Puravankara Limited (PURVA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Puravankara Limited Q1 FY '25 Earnings Conference Call hosted by JM Financial. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumit Kumar from JM Financial. Thank you, and over to you, Mr. Kumar.

Good evening, everyone. On behalf of JM Financial Institutional Securities, I would like to welcome all of you to the Puravankara Limited Q1 FY '25 post earnings conference call. From the management, we have with us today, Mr. Abhishek Kapoor, Executive Director, Group Chief Executive Officer and Chief Financial Officer; Mr. Neeraj Gautam, President, Finance; and Mr. Vishnu Moorthi H., Senior Vice President, Risk and Controls. I would now like to hand over the call to the management for their opening remarks. Over to you, sir, and thank you.

Thank you, Sumit. Good evening, ladies and gentlemen. Thank you for joining the company's earning conference call to discuss the performance of the first quarter of financial year 2025. The results and a comprehensive presentation are available on the stock exchanges. We hope that you had a chance to review the same. Now let's begin with the macro economic and industry outlook. The Indian real estate sector poised for robust growth in FY '25, driven by the country's strong economic performance and rising demand across the residential, commercial and industrial segments. The IMF has revised India's GDP forecast to 7% from 6.8% for FY '25. Increased organization, infrastructure development and favorable government policies are boosting home buyers' confidence. The residential sector is witnessing a continued surge in demand. And Puravankara is expected to experience the same growth in line with the sector, supported by the [ conditional ] economic environment and evolving consumer preference. Moving into the company's operational highlights, In Q1 FY '25, our sales were INR 1,128 crores, while collections were at INR 965 crores, representing a growth of 39% year-on-year, indicating improvement in our operating efficiency. The average realization witnessed a growth of 6% year-on-year to INR 8,746 per square feet for the quarter. Our sales across projects, were led by Puravankara with INR 585 crores, Provident followed by closely at INR 449 crores and Purva Land contributed INR 95 crores. The sales value at Puravankara Land were lower due to new launches during the quarter. While Purva maintained its sustaining sales velocity with 12% higher realization, and Provident grew by 109% on year -- to consistent sales in ongoing projects, and newly launched project Provident Botanico. Now coming to geographic contribution. Bangalore was 54%, followed by Chennai at 17%, Mumbai and Pune at 14% and Kochi at 10%. Our launch pipeline is robust with approximately 12.7 million square feet of new projects from the land bank, while Mumbai and Pune together constitutes 47% of the plan projects marking our further expansion into West India. On the business development front, the company deployed INR 762 crores for land acquisition in MMR, Goa and Bangalore. This includes a 12.77 acres land parcel in Thane with an estimated potential development area of 2.8 million square feet. This acquisition further solidifies our commitment to MMR, sustainable and dynamic real estate market. Additionally, we acquired 7.26 acres of land in Hebbagodi, Bengaluru. We have also secured the [ land owner's share ] in 2 existing projects, 0.17 million square feet in Adora De Goa and 0.26 million square feet in Botanico. Coming to our debt management. Our net debt increased from INR 2,151 crores in Q4 FY '25 -- FY '24 to INR 2,237 crores in Q1 FY '25. Our net debt and equity ratio at the end of the quarter was 1.17. Our cash and bank balances increased to INR 1,044 crores as on 30 June 2024, which indicates the strong liquidity profile insuring suitability and our personal continuity. We have constantly focused on reducing our debt per square feet of our under construction area, which stood at INR 912 square feet, ensuring the effective optimization of financial resources in our projects. As of June 2024, our cost of debt stood at 11.64% despite a slight increase due to higher rates in land loans, we are continuously working on maintaining our average cost of debt down. We have delivered 929 units with area of 1.16 million square feet in Q1 FY '25, when compared to the 446 units with 0.49 million square feet in Q1 FY '24, which had more than doubled demonstrating our operational progress. Finally, turning to our financial performance, in Q1 FY '25, our total revenue grew by 101% year-on-year basis to INR 676 crores. Our EBITDA for the quarter was INR 148 crores, with 22% EBITDA margin. PAT for Q1 FY '25 was INR 15 crores, which compared to INR 17 crores loss in the single quarter previous financial year. In conclusion, Q1 FY '25 has been a sustained financial performance with a strong collection. We are expanding our system with new projects across India and delivering exceptional value to our customers, ensuring long term shareholder value. Thank you for listening and we welcome the questions you may have. Thank you.

