2 quarters, like our project in Hyderabad -- 2 projects in Hyderabad and a couple of projects in Bangalore [ and another ]. So overall, if you look at -- we have INR 4,900 crores of spend on residential and commercial projects that are meant for sale. So we may be spending roughly INR 3,000 crores to INR 3,500 crores of money between the residential and commercial and retail and hospitality projects in this year. Hello?

I think we lost the connection for the current participant.

Can you hear me?

Sir...

We said we'll be spending between INR 3,000 crores, INR 3,500 crores overall with respect to residential, commercial, retail and hospitality, all projects put together during this fiscal.

Seems like we lost the connection for the current participant. We move to the next question from the line of Sameer Baisiwala from Morgan Stanley.

Just thinking, how do you think about your capital structure? I mean what would be the logic for the framework that you would be applying, if you have a debt equity of, say, 150% and a net debt of INR 8,400 crore or thereabouts? So as you look at your assets on hand and future plans, what is the ideal or a good case scenario for you?

So as against debt that you have mentioned, Sameer, we have close to INR 1,100 crores of rental income from office and retail. We have around INR 350-odd-crores of income that come from hospitality. So all these put together is around close to INR 1,500 crores. Now if we look at nonresidential debt slide, so this would be close to less than 4 years of our annuity income minus residential debt. So quite comfortable. Absolutely, there is no issue except the fact that, as Irfan was explaining, temporarily because of hotels being shut and malls not being operational, there is a little bit of uncertainty. But otherwise, quite comfortable situation with respect to what we have built and what is the debt that's outstanding.

So Venkat, what you're saying is true, but at the same time, you've been trying to monetize assets, you want to create liquidity. For whatever reason, I mean the question here is -- and I understand that you are quite comfortable where things are. So what's the ideal situation for you? Is the ideal situation that you raised INR 3,000 crores and so part sale your stake and then bring down the debt to INR 5,000 crores? I mean how do you think about the evolution of your balance sheet?

I mean see, if we do capital pricing, unlock value, that will be helpful for redeploying that in under construction and upcoming portfolio, wherein we can create those assets with the yields of 15%, 16%. And once they are ready and after 1 year of stabilization, we can churn it out for lesser cap rate. And therefore, we make the delta. So reason for churning and unlocking the value is primarily if you don't do that, and there will be a heavy reliance on the borrowed capital for completing the under construction as well as upcoming projects. So it's about now balancing strategy of unlocking value and redeploying. See otherwise whatever we are holding will continue to grow at a contractual rate for the next couple of years. The best way for us being in the business of building, developing and leading and managing is to unlock and redeploy so that we make a lot more -- we can create a lot more value of it. And plus you see assets also, as you go along, they start aging. So in a way, it is good if you start churning that and maybe replace one aged asset with a brand-new asset. So it's a lot of thought. I mean we can debate it internally. And whenever, whatever happens, it's more to see how we can work in a balanced way without really increasing our debt and, at the same time, trying to do more work and getting value for the company.

Okay. Got it. So basically, you're looking for growth capital. I mean probably that's the best way to summarize it. And are hotels part of this asset sale plans or monetization plans at all?

Sorry, Sameer?

Are hotels part of your monetization plan?

Some of them will go to because they are -- while answering for earlier question, Mr. Razack was mentioning, because there is a mall and the hotel attached to it, there is [ as he said ] and there is a hotel in that. So as I said earlier, we are thinking and evaluating. When we take a decision, we will let you know.

Okay. And just one final, if I can. So Venkat, when I look at your Slide #23, you've got this total land bank, roughly 240 acres across 4 locations. So when do you think would be the earliest groundbreaking in each of these 4?

So you see the upcoming projects are conclusion number. And right now, the priority is to launch as many as possible in upcoming projects because they are the ones with -- in a final approach. As far as the land bank goes, like there is some land-related conversion that is happening with respect to the large chunk of land in Goa, which is 74-odd acres. And number two and number four are -- can be projects maybe next year. Only the first one, first one, we have a little more land that needs to be acquired. So maybe if we acquire another 30-odd acres of land, then that could be a doable project.

