Sunteck Realty Limited (512179) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Sunteck Realty's Earnings Conference Call for Q4 fiscal year 2020 and Q1 fiscal year 2021. We have the us today, Mr. Kamal Khetan, the Chairman and Managing Director of the company; along with the senior management team of Sunteck, comprising of Mr. Manoj Agarwal, Chief Financial; Mr. Prashant Chaubey, Head of Corporate Finance; and Mr. Raunaq Rathi, AVP, Investor Relations. [Operator Instructions] The conference is being recorded, and the transcript for the same may be put up on the website of the company. [Operator Instructions] Before I hand the conference over to the management, I would like to remind you the certain statements made during the course of this call may not be based on historical information or facts and may be forward-looking statements including those related to general business statements, plans and strategies of the company, its future financial condition and growth prospects. These forward-looking statements are not based on the expectations and projections and may involve a number of risks, uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by such statements. I would now like to hand the conference over to Mr. Khetan, Chairman and Managing Director of the company. Thank you, and over to you, sir.

Good evening, everybody. And welcome to the earnings call for the fourth quarter of the financial year 2020 as well as the first quarter of the financial year 2021. Thank you for joining us. Before I share a few updates, I sincerely hope all of you are fit and fine. The ongoing COVID-19 pandemic for the last 4 to 5 months has significantly impacted the economy across industries. The quarter gone by has been the most unprecedented and challenging one for us so far. On the macro side, we are seeing few things, uncertainty in the business and employment could lead to near headwinds. On the flip side, the interest rates for housing are extremely low and affordability is attractive. The importance of having a nice room in a work-from-home environment is positive. We are observing a major shift from wanting to buy under construction to wanting to buy ready or near-ready inventory. More by luck rather than design, a majority of our inventory is now ready or near ready. We have been positively surprised by the kind of presales we have been able to do and most of it is driven by either finished or close-to-finish inventories, such as in our projects like Sunteck City Avenue 1, Signia High at Borivali and Signia Waterfront in Airoli. We have also seen a significant momentum at Sunteck World, Naigaon, Phase 1, that's Sunteck Westworld which is, which near ready and affordable. Hence, more resilient. During the lockdown, we shifted gears to launch a digital platform SunteckAER that accelerated the sales momentum despite the pandemic. During the complete lockdown in MMR, we were able to do -- book healthy presales. All our under construction sites now have resumed, and we are on track to returning to pre-lockdown activity levels by next month. It is opportune time to afford ready-to-move-in inventory, given the current demand trend. It is important that we continue to focus on our construction progress, which in turn will lead to stronger revenue recognition, as well as generate steady cash flow in coming quarters. GST, demonetization, RERA, NBFC crisis and now COVID-19 is only going to increase the pace of consolidation in the real estate industry. Developers with weak balance sheet have multiple challenges, lack of liquidity to complete the projects and nonavailability of fresh capital. Lenders are not willing to offer home loans to buyers of unorganized developers. And there is a tremendous distress on the street. Our brand recall , quality, execution track record and balance sheet strength, positions us to be one of the biggest beneficiary and increase our market share. We intend to capitalize on the opportunity at hand, setting the stage for further sustainable growth and attractive ROE. Our recent acquisition of Vasai (West) is a step in this direction. Similar to our strategy to enter BandraKurla Complex, BKC, and ODC at Goregaon West and the Naigaon market, Vasai will evolve into our fourth growth engine as it offers a big demand potential in an untapped micro market. With a focus on middle-income group, we intend to offer a well-designed apartment, unobstructed sea view catering to emerging customer need of residential premises that not only offer a luxurious lifestyle, but also ensure a comfortable work-from-home environment. On that note, I would now like to take -- hand over the call to our CFO, Mr. Manoj Agarwal, who will take you through the operational and financial numbers for both the quarters. And as always, I'll be happy to answer any of your questions that you may have during the conference call. Over to you, Manoj.

Thank you, sir. Good evening, everyone, and thank you once again for joining us today. Now I would like to run you through the financial and business performance numbers of fourth quarter of financial year '20 -- full year financial '20 and Q1 of financial year 2021. I'll begin with the operational performance numbers, we recorded presales of INR 608 crore in quarter 4 of financial year '20, which is a 110% increase year-on-year as compared to INR 289 crores in quarter 4 of financial year '19. Quarterly presales of financial year '20 stood at INR 1,221 crore, which is 2% increase year-on-year as compared to INR 1,202 crores last year. In terms of distribution mix of quarterly presales of INR 608 crore, Naigaon presales stood at INR 680 crores, while ODC contributed INR 6 crore in BKC units was INR 31 crore at balance INR 3.2 crore spread across other projects. In Q4, we sold 1,772 units in Naigaon, 3 units in ODC and 1 Signia Waterfront. We achieved collection of INR 715 crore in financial year against INR 661 crore, which is 68% growth as compared to financial year '19 and INR 175 crores for Q4 for financial year '20 against INR 160 crores in previous year and INR 207 crore in previous quarter last year. In terms of financial highlights, we reported consolidated revenue of INR 608 crores in FY '20 as against INR 857 crores in last year. That consolidated revenue in Q4 of FY '20 was INR 92 crores against INR 198 crores in Q3 FY '20, and INR 270 crores of Q4 of FY '19. On the EBITDA front, the consolidated EBITDA of FY '20 is INR 163 crore as against INR 378 crore in the last financial year. We recorded consolidated EBITDA for Q4 at INR 9.2 crore as against INR 15.2 crores of Q3 and INR 88.8 crore of Q4 of financial '19. Consolidated EBITDA margin in financial year '20 is at 28% compared to 44% last year because of change in revenue mix. With respect to profit after tax we reported INR 1 crores in Q4, against INR 33.6 crore in the previous quarter. We have reported... [Technical Difficulty]

Ladies and gentlemen, the line for the management has got disconnection. Please take an exit while we reconnect the management. Ladies and gentlemen, thank you for patiently holding. We now have the lines of the management reconnected. Over to you, sir.

I'm extremely sorry about this. We actually had some logistics problems. We are back live. We're sincerely sorry this. Hang on.

So I'll start from the operation numbers. We recorded presales of INR 608 crore in Q1 of FY '20, which is a 110% increase year-on-year as compared to INR 289 crore in Q4 of FY '19. The presales in FY '20 stood at INR 1,221 crore, which is a 2% increase year-on-year as compared to INR 1,202 crores last year. In terms of distribution mix of quarterly presales of INR 608 crore, Naigaon presales stood at INR 680 crore, while ODC contributed INR 6 crores, BKC unit was consisted INR 81 crores and balance INR 3.2 crore is spread across other projects. In Q4, we sold 1,772 units in Naigaon, 3 units in ODC and 1 in Signia Waterfront. We achieved a collection of INR 715 crore in FY '20 against INR 661 crore, which is an 8% growth as compared to financial year '19. And INR 175 crore for Q4 of FY '20 against INR 166 crore in previous quarter and INR 207 crore in previous quarter last year. In terms of financial highlights, we reported consolidated revenue of INR 608 crore in FY '20 versus INR 857 crore last year. Our consolidated revenue in Q4 of FY '20 was at INR 92 crores against INR 198 crore of Q3 FY '20 and INR 270 crores of Q4 FY '19. On the EBITDA front, the consolidated EBITDA for FY '20 is INR 163 crore as against INR 378 crore in the last financial year. We recorded consolidated EBITDA for Q4 at INR 9.2 crore as against INR 50.2 crore of Q3 and INR 88.8 crore of Q4 of FY '19. Our consolidated EBITDA margin in FY '20 is at 28% compared to 44% last year because of change in revenue mix. With respect to profit after tax, we recorded INR 1 crore in Q4 against INR 33.6 crores in the previous quarter. We had reported PAT of INR 101 crores in FY '20 as against INR 241 crore in last year. Our consolidated PAT margin for FY '20 are at 17% compared to 28% last year. I also want to touch upon on the cash flow statement for FY '20. Our cash flow generated from operation before tax and after investment in business development for the year stood at INR 7.3 crore and after-tax negative INR 34.6 crore. Now I would also like to run you through the financial year business performance number for the first quarter of financial year 2021. I'll begin with the operational performance numbers. First, presales in the first quarter stood at INR 101 crores compared to INR 185 crores last year, same quarter. In terms of distribution mix of quarterly sales of INR 101 crore, it's 40% of ODC, 48% in Naigaon and the balance in other projects. Unit-wise breakup is 21 units in ODC, 123 units in Naigaon and 7 units in Signia Waterfront. We also achieved a collection of INR 65 crore in first quarter compared to INR 189 crore in Q1 financial year 2020. In terms of financial highlights, we reported consolidated revenue of INR 61 crores in Q1 of financial year 2021. This is a decrease of 34% Q-on-Q against INR 92 crores of Q4 financial year '20 and decrease of 66% Y-on-Y as against INR 178 crore of Q1 financial year '20. On the EBITDA front, the consolidated EBITDA for Q1 at INR 10 crore as against INR 9 crore of Q4 financial year 2020. Our consolidated EBITDA margin for the first quarter of financial year '21 is at 17%, 1-7 percent, compared to 10% last year. With respect to profit after tax, we recorded INR 3 crore in Q1 as against INR 1 crore in the previous quarter. We can now open the forum for questions from the participants. Thank you very much.

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

The first question on the BKC cancellations. Like, can you just explain for how many units has it been? And what is the accounting impact? And are -- do we expect any more cancellations in the first or second quarter of this year, depending on what visibility you have?

Adhidev, are we audible?

Yes, yes, yes. I can hear you.

Adhidev, one second, we are trying to switch on to the other phone because of this logistic problem, which is happening.

Adhidev, can you hear me?

Yes, yes. I can hear you.

Adhidev, Prashant is right. So in -- we have canceled 1 unit in Signature Island, which is up to the value of INR 81 crores. And that is what has been written down in the fourth quarter of financial year 2020, which was sold in Q2.

Okay. Okay. And just on that follow-up, is there any further concession or is this one-off you are seeing?