[Operator Instructions] The first question is from the line of [ Deepak Purswani ] from Swan Investments.

Sir, firstly, I wanted to take it out recently, we got a approval from Board of Director for INR 1,000 crores QIP. Just wanted to understand the utilization of these funds, whether this could be utilized primarily for debt reduction, specifically land debt reduction of INR 745 crore or this would be for the additional land acquisition for the business development, we may look it up in future. If you can throw some light on that part?

Our Board has approved us to raise the funds from QIP to an extent of INR 1,000 crores. At the same time, shareholders have also approved it. We are currently evaluating all of our options to raise capital including the QIP. And as and when we take decision about it, we will let you.

I will just add here that typically, generally in the industry, what happens is a QIP capital is generally allocated between the debt reduction, new acquisition and operations to unlock the existing land banks or whatever people may have, generally, the trend is that. And obviously, when the organization decides to go ahead with the proposal, and we can then update on specifics of the matter. But at this point in time, I think it's early to answer that question.

Okay. And secondly, sir, in the presentation, we have also mentioned regarding Keppel Puravankara Development Private Limited. We have mentioned that we have already repaid the investment. If you can give some sense -- if you can give a background about this investment and what has been a recent development that would be really helpful.

This transaction, I mean, this, we repaid long back.

Yes. No, we have currently open this company, it's a joint venture company with Keppel Land, where Puravankara Limited is holding 49% share and Keppel is holding 51% share. Under that company, we developed 3, 4 projects and currently, we are not developing any projects in that company. That's the status.

The Keppel Land was given an exit or -- the return of capital and closure of that entity and that partnership happen in FY '23, '24. If I'm not wrong.

Okay. And thirdly, sir, with regards to our interest expenses part, if I'm looking into the P&L part of it, that is roughly INR 119 crores, which is implying average cost of borrowing to the extent of 14.5%. While I do understand there is a cash and noncash component. But if it can give some sense in terms of what is the convertible and structured in the overall debt component at the current juncture.

Sir, could you repeat your question, please?

So in terms of the interest expenses, in Q1 FY '25, our interest expenses in the P&L is INR 119 crores, debt of INR 3,280 crores, which is implying average cost of borrowing of 14.5%, right?

But if you look at our debt slide, INR 3,200 crores is our debt, which is serviceable where we are paying interest month-on-month. Besides that, we have also INR 417 crore debentures, which we have issued to HDFC CARE and about INR 162 crores investment by Purva Investment in our project. These 2 instruments, though I'm not servicing any interest. However, under -- in the case accounting, I had to do a fair value accounting for the implicit interest cost for these 2 instruments. And thereby, my interest, which is charged to P&L includes the interest cost or the fair value cost attributable to these 2 instruments also, and that is where the difference is.

Okay. And how much was the amount for that?

So there is the -- 400 -- the facility amount is INR 417 crores and INR 162 crores. Exact amount, I'll tell separately, connect offline and I'll tell you how much is the amount we have accounted related to these 2 investments.

Sure. Thirdly, on the launch pipeline, just wanted to check it out on Slide #19. We have given the details about the Lokhandwala and Thane launch. We are -- for the Lokhandwala we have given the area of 0.6 million square feet and for Thane it's a 2.8 million square feet. Firstly on the Lokhandwala site, 0.6 million square feet, is this free sellable area, our component, or this is an entire project area?

Both are sellable areas, they're not [indiscernible] because we're reporting in the sellable across the board, which is normally the practice. So both are sellable areas free for sale.

Okay. And sir, would we be looking to launch the entire project at one go for both, for the Lokhandwala and Thane?

