Sunteck Realty Limited (512179) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Sunteck Realty's Earnings Conference Call for quarter 4 and full-year FY '24. We have with us today Mr. Kamal Khetan, the Chairman and Managing Director of the company; Mr. Prashant Chaubey, the Financial Officer; and Mr. Abhishek Shukla, the Vice President of Strategy and Investor Relations. Please note, this call will be for 30 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 business statements, plans and strategies 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 statements. I would now like to turn the conference over to Mr. Khetan, the Chairman and Managing Director of the company. Thank you, and over to you, sir.

Very good afternoon to everyone for joining us today, and thank you for taking the time to participate in our company's earnings conference call for the fourth quarter and the financial year 2024. We had a decent year on presales growth and another strong year on cash flow generation, which has been the main focus of the company always. This has led to Sunteck achieving net debt 0 as at end of FY '24, yet again demonstrating our financial prudence. Gross debt is down 58% since FY '22 and stands at just INR 295 crores with a gross debt-to-equity ratio at 0.09. We believe we have a strong and liquid balance sheet, and this gears up to do more work. Inventory month at our under-construction projects from the area offered for sale stands as low as 8 months, which we believe is amongst the lowest in the industry. With existing projects completing, we have geared up to release more area for sale in our large-scale projects across Goregaon West, Mira Road, Naigaon and Vasai. We are also in advanced planning stage for new launches in South Mumbai, which is Nepean Sea Road and Bandstand, Bandra West. Both offerings are of GDV value, which is over -- more than INR 3,000 crores. The sales momentum at our BKC inventory has picked up in FY '24, as we sold this year -- last year, INR 245 crore worth of stock versus only INR 203 crores sold in the previous 3 years all put together. With this momentum across projects, we are geared up to achieve a presales growth of at least 30%, 35% in FY '25 and a higher growth of operating cash flow. On adding new projects, we are in discussions for adding projects in Mumbai City, especially in western suburbs and more in South Mumbai. As communicated earlier, we have embarked on the ambitious, yet achievable roadmap of doubling our GDV, which is gross development value, from INR 30,000 crore to INR 60,000 crore in the coming years. Our confidence to achieve this stems from our strong foothold in the market and our ability to capitalize on the deep consolidation within the industry. In the past, through meticulous planning and execution, we have seen our GDV double in less than 3 years till end of FY '24. On the annuity front, both our marquee properties around BKC are now fully leased out with long-term lease signed. We have also moved ahead on planning for our commercial portfolio at Oshiwara District Center at Goregaon West. We will be able to confirm the commencement plans on this very soon. I will now hand over the call to Mr. Prashant Chaubey, our CFO, for more information on earnings performance of Q4 and full-year FY '24. Over to you, Prashant.

Thank you, sir, and good afternoon, everyone, and welcome to the earnings call for the fourth quarter and full year of financial year 2024. The financial and operational numbers have already been published on the stock exchanges. I believe all of you must have gone through the same. Some of the brief highlights of the financial performance are as follows: we sold INR 1,915 crores worth of area in FY '24, which is a 20% growth over FY '23. Cash inflows, including collections for the full year of FY '24, stood at INR 1,236 crores, resulting in our net cash flow surplus during the same time period of INR 484 crores. The cash flow yield stood at 21%. In quarter 4 FY '24, we recognized some revenue from Maxx World, as we received occupation certificate and started handing over possessions and BKC projects. We have recognized approx INR 284 crores from Naigaon, and the project level margin stands at 30%. We are on track to complete Sunteck City 4th Avenue project in FY '25. And due to better realizations, we expect to record higher EBITDA margins in this project from the revenue recognition. We expect to see a strong jump in profitability as well as margins in FY '25. And finally, I'm happy -- I'm pleased to report that the long-term credit rating of Sunteck has been upgraded from AA- to AA with a stable outlook. Thank you. And with this, we open the floor for questions.

[Operator Instructions] The first question is from the line of Kunal Lakhan from CLSA.

Sir, my first question is on new launches for FY '25. You did said that in Nepean Sea Road and Bandstand is something that will get launched. But are these the only 2 new launches in FY '25 or will there be more?

So launch pipeline, first, you have to understand -- Q1 will be, obviously, what we are talking is, mostly sustenance sales from all our 6, 7 projects, which are already launched and they are there. Q2, we are targeting the new phase launches of Mira Road and new phase launching of Naigaon. And in Q3, we are looking to launch a new phase launch, which is 5th Avenue in ODC, which is Goregaon West. And by the year-end, we will be -- obviously, we are trying to get ready for the launch of our South Mumbai project. You need to also understand we also have sustenance sales, Kunal, at Sunteck Crescent Park, which is Kalyan, and Sunteck Beach Residences, Vasai, where we are obviously marketing also -- all these projects are also obviously there.