So Adhidev, obviously, this was just pre-COVID. The deal was in Q2 and the deal was going through. And with that -- this is one-off, I can say, obviously, where we don't expect any more to happen.

Okay. Sure. Sir -- and second question is, now after COVID, so what is the plan now for our ODC commercial, the 3 million square feet. How do you view -- how do you look at the project mix and time lines for the project?

Adhidev, obviously, we want to be, obviously, cautious after this COVID. It is, again, by luck, I would say, we were -- in fact, it was our -- due to the approvals -- delaying in the approvals. In fact, on the hindsight now, it has turned out to be lucky for us that we didn't start the project. In fact -- but we would definitely want to see the market post -- once this COVID thing gets over for 3 to 6 months. And if we see the demand continues to be there in the commercial segment, we will go ahead and do commercial out there. If we don't see the demand, we will -- we have a plan to -- that is definitely we can start -- we can start looking at residential in that sector. So the fifth avenue, which we call, where we were going to do commercial. So we can partly start with residential instead of commercial. If we feel that commercial demand goes down completely after -- post-COVID. But we want to wait and watch for next 3 to 6 months.

The next question is from the line of Riddhesh Gandhi from Discovery Capital.

Given we are -- like, we are actually located in MMR, which was pretty much under hardcore lockdown in Q1, can you just explain to us how we were able to do presales of INR 100 crores plus? And also the trajectory we are seeing between April, May, June and also as we've gone into mid-July, August, how the presales is looking and how the markets is looking?

So definitely, when there was a complete lockdown in MMR in spite of that -- so the -- I think the which -- one of the biggest things which helped us that we started immediately the online platform within -- after the lockdown within 15 days. We tried to put an online platform, and we marketed it as SunteckAER and we put it up. We felt that there should be some demand, whatever we didn't want it to keep our sales team idle. And in fact, we were also really pleasantly surprised. We thought that, okay, we'll at least keep our sales team busy and try to do some sales than rather doing nothing. In fact, we were pleasantly surprised after seeing the demand. And we -- as I spoke in my speech before in my commentary, that the most of the demand we could see was coming for the people who have, like, in lockdown, they feel the people who are on the lease and license or they have not -- they don't have room and now the work from home has become -- maybe the stipulated -- going forward, we'll see a lot more and more like work from home happening in many companies. In fact, I think that at least 20%, 25% of the staff, some of the departments will work from home. I think this has made people -- people who are trend seeker or who were not buying home and waiting for the correction because pre-COVID also, the market was not so good for real estate. So post-COVID, people felt that obviously, people feel this is the bottom. And now it's the right time to buy a house and they feel -- so we see good demand. And that's why we could do good sales. And not only that, if you look at the current quarter, I can share that till July, we have done sales and looking at the current sales, we -- I won't be hesitant in saying that I'm pretty confident we might -- or this Q2 might surpass the corresponding Q2 of the last year, presales. So we are seeing that kind of demand, especially in ready-to-move-in products or near ready-to-move-in products.

Okay. I understood. Interesting. Interesting. And see -- and the other question I would ask, if you could just highlight some of the actual economics of your recent acquisition in Vasai. We thought and the presence of the potential INR 5,000 crores of revenue. If you could just give us a broad view of how much of that will be shared, how much of that would be our cost and in turn, effectively. How do you think about these projects as a whole in terms of equity IRRs and also in terms of absolute profitability?

So I will give you some clarity what is the reason, obviously, we -- as you see that we have always tried to go -- when we take a big project, we are very particular about the location. We do a lot of research before we get into any location. Historically, you see we have gone to BKC and then ODC and then Naigaon. So we have explored such new locations. And there we saw there is an untapped demand which is there and which can be tapped even in any market that outperforms. So while doing this, we obviously see this Vasai market, which is one of the posh locations of the Vasai and which has a very beautiful scenic view from this property, a sea view. And we definitely wanted to tap this. And this is, again, an asset-light model. And I think we got, in fact, a better deal than what we did for Naigaon, because of the current market conditions. So almost like 25% of the top line. This is a micro market, which is more expensive than Naigaon. And still, in Naigaon, like we give close to 25% of the top line in Naigaon. And this market being -- in spite of being expensive than the Naigaon market, we will still continue to give almost similar 25% of the top line to the landlords. And in looking at IRR numbers and other things, I think Raunaq, can you explain in detail?

Sure. So in terms of top line, as we mentioned in our press release as well, we are looking at close to INR 5,000 crores. Our share will be closer to INR 3,750 crore out of that if you do a simple math of 75%. In terms of structure it is very similar to our Naigaon deal. So we are only responsible for execution, sales and marketing. All land-related premiums as well as approvals are to the account of the landowners. So our limited cost will be only to the tune of INR 1,250 crore, which is for execution. We are looking to realize a surplus of about INR 2,500 crores on a project life cycle of about 5 to 7 years. In terms of margins, we expect this to be close to between 25% to 30% typically in range for this pricing.

Got it. So you're saying our share of surplus from activity in Vasai after cost could be INR 2,500 crore?

