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

Ladies and gentlemen, good day, and welcome to the Prestige Estates Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference to Mr. Pritesh Sheth from Axis Capital. Thank you, and over to you, sir.

Yes. Thank you, Shruti. Good afternoon, everyone, and thanks for joining 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, Chief Financial Officer. I'll now hand over the call to the management for their opening remarks. Thank you, and over to you.

Good afternoon, everybody. I'll hand over to Zayd to give the opening remarks. We also have Mr. Naik, our Chief Finance Controller. He's also listening on.

A very good afternoon to everybody, and thank you for joining us today. The first quarter has been a good start for the year with stable operating performance across all our businesses. We continued to execute on our development pipeline, maintained healthy collections and saw consistent performance across our office, retail and hospitality portfolios while laying the groundwork for a much stronger launch calendar over the balance of the year. Our resi business recorded presales of INR 6,579 crores during the quarter with sales volumes of 6-odd million square feet across 337 units sold. Customer collections remained robust at INR 4,802 crores, reflecting healthy customer demand and continued execution across our projects. Geographically, our sales remained well diversified. Hyderabad contributed this time 49% of quarterly sales, driven by the successful launch of Prestige Golden Grove, followed by Bangalore at 27%, Mumbai at 12%, NCR at 7% and other markets at 5%. Average realizations for apartments stood at INR 11,193 per square foot, primarily reflecting the geographical mix of sales with Hyderabad accounting for nearly half of quarterly presales. During the quarter, we launched 4 projects spanning a combined 20.16 million square feet of developable area. These included Prestige Golden Grove in Hyderabad, Prestige Gardenia Estates Phase 2 in Bangalore, Prestige Pine Forest -- sorry, Prestige Forest Hills Phase 2 in Mumbai and Prestige Century Landmark, a commercial development in Bangalore. Together, our resi launches represented a GDV of approximately INR 12,000 crores. While Prestige Golden Grove contributed significantly to our quarterly performance, Prestige Forest Hills Phase 2 was launched towards the close of the quarter and therefore, only a limited contribution to Q1 sales. We expect the momentum from this launch to be more meaningful over the coming quarters. During the quarter, we also completed 3 projects with a developable area of 4.37 million square feet, comprising Prestige Tech Forest, which is a commercial project, Prestige Sanctuary, a residential project in Bangalore and Prestige Cityscape in Kochi. Our annuity portfolio also delivered another healthy quarter with our office business. We recorded a gross leasing of 1.5 million square feet during the year -- during the quarter. A key highlight was the successful preleasing of the entire development at Prestige JRC Signature Tower to one of the leading banking institutions, which shows the continued preference of marquee occupiers for well-located institutional quality office developments. The exit rental of our commercial portfolio for FY '27 stands at INR 865 crores. Our retail portfolio continued its strong performance with gross turnover increasing 18% year-on-year to INR 737 crores. Footfalls across our malls reached 5.2 million during the quarter, while the FY '27 exit rentals for the retail portfolio stand at INR 370 crores. Our hospitality portfolio also continued to perform well, supported by increased occupancies and competitive room rates -- average room rates. Beyond business performance, we also remain committed to our sustainability agenda. On the occasion of World Environment Day, the company participated by planting 1.25 lakh saplings as part of our commitment to plant 1 million trees in Bangalore. This initiative reflects our continued focus on integrating environmental stewardship with long-term value creation across our developments and communities we serve. As we enter the festive season, we have a strong lineup of high-value, high-velocity launches across our key markets. These include marquee developments such as Prestige Business Bay in Mumbai, Prestige Bougainvillea Gardens, Prestige Meadows in NCR. Prestige Falcon City Reserve in Bangalore -- Prestige Falcon City -- and Prestige Clover Dale in Chennai, The Prestige Place in Hyderabad are a few important launches lined up for the second quarter, which will further strengthen our momentum heading into the festive period. Beyond launches, we also continued to strengthen our long-term growth pipeline during the quarter through lots of business development. We expanded our presence in 3 new micro markets in Mumbai, that is Thane, Borivali and Versova, which marks another important step in broadening our footprint in Mumbai, MMR region. These acquisitions not only expand our footprint, but also add to our launch pipeline with our teams already working in advance towards launching these over the coming quarters. With this, I think we're happy to take your questions and hear more feedback from you.