Look, as far as Lokhandwala is concerned it will be in 2 phases and Thane also is likely to be in 2 phases. Depending on response, but most likely both of them will be in 2 phases. Sometimes the response is so high that then we decide to accelerate and completed it faster. The plan is in 2 phases for both.

Okay. And sir, continuing on the launch pipeline, I mean, if I were to look at another project Clermont Tower C, which we were looking to launch in Q2 FY '25. This time in the presentation it is not there. Just wanted to get a sense on that Chembur.

No, no, it is there. It is basically -- at the bottom if you see, there is a line mentioned new sales launches in existing projects, which is 4.56 million, which is on Slide 19, right, which is then totaling up to 17.25 million square foot. So if you see there, we have actually captured all those launches there.

Okay. And this is on track to get launched in Q2 FY '25?

Yes.

Okay. And just a final question from my end. If you can give a sense in terms of the industry or demand environment at the current juncture, especially in the context marginal price hike we have seen in the industry, especially in the macro market in Bangalore and MMR region. How we see the adoption trend in the last 6 months or so after the pricing?

So from the market point today, the struggle for all of us is really to keep up with the demand, and that is the challenge. Like, for the first quarter, we have largely sold out of sustenance projects. We have not had a new launch on a much increase size. We have still maintained the velocity as well as the value of the business that we have done. So overall, demand continues to be robust. And we expect it will -- see it on ground. I think it's more a challenge for us, also the industry in general to bring in the supply to catch up with the demand. Specifically in the example of the markets we talk about Bangalore, in fact, Mumbai, if you look at Pune, if you look at Chenai, and all of these markets, currently, I think the issue is much more related to how much supply you can deliver, specifically, definitely in Bangalore.

[Operator Instructions]

Are there some technical problems people are facing? Because we can see a lot of people in the queue.

The queue just assembled. [Operator Instructions] The next question is from the line of Akshada from Vivog Commercial Limited.

Hello, am I audible now?

Yes.

Yes. So I just wanted to have a general guideline for the company? What expectations or what guidance would the management like to give us for this year FY '25 in either units or what kind of launches that are expected or collections? Anything would be helpful.

Sure. So overall, the company is expecting to launch 17 million square foot, including phases of the launch projects. New launches to the extent of 12.7 million square foot is expected and 4.56 of the existing launched projects where new phases will be opened up for launch, a total of 17.25 million. If you look at the distribution, we will see about 9.3 million square foot is in Puravankara and about 3.28 in Provident, and there is a small project called Bouganvilla in Purva Land. Currently, this is where the pipeline is. Of course, we see a substantial launch of about 3 million square foot is expected in terms of sanctions and -- so in phases obviously in the Western region. So -- which was our commitment in terms of what we were looking at in the -- in terms of new launches and adding to the business. And we're already seeing increased contribution for the Western region in the business. So we are expecting these launches to go to the market...

Okay. Okay. And do you expect the per square feet realization to keep a positive momentum throughout the year? Are we expecting to maintain the growth that we got this quarter?

See, the per square foot average realization is a mix of inventory that we said. So in certain project for example, where -- especially Purva Land, where the average realization maybe as low at INR 3,000, INR 3,200 square feet would drag your average realization down. So if you see, for example, in June quarter, our profit development average realization is INR 4,316 whereas Puravankara at INR 11,464 and Provident in the INR 8,000. But average realization is only INR 8,746. So it's more a mix of inventory that drives the average realization. But let me come to what we expect in terms of overall, how we are looking at it. So this year, with Mumbai, MMR coming into play, definitely, it will have some impact on our average realizations as a contribution increases. That is one. And second is the new launches that come in will also had a certain impact on our average realization. But if you look at project wise, I would expect some of the sustenance. We would look at -- my expectation is the industry will look at an average of about 9% in term of average growth. Now, of course, project to project, market to market, it will be different. And depending on the micro market and the stage of the project it defers. Like, for example, in the last year, we have seen average realization go up from 11%, 12% up to 27% in certain projects. Where we see significant demand for the supply and the projects and the products is position in a certain manner by the company. So that's the general direction that we would expect to see. Of course, project to project would be different in this year. And depending on the stage and completion of the project.