[Operator Instructions] The next question is from the line of Kunal Lakhan from CLSA.

Just wanted to understand in terms of our pre-leasing strategy. So we have about 15 million square feet of ongoing projects in office under development. And some of these projects are quite large in nature, in Bangalore, Hyderabad and some in Pune and Kochi as well. And some of them will start becoming operational from FY '22 onwards. So where are we on pre-leasing of these projects? And what will be our strategy?

Yes. I mean that's -- the strategy is to do pre-leasing, in fact, for that endeavor. Now we've set up since we have the separate SPV, Prestige Office Ventures. And to strengthen the entire SPV, we've also appointed Mr. Juggy Marwaha, who was the Head of JLL for business development as well as he has a great connect with all the MNCs, and a person who can bring a lot of value to the company. So he's been made the CEO of Prestige Office Ventures, and he will drive the -- not only leasing but also seeing that the overall construction and development along with the latest whatever is required as per the customers' needs. And that is where since it's going to be real focused activity, and he will have a team under him he'll be running. So I believe that there will be a lot of value that we brought in, and the endeavor will be to see that at least 60%, 70% of the property that we are now going to build will be pre-leased so there won't be any risk at all. We can't be doing spec buildings totally. So it's either going to be -- some of them will be strata sale and some of -- most of them, they will be pre-leased. So hence, it will be a combination. And I believe that's the way to go.

Sure. Sure. That's very helpful, sir. And my second question is on our rental renewals. Of the 12 million square feet that is operational and rental yielding, how much of this would come up for renewals in FY '21, '22 and F '23?

Would come up for?

By FY '23, if you're talking of renewal or escalation?

No. Renewals. I'm talking about renewals.

That means entire lease expiring?

No, no, no. I'm talking about the 12 million square feet that is operational and rent yielding. How much of area would come up for renewal in '21, '22 and '23?

That is -- we can't give a general answer for that because the leases are done in a different way, some are for 3-year, every 3 years, some are every 5 years. So it can't be a generalized answer on it. But then I think Venkat also wants to supplement a little bit on that.

Yes. So as the Chairman said, there's no generic answer, but specifically to tell you, Cessna, for example, is a long lease of 4 million square foot for almost 35 years, okay? So the remaining are all on an average 9 years to 12 years. So by FY '23, except for Cessna, everything goes through an escalation, okay? Cessna loan is once in 5 years, if we're talking about escalations. If we're talking about renewals, then we need to look at each of the contracts and then look at it. But I don't think anything that is very significant because 1/3 of that, anyway, is for very, very long term.

[Operator Instructions] The next question is from the line of Mohit Agrawal from IIFL.

Yes. So my question was on the residential cash flow. So I just wanted to confirm for the first quarter, were you net cash positive on the residential side? Because it seems that debt has gone down on the resi bit. And what is the outlook for the -- based on the collection trajectory, what is the outlook for the remaining year?

The collections have been good for the quarter as I've mentioned in my opening remarks also. So in spite of whatever is happening, INR 731 crores of money is what we have collected. This is excluding the rental income. So the spend on the residential bit, as I mentioned in the opening remarks, let me bring it out for you, has been around INR 472 crores residential and commercial that's meant for sale. So there -- we are largely [ with GAAP ] positive on developmental business in terms of cash flows. The outlook going forward is the lot of inventory of completed projects is moving. Like, for example, Golfshire, White Meadows, as we mentioned, and the Lakeside Habitat, Falcon City have contributed to the sales, and these are all completed projects. So the collections are -- I know cash flows are upfront now unlike just launched or ongoing projects where if you sell, the money will come over a period of 2 years, 3 years. So therefore, the way we look at it is this entire year, we should be, under developmental business, cash positive as we keep selling more and more of completed inventory. And there's a lot of traction also towards completed inventory just now because that doesn't have a corresponding construction spend.

Sure, sir. That's helpful. Sir, can I ask one more question?

Yes, please.