Yes, that's correct.

And over how many years you think the ...

We're looking at a product life cycle of about 5 to 7 years.

Got it. And just a last question is that, are there other acquisitions actually like this, which we are considering or we will go slowly by sizes ...

So Riddhesh, yes, Kamal here once again. So definitely, because we are -- we want to be very aggressive at the same time, very, very cautious. So you can understand that's why we are very clear we are doing asset light. We won't stress our balance sheet, but I can tell you, we are looking at the similar kinds of project without putting balance sheet under pressure. We will continue to do some aggressive cautious acquisitions.

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

Just on this Vasai thing, how many million square feet will that add to your portfolio?

So it will add almost 4.5 million square feet.

Okay. Okay. So basically, you're looking to sell 0.5 million square feet every year in that locality, more than half?

At Naigaon, typically we sell close to 1 million square feet every time we launch, which is in a year, 12 to 15 months. We are looking half of it to be sold, 50% of that kind of volumes for Vasai.

Right. Great. So this is very interesting. You guys are going to places like Naigaon, Vasai and obviously doing very well. The deal looks good and your performance on Naigaon also is quite impressive. What is it that you're doing differently versus some of the other guys who would also be seeking to enter these markets? What is the competitive advantage that you have there?

I think, Puneet, definitely it is, today, everything is the risk of your brand and the performance and the financial strength. Well, I think these 3 put together, I think -- and also the execution track record. So if you maintain brand, that means everything comes into [indiscernible]. Obviously, you have to be financially disciplined with a strong balance sheet. And I think -- and we have -- one more thing we have always -- people must have seen our track record, like we have not rushed for the -- desperately gone and did some acquisition. We have been very -- like whenever we did acquisition, we have done a lot of research on that location before entering any location. So historically, even if you see. So since Sunteck was born since 2007 or 2006, '07, always, whenever we have gone big on any location, which is -- we have created that into -- we have taken that territory into a different zone that particular micro market.

Yes. Okay. Sir, secondly, if you can give some color on what is the inquiry momentum in the current month, July for your ODC portfolio? Because I thought it was a very interesting portfolio pre-COVID. Do you think that portfolio might become a disadvantage given that people might ask for slightly bigger homes?

No, I don't think so because, in fact, the most of the inventory what we sold right now is -- I mean, second to Naigaon is ODC, which is our -- all the 3 phases for Phase 1, Phase 2 and Phase 3. So obviously, Phase 3, which is the fourth avenue, the inventory sold post-COVID is negligible because it is just under construction and it just started the construction. And it will -- the project will be delivered next after 2.5 to 3 years, whereas the Avenue 1 and Avenue 2, first phase and second phase, which is almost completed and near completion, where we have seen a good demand and excellent demand, and we continue to see that robust demand. And that's why we are putting all our strength, I would say, to do execution and keep the execution at the fastest speed as possible.

Puneet, Raunaq here. Just wanted to point, because you spoke about larger homes. In fact, in the last quarter or 2, we have also seen a lot more inquiries in Avenue 1 because relatively there, the apartments are slightly bigger and that also being nearing completion becomes a very attractive proposition for the customers as well.

So also larger homes with affordability. So that is also a key thing. So if you give a larger home in Goregaon, which is worth like INR 5 crores, INR 6 crore, obviously, then how much affordability you can look at. So -- and how many apartments you can sell. So definitely, we have seen in July, a great demand again. What we could not sell in last 2 years, that kind of momentum just in July in Signia High. So we are seeing that kind of demand, which is completed perfect and it's rightly what you speak, large homes. These are large homes. So -- and -- but not too much of the inventory, like not 200, 500 apartments, these are like balance apartments are just 30, 40. So I see that market in every micro market for that kind of a product, but not more than 40, 50. So that is a ticket size of INR 5 crore to INR 6 crore in Borivali. But that ticket size, you can't have 4 and -- you can't sell 400 or 500 apartments, but you can definitely sell 30, 40 apartments. And fortunately, by luck, we only have that 30, 40 apartments, and we are so confident that what we didn't sell in last 2 years, we may end up selling in this month or maybe next month. So that's how the demand which we are seeing. It is a lot of exciting times, let me tell you.

What is also interesting is that for the ODC site, you actually did higher number of sales in Q1 versus Q4.

Correct.

Is there something to read into it? Or would you comment what was different in Q1?

So that's what. So it's -- so post-COVID, that's what I'm trying to say. We have been selling more in post-COVID the ready inventories than pre-COVID. That is what we are seeing the difference.

Okay. And in this INR 40 crore, you would say, bulk of it would be Avenue 1 and 2.

So in Sunteck City, 80%, 90% is in Avenue 1 and 2 post-COVID.

The next question that is from the line of Prem Khurana from Anand Rathi.

Two questions from my side. So one was eventually, I mean, when I look at the acquisitions that you've done in the recent past. I mean you've done 3, that has been announced officially for 1 was Andheri West, and then we had Naigaon, and then we have this Vasai. So are -- these 2 seems to be in kind of extended suburbs. So is it by design that you've been able to manage these? Or we were, I mean, working towards kind of adding more on extended suburbs because you get to have larger layouts where then you have option to be able to design your product as per your discretion, whereas when you look at some of these suburbs, you tend to have some restrictions in terms of about sizes as well as in terms of the kind of size that we could get.

So by design definitely, we would not like to enter certain micro markets. I would not like to name, but there -- many of the developers are there and they have burnt their fingers, and they are not able to sell even a single apartment. So where we see there is a demand which is there, and we do our research, that's what I said. Naigaon, there was no one who tapped Naigaon or no one tapped BKC as a residential or there was no demand in ODC, but we saw that there is a demand which is there, which is untapped. So similarly in that micro market of Vasai, we see a huge potential of demand, which is untapped by any organized player. So we like to go in those micro market. We don't like to go where everybody else is going just by -- we also go by default in that micro market. So we have been very selective. And I can say, fortunately, we have been lucky and what we want with the hard work, we get it finally. Otherwise, it is not necessary then you do all the hard work and you get it. So God has been kind, I would say, we have been also lucky for that. Lucky in getting that.

Just to understand it better. I mean when you evaluate or rather when you look at growth opportunities, do you tend to go with the mind that I want to have this much area in, let's say, before Borivali and then these many million square feet after Borivali? Or you have no such restriction and we are free and if it is -- and if it fits our strategy, we are open to kind of take up more on beyond Borivali projects.

Yes, so definitely. So we are open to take where we feel there is enough demand. We'll continue to do aggressive, but definitely cautious in current times, acquisition on an asset-light mode. And we will -- we see there is a huge potential and there is a lot of distress in the market. So at the same time, we want to be aggressive, but again, very, very cautious.

Just the last from my end. On Andheri West launch, I mean any time lines in mind, especially given in the backdrop of COVID, I mean as you said, as you rightly said, the demand seems to be much better for the near complete or ready-to-move-in, so would that make you kind of push that launch to a date which is farther in the future now or is it that you're trying -- planning to launch it this year? Or could it be pushed for next year or we are going ahead with the launch this year only?

So we will definitely continue to keep our launches on. We are not like -- we would not like to delay. Maybe we may see not that much of a demand for under construction, but it's not that there is no demand for under construction for a good developer, organized developer, there is enough demand for under construction. But if there is any demand which goes down, obviously, in under construction. I think more than that, which will be compensated by selling ready inventory with the cash flow coming upfront. I think that is the key point, which we should understand, which is a big, big benefit for the company, I think. And I would be more keen in selling the ready inventory. That does not mean that I will not sell or not launch any new projects. But we are anticipating, let us accept and understand that supposed pre-COVID, we would sell, let's say, 100 apartments, I wouldn't be surprised now in the same launch, maybe under construction, we may end up selling only 60% or 70% of it. 100 versus only 60 or maybe 100 versus only 70. But I think more than that, it will be compensated, that 30% loss or 40% loss will be compensated by selling the ready inventory, which was not moving out for quite some time and which was building up in our portfolio. In fact, that is a great -- that has come as a great advantage, I think. I think that answers your question.

We will move on to the next question that is from the line of Sagar Karkhanis from Motilal Oswal.

Sir, first of all, congratulations on showing some fantastic presales and collections in an otherwise really lackluster environment for the real estate industry. I just had some questions on our new project in Vasai. If you can just share what is our vision in terms of what will be the ticket size over there? And what kind of customer profile that we are looking at? Because I understand this location is very far away from the railway station. So you must have thought of what kind of customers you will be looking at? And can you share some of your broad overview on this?

So we are looking definitely, Sagar, at mid-income group segment, which is -- which are quite -- which is the demand in that micro market, what we studied. And so what we are selling in Naigaon is a ticket size, which is like INR 35 lakhs to -- let's say, INR 35 lakhs 1 BHK to 3 BHK, which is INR 65 lakhs, INR 70 lakhs in Naigaon. Here, what we are looking at, 2 BHK, which is like INR 45 lakhs, INR 50 lakhs to going up to 3 BHK, which may go up to, like, less than INR 1 crore, which is near between -- something between INR 75 lakhs to INR 1 crore. So I think that micro market has enough potential for this kind of -- and this is -- this may be slightly away from the station, but this will complement something like for Juhu, for Andheri or Vile Parle area or Lokhandwala for Andheri location, which will be something similar demand, which will go in that micro market of Vasai, something which we create a luxury in that micro market. There is a huge demand for that kind of a product there.

Sure. And given that we are seeing good traction for ready-to-move-in apartments, and this is going to be a greenfield project. So how do you see the sales velocity picking up for this project? We will be doing presales for under construction and the construction we will be doing in-house for this?

So we have -- across all our brands, in fact, if you see, we have construction in-house only. So whether it is our top end, which is uber luxury Signature brand or a Signia brand or a Naigaon construction or the City construction, it is all in-house. So this comes something between City and the World, I would say, this is something a product which is slightly lesser expensive than the City Goregaon product, and it is more expensive, slightly more expensive than the Naigaon. So I think there is no reason why should we outsource the construction when we have enough, good capability of constructing in-house. I don't see any reason why it should be constructed through the third party.