[Operator Instructions] The first question is from the line of Parathikshit (sic) [ Parikshit ] from HDFC Securities.

Congratulations on a good quarter. So my first question is on the Hyderabad contribution to the sales in this quarter, the Golden Grove project. So -- versus the GDV, the numbers look a little muted. So if you can give some color on how is the Hyderabad demand in the current environment?

We sold 60%.

Sir, we have sold already 60% of the total project. We have a GDV of INR 9,500-odd crores.

Including land.

Including the landowner share.

Which we are not selling.

Which we're not selling. And we've, I think, sold very well over there.

Okay. And just on the business development, I think we have announced a strong business development, including Aramnagar in the Q1. So how is the rest of the year looking in terms of business development across Mumbai, Bangalore, Hyderabad and NCR? If you can give some more color what are the targets for this year? I mean, how much do you think we can do business development this year? And how quickly can we bring these launches, especially the Aramnagar one, into the launch pipeline?

Sir, in terms of business development, it's very dynamic. It changes quarter-on-quarter. We are on target to, I think, achieve that spend for the year. We target about INR 4,500 crores of spend towards business development for the year, which will be spread over the ensuing quarters. And in terms of launches, actually this quarter, we plan to launch 4 projects in Bangalore, which is the Prestige Avon, Prestige Battersea and the Prestige -- the Garden Breez. These are all under approval. We should get all the approvals in maximum 8 or 10 days' time after which RERA and then we launch that. Apart from that, we are going to launch Prestige Palm Court in Chennai this quarter. So it's quite a lot of action that you're going to see. So Garden Breez, Avon, Springwood and Battersea this quarter in Bangalore, Palm Court this quarter in Chennai and Park Street in Chennai will be next quarter and then it will follow. So there's a big, big launch pipeline, which is almost INR 45,000 crores worth of launch pipeline that is still pending. And I think all seems to be on target. In fact, quarter 3 will see Prestige Meadows, Prestige Bougainvillea Gardens and the Prestige -- what's that called, Chambers 51 in Mumbai, 2 are in Delhi, 1 Chambers 51 is in Mumbai.

Okay. Just last question, Irfan, sir. So have you seen any impact on the ground in terms of delays in deal closures by the customers, any elongation in the sales cycle because of geopolitical tensions because -- any concerns around AI because there has been a lot of noise around AI and its impact on slowdown, especially to the traditional IT companies and the demand related to that. So on the ground, especially in Bengaluru, how things are shaping up and even across your other sites and geographies, have you seen any impact of the sentiment around the geopolitics?

I think you asked me 3, 4 questions all in one go. The first part is you asked about delays. Delays, we had a whole lot of stress in the last quarter, which, of course, will have an impact on handovers. That is during the elections in Assam and West Bengal, a whole lot of labor had gone away, and now they have started coming back or they have come back. But we did have huge stress of about 2 months. So that will impact deliveries by a month or so, but nothing really to really get concerned about. Then your next question is, how will geopolitics affect the business. Business has not got affected because of geopolitics. But what happens is our costs have gone up because of geopolitics, because of the oil prices going up, because of commodity prices going up. Obviously, cost has gone up. But then that's only for that particular time, that 3 months or 4 months, whenever, then we go back to the thing. But then there is going to be some impact on a bit of expense. And the third part you're asking whether the demand is there. Demand continues to be there. We don't see anything. And AI, I think AI is more positive than negative. AI is another business model that is coming up and more job creation happens. Yes, on one side, the mundane jobs, which is a regular accounting jobs may be at peril. While that happens, there are new type of jobs that are coming in, which are more technical and everybody has to upskill themselves. However, we don't feel the pinch here. We believe that there is demand and people are positive and they have a need and they are committing themselves even at these higher prices. That's the amazing part of it. And that's not only in Bangalore, it's across all the cities we operate in.

So you remain confident of that 15% to 20% presales growth which you have guided in the last call?

No, that is given. That -- we are very, very confident because we've got a big pipeline. And the only thing that may -- which may trip is that these products don't come to market. But once we hit the market, I don't see us not selling. So the question of not being able to sell does not arise. But always, you have this problem of delays in approval, delay in getting RERA. In fact, that is where our major stress is. But like you see 4 projects, which I told you should have come in Bangalore. Now they all got delayed to this quarter. Otherwise, instead of INR 6,500 crores, we would have been like hero saying we did INR 8,500 crores. But then it will come this quarter. There's a big pipeline. And I think it's a good pipeline that we have, including now we've got some 3, 4 big projects even in Goa where we've invested in land. Now it's like a moving target. Every week we have promised next week and the next week doesn't come. So what happens is we really just cannot plan it. So that's where our problem is. But in spite of all the connections, in spite of having all the relationships, sometimes targets are moving.

The next question is from the line of Kunal from CLSA.

Just a couple of questions. Firstly, on the annuity side, right, in terms of the projection that we have given out for rental income, particularly for the office portfolio, there has been some revision, downward revision, in '27 and '28 numbers. Is it on account of some spillover of some deliveries completions? And if yes, then can you just highlight on that, please?

Kunal, basically, it's 2 projects which we have pushed the time line by a couple of months, maybe 2, 3 months, it will -- so we had planned those projects to get completed in March '27. The time lines for those completions is now somewhere in June '27. These are basically a tech zone as well as JRC. These 2 projects is what we have pushed the time line. But again, no significant delays as such.

Okay. And just like a couple of quarters or like a couple of months delay? Not -- and any reason for the...

Couple of months. Not a couple of quarters. Couple of months.

Okay. Okay. So by '29 -- I think '29 onwards, our estimates are pretty much.

In fact, JRC, we have already committed to the tenant that we will be handing over in June quarter [ for fit outs ]

This is next year?

Yes. Next year. [ It's fully reserved ]

Sure, sure. Also on the cash flow side, right, this quarter, we saw some -- a little bit of surge in the expenses, particularly. The collections were fine, but on the expenses side, we saw some surge. Should we expect a similar level of expenses both in the construction and the overheads for the rest of the year also? Or should we -- would there be any moderation there?

You can see almost similar run rate. But in Q1, the expenses were a little higher because whatever bills were submitted by the contractors in the last quarter, they got certified and we had to pay that bill. So the construction cost was a little bit higher. Moreover, we have a big launch pipeline in Q2 as well as Q3. So some of the approval payments and all that we had to make. So -- because of that, the construction payments was a little higher than what we had expected.

Correct. Correct. So does that mean that -- because our collection run rate is pretty much on track with our full-year guidance of INR 20,000 crores. And if we are able to achieve the same guidance, then in terms of operating cash flow, would there be some pressure there versus last year because if we expect the same level of expenses to continue? Just trying to understand on the operating cash flow side where would we end up there?

No. Even on the cash flow, if you see it was a little lower compared to our full-year guidance because the sales what we have guided for the full year, it has not happened at percentage terms. So if you see, we have guided the residential collection in the range of INR 21,000 crores plus -- INR 21,000 crores to INR 22,000 crores is we are expecting residential collection for the year should be. And the total gross collection, including all other verticals, will be in the range of INR 25,000 crores. So at the current run rate, it will touch only INR 20,000 crores, INR 21,000 crores. But then once we launch the projects what we had slated in Q2, Q3, okay, those projects will add to the cash flows. And definitely, it will -- our free cash flows also will improve.

Understood. Understood. And lastly, one question for Mr. Razack. We've seen some -- NCR market really doing well. I think some of the new entrants got some very good response last quarter or so. Any plans of like scaling up there in terms of like project acquisitions or like expanding in, say, Gurgaon market or so?

No, no, we've got 3 projects tied up. One is, of course, an old project, which is in Sector 150 where the master plan is now finally approved at the sports city. We are only waiting for the building plans to roll out and then RERA and then launch. So that is imminent. That will happen very soon. Similarly, we have tied up that is the Prestige Meadows in Sector 92, which will again have a GDV of INR 4,500 crores. So even that is also the agreements are signed and the plans are drawn up and they put it for -- locked in for approval, which should come soon, we should have a November launch. And then there is one -- another project, which is Sector 190 or whatever, and that is also called the Prestige Falcon City, and that also is ready for it. And that -- there also we are just doing the final paperwork. I think that also should get done soon. Apart from this, we are also discussing a couple more. So there is a good pipeline. And I think we are very bullish on the NCR market, more so since it gave us some great numbers in the last financial year. We definitely are trying to see that we get the choices. You see, we're just not getting desperate and picking up anything and everything. Only if it makes business sense and if we believe that there is a bottom line and there is a potential to get good revenue, we are locking in those. And we've locked in 3 and then maybe 1 or 2 more will keep coming as we go along.