Sure. Understood. But in the past, right, when we have seen your sales really do very well is generally when we have seen your new greenfield launches come through. So in terms of greenfield launches, Nepean Sea Road is the only -- and of course, like I think 5th Avenue, seems like the 2 launches, which are going to be large ones.

And obviously, the Mira Road, the new tower, because we have already got a best response in Mira Road Tower 1. When we launched second time, we did exactly something similar sales in Tower 2 as well. And now when we launch Tower 3, I'm confident we will do a similar sales in Tower 3 also. Each tower is as good as 1 phase. And plus Naigaon is almost like we'll be launching more than 1 million square feet. And always, if you see in Naigaon, we have -- whenever we have launched, we have sold close to INR 300 crores to INR 500 crores in each launch in the past, every time when we launched.

Sure. Understood. My second question was on the enabling resolution that you have taken for raising up to INR 1,500 crores of NCDs and about INR 750 crores of equity. Do you intend to put -- execute this or raise this kind of money or is it just enabling resolution?

Yes. You're right. So you know our net debt is we are cash surplus of INR 8 crores this year. Obviously, we don't want this. But as a practice, we have been taking this for the years from last few years that this enabling resolution is always there. But obviously, we don't plan to raise any equity or increase the debt. We are already net debt positive.

The next question is from the line of Pritesh Sheth from Motilal Oswal.

First is on the cash flows that we generated this year, roughly INR 400 crores of net cash flow...

I'm sorry to interrupt, there is an echo on the line, and it's difficult to understand what you're speaking. May I request you to use your handset?

Sure. Yes. Sir, just on the cash flows, you generated INR 400 crore of surplus cash flows post CapEx, and obviously, next year, we'll see another increase on that number. How do you intend to spend all these cash flows that you're getting? Obviously, you have cleared out on intentions on doing more business development. But any clarity in terms of pipeline of projects that you might acquire this year would be helpful.

So thanks, Pritesh. So, Pritesh, obviously, we have been doing more of JDA now. Obviously, we will not -- we'll treat JDA as well as some buyout, but without obviously compromising on IRR and our returns, we are very clear. Plus, we feel now with leasing out these 2 commercial towers on the junctions of BKC. On our investment, we are making like a return of 30% return on our investments ROI. And once we start the ODC 1 million square feet close to a commercial property, and we are looking to start 1 more property somewhere in -- for commercial. So we are well -- gearing ourselves to deploy this, all this strong cash flow, which we are seeing -- which will be coming over the next few quarters to either put it in business development, obviously, again, at the cost of reputation without compromising on our returns. And also, we will be investing obviously more into the commercial property where we can make like a similar return what we are doing in our existing Sunteck Icon and Sunteck BKC 51, the 2 properties, which we leased out for 29 years on the junctions of BKC.

Sure. And on business development, we will surely see some transactions getting closed out this year. Or we are -- since we have so much of projects anyways in the pipeline, it would be opportunistic transactions for us?

No. So, Pritesh, we are aggressively looking for more projects because looking at such strong cash flows. We have enough on our plate, but we want to grow. And most likely, we would love to grow more than 30%, 40% -- 30%, 35%, what we are claiming right now, and we are gearing ourselves towards that.

And secondly, on the revenue recognition. So I think there's just fairly partial revenue, as you have mentioned, has got recognized as we progress on possession for Maxx World, and we will have Sunteck 4th Avenue getting completed this year. Overall how we see revenue recognition in FY '25 in terms of absolute numbers if you can guide us on that?

Pritesh, Prashant here, as we have already elaborated in our opening remarks, in FY '25, we expect Sunteck City 4th Avenue to start getting recognized. And the Sunteck Maxx World project also will be partially getting recognized in the FY '25. So overall, FY '25 numbers are looking quite strong, but it will be difficult to give any guidance on that. And over and above that, you will have BKC sales as well, which will come through. So that's why we are quite confident of having a good revenue recognition in FY '25 as well.

If you can just quantify the total potential, obviously, I can understand, we will obviously recognize once possession starts, but just the potential between the 2, what is left in Maxx World and what is the total potential at Sunteck 4th Avenue?

So, Pritesh, again, I cannot quantify the number, but definitely can assure you that this number will be much, much bigger than the FY '24 number.

The next question is from the line of Biplab Debbarma from Antique Stockbroking.

So my first question is on Nepean Sea Road project. Sir, recently, I visited your Nepean Sea Road project. It's a very -- it's an excellent land parcel. So, sir, where are we at this project? What is the status of this project? I understand you will launch it by Q4. But currently, what is the status of this project in terms of the approval or any other processes?

So, Biplab, first thing I want to clarify that we are definitely looking to launch at -- towards Q4. It may go to Q1 of FY '25. I don't promise you that, but I can only tell you that project is -- we have almost vacated everybody, and we are in the process of getting all the approvals. And without -- irrespective of this project coming or not coming, we are very clear that we will make minimum 35 -- 30% to 35% presales growth and plus -- and we have discussed on the revenue already.

