Puravankara Limited (PURVA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Puravankara Limited Q2 FY '24 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. Samar Sarda from Axis Capital. Thank you, and over to you, sir.

Yes. Thank you, Arvind. Good evening, everybody, and I hope everybody had a good Diwali, wishing you a good Vikram Samvat 2080. As always, from the Puravankara management, we have the senior most guys attending the call led by Abhishek Kapoor, the ED and CEO; Neeraj, President, Finance; and Vishnu Moorthi, Senior Vice President Risk and Control. I hand over the call to the management for the initial comments. Over to you.

Thank you, Samar. Good evening, ladies and gentlemen. Thank you for joining Puravankara Limited Q2 FY '24 Earnings Call. I'm Neeraj Gautam, President of Finance, your presence is highly valued. We are delighted to share our financial results for the quarter ending September 30, 2023. Comprehensive details can be accessed on stock exchanges. Today, I'm to offer insight into our strategic outlook and key initiatives. Let's comment by delving into the overarching economic landscape before delving into our company's individual performance. This analysis will furnace insight into the consistent demand propelling our sales achievements, thereby highlighting the potential for future growth. Amidst global challenges, India's economy stands out as it [indiscernible]. In the initial quarter of this fiscal year, it recorded a robust growth rate of 7.8% as reported by National Statistical Office. Looking ahead, the Reserve Bank of India has [ retained ] a GDP growth forecast of 6.5% for the fiscal year 2023-2024. Even in the face of global challenges, institutional investments in the Indian real estate market saw a substantial uptick, reaching to $4.6 billion from January to September 2023. This marks a noteworthy 27% increase compared to previous year. The resilience and uplift of the market are further highlighted by investments [indiscernible] an impressive 93% of the total record in 2022. Further, the stability insured by unchanged interest rate act as a catalyst, inspiring prospective buyers to explore real estate investments. A consistent interest rate environment fosters a sense of financial security, driving individuals to make confident home purchases. Turning to -- our attention to Puravankara Limited, this favorable environment has consistently driven us to surpass sales records quarter after quarter. As evident from our operational update, we are thrilled to announce that once again, we have achieved the highest ever sales value of INR 1,600 crores in any quarter since our inception. This reflects a remarkable increase of 102% compared to INR 791 crores in Q2 FY '23. Breaking it down, INR 736 crores is attributable to Puravankara brand, INR 740 crores to Provident brand and INR 124 crores to Purva Land. Our collection experienced a significant surge reaching INR 879 crores, reflecting an impressive 70% year-on-year increase. Additionally, the average price realization witnessed a 7% uptick rising to INR 7,947 per square feet during Q2 FY '24 from INR 7,396 per square feet in Q2 FY '23. In terms of new launches, we are delighted to sharing significant developments in our portfolio for this quarter. Provident Ecopolitan in Bengaluru takes center stage, a new project that's spanning a salable area of [ 1.13 million ] square feet. Additionally, unveiling itself as a new phase in Bangalore, Purva Park Hill Tower B, contributes a sellable area of 0.2 million square feet. In Chennai, we introduced another new phase for Purva Windermere phase 4B fixing a sellable area of 0.75 million square feet. Regarding our launch pipeline, we are pleased to report a substantial figure of approximately 30 million square feet assuring a consistent influx of new projects in the foreseeable future. Notably, non-Bengaluru projects now contributes 44% of sales of our ongoing projects and an impressive 72% on the launch pipeline. Breaking it down by division, Provident accounts for 50% of the launch pipeline, aligning with market trends and the strategic focus of the group. Turning our attention to the debt management, we are pleased to report a positive trajectory demonstrating fiscal presence, our net debt has reduced from INR 2,144 crores in Q2 FY '23 to INR 1,992 crores in Q2 FY '24, significantly a substantial decrease in the net debt to equity ratio from 1.10 to 1.01. Noteworthy is the decrease in net debt by INR 127 crores from the previous quarter. Equally significant is the decline in debt per square foot of building assets, decreasing from INR 1,376 per square feet in Q2 FY '23 to INR 886 per square feet in Q2 FY 2024 underscoring our commitment to efficient capital utilization and fiscal responsibility. In [indiscernible] our strong financial [indiscernible] I want to highlight that of September 30, '23, the outstanding receivables from our sold units stands at approximately INR 3,636 crores. This sustainably -- this substantially amounts cover about 77% of the remaining costs needed to complete the inventory currently available for sale. This indicates that a significant portion of our -- for the cost to finishing the remaining inventory has already been secured through receivables establishing a robust foundation for meeting our financial commitments. Furthermore, our cash flow visibility is equally promising with the projected amounts of INR 6,455 crores anticipated over the next 3 to 4 years. This underscores our robust financial planning and substantial cash reserves positioning us as well as supports our operations, projects and growth initiatives in the foreseeable future. In Q2 FY '24, our revenue from projects grew by 54% year-on-year to INR 368 crores. The EBITDA for Q2 FY '24 was INR 98 crores, with a 26% EBITDA margin. Our PAT for Q2 was negative by INR 11 crores due to only 481 handovers of units during the quarter. We are targeting to handover 2,500 units during H2 FY 2024. In conclusion, it is crucial to emphasize that Puravankara is strategically poised to seize opportunities in the nationwide expansion of real estate sector. The substantial interest related by our robust launch pipeline has translated into exceptional sales performance consistently breaking records since Q2 FY '23. This success is attributed to our meticulous project selection, robust marketing strategies, personalized customer outreach and an unwavering focus on delivering exceptional products. Significantly, the ongoing quarter aligned with the impactful festive season in India historically associated with increased investment in real estate. As a developer, we have strategically devised attractive deals to incentivize property purchases, acknowledging the historical surge in house demand during the season. We are steadfast in our commitment to leveraging this opportune period. With that, I conclude my remarks. Thank you for your attention. Now the floor is open for the questions you may have and suggestions you would like to give us. Thank you.