Sure. And then lastly, just on the business development side, our spend will be in line with what we had guided for at the beginning of the year around INR 4,000 crores, INR 4,500 crores?

Yes, we saw some higher spend, yes. Yes, yes. And then, of course, you'll -- see there will be churn of capital, there will be inflows and outflows that keep happening. So right now, see, even in Mumbai, it is tied up. Yesterday, we just announced that we have tied up Thane. Thane, which is a very large project in Thane, and I believe that should do extremely well. And that's going to happen pretty much fast because it's not an SRA project or a redevelopment. It's a clean land. And I believe that, that should do extremely well.

[Operator Instructions] The next question is from the line of [ Rahul ] from Elara Capital.

Sir, my main question was on the leverage front. How should we look at net debt moving from here on through FY '27? You did mention that you're going to spend around INR 4,500 crores in BD. Your annualized finance cost is running at around INR 1,800 crores, INR 2,000 crores. And if I look at your annual CapEx, that's around INR 3,500 crores, INR 4,000 crores. So where should we see your peak net debt level over the next 4 to 6 quarters? That's my first question.

See, on the debt part, if you see, we have guided that gross collections for the year should be close to INR 25,000 crores, of which residential will contribute around INR 21,000 crores to INR 22,000 crores, it will be in that range. And the free cash flows will be in the range of INR 8,500 crores to INR 9,000 crores. So the free cash flow what we'll generate from the operations will be sufficient to meet our spends on the CapEx spend as well as on the business development. There'll be a marginal increase on debt, maybe by maximum INR 1,000 crores, INR 1,500 crores, not more than that. So I don't think so there'll be a significant drawdown on debt this year. So whatever launches we are planning, that will unlock capital and maybe there'll be a reduction in debt as well.

Okay. And what is your debt at the SPV level? And what is the company share in that?

Sorry, debt in?

At the SPV...

You mean joint ventures?

Yes.

Yes. So our net debt, Prestige share in joint ventures will be in the range of INR 2,200 crores.

Okay, understood.

Includes the DIAL project, then the Lakeshore Drive and Tech Pacific. These are the major ones.

The next question is from the line of Akash Gupta from Nomura.

Sir, my first question is on the reported P&L. The margins were on the weaker front. EBITDA was down 4% year-over-year. So I just want to get a thought around the P&L and how the numbers are going to move over the next couple of quarters. That's my first question.

See, again, on the margin front, if you see the [indiscernible] (0:22:25) reported a residential top line of INR 1,600 crores. It was mainly because during the quarter, we didn't have any major completions because of which the handovers were lower and the reported numbers were -- reported residential numbers were lower. But my fixed costs remain the same. In fact, it increases because we are planning heavy launches in Q2 as well as Q3. So -- because of the mismatch in revenue recognition, my reported margin is a little lower. But if you see at the project level margins, it remains the same. There's no pressure on the project level margins as such.

Understood. Sir, my second question is on our launch pipeline. I think I heard roughly 3 launches in Bangalore and 1 in Chennai. That's still cumulative roughly maybe INR 30 billion, INR 40 billion of launches. And then this would imply like a presales run rate of another INR 60 billion, INR 65 billion in the second quarter. Wouldn't -- are we not leaving too much to -- for an ask perspective in the third and fourth quarter? And then if we have like INR 450 billion of launches pending, why are we just launching like INR 40 billion, INR 50 billion per quarter?

Would like to have more launches in Q2, but approvals and all that, they are at various stages. And basis the current status, we expect some of those approvals to come in Q3. So that's what we are expecting Q3 to be a big quarter for us.

Is there any problem in any particular city that there is a delay in RERA approval? I mean what's holding our projects? Where is the delay?

There is no specific problem or delay. It is just the time that certain things take to process, like each project is in a different stage of the approval process. And each, I think department -- government doesn't perform like the private sector, right? If it was, then I think we would have more predictable launch time lines and quicker time lines. Unfortunately, that's the case. So we do our best to make sure that things are expedited. But I think what we are giving you is a very conservative time line. Hopefully, we will launch faster. But 1 or 2 quarters, things may move up or down.