And Sagar, Raunaq here, just one more thing. From a customer perspective, large organized players will continue to be the preferred mode for buying when looking at new projects, right? So even though we will be offering it as an under construction project, I think somewhere the customer will also derive comfort from our balance sheet strength and our ability to deliver. So we don't really foresee it to be a challenge per se from that perspective.

And more than that, we have only considered half of the volume of Naigaon, that's why we have already taken that thing into consideration that whatever we have said in the past, whatever we have sold in Naigaon, let's say, almost 1 million square feet during the launch versus which we will -- every year, we will only sell in every launch, 0.5 million square feet. So I think that we have already taken it quite conservative.

Right. That's helpful. And like I said, in a dull environment, if we are showing such encouraging numbers, I'm really excited about what we can achieve when the market recovers. So best wishes.

We'll move on to the next question that is from the line of Biplab Deb from Antique Stockbroking.

My first question is on the cash flow situation. Just trying to understand the cash flow situation. If we -- assuming there is no incremental sales in FY '21, how would cash flow situation would be? Like what is the total receivable construction cost to be incurred, fixed cost, interest and debt repayment in FY '20? Just trying to understand the cash flow situation.

This is Prashant this time. First of all, I would like to mention that the situation of no sales doesn't arise because in the first quarter, we have already done INR 100 crores worth of sales and that too in a locked down environment. So from that perspective, the question of no sales doesn't arise. So that is the first point I want to clarify. Secondly, sir, on the debt front, I can tell you that our debt levels are one of the best in the industry. Our debt/equity ratio today stands at 0.26 net debt-to-equity ratio and our total debt is around INR 750 crores, total net debt. Coming to the receivables, our receivables from both completed, nearing completion project is to the tune of INR 1,100 crores. And against that INR 1,100 crores, we have to incur only INR 300 crores of cost. So balance, INR 700 crores is free cash flow for us. This is committed receivables I'm talking about. And from projects which we have launched in the last 2 quarters, we have a total receivables of close to INR 800 crores, against which we have to spend INR 650 crores. So all in all, if you see my total net cash flow from committed receivables will be close to INR 930 crore INR, and over and above this, I'm sitting on our unsold inventory in these 2 brackets of close to INR 3,500 crores. So over the next 2 to 3 years, you will see this INR 4,500 crores of potential getting that. In this I'm not taking into account any new acquisitions and any new launches.

Okay. Okay. One more question is on the Sunteck City. Okay? So in the year FY '20, you sold around 156 units. So all the units you sold are from Avenue 1, Avenue 2 or also in Avenue 5? What is the new project that you have?

Biplab, we have sold 123 units in fourth avenue and the balance 30, 40 units we have sold in Avenue 1 and Avenue 2. And the sales in the first quarter has been mostly from Avenue 1, which are ready-to-move-in inventory.

We'll move on to the next question that is from the line of V.P. Rajesh from Banayan Capital.

I was just wondering, earlier you would give a slide, which had estimated inventory value and estimated cost. So have you discontinued that? Or will you be publishing that separately?

This is Raunaq here. If you've noticed, we have started updating a fact sheet on our website as well as we filing with the stock exchange. That will continue to be updated on a quarterly basis, which will contain all the information that you just mentioned. So that has been -- the change is being uploaded and disclosed regularly.

Okay. So just on the BKC, what is the number of unsold apartments as of Q1? And what is the value, which is there in the balance sheet in the inventories category?

Sure. So the total unsold units are close to 39 units.

Okay. And what is the value of those 39 units?

Total unsold inventory will be INR 1,800 crores. Anything else?

Yes.

Did you get that? I said the total unsold inventory is at INR 1,800 crores.

My follow-up question was that given the way market is, what is the sales velocity you expect in BKC? Because last year, we sold only 2 on a net basis. So are you expecting this to pick up in this year or next year or the year after that? So that was -- just trying to get a sense on that.

So Kamal here. Yes. So definitely, obviously, looking forward to sell as much as units, obviously, every quarter-on-quarter and year-on-year. Always, we have been able to sell 8 to 9 units every year. Unfortunately, the last 2 quarters have been bad quarters because, obviously, due to COVID. Otherwise, if you see the track record from last more than 4 to 5 years, we have been able to maintain the velocity of 8 to 10 units on every year-on-year basis. And for every quarter, at least maybe 2 to 3 units. So going forward, we don't see any -- if we continue within that momentum, we should be -- we are confident that at least I think we should be able to maintain that momentum.

Even in the current financial year, you think you can sell 8, 9 units?

We already lost 1 quarter and maybe, very frankly, we don't know 9 months -- this COVID will last how much time. So if this goes -- continues for another 9 months to 1 year, maybe we may see lesser velocity in that. We are not very confident on the BKC product sales, to be very frank. But now as we hear from the market, given the demand has slowly started picking up in even the uber luxury segment. So we have seen quite a few sales happening in South Mumbai, which is in the uber luxury segment, which is like ticket size upward of INR 30 crores, INR 40 crores. So I think that is slowly picking up, and we -- hopefully, we should at least do, if not 6, 7 apartments, at least we'll try and what we are looking forward for at least 4 to 5 apartments in coming quarters.