[Operator Instructions] We have the first question from the line of Samar Sarda from Axis Capital.

Yes. So Neeraj, a couple of things if you would like to want to inform the participants. One, like you made roughly INR 3.7 billion in the first half, INR 377-odd crores after interest and tax. With a lot of deliveries happening in the second half, like you mentioned, a little more than 2,500 units, how would the operating cash flow post your interest costs and other things tend to look like at the end of the fiscal? So that's question number one. And from an absolute debt perspective, like, we have a gross debt of roughly INR 2,600 crores. So given that you're also looking to deploy money for land and CapEx, how would this INR 2,600 crore number move over the next 2 quarters?

I'll answer first on P&L then the operating cash flow and then the debt, 3 things you have asked. During the quarter, as I mentioned in my opening remarks, we have handed over only 481 units and thereby the gross profit which came to P&L is only related to this 481 units. However, as against to this, we have sales and marketing costs for the quarter as well overhead has been charged with gross profit, and thereby, there is the loss for the quarter. However, for the second half year for this period, we are targeting to handover about 2,500 units. And then corresponding gross profit will come to the P&L and we are expecting if the sales and marketing expenses and -- as well as the G&A will kind of maintain the trend and then the outcome will be positive. We are not giving any guidance. We're not quantifying the number. However, as -- in a broader map as against 481 kind of delivery, this kind of number we're reporting and next H2 I'm going to deliver -- or targeting to deliver 2,500 units and thereby keeping -- the fixed costs remain the same, the outcome will be different as far as the P&L is concerned. Coming to the -- as far as cash flow is concerned, as is evident from the Slide #26 of our presentation, we have been posting the operating surplus for the last few years by now. And if you look at operating inflow also, consistently we are increasing. For half yearly basis, we have collected INR 1,756 crores. That was our inflow. And this is by doing the sales of about INR 2,700 crores for the half year period and the operating activities. And if this trend continues, the cash flow and operating inflow will be grow furthermore, commensurate with the number of sales. Growth will happen in the next 6 months as well as the construction activity and the delivery happens during the second half of the period. So commensurate with the cash flow will -- operating inflow will increase for the next half year of the period. Coming to the third question which you asked about the debt, my gross debt was INR 2,616 crores. However, as against this my debt was -- first time my net debt was less than INR 2,000 crores. My net debt at the end of the financial year was -- end of the quarter was INR 1,992 crores only. So this is because we have a cash and cash equivalent lying in my bank and all is about INR 624 crores. This cash and cash equivalent is lying in different project RERA account and other accounts, which due to certain RERA regulation and the related requirement the money is available, however, I'm not repaying or not using it, but the liquidity is there and the overall liquidity is there in the business. Coming to the debt level is concerned, our next -- our repayment is slated about INR 400-odd crores is slated for next -- by the end of the next financial year, that repayment will automatically happen due to the schedule plus by SI also some reduction will happen. However, as we mentioned that we are on our growth trajectory, and we'll be acquiring land parcel, and thereby, there will be some increase in debt as well as the drawdown of the construction finance. However, our endeavor will be maintaining the debt as of this level at least the coming -- by the end of this financial year.

And something about the launches, like, last year also we had a big guidance on launches. Most of the second half. What is the likelihood that the 13-odd million square feet, which is planned in the second half, might be spilled over to the next year? And which are the really big launches which are slated during this year, like, which could give impetus to the sales further from the INR 1,600 crores already done in the quarter?

So Samar, Abhishek here. If you see the slide, which is Slide 20 on the launch pipeline. We have kind of given an indication of what the time lines are looking like or most of these projects are in very advanced stages of either RERA or -- and submitted for RERA awaiting approval in RERA or in advanced stages of approval. So we are expecting that almost these are about total of 15-odd projects and out of 15 projects, at least 12 -- 13 projects definitely will go to the market by March. That's the target that we are definitely working towards. Having said that, the point you made on, what can be expected in terms of sales trajectory, given the fact that we have -- all of the earlier launches have gone into sustenance and the new launches add to the impetus of sales, we expect that this momentum will continue in the coming 2 quarters in the second half of the year. And largely on account of approvals is where it is. And from the beginning we have been saying that in the third and the fourth quarter, we do a lot more launches. So I think we are pretty much on track as far as the launches are concerned. And obviously, we are working on other assets as well for the next financial year.