Some of them are recent acquisitions, which we are pushing hard for bringing it to the market.

For example, Prestige Meadows in NCR.

And the Chennai project.

The next question is from the line of Pritesh Sheth from Axis Capital.

Two, three questions from my end. First, I think we had good 3 project additions this quarter in Mumbai and across different markets. I just wanted to know the project structure of probably each of them. I know Aramnagar is a JV. Thane, you mentioned it's a clean land, but it's the JDA -- and even for Borivali, what's the structure like? And what would be the margin expectations from these projects?

Both Borivali and Thane are state joint development agreements. And I think the JDA for Thane is even registered as of yesterday. So all the terms are there very clear.

Sure. And margin expectations would be similar to what we have at the company level or we are slightly getting better here or how is that?

We always like to get better. It all depends on the cost as well as selling price. But then selling price is going up. And it's a large development. I think Thane will get a GDV of almost INR 9,000 crores, which I believe we also want to really get some great volumes there. And that should do well because it's a nice piece of land, well located, and it should do well.

Sure. Got it. Got it. And in terms of Mumbai commercial assets, BKC and Mahalaxmi, we had done some preleasing earlier, but any progress after that? And in Q1, have we done more? If you can just guide us on some numbers in terms of how much we have preleased for both the assets?

No, this is all work in progress. Only thing I can say is there's a great interest and the numbers are very strong and we ourselves are sort of holding back. But at the same time, we are concentrating on seeing how we can get the production in terms of completion done soon. Work is going on at a brisk pace, but we'll be most happy and most rested only once the project gets completed. And I think the teams are really working hard to see that happens. And I don't think we have any sort of doubt on the leasing part as also on the rental. The rental is also pretty quite robust.

Sure, sure. And lastly, if you want to just provide update on hospitality piece, on the IPO or in between, we had media reports about we doing a private transaction as well. So if you just want to clarify on that, how are we approaching the monetization of the hospitality portfolio?

No, no. See, as of now, nothing new to say, except that the teams are working on various options. We'll see what works out. It's all work in progress. See, we could have done the IPO, which again, we have time till September 30. But at the same time, today, some -- there are interest from various PEs. Let's see what comes out.

Yes. Okay. Okay. Because there also debt is kind of material enough. We know that monetization also can bring down the leverage at the company level that way. So, yes. Okay, no problem.

The next question is from the line of Girish from Avendus Spark.

Firstly, just if you can give us some understanding on the Chennai launches, right? Because we see close to INR 12,000 crores, INR 13,000 crores of GDV, which is planned in this market. So how confident are you in terms of the sales velocity given the depth of the market? Because in the past, what we have seen is that Chennai projects have seen a lower sales velocity at the time of launches. So if you could give us some update on the approval stages also?

Yes. So we are pretty confident. The approvals are in a pretty advanced stage. So Prestige Palm Court, we should launch in Q2 for sure. This has about INR 1,200 crores of GDV. And I think this project should do well as well in velocity. Next would be Prestige Park Street. This either will launch in Q2 or will move into Q3. This has about INR 1,500 crores of GDV. And this is a luxury segment. So we're quite looking forward to it as Chennai has not seen a good quality luxury project in the recent past. Especially for Prestige, this would be a big one. Next is a large launch that we should have in Q3, would be the Prestige Falcon City. And I'd like to mark that both Park Street and Falcon City are recent acquisitions. So this is quite quick to turn things around and launch in Chennai. Falcon City will be 6.84 million square feet, and it's about INR 5,000 crores of GDV. Q4 we should launch Prestige Clover Dale, which is also a big launch, about 4 million square feet and another INR 5,000 crores. So it's about INR 13,000 crores of -- INR 13,000 crores, INR 14,000 crores of GDV just in the next 3 quarters in Chennai, which we're pretty confident of launching.

Awesome. Got it. Secondly, in terms of the unsold inventory, which is close to 16 million to 17 million square feet. We see Hyderabad is pretty big, right, almost 7 million square feet. So if you could just give us some view on the sales velocity of the Hyderabad inventory, which I'm assuming is the Golden Grove and also for the rest of the inventory.