[Operator Instructions] The next question is from the line of [ Abhishek from Yes Securities ].

Yes. So basically, my question is around that debt. We always said that the debt per square feet, we [ exceptionally ] look at INR 1,000 per square feet and we are comfortable in that. From last 2 quarters, we are seeing there is a bit of increase in that. And by the end of Q1, we are at INR 912 and even our growth rate is increasing. So how do you see that? And secondly, with the kind of debt we are right now and the cash, why you're not reducing the debt. That's a simple question because we also have a QIP ahead.

Thanks, Abhishek for the question. So if you see the trend in March of '22, we were at about INR 1,248 a square foot on that. March of '23 at INR 1,106. March of '24, we were at INR 874 and June of '24, we are at INR 912, and you are right in that observation. So we are very much under the comfort level as well. At the same time, I must mention that our average realization is also going up. Having said that, because the way we look at debt. And if you look at the debt profile and the debt breakup on where the debt has gone up and how it has gone up to the extent net debt has gone up to an extent of INR 86 crores. Now if you see that movement period commercial is about INR 47 crores. This is Slide #27. So if you see CapEx towards commercial of the INR 86 crores incremental net debt has gone more to CapEx. And we have also deployed as Neeraj has mentioned earlier on INR 760 crores in [indiscernible] solutions. Now -- so that clearly indicates and you have today, you're setting with the INR 1,000-plus crores of approximately net cash in hand [indiscernible] cash and cash equivalents. So if you look at the overall scenario and our collections is approximately raising between INR 900,000 crores currently at this current turn rate, not including the new launches that we are looking at June. So if you look at the overall scenario and the deployment of capital, the company is really, really positive on replenishing [indiscernible] and scaling our business in terms of creating order lines, which will then go into the pipeline for launches which is geared toward the growth of the business. So our focus is to maintain debt at similar levels in terms of per-square-foot numbers, keep it on the housing and continue to scale the business so much that then it becomes [indiscernible]. And that strategy will continue to play out. So if you see the liquidity in the system attending, which is most in volume today in INR 763 crores, we have added more than 4 million square feet in between Mumbai and Bangalore and Goa. And you see that the value is getting created in the that. So repaying debt versus creating value, there is a significant on that and upside, I mean, in terms of margins and turning the capital and return on capital employed. So we are very comfortable with the current number, and we'd like to increasingly grow in the business while we keep it at a similar number.

[Operator Instructions] the next question will be from the line of Deepak Goswami from Swan Investments.

Just on fact, I mean, has it again specifically considering the Q1 sales and the launch pipeline over the broader time frame, what would be the presales trend rate we would look at over the medium term?

So again, I must mention here, we do not give guidance. But what I can share with you is our performance for the last 3 years. And of course, what we are looking at in terms of our acquisition plan and the launch pipeline. So if you see the launch trend of last 3 years, we have launched in -- we had launched last year about 10 million square foot. And it started back with about 2 -- 1 million square foot for a launch per year. That launch trend has resulted into last year selling about 7.36 million square foot approximately. And our intention is to continue to push the new launches. So for example, in this year, we're looking a new launch pipeline. Instead of a 10 million or 15 million position last year on an overall basis of which we opened about 10 million square foot. 10 million, right? We opened about 10 million square foot last year -- 8 million. So we opened about 8 million roughly. This year, this increase in launch pipeline, we are expecting to continue that momentum and of course, with an increased number. So our goal will be to continue to push our new launches from existing landbank, which will help us unlock our existing equity as well as profit. And add to that new acquisitions and new launches, which will also help us to bring more momentum in terms of [indiscernible]. So our goal will be to continue that -- so if you just look at the CAGR of units sold in the last 3 years, it's been about 48%. And if you look at our CAGR for volume it is 45%. In value, it's been about 57%. This is on Slide 8. This is how has been our fast track income.

Okay. So in that context, Abhishek, if you can also throw some light in terms of the approval for most of the projects, especially in the context, because of the election in between -- are all the approval processes are on track during this year or should we expect there can be some kind of a slight delay in terms of the project launches?

So the general likes are over. Now the state elections are there. So you know how it was during the state elections and your observation is right. Our target will be, our goal will be to try and meet the annual target, which is what we have set for ourselves in terms of launches. A quarter year or quarter there could be because of the [indiscernible]. Maybe you will let it by a month, not much and then we would split over into the next quarter. But our endeavor is to ensure that we take these products to the market on time.

And then moving to the correction and construction costs this quarter, how was that trend? And how should we see it in this? I mean, if you can give the numbers for this quarter? And also, how should we look into its collection and construction outflow during this year?

We have collected INR 955 crores during the last quarter. And if you look at the trend, it's on Slide 15 of our presentation, we are slightly down from the previous quarter. However, as they compare to the quarter year ago, we have substantially grown in terms of collection as well. That is the trend. As far as the construction outflow is concerned, last quarter, we have incurred at INR 247 crores on contractor costs and INR 65 crores in the cost of raw material. So if you total about INR 300 crore plus we have spent on the purely in consistent cost on our rates. And then that construction projects are switching all projects and the same will continue.

Of course, it will go out as different projects to reach different phases and new launches that added.

I mean, if you're looking at -- if you look at the quarterly expense is about INR 300 crores towards operations, collections around INR 900 crores, which is typically 1/3 of your -- so it's pretty much backed up in taxes because collections have directly linked also to a process of construction and invoicing that we do.

Okay. So most of the sales which we did last year, the collection to the extent of 35% to 40% collection would flow in this year? Would that be the correct assumption?

See, in the first year, particularly of the launch from the date of the launch, you would lend us connecting anywhere between 30% to 40% of the total steel value, which we have done in a particular project. And then over the balance comes over the next 3 years, typically. So we would -- I mean, depending on the timing of the launch and the type of launch. Now for example, the land would be slightly different, and we're getting much better collections within the terms of the launch. But if you look at private income to one, that would be the general trend. So we would expect the overall collections to continue to be robust.

The next question is from the line of [indiscernible] from JM Financial.

My question is, any guidance on your EBITDA margins? And will the new projects in Mumbai will bring in higher margins?

So see, our current EBITDA margins, which we are holding up for last, I guess, a couple of years have been around 22%. Largely, it has been on account of 22% and 23% in FY '24, right?

FY '23, it was 31% to 32%. FY '22, it as 46%. In FY '24, 20%. In this last quarter, it was 20%.

Yes. So generally, if you see the EBITDA margin do take a hit because of the -- some amount of marketing cost of new launches and ongoing projects EBITDA while old projects, which we have been handing over of some portion of those marketing costs also with the bottom line. So unfortunately, as an accounting standard the new launches, marketing cost and expansion overheads. For example, our expansion in Mumbai, now we have set up an we'll be hitting our bottom line because you can see on paper or see on the numbers. But as the delivery picks up more and more and start catching up with up the sales number and gets closer and closer, these numbers will evolve and change. The way we get closer to our target number, which is at about 30% of EBITDA. So on paper, I think it will take us some time to get close to that number. If you look at margins, typically, we expect between in Provident between 27% and 30%, 33% margin. In Puravankara, between 30% and 35%. In Purva Land in excess of 35%. Coming to Mumbai, if you look at our margins, Mumbai redevelopment, it depends on what kind of projects and outside projects will be very similar in most of the country. Then we will see in excess of 30% market EBITDA margin. But if you look at [ JV ], it would be somewhere around 15% margin, which will be net of interest because the interest will be lower because land cost is much lower, right? Now it's an asset-light model. In Mumbai, if you look at each on projects, it could be not being the entire land process but most of the cost is evolved is paid over the life of the project in terms of -- other than the initial cost and the rent that we pay over the lifetime cycle. The biggest cost is the cost of pension. Now that cost of pension also is fair over time. So that margin typically lies between a JV margin and an outright margin. And that's how we look at the margins in the Mumbai redevelopment market. Now if you look at the absolute number, clearly, the Mumbai first square foot margin will be much higher because these values are very different. And hence, add on an absolute value on the number that we can see as a margin coming up and on an absolute basis. On an overall basis, I think both our average realization definitely will go up in terms of Mumbai projects that is adding to the rest of the country.

[Operator Instructions] The next question is from the line of Chintan Mehta from Prudent Broking.

Sir, on Slide 23, you mentioned about [ renting ] to be recognized a number of units in India. If you can throw out a group this is specific to '24 and '25. So if you can throw on entire group level, what is to be recognized unit or revenue spending?

That slide only includes that tend to be recognized in renting out of the recent OCs. However, we can give you the complete detail of all the projects put together. What is our spending to be recognized it and inventory, and I can give it to you offline.

Okay. Sure. Who could be your inspiration to be a national level player? So what's the new geography we are looking and what will be the rough time line for this?

[indiscernible] question, to become a national player. So our focus is, of course, Bangalore, Chennai, Hyderabad, Mumbai, Pune and we are adding NCR here. NCR we just put the name and account. So we are hoping that in the next financial year, we should see by the next, we need to track very carefully. It's a new market. It takes some time to acquire and do the right acquisitions from the brand and strategy point of view and also to be careful in markets, especially NCR. So we want to be perfect. And our strategy is to enter with an asset-light model there. So we are hoping that within the next financial year, we will see some results. Other than that, all the other markets we've already seen launches, we already have ongoing project. So that [indiscernible] is already there. The only large market that we have been missing out is on NCR, and we are hopeful to see some direction coming in by the next financial year.

Sure. last question on my side. You just mentioned a slide on [indiscernible] on the group. This slide, this time is missing. So if you could add it, it may [indiscernible] great on many presentation.

Sorry, you broke up in between. You said cash, some slide which was there earlier?

Cash flow potential.

Cash flow potential is there. It's there.

Okay. We can check those with you offline, Chintan.

Sure, sure, sir. And just a suggestion from my side. On the current construction project, if you mentioned the completed construction percentage, that's going to be great if you can give to us.

Yes, sure. Your feedback is noted. Our team [indiscernible] at the end of construction projects, we can even give that detail going forward.

[Operator Instructions] The next question will be from the line of [indiscernible] from [indiscernible].

For the, [indiscernible] we are anticipating the market going in the next big 14 cities. You are currently presenting almost 4 or 5 of it. Do we have a strategy to be penetrating all 14 of the cities?

Sorry, we couldn't get you clearly. Because it's too much background distortion. Is it possible to repeat the question, please?

Sir, is it clear now?

Yes, much better.

So top 14 cities in India are having a lot of potential. What do we have read. And you are present in almost 5 of them. Are you having a strategy to be present in all 14 of them?

Okay. So as a business, it takes time to understand the local environment and build the business in a new city. Over the last 49 years of business that we have done today, we are in 9 cities, which is Bangalore, Hyderabad, Chennai, Kochi, Coimbatore. Mangalore is one market we don't want to be in, we can possibly get out of it, Mumbai, Pune and Goa. And now the only other market we want to enter at this point in time in NCR. And I think this is enough for us to really scale our business because if you look at the video we have the entire spectrum of products as far as residential is concerned, from projects which start at 3,000 square feet to the top end of the business which will go possibly at over 100,000 square foot eventually. So if you have the whole range and we have these cities are going to be first to go deeper and work on the market share for the cities before we look at any other city. And as I said, it's taken us time and it is time to understand the loan do the acquisition and then we set to launch complete the projects and showcase our delivery capability in each of these markets. So at this point in time, we will stay limited to those cities that we spoke about. And at a later at appropriate time, we will revaluate any other city that we will look at. But right now, we see enough potential to just focus on the cities in the previous year.

[Operator Instructions] Thank you. Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Thank you. Thank you, everybody, for joining our conference call. And I hope me and my team have been able to answer all your questions. Both of us are available offline if you have any further questions, please write to us. We'll provide a response as soon as possible. Thank you.

Thank you, everybody.

On behalf of JM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.