We have the next question from the line of [ Samar Sapre ] from WealthTree Advisors.

Congratulations on a good set of numbers. Sir, just regards to our debt, I believe we are having some INR 2,000 crores on books. And if you can just share how would be the trajectory going forward? And especially seeing that we have a good collection and sales trajectory, so -- and would you see that this would be sustaining it for next couple of years, seeing that real estate market is in very strong footing?

So let me just break this down for you on an overall debt basis. If you see, this is Slide 31 of the debt composition. Our residential debt continues to come down. There is obviously some addition of land that's happened. And CapEx towards commercial development has increased the debt. However, with the cash and cash equivalent, we've been on an overall basis, on a net debt basis, the number has come down to INR 1,992 crores. There's another slide we have, which is Slide 32. If you look at our trend of debt per square foot, and I keep going back to this number continues to come down from about INR 2,100 -- INR 2,077 a square foot down to about INR 886 and INR 900 a square foot on per square foot area under development. And why I keep pointing this out is because I think that is relative to the quantum of business that you do. Our business clearly has shown 100% growth this year in the first half of the year. And therefore, we are continuing to see this debt level come down. Our intent is and goal is to keep the debt level in and above the current absolute number and not increase it substantially while we go into the acquisition. These new launches and the liquidity that is further coming into the system along with the schedule repayment, as Neeraj mentioned, is to the extent of about INR 700 crores, if I'm not wrong, in next 12 months -- about INR 700 crores in the next 12 months. And -- but having said that, we'll obviously not hold back from new acquisition and you will start hearing a lot more about the new acquisitions that we are looking at going forward. So therefore, the way we are seeing it, we'll try and keep it at similar levels, but increase the volume of business that we do and continue to reduce our debt per square foot by launching more and more projects, and hence, creating a lot more surplus available from coverage, servicing and liquidity perspective.

Okay. That was helpful. And one last question with regards to the realization, I believe we are at now close to 8,000 square foot in the residential division vertical. So how would the gross margins behave in this segment? And would that be sustainable seeing your new launches coming in?

Sure, sure. So I'll break this again into 2 parts. What is ongoing currently. Where we see current ongoing and new launches coming in, I think our average realization because of a large number of branches, especially coming in Provident will hover around a similar number. Having -- and also Purva Land. So on an average realization, you may see, in fact, slight dip because the mix of product will be different in the coming 2 quarters. Having said that, our new acquisition strategy that is currently from the land point of view, especially adding best as a significant contributor in the next financial year, both in terms of new launches and acquisitions that we are doing other than what we are already working on in South should take up our average realization over the next 1 year's time as we do those launches. So to answer that question, I think on the longer-term trajectory, you will see our average realization continue to go up while the volumes go up, specifically on account of addition of projects in Mumbai, Pune and also other projects in Puravankara. Having said that, having added Purva Land and Provident where the realizations are, Purva Land the realizations may be as low as INR 3,500 which drives some average realization, but gives me the volume and the margins. So if you look at the margin level, I think, to answer that question, our EBITDA levels will continue to remain on an average, hovering around 30% and above. And while the average realization in the coming couple of quarters might slightly drop, our average realization will continue to go up in the longer-term.

Okay. Lastly, and I'll be joining back in the queue again, if needed. Can you -- this is -- this was with regards to the current quarter, how much of the portion is attributed to the new launches?

Of this total, new launches would be to the extent of -- if I'm not wrong -- to the extent of about INR 600 crores, if I'm not wrong in the number, about INR 1,000 crores should come from the under construction -- sustenance projects. But I'll confirm that number to you. I'm just giving it from the -- my back-of-the-envelope calculation, but let me just confirm on that.

Okay. Okay. So that run rate will be maintained for the current quarters in the launches coming up going ahead in H2 also?

Look, we don't give a forward-looking statement because all the...

No, no. Roughly, ballpark, ballpark. I don't want exact...

This depends on -- it all depends on the launches that hit the market and the timing of those launches. I think we'll wait and watch, but our expectation is that we'll continue the trajectory.

We're targeting those launches, we have already reported [indiscernible].

Thank you. Ladies and gentlemen, that is the end of the results call. I would now like to hand the conference over to the management for closing comments. Over to you, sir.

So I'll just add, it's about [ INR 680 crores ] from new launches out of INR 1,600 crores. So my number was [ off ] by about INR 80 crores. Okay. Over to you Neeraj. Thank you.

Thank you for joining our earnings call today. Thank you very much, once again, and wishing you all have a very happy Diwali. And we -- me and my colleagues are available for any query, any questions you have, you can write to us and we'll respond back to you. Thank you very much.

Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.