Okay. That's helpful. My second question is, your debt has gone up year-over-year. So any thoughts around what it will look like by the end of this financial year?

Sorry, Rajesh, you are saying your debt has gone up. The way you said, I really felt that it has rocketed or something. I think it is marginally going up. Obviously, we are doing new acquisitions where we are putting too much money into the construction. We want the construction speed to be fast. And you're seeing the cash flows are very strong. So I don't think we need to worry with such a kind of debt/equity ratio. If we don't have this much debt, then I think we can't get a good ROE or we will never be able to -- I mean, do good business. I think this is relatively, in fact, very cautious and conservative debt/equity ratio. And we like to maintain this kind of debt/equity ratio. In fact, historically, if you see Sunteck always has been near this ratio. And we continue to maintain in spite of aggressive acquisitions mode, which we will get into what we are looking forward -- what we are seeing in the market, we don't -- we are not looking to increase our debt anyhow and stretch the balance sheet.

Right. No, Mr. Khetan, I was just pointing out that...

Excuse me, Mr. Rajesh, sir, we would request that you return to the question queue, there are participants waiting for their turn. We'll move on to the next question that is from the line of Mr. Sameer Baisiwala from Morgan Stanley.

Just a quick question on the Vasai acquisition and congrats for that. Is the selling price assumption, INR 10,000 in construction cost to INR 2,500?

Kamal, here. Sameer, the construction sales velocity, what we have taken is at -- starting from INR 7,500, INR 8,000 per square feet, in fact. And the construction, obviously, what we are doing in Naigaon. And today, what we are getting because we are doing in-house construction, because of our in-house construction capability, I think today, we are doing construction cost at Naigaon which is close to INR 2,000, INR 2,200. So per year, this will be a slightly one notch higher product than the Naigaon, so -- and similar 23-story towers. So we look at INR 2,500, INR 2,600 a square feet. And that's all. And so over a period of the lifespan of the project, we look -- we are looking to achieve INR 8,500 to INR 9,000 a square feet on a realization value, which is close to, if you look at 4.5 million square feet. There will be some small in-house retail and other components, which will give us a higher realization and some other products, what we are looking to design, which I would not like to, very frankly, share on this call. That will give us -- on an average, we are pretty confident over the lifespan of the project, we will easily achieve anything close to INR 10,000 a square feet. But we'll start with close to INR 8,000 a square feet.

Okay. Great. That's very clear. And would this be affecting any tax benefit? Or would this be at your marginal tax rate?

No. So we are not taking into consideration any tax benefit on this. So we are talking about 25%, 30% margin, that is post tax, post tax.

Okay. Got it. Great. And sir, second question here is, given the kind of market conditions and the -- and your balance sheet strength, is it possible to do 2, 3, 4 such deals in a year rather than 1 every 1 to 2 years?

I will be very happy, Sameer. Why not do 2 -- why to restrict myself to 2 or 3? In fact, I will love to have 4 or 5. But on a lighter note -- sorry, but definitely, we will look to do as much as possible, but we want to be very selective because even if you take 1 wrong project, maybe you'll not make loss because of the asset-light model, but your bandwidth loss can be enough that may make you eventually lose the potential to acquire a better and good project. So we will be quite selective, but we will not stop it. In this year itself, if we get similar 2 or 3 more projects that we will not stop that because that we will not be able to ramp up for that. We are ready for that. And this is a once in a lifetime opportunity, I think. Unfortunately, it's a wrong moment, wrong purpose -- the opportunity has come due to a wrong reasons. But it is an opportunity as a business. I don't think we should -- we will leave it if we get any such similar opportunity once again.

And sir, are you also thinking of doing such deals within the municipal limits? Or would these be outer suburbs?

So we have been very clear, Sameer, that we want to maintain -- MMR region is our key strength. And this proved even in this worst COVID kind of a scenario. In spite of complete lockdown, Mumbai was in complete lockdown, and we could sell -- we could do such kind of sales. So we are pretty confident that we want to maintain ourselves -- restrict ourselves in MMR region. And again, not lose out our bandwidth. Because if it's being in MMR if we can do a product of INR 25 lakhs to INR 125 crores, why should I feel we should go out of MMR region. What is the reason? What is the compulsion? I think MMR market is the most resilient market. We have seen this during the Lehman crisis. That is, again, so many -- we have gone through so many crises, whether it is demonetization, GST, RERA, so many things, NBFC crisis. I think this is the most resilient market, except the few micro markets where there is an oversupply. And you can see we have always stayed away from those kind of micro markets.

No, no, I meant within MMR, the municipal limits, so not...

MMR, so Vasai is again in VVMC, that is Vasai Virar Municipal Corporation, which is not BMC. And Naigaon is again in VVMC. So it is not in BMC. So it's a municipal limit, but not in the municipal limit of Bombay. But Thane does not come or Navi Mumbai what we do, which is in NMMC, which is Navi Mumbai Municipal Corporation and Thane, which is obviously TMC. So these are obviously municipal limits, but outside Bombay municipal limits.

The next question is from the line of Parvez Akhtar from Edelweiss.

Congrats on a good set of performance in Q1 amidst all the uncertainty which is there. A couple of questions from my side. Obviously, the near-term environment is pretty uncertain and challenging. But what is the kind of launches that we can probably see in FY '21 across all our projects?

Parvez, I would definitely not like to disclose right now on this call what are the launches, but you will definitely see some launches coming up from Sunteck. We will not shy away because we are in -- so like we didn't close our sales pavilions or sales shop during the lockdown. Now almost the lockdown is now slowly, slowly getting over. And we are looking forward to do 2, 3 launches and acquisitions as well. We are confident that good sales momentum, we will see, especially in this quarter, July, August and September.

And sir, also because of the lockdown, obviously, there would have been some disruption to our construction time line. So for our under construction project, what are the kind of construction time lines that we are now focus?

So we have internally calculated. I think because of the lockdown, where there was a complete lockdown, there was no -- construction was not allowed. Obviously, that was close to like 2 months or so. And obviously, those 2 months, obviously -- we obviously could not do any construction at all. No one was allowed to do any construction. But since we have in situ workers. So workers, they were -- most of the workers, we tried to retain them at the site, and we kept them well with the proper social distancing and providing them proper hygiene and giving them food and everything. I think we could retain many of them from going back to their hometowns. That helped us to pick up our construction site faster. And I can tell you that we are almost, I will not say, but still we are slightly away from the pre-COVID time, but we are almost near pre-COVID time. And that's what -- I think by the end of August, we will be almost -- we will be, again, in fact, almost to the pre-COVID level or, in fact, faster than that because we want to catch up for the loss of the time, whatever we have done during that COVID time. So that's all.

Sure. And sir, last -- just one data-specific question. What is the inventory that we still have in ODC 1 and 2?

So Parvez, Raunaq here. The total unsold inventory in Avenue 1 and 2 will be close to about INR 575 crore roughly.

The next question is from the line of Sumit Kumar from Max Life Insurance.

Congrats on the deals. My question is on the commercial projects. Particularly the BKC project that we had and the one in OBC and Naigaon. So what's the construction status? And any update on leasing or [ re-leasing ]? The second question is a follow-up on the ODC commercial. It's been, I think, since FY '18, since you had plans of starting it. So what was the reason for the delay in approvals?

Yes. So coming to -- so commercial project, first of all, when we are talking about commercial projects, we have in all 4 to 5 commercial projects. Let's talk about BKC, which is BKC Sunteck Icon. And then the second BKC is BKC 51, Sunteck BKC 51. So both those projects are under construction and in full swing. They are above the plinth level, and we are looking forward to complete those projects in the next 9 to 10 months. So those are, again, being nearer to BKC, we don't see any problem in those. And the construction, that's why we don't want to slow down. We want to maintain that same speed. And we are quite confident being -- because being close to BKC, I think we'll be able to get away with that. Now coming to the ODC project. So fortunately, obviously, I would say, once again, at the cost of repetition, we were lucky that we didn't get the approvals. Now there are -- obviously, the approval could not come. We all know there are various approvals which are required in every project. There are end number of approvals starting from environment, to the ULC, to your high-rise approval, like HRC, HR approval, end number of approvals. I can continue to go on. Definitely, there were 2, 3 approvals, which were challenging. I think we were fortunate, I think we are -- so that's why right now, to see, we say that we may be best in doing the construction, designing, architecture, putting a right product, right everything. But maybe I think we are slightly less efficient in getting the approval. And we want -- we don't mind saying that. And I think that is, in this case, at least on a hindsight, this has been helpful to the company, and we have been lucky as well. I think that's okay?

Sure, sir. But on the mix between the projects in ODC and Naigaon, what's the feedback?

So for Naigaon, there is nothing called commercial. So there is a retail, which we are selling to [indiscernible]. So -- or only 1 or 2, maybe strategically to get the better sales velocity, we will lease it out to a good brand. But otherwise, the idea is to do a [indiscernible]. Retail, if we do a retail mall or something, that will be only if the things get improved and that is only to complement the residential. And the size will be -- only that size, which can cater to the community, which is staying in Sunteck World, not that we want to do a mall and get into a mall business out there. The idea is to complement and get a better pricing for residential in that micro market by giving a proper, good infrastructure to that entire community. That's the idea of doing residential or retail out there -- sorry, retail shops and the retail mall out there. And ODC, we have already started the commercial. Anything which I missed out?

No.

Ladies and gentlemen, that's was the last question. I now hand the conference over to the Chairman and Managing Director, Mr. Khetan, for his closing comments.

Thank you all for taking all the time from your busy schedules today. In case if any of your queries have been left unanswered, you can get in touch with me or my team. We look forward to your continued support. Thank you once again for joining us today, and please be safe. Thank you.

Thank you. Ladies and gentlemen, on behalf of Sunteck Reality, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.