Puravankara Limited (PURVA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Puravankara Limited Q4 FY '23 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Samal Sarda from Axis Capital. Thank you, and over to you, sir.

Thanks, [indiscernible]. Good evening, everyone, and thank you again for taking the time out. Let me start with congratulating the management on a great year of sales and collections and also wishing them good luck for the next year ahead. As always, the senior management of the company is here with us today are led by Mr. Abhishek Kapoor, the ED and CEO; Mr. Moorthi, Senior VP with Risks and Control; and Neeraj Gautam, Executive Vice President, Finance. I'm handing it over to the management for the initial comments.

Thank you, Samar. Good evening, ladies and gentlemen. Welcome to Puravankara Limited Earnings Call for the Fourth Quarter FY '23 and Fiscal Year 2023. I'm Neeraj Gautam, [indiscernible] the Finance of Puravankara Limited. Thank you for joining us today. We are delighted to present our financial results for the quarter early March 31, 2023 and the full fiscal year 2023. The results, along with the comprehensive presentation has already been uploaded to the stock exchanges for your review. . Today, we will provide some impact into our outlook and key initiatives. Before we delve into our financial performance, I would like to highlight the promising prospects of Indian economy and the rate of success present for the investors backed by innitiative of the government and a vigilant central bank, the Indian economy has demonstrated towards growth, controlled inflation and enhance current account balances, posting a stable and favorable economic environment. simultaneously various in India experiencing and upward trajectory, fueled by factors such as expanding internet penetration, e-commerce advancements, increase infrastructure investments and modalized supply chain the elastic market is projected to grow at a remarkable compounded annual growth rate of 7% to 8% during 2023 to 2025. The sector's resilience is evident and strengthened developer balance sheet and the sale of equity investment, reflecting our strong investor confidence. Additionally, housing sales have witnessed significant growth across the properties, focusing sustained demand and lucrative opportunity for investment. Now let's dive into our operating performance for FY '23 with showcase significant achievements our sales reach an all-time high with a total value of INR 3,107 Crores, a substantial increase of 29% compared to the previous fiscal year. Moreover, our customer collection from the real estate business experienced a remarkable jump of 57% totaling INR 2,258 Crores in FY '23. The average price realized and also displayed strong growth, rising by 14% to INR 7,768 per square foot during the fiscal year. These outstanding results reflect the growing demand for housing and demonstrate our ability to meet the solution of end users. For quarter 4 of FY23, we achieved the highest Sales value of INR 1,007 Crores, representing a significant 21% increase compared to Q4 FY '22 of INR 831 Crores. This outstanding performance was supported by a sales volume of 1.21 million square foot under scoring at a strong market presence. Furthermore, our customer collection amounted to INR 661 Crores, reflecting a remarking 48% year-on-year increase and indicating improved operating efficiencies. Our Average Realization for the quarter was INR 8,321 per square foot. In terms of the development, we are proud to announce that we acquired a 100-acre parcel in Chennai for product development in FY23 with a static move strengthens our presence and provides a decorative opportunity for future growth. Throughout FY '23, we successfully launched 9 projects across 3 cities, covering a total area of 6.7 million square feet, not only Bangalore and Chennai witness and majority of our launch area. Furthermore, we are investing launch pipeline to have approximately 15 million of square foot , a steady flow of new rates in the coming period. Non-Bengaluru projects now account for 44% of the share of ongoing and 68% of launch pipeline. In addition to our residential offerings, we introduced Zentech Business Park with commercial projects catering to the growing demand of office Receipt more over construction commenced on the Purva Aerococity prominant 2 million of square foot [indiscernible] Further expanding our portfolio. When it comes to the Debt management, our net Debt increased from INR 1,846 Crores in Q4 FY '22 to INR 2,208 Crores in Q4 FY 2023. The primary cause of this increase was the rise in the number of project launch and existed project execution. However, it is worth noting that our Debt per square foot of building assets declined from INR 1,248 to INR 1,106 per square feet in Q4 FY23. So taking out efficient capital utilization. As of March 31, 2020, the balance receival from sole limits in all launch projects amounted to INR 2,963 Crores, which cover about 62% of remaining costs of underconstruction projects when combined with value of unsold inventory for all ongoing projects of worth INR 11,232 Crores from the ongoing projects, the company projected to have coming surplus cost about INR 10,118 crore. This position is favorable when compared to current net Debt of INR 2,208 Crores. Now let's move on to our financial performance. In FY '23, our revenue from projects increased by 29% to INR 1,236 Crores compared to INR 955 crore in FY '22. However EBITDA was for FY23 was INR 443 Crores with a 31% EBITDA margin, down from the INR 635 Crores FY '22. I would like to update that for previous year, our EBIDTA was increased for a onetime transaction. The PAT for FY '23 was INR 63 Crores, while it was INR 146 crore in FY '22 with a 4% PAT margin. In Q4 FY '23, our revenue from projects grew by 32% year-on-year to INR 389 Crores. The EBITDA for the Q4 FY '23 was INR 117 Crores, up by 90% from Q4 with a 26% EBITDA margin. The fact of Q4 effect was INR 28 Crores compared to INR 21 Crores (sic) [ INR 22 crore ] loss in single quarter previous financial year. I would also like to highlight our dedicated arm for product line development, Purva Land Currently, we have 9 projects across 3 cities, cumulating up to 7 million per foot. These projects are located in Bangalore and Chennai and Coimbatore are recent edition in the launch of Purva Raagam launched in Q1 FY24 with Purva Land we aim to provide well planned and significant profit link projects to meet customer desire for their dream home or profitable investments. Lastly, I want to mention our wholly owned subsidiary in Starworth infrastructure in concession. They are focused on technology level construction solutions with an order book over INR 1600 Crores Starworth undertakes Residential, Commercial, Infrastructure & Industrial Projects providing end-to-end services from design to Handover. Operating a fully operational precast factory in Bangalore, they emphasis technology and Off-Site construction method. some of their market clients include BMRCL,ITC Limited, Jindal Steel & Power, Taj GVK, BIAL, HRC, Godrej properties, DAE, and AMPA. I'm pleased to inform that ICRA has reaffirmed our Credit Rating as A- stable division. In conclusion, Puravankara Limited financial performance for FY '23 has been exceptional with record sale, Strong customer collection and promising growth indicators in the real estate sector are a satiation success and project launches and Debt management initiatives position us well for future successes. We remind -- we remain committed to delivering dividend to our stakeholders while navigating the evolving market dynamics. Thank you for your attention. And now I'll open the floor for questions -- thank you.

[Operator Instructions] Our first question is from the line of Siti Tanna from NVS Brokerage.

How do you see margins picking up since that has been negative.

So that is a factor of 2 or 3 things. Look, yes -- okay. So basically, PAT is a factor of 2 or 3 key parameters, right? Your question is related to the PAT.

Yes.

Okay. PAT is the market. PAT was negative in the single quarter previous financial year because the single quarter previous financial year is frankly, our revenue recognition were less and thereby, we delivered less gross profit and there was a loss for the quarter. However, for last year for full financial year, yes, we recorded a profit of INR 146 Crores. And this year, for the quarter, we recorded a profit of INR 28 Crores as well as a full financial year basis, we have reported a PAT of INR 63 Crores. So this financial year as a whole basis, we have recorded a profit. And last year also as a financial as a whole, we reported a profit only for a that particular quarter because of the less revenue recognition, the quarter was resulted in the negative, but that was the Q4 of the last financial year. This Q4 and this financial year, we are profitable.

Okay. Okay, sir. Sir, can you please tell your plans for commercial along with time line? How many square feet overall are we planning to launch in FY '24 and FY '25?

So yes, I'll answer that commercial, but I'll just add to the previous question. Basically, revenue recognition and PAT is dependent on the quantum of possessions that we hand over in a particular quarter that is one. And secondly, it's also dependent on what expenses we booked in the quarter which could generate revenue in the future. For example, even if we do a launch in a quarter, there are expenses that we booked at cost in the same quarter, but we can't build those revenues. So those are the factors that typically influence PAT and the revenue recognition numbers. So I just wanted to clarify on the previous point on what constitutes revenue recognition for a particular quarter. And the moment you see higher positions happening in a particular quarter, you'll see more and more revenue recognition and higher PAT. Coming to your commercial question, we currently have about 3 million square foot under construction. We intend to continue execute these will come up for completion in 2025 including about 800,000 square feet, which is -- It is called Zentech and about 2.1 million square foot of a project called Purva Aerococity, which is in North Bangalore. And these are both very unique projects in very unique markets, and we are quite optimistic with these developments, and we are -- the development is going on at full pace. At this point in time, we are not intending to add any more commercial in terms of new launches for this financial year. And -- but we are out there in the market looking at new opportunities as well.

Okay. Also it is the new PAT circle rate for [indiscernible] will increase. So what is the impact? Will it affect the demand?

No, Circle rates don't necessarily impact the demand. So look most of our -- I mean, all our projects are kind of priced in a way where the Circle rate doesn't really have an impact on the standity calculation. The area Circle rate may have certain impact is on current cost of approvals wherein certain premiums, et cetera, that are payable are dependent on the circle rate. But we don't see any significant impact at all on the demand side at all.

[Operator Instructions] Our next question is from the line of [ Harish Shah ] from HS Investment.

So I have a couple of questions. So basically, recently, the home interest rates have increased. So have they led to decline in footfall or conversion rate? How do you see the current state of the end market and mid income unless it is segment, considering the impact of the hike?

So at this point in time, we have seen no impact on the increase -- of the increased interest rates on any of our demand. I mean, if you look at our last quarter numbers, and I think tell you some round PLC as of date, we are seeing no impact even today. In terms of impact due to interest rate calculation. Last quarter number that as we have mentioned, has been our highest quarter, highest number. We crossed 4 million square foot of sales last year. So we're not seeing any impact on the demand or only footfall in the due to interest rates. However, having said that, I think what is very interesting for us and why we see the demand going up is we are entering an appraisal cycle for all the corporates and even if we assume that it will not be as significant as the last year which was upwards of 20% and somewhere in the mid-teens. We believe that will obviously be more headwind for a lot of people to make their buying decision. So that is point number one. Point number two, the work from home concept in the hybrid kind of is very healthy in the per person demand of housing. So when people work from home, at least 2 to 3 days a week, they need their own private spaces, which could normally be a working couples Therefore, we have seen increased demand on per person basis for residential demand. And the other fact is that rentals have gone up across the board very, very significantly. So if you see with that kind of increased rent of the [indiscernible] opportunity is so low that people would rather buy than to rent. So the across -- and of course, you seen this happened because decreased inventory levels in the market. I mean today, we are talking about a little less than 12 months of inventory across India. And Bangalore side, if you look at it around 8 months of inventory. So no indicator or no numbers ensure that right now we have any kind of resistance from the demand side.

Okay. And my second question is just going to what you have just spoken now. So in that context, do we see the pricing getting on the higher side for your both existing and the upcoming projects?

Look, I think realization is a factor of multiple sales for us. It's also a mix of inventory realization, the factors of the kind of product that we're launching and the marketing in you are launching in and the demand supply down. . So currently, the way the demand side analysis is definitely supportive of the pricing and of course, the kind of products that we are launching and the value break we bring as a brand on the project and in the market share presence in, we definitely bring a lot of value. We and therefore come on the premium in all of those markets. So I think from pricing point of view, we're quite confident that we will see a positive uptick in the pricing.

Okay. And is it possible to quantify that, that would be in a low digits or a higher double digit, something like that?

Look, last year, we got an application of mid-teens, that are entitled if I am not wrong it was around 14% average increase Y-o-Y basis as a number, right? So I think see what happens in real estate and I'll just take a secondary any project that we launched through its project life cycle normally goes through an application of anywhere between 50% and 70%. So as we go along selling our project, and that normally happens because we will start seeing visibility of the development and it starts getting closer to the construction completion. And of course, as you sell, you'll have financial closure and as people see the progress, that are agreeing to pay a higher price. Of course, subject to the fact that it's a strong brand, good quality, all of these parameters tightening are not continuing to this. So we see that trend continuing for us in this financial year as well.

Okay. Last question from my side. How do you see your plotted development projects panning up, especially in Chennai? Given that you have close to more than 3.7 million square feet saleable area? And how do you see the cash flow coming in from this project in the coming -- in this financial year?

So 2 parts. Why we are too excited about Chennai . We launched a project last year called SouthBay, that got 100% sold out in 3 days.