Okay. Sir, there's this media article about a week back saying that the Karnataka government is looking at changing the FAR/FSI policy. And there is a premium FSI which is going to be introduced in Bangalore. Just wanted to understand your initial thoughts. And do you see any impact? Do you see any viability of that and any impact that it could have on our future development?

See, actually, the way the government works is always very unclear and leads to a lot of confusion. They have gazetted policy for premium FSI, which says 1/3 of the value of land, but then it also says land and building. No, I don't know how that's going to be evaluated and what are the charges that are going to happen on premium FSI. That is the first part. Second part is that no way in that gazette it mentions how much of that premium FSI we can load. And third part is, again, we were a little concerned, are they going to reduce the FSI and then start charging premium than what we are getting and are we going to pay for it rather than getting it without paying? So these are all gray areas. Nothing has happened as such. The only thing that we were told is, this is for the metro corridor and people can load more FSI on the available FSI that is there and avail of the benefit by paying for it so that the money that comes in will be used for metro construction. So this is what we were told. But the fact is that some -- the premium FSI policy has been gazetted, just a bland thing without talking about how much can be loaded and what's the percentage that can be loaded. Only thing they've said is 1/3 of the value of the land and building can be charged as premium FSI. Now we'll have to wait and see how it pans out. Because of the pandemic, offices being closed and we ourselves can't go in for any physical meetings, things are a little bit unclear. But I think it will soon clear up. It's a matter of time. But I don't think it will -- anything will adversely affect us. If at all, it will only give us more FSI. And especially, that is for projects which are not yet planned or approved. It will be only for new developments that we may have or take up. And that again will be useful only for CBD properties.

Ladies and gentlemen, we take the last question from the line of Dhaval Desai from Morgan Stanley.

My question is, hypothetically, if there were to be a sale of ready commercial assets to other private equity or REIT, how do you think of your own REIT listing playing out? I mean do you think you have enough assets to do both of them concurrently? Or would your own thought or your own REIT listing get pushed out when some of your other under construction projects become operational?

Idea is to unlock the value, whether we unlock through the private equity sale or through REIT. Idea is to unlock the value and churn that capital by redeploying and building and completing the under construction upcoming projects. So therefore, if this were to happen and that gets deferred till -- by 3, 4 years, till the new offices become operational.

I now hand the conference over to Mr. Aditya Bagul for closing comments.

Thank you, everyone, for taking the time out. A special thank you to the entire team of Prestige for patiently answering all our questions. Sir, I'd like to hand the floor back to you for any closing remarks you would have.

Thank you, everyone, once again for taking time out to be on this conference call. And as all of you know, we are present in different, different verticals. Each vertical has got its own positives and uncertain times that they are going through. But having said that, we, at Prestige Estates, are committed to deliver what we have promised and also evaluate and capitalize on the opportunities that are coming in our way in each of the segments, of course, with a calculated and cautious approach. We believe that given the consolidation that was happening earlier also in the residential sector, and given the COVID impact as it frees up, it's only happening faster. And if you look at the entire residential sales from the market that we are presenting, more and more sales are from the organized well-governed company. So therefore, most of the demand traffic is going to these developers. So we believe that we are poised to take off from where we are with respect to residential. And we will, in quarters to come, become a bigger company, not only because of the consolidation impact but also given the fact that our offering has got a lot more variety now. In this market, we're going deeper. At the same time, we're going wider by launching projects in the geography that we were not present in the past like Mumbai, like NCR and all of that, and which are quite promising given the kind of deals that we have got. And the CapEx project, I mean, as I said, there are some discussions with respect to evaluating unlocking the value. If they were to happen, I think that will help in easing debt and giving us cash flows to complete the projects and also to grow to the next level. We look forward to your continued support. And thanks for spending time in understanding what we are doing in the business model. And any questions, please feel free to reach out to us. We'll be happy to provide necessary information.

Thank you again. The questions are quite insightful and a good participation. I look forward to this participation whenever, and then Venkat is always available to answer your questions as you go along for anything.

Thank you. [ Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines ].