Sunteck Realty Limited (512179) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Sunteck Realty's Earnings Conference Call for the Q3 FY '22. We have with us today, Mr. Kamal Khetan, the Chairman and Managing Director of the company. Mr. Manoj Agarwal, the Chief Financial Officer; and Prashant Chaubey, SVP Corporate Finance. Please note, this call will be for 60 minutes. [Operator Instructions] This 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 that 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, plan and strategy of the company, its future financial condition and growth prospects. These forward-looking statements are 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 statement. I would now like to hand the conference over to Mr. Khetan, the Chairman and Managing Director of the company. Thank you, and over to you, sir.

Thank you for joining Sunteck Realty's third quarter FY 2022 earnings call. Hope each one of you and your family are safe and healthy. Over the previous years, I have introduced yourselves to the guiding principles of the new Sunteck, what we are calling Sunteck 3.0. Sunteck 3.0 is focused on 3 key priorities: maintain a strong balance sheet and strong cash flows; second, continue to do marquee acquisitions in line with our business development strategy; third, building an exceptional team. Given our strong balance sheet, high brand recall and strong execution of projects, both our presales and collections are registering healthy and rising growth on a sustained basis. This has also enabled us to grow our business and fiscal prudence by maintaining net debt equity ratio at sub 0.25. In the last 18 months, through excellent cross team coordination at the organization level, we have succeeded in acquiring approximately 23 million square feet across MMR. This has enabled us to double our growth engines from 3 to now 6, namely BKC, ODC Goregaon West, Naigaon, Vasai West, Kalyan and Borivali West. We have close to 36 million square feet of development portfolio now across all these 3 -- 6 locations. All these locations give us a clear visibility for the coming 7 to 8 years. The strong project pipeline has allowed us a slew of launches over the next 12 to 18 months across all segments. We are confident that these launches will scale up our presales to achieve the next leg of growth for Sunteck and continue to witness rising market share. There is a continuous flow of business development opportunities that we are currently evaluating. Our endeavor is to capitalize on our strength of business development and do similar acquisition, taking our portfolio from current 50 million square feet to approximately 70 million to 75 million square feet over the next 18 to 24 months. We are not just focusing on our presales growth, but profitable growth. We have achieved an average EBITDA margin of 35% in the last 5 years. Going forward, we are looking at upward of 35% margin from our current portfolio. Last but not the least, I'm very proud of the team that we have built at Sunteck in the last 15 years and focused on strengthening it further. Thank you. I will now hand over the call to our CFO, Mr. Manoj Agarwal, for his comments. I would be happy to answer thereafter your questions, if any. Over to you, Manoj.

Thank you, sir. Good evening, everyone, and thank you once again for joining us today and take out your valuable time for Sunteck. Hope all of you are safe and well. The financial and operational numbers has already been published on the stock exchanges. I believe all of you must have gone through the same. Now I would like to highlight the key financials and business performance numbers. Starting from the presales, our presales grew up by 29% on Q-on-Q basis in Q3 FY '22 to INR 352 crores compared to INR 272 crores in Q2 FY '22 and 1% year-on-year basis from INR 349 crores in Q3 FY '21 last year same period. Collections grew up by 30% on a quarter-to-quarter basis in Q3 FY '22 to INR 272 crore compared to INR 207 crore in Q2 FY '22 and 7% on year-on-year basis from INR 250 crore in the last year. For the period 9 months ended FY '22, the presales grew up by 23% on a year-on-year basis to INR 800 crores compared to INR 651 crores in the last year. Also, the collections grew up by 41% on a year-on-year basis to INR 649 crores compared to INR 459 crores in the comparative period last year. With respect to the financial highlights, we have reported a consolidated revenue of INR 128 crores in Q3 FY '22 compared to INR 136 crores in Q2. For 9-month basis, the revenue for FY '22 stood at INR 357 crores compared to INR 419 crore in the comparative period last year. The consolidated EBITDA for Q3 FY '22 is INR 35 crores compared to INR 37 crore in the last quarter. EBITDA for 9 months stood at INR 92 crore compared to INR 98 crore in the last year. During last 9 months, we have taken 50% consistent benefit on premium and approval payments and paid INR 222 crore in advance to get the benefit of the same. 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 Puneet from HSBC.

Congratulations on good performance. My first question is with respect to land acquisition. You talked about acquiring 23 million square feet of land since pre-COVID. Why do you see a need to acquire more land? And how different are these land prices or the terms of agreement versus what you did during the pre-COVID and the COVID period?

So Puneet, so we have -- obviously, why do we need land for acquisitions, definitely, this is raw material for us, and we continuously need that to grow the company. I don't think we cannot survive if we don't have a proper land acquisition strategically on right time. And this is looking at the timing, obviously, where the consolidation is taking in the industry, I think it is the best time to do acquisitions and that too at the asset-light model and with the better terms than what we would get obviously before pre-COVID.

Okay. So you're seeing the terms are better than pre-COVID even now and versus the COVID period, are the terms equivalent or worse or better?

It is better. It is better.

Even when you look at the COVID season of 2020 and '21, the deals which are sitting on negotiating are better than '20 and '21?

Yes. So we are -- I can say, if not better, they are similar, but not as bad as our pre-COVID level when there was like everybody or anybody was there. So we know that a lot of consolidation is already taken in the industry. And that has only given us an edge because the few players are left -- very few players we all know. And that's where organized and listed players are definitely getting that benefit.

Okay. And in terms of this land acquisition, what kind of land parcels are these? Do you have to -- are there auction land parcels? Or do you have 2 JVs? Or are there slum and statuary redevelopment, business redevelopment potential as well?

Puneet, we definitely don't do any slum redevelopment, and we have not done any redevelopment projects as well. These are all JDA asset-light model with most of the landlords and it is there in the public domain. And I think if you were -- if you must be tracking Sunteck, all these deals are there in the public domain.

That's helpful. My second question...

Mr. Puneet, so sorry to interrupt, but for any follow-up, maybe request you to rejoin the queue, please. The next question is from the line of Kunal from CLSA.

So my question first question was on the BKC sales. So in the last 9 months, we haven't seen much happening there. So going forward, what will be your strategy to revise sales here? And what is the monetization time line that we are looking at here?

So Kunal, definitely, we are concerned about the BKC sales going slightly low. But one thing is you have to understand at 1 point of time, Sunteck City was doing almost -- just 2 years back -- in fact, 60 to 65 -- 50% to 60% -- 2 to 3 years back, 50% to 60% of the sales would be from BKC. So our dependency on the BKC sales have, in fact, gone down. At the same time, nevertheless, that we cannot forget -- we know that we cannot forget doing sales at BKC. So we are finding -- we are doing different strategy. And we see very frankly right now, some action going forward from -- in this sector, especially in the BKC project. And we'll see some improvement in the sales from this project.

Okay. Sure. And sir, on your Slide 17 of your -- 27 of your presentation, so you've given the time line for the new launches. I wanted a particular update on Borivali project. Can you give us an update there, when do you expect the site to be handed over and then submit the plans for approvals and the final nod? Because it's been -- they acquired the project in March 2021, and we are expecting the launch to happen in FY '24. So just trying to understand why -- what's happening here?

So obviously, there is a registered definite document with the landlord and it's a JDA model. So it is a landlord probative to get approvals as per the agreement. So he has to get the approval. We are seeing that approval the way the approvals are moving. So there are -- obviously, we know that there are a lot of approvals before we start the projects. So we are not expecting those approvals to -- all these approvals to come before the end of '23 -- financial year '23. So that's why on a safer side, we have tried to show that the launch, which we expect during the financial year '23, '24.

The next question is from the line of Adhidev from ICICI Securities.

Sir, just a couple of questions. Firstly, sir, we have done around INR 800 crore in 9 months this year. So any guidance you'd like to share for this full year? And for FY '23 for the INR 1,800 crores of your guidance you have given here, could you take it up into how much would come from the projects you already have plus how much would come from the new launches which we plan next year? That's it from my side.

So Adhidev, thank you so much for asking the question. In terms of the target for FY '22, we are targeting close to INR 1,300 crores of presales for the entire year of FY '22, right? In the fourth quarter, that is a quarter which is currently ongoing, we have launched our third phase in Naigaon which is Sunteck One World and the kind of response that we are receiving is quite encouraging. So that gives us confidence in terms of achieving INR 1,300 crores for the current financial year. In terms of FY '23, in Slide 27 of our presentation, as you can see, we will be launching close to 3.35 million square feet of portfolio. So that portfolio plus the foundation, plus the sales from other ongoing projects that we already have, we are very confident that we can achieve INR 1,800 crores of target that we have given in our presentation. Thank you, Adhidev.

The next question is from the line of Venkat from Tata A&E.

Sir, am I audible?

Yes, you're audible.

Sir, my first question pertains to the sales figure. So basically, we had initially guided for around INR 1,500-odd crores in FY '22; and FY '23, [ INR 20 billion to INR 22 billion ]. So any reason why we are kind of revised it kind of downwards. And then again, the way that we are kind of adding to our gross development value, the conversion of the thing isn't reflecting in terms of our pickup in sales, right? So how should we think about this?

Yes. Venkat, Kamal Khetan here. So what we are talking about the revision very frankly, we were looking at upwards of INR 1,300 crore. But as we know that there is always an uncertainty of getting the approvals. So we were looking at, at least one new launch from the new acquisitions that we have done, let's say, like Vasai or Kalyan. But definitely, the approvals have not come in line with what our expectation was. So we are definitely looking -- we have missed this quarter. We will miss this quarter for the approvals of one of these projects. And we are really confident those approvals will go to the next quarter. And hence, that's why we had to -- maybe we were looking at INR 1,300 crore plus presales. But right now, that's why we want to restrict it to the INR 1,300 crore.

Right. Right. So sir, if the approvals are slipping to the next quarter, ideally, what you were originally guiding for FY '23, there should be some upward revision or at least reinforcement of that guidance, right? But again, when we look at FY '23 numbers also, they are kind of revised downwards. So what exactly are we missing here?

So Venkat, very frankly, we are very clear that INR 2,000 crores getting -- achieving that -- we don't want to revise next time. I would put it that way. There are always some uncertainty we all know. We are getting -- any new projects started, there are a lot of approvals, which is required in this segment in real estate sector, so as a sector. So we know that uncertainties are always there. So we want to be conservative. I can guarantee that if all the approvals are in line and what we are targeting this time the approvals -- or the projects, which will be launched in next financial year, FY '22, '23, we will definitely see not only INR 1,800 crore, maybe above INR 2,000 crore. But at the same time, on a conservative side, we want to give a guidance of INR 1,800 crores. So we don't need to revise downward next time.

Sure, sir. I mean one request is if you -- whenever you are guiding to the markets, if you could please take a conservatism into consideration whenever you're guiding because obviously, you will be the person who will best about this business, right, versus the investors. So that's one request I would want to place on record. And my second question is -- and there is a request to this as well. With respect to the way that you are planning your investor presentation, if you could make it more consistent because in this quarterly presentation, we don't really see a walk-down of the cash flow, right, which is really important for the investor to understand because that's the single most important metric that investors would like to look at. So if you could kind of incorporate that in all the future presentations? And just as a continuation of that, could you help us understand, I mean, what was -- how the collection -- what was the collection, what was the spend, different type of spends and then the net debt figure at the end of Q3 FY '22?

Venkat, this is Prashant this side. I trust you are doing well. So Venkat, we have tried to better the presentation and make it more investor-friendly. We are happy to take your suggestions. And from next time onwards, we'd incorporate all your suggestions. Thank you so much for being candid with us. As far as the cash flow is concerned, Venkat, as you are aware, we have done INR 800 crores of presales in the current 9 months. And the breakup of the presales is as follows: in the luxury segment, we have done -- in the third quarter, we have done INR 77 crores of presales; in the mid-income segment, we have done INR 139 crores of presales; in the affordable segment, we have done INR 111 crores of presales; and the balance comes INR 25 crores we have done in our ongoing commercial projects. So that translates to INR 352 crores. In terms of collection, Venkat, in the third quarter, from the luxury segment, we have collected INR 115 crores; from the mid-income segment, we have collected INR 123 crores; from the affordable segment, we have collected INR 119 crores; and from the commercial segment, we have collected INR 12 crores. We take your point, Venkat. We will try to incorporate this in the presentation as well. Thank you so much.

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

So 2 questions from my side. First, what is the kind of inventory that we have currently in the ODC project? And second is with respect to the Naigaon project, have we launched the entire 1.25 million square feet in the third phase that we were targeting to launch in Q4? And what is the pricing that you have put for this phase III?

First is inventing ODC.

Parvez, can you repeat your questions, second and third?

So the first question is what is the kind of inventory that we have in the ODC project currently? And the second is, in your opening remarks, you said that we have launched the third phase of Naigaon project. So have we launched the entire 1.25 million square feet that we are planning to in Q4 in Naigaon phase III? And also what is the pricing which we have kept in this phase II for Naigaon? These are my 2 questions.

So coming to your second question, the Naigaon phase III has been launched in line with what we were looking at. And the pricing is similar to what -- means, I would say, pricing is similar to the market what we are selling the current product set. So it is the same in line with the existing sales, which is happening. And the first question, Prashant, can you give the inventory?

Parvez, so with regards to the inventory at ODC, I would like to take it up for you from currently ongoing and the future. So in the currently ongoing, Parvez, we have close to INR 1,000 crores plus of unsold stock, which is available with us across Fourth Avenue, Sunteck City First Avenue and Sunteck City Second Avenue. This is because in the first avenue and the second avenue, we have got extra approvals. So because of that, there is a generation of new inventory. Secondly, in our upcoming projects, in ODC, we have a total inventory of plus INR 5,000 crores. So that is the breakup of inventory for user.

The next question is from the line of [ Ritesh from Motilal Oswal ].

Just on the launches. So the ODC launches that we are planning for FY '22, '23, these are going to be the new avenues? Or these are going to be the higher floor inventory, which are you applying to launch?

So yes, [ Ritesh ], it will be a combination of higher flows and the new tower launch.

So new tower launch will happen in '22 -- '23 or '24?

I can only say that the total put together, we are looking at the launch area of close to 0.6 million square feet, which is -- which will be from -- because we -- as we discussed in the past one of the questions that there are always uncertainty in getting some approvals. So we are confident that at least 0.6 million square feet, we will be able to launch taking the combination of new tower and higher flow launches put together.

[Operator Instructions] The next question is from the line of [ Mohit from Leverage Capital ].

So my question is essentially on avenue 1, while you are talking about higher floors, et cetera, when we do channel check, we understand that even the existing ones, the amenities is not ready. The gym is just about 400 square feet between 440-odd flat. So how do you plan to sort of really scale up your luxury project? And in light of that, do you want to do more luxury projects? Or you think management capabilities lies best in Naigaon, Kalyan, et cetera?

[ Mohit ], I don't need to explain to Sunteck. Sunteck has started the journey with BKC Signature Island project. I don't know your market sources from where you've got this feedback. But as far as today, I can proudly say there are some of the best corporate people are staying in our projects in BKC. And we are pretty confident. We are -- in fact, Sunteck is known for the luxury. And whether it is maybe in over luxury segment or in the mid-income premium segment or maybe in the affordable segment. So we'll continue to command luxury and we continue to command premiums over across all our projects. So sorry to say that, if you think that Sunteck is would be only doing affordable, I don't think we would be getting so many of BD development projects. On a asset-light model where the landlord is trusting Sunteck with this land property, which is worth like close to INR 1,000 crores, INR 800 crores. So I don't know where you have got your channel checks done from. Thank you.

I would now like to hand the conference over to the Chairman and Managing Director, Mr. Khetan, for closing comments.

Thank you all for taking all the time from your busy schedule today. In case if any of your queries have been left unanswered, you can get into 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 Realty, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.