Okay. That's good. And sir, in the business development front, within MMR, what are the locations you are looking at? And -- I mean, just trying to understand are we -- would you be looking at a project with GDV of 600 ballpark number, typical ticket size or you have some target like I would be looking at INR 2,000 crores GDV, INR 5,000 crores? Is there any ball -- any typical ticket size of GDV projects that you are looking at?

You know, Biplab, that we look at only large projects. Even when we were doing more projects in MMR, all our projects are very large, including if you see, when we look at South Mumbai, Nepean Sea Road, which is more than like INR 2,500 crores, INR 3,000 crores almost today. To today's value, it is more than INR 3,000 crores of GDV value. So what projects? Right now, we are looking more projects, not in MMR, I would specify that it is more in the MCGM limits, Mumbai Municipal Corporation's limit and more towards South Mumbai and these locations. And we are quite confident that we -- and each project, we don't want to do any small, small projects. We are looking at sizable projects, and you will see some good news coming in FY '25, for sure.

That's great. And my final questions are on the launches, the new phase launches that you have mentioned, sir, Mira Road, Naigaon, ODC phases. Basically, what would be the GDV of these 3 phases, INR 1,000 crores, INR 2,000 crores?

So if you are talking about Mira Road, Naigaon, Goregaon, all put together, the GDV value of these projects, all 3 put together, will be more than INR 4,000 crores, INR 5,000 crores. So these stages put together. But we are talking -- just to give you a clarification, we are talking a sizable Goregaon, which is Avenue 5, which will be close to 1 million square feet, which itself is more close to INR 3,000 crores of GDV value. And when we talk about Naigaon, 1 million square feet, which is again close to INR 2,000 crores, so -- which is almost like -- so like Sunteck City, the GDV value will be more than INR 2,500 crores. Sky Park, again, what we are launching, we'll be launching 1 more tower, which will be the GDV value close to INR 800 crores. Sunteck World, which is Naigaon, which is more than close to INR 1,000 crores. So we have enough in the pipeline plus we have the sustenance plus obviously, we are looking forward to launch as soon as possible the Nepean Sea Road as well. But irrespective of -- let me give this at the cost of reputation, irrespective of Nepean Sea Road, we are very confident we'll grow minimum 35% to 40% -- 30% to 35% in our presales number.

The next question is from the line of Vasudev from Nuvama.

Congratulations on good set of numbers. So while most of my questions are answered, just 1 thing. What would be your thoughts on the Borivali launch? And just to confirm that you said Bandstand also, are we looking to launch in Q4 of FY '25 or could it slip to FY '26?

So definitely, we are not talking about Bandstand right now, but we are very -- obviously, we are looking to launch every project as soon as possible. We want to give a top conservative number and over -- commit less and deliver more. That will be our endeavor. That's what we want to do. And plus, obviously, you have asked from Bandstand and the Borivali. So the Borivali obviously, we -- I don't know whether you are aware that was in a special development zone, SDZ. And government has come up with a policy for special development zone. So now we see that project getting fructifying that project, and we are working towards planning and other things. And I think very soon, we'll be able to give you good news on that as well. But we can not promise that it will be in FY '25 or worst case, obviously, FY '26. We are talking about only those projects where we are 100% confident, and we are very near to the approvals.

Okay, sir. And just -- can I get the inventory numbers for ODC, Naigaon, Vasai and Mira Road?

Yes. Prashant?

So, Vasudev, Prashant this side. So the inventory numbers, the ready-to-move-in inventory is close to around INR 1,500 crores to INR 1,600 crores and the ongoing projects have an inventory of around INR 1,500 crores.

The next question is from the line of [ Riddhi ] from Arihant Capital.

This is Abhishek Jain. I have 2 questions. Can you let me know what is our thought process of capital allocation? Now, we have got an approval for INR 2,250 crores of fundraising, where exactly we are going to do that? And what will be the projects which we are online because as most of the projects which we are doing right now is basically joint lending only right now, co-development only? So can you share some thought process on the same? Also, there are -- second question is on what is your thought process on Nepean Sea Road? When is the timeline to -- when we are planning to launch that?

So to answer to your first question, I think we already answered this question that this is just an enabling resolution. This is just an enabling resolution like every year what we take. Obviously, we are not interested in raising any funds. I believe you were not part of the other -- earlier Q&A round because this question has already been answered. And I think your second question about Nepean Sea Road, I think I've already answered that as well. And if you want, I'll -- at the cost of repetition, I'll answer once again.

We'll take the next question from the line of Prem Khurana from Anand Rathi Shares and Stock Broker.

Yes. Sir, when I look