In this quarter, as we just mentioned, we have launched a project called Raagam. We've got a very positive response. We've just gone to market as we -- and within the first 2 days, we have crossed 100 bookings, right? So we are seeing great traction there, and we are confident that with launches we see. And because of the quality of product that we are delivering across the brands, and in fact, lot of people find it very interesting that we have really update quality of the brand in command premium in any market that we go in. So when people are seeing because we have delivered already a project over there. People are seeing what we are capable of developing as a market development and how is assured them of the value that we get out of the project in update application they will get at over the life of the development that we do at their home. And we are very, very confident that we'll sell very well. As far as the collection concerned, typically, from the date of launch within the first year, we typically look at anywhere between 50% to 60% collections of the sold realization. That's the minimum we look at. So suppose we launched in -- like this, for example, Raagam we launched now. We would anticipate in like 9 months because it's 9 months, I would say between 40% to 50% collections still happening this financial year. And similarly, depending on when we launch the next project, it will change it. I mean last quarter, we launched a project called Oakshire in Bangalore. And it is almost, I think, 80% sold out as we speak. In the first 2 days, we sold about INR 100 Crores of inventory. So again, we are looking at in this financial year itself from Oakshire collecting almost 60% to 70% of the sold line. So that's the kind of traction and then the kind of turnaround we are able to see as well as capital is concerned...

Our next question is from the line of Yash Jain from ICICI Direct.

Sir, my first question is about the Chennai As you told that you are planning to launch. So when is the date you are planning to launch? And what you're expecting the revenue from this project.

Sorry, you're talking about the Chennai project development? Is that the one you're talking about?

Yes.

Okay. So there are 2 targets in Chennai. One is a project which we have just launched, which is about 700,000 square foot. In the 700,000 square foot, we are looking at revenues of excess of INR 200 Crores. There is another project, which we will launch in next -- within next 2 quarters. which we will launch about 1 million square foot in the first stage. That would be the total revenue potential there will be about another INR 250 crore to INR 275 Crores. Of course, there are subsequent phases where we will add because that's a 3 million square foot of development. So subsequent losses will also add on. So that's the kind of number we're looking at for this year.

Sir, my next question is, what is the plan for the Debt reduction because the Debt is increasing how you're planning to control your the decorated ratio and reduce either.

If you refer our Slide #32 in our investor presentation, there we have given a detail of how a data a different segment of business has increased or decreased during the last quarter. If you look at the Debt which we have taken for our Residential business, Their Debt has come down. It was at the beginning of the quarter. It was -- the gross Debt was INR 2,195 Crores and the end of the quarter, it was INR 2,122 Crores, so we have reduced Debt by INR 72 crore we had taken a Debt of INR 245 crore taken outstanding Debt of INR 245 Crores for land purchases, that Debt also has come down. That is INR 220 Crores at the end of the quarter, so that was down by INR 25 Crores. However, if you look at the Debt, which we have taken for 2 commercial projects, which is backed by a full credit line and there we are developing commercial projects, then the Debt has gone up by INR 33 crore And as we progress the construction that we will have to draw down and than we use towards completing the project. And then Debt has gone up during the quarter. On beside this -- we have also taken a bit of INR 115 Crores to buy cash flow of the JDA partners. Our JDA partners are still in the project 25% of the cash flow, we bought out for INR 115 crore. INR 115 crore than 10% capital is now available for the company while we can get back to the landowner. And besides that, I would just like to update this INR 115 Crores of the loan, which was taken Due to the quarter, of the first was INR 55 Crores repayed during the Q1 and second quarter. So as we are seeing today, the INR 115 Crores also has been reduced by INR 55 Crores. So -- and then hence, thereby, which we are trying to communicate in terms of our Debt taken for residential projects and the land is coming down. However, Debt taken for a commercial project has gone up because of the condition of creating a capital asset. And we would like to give you further information. If you refer to Slide #33, there, we have also worked out kind of measure the Debt is are the area under development. how many areas we have the home borders that square foot is Debt under construction today with the company and what is a bit against it. So if we have plotted this number from the Q4 FY '19, which was that sometime the best perspective about INR 2,077 per square feet. Today, as we are speaking today, the Debt for second development is INR 1,106 Crores. So it's substantially down and it's a decreasing trend. In previous quarter, it was INR 1,291 Crores -- and hence, it's reflecting those Debt absolute number has not come down substantially . However, while we added the 9 project during the financial year. And thereby the product -- these all line have gone through production as well. And hence, a quite a big Debt which entity has come down.

So my next question, are you planning any new projects for -- in future, especially for pipeline sector?

Yes, of course. Total, we are looking at launching 16 million square foot of developable area and a salable area of 13.7 million square foot, which is on Slide 21 of the ICP. Of this, about 3.74 million square foot salable area in Puravankara, 6.22 million square foot in provident and 3.73 million square feet in Purva Land And this is spread across the Southern West of India.

Our next question is from the line of Tirath Muchhala from Elusividya Advisory.

Just coming to the cash flow statement. I wanted to understand that there is a significant increase in operating outflows for the year. So is it because of accelerated construction? Or is it because of some other reasons?

So if you look at our operating -- I would like to give you that the compares are between operating inflow and outflow both our operating inflow has also increased during the quarter and during the financial year. At the same time, operating outflow also reflect. So operating outflow has gone towards number for passing the construction and the more construction progress we achieved that collection is resulted into more collection that's point number 1 , Point number 2 we have launched 9 Projects during the financial year. And hence, to launching these 9 grids we have initial working capital is required to launch expenses, approval expenses, et cetera. And that outflow also help towards the launching these projects. outflow or the collection of these projects in the coming quarters. Besides that, we have also spend about INR 125 Crores. on this 2 commercial projects, which we have mentioned, the Zentech and Aerococity, that is also included in our outlook. And hence, the outlook includes the outflow has 3 characteristics. One is outflow related to the ongoing under construction project against which we have collected INR 2,680 Crores. outlook, which is for new launches, which is the initial working capital. Inflow for this investment will come in the coming quarters. And third, the outflow for the commercial development for against this by spending this money, we are developing a capital asset, and this outflow is fully backed by the PF line. Hope this clarifies your question related to increase in outflow vis-a-vis our inflow.

And coming to 2 particular matters. One is 12 months ago, we announced that we are aiming at 12 million square feet of launches for FY '23 and we have done 6 million square feet . And I think this -- and now you guys are taking of -- I'm mistaken, but is it 16 million that you're targeting for the next 12 months?

In million of developable area and about 14 million square foot of saleable area.

Right. So we've had a history of not meeting these targets. If you look at all our presentations in the last 5 years, so how confident are you at meeting this target?

Look, I think what's positive and I'll start. I have always look at the optimistic side first. And I personally lead that we are in the right direction, we are working on actually the entire portfolio. Fortunately, unfortunately, in real estate sector, it takes time and the timing can be [indiscernible] point external environment. Having said that, if you look at the new launch pipeline, it consists of the previous year's pipeline, which is about 6 million square foot that we missed. But having said that, we missed by a quarter or 2. So what is happening is that the way deferment, the value is not lost. In fact, value has really gone up. because the prices have gone up for site for us. And hence, in fact, we have gained value. But having said that, our focus is really early to launch it as quickly as possible. All of this 14 million square foot today, what we are talking about will be in advanced stages of approval. So we are quite confident that this year, we will get -- we should meet the target or maybe we will get definitely very, very close to the target. It's not across it. So yes, I mean what I can take for sure is that we're working on the entire portfolio and the unfortunately the retail of the business everything from the local environment election to anything that impacts that. But having said that, I think we are very much on track as far as our pre launches are concerned.

Okay. I wish the best for the team. Can I squeeze in one more question?

Yes, please.

So just for deliveries, I think we are missing the Slide in this particular presentation. For FY '22, how much have we completed or delivered to the end customer?

Give us a moment, we'll confirm that number.

Sure. And for FY '24, what's the delivery number in mind that we should be able to hand over?

So we have delivered in excess of 1,600 units in the last financial year. And for the next financial year, our target is to double it and deliver in excess of 3,000 units. Total area that we have delivered in last year is 1.73 million square foot. And next year, we are talking about delivering in excess of 3,000 units. So obviously, almost doubling the number.

So does that imply that revenue explanation might be almost double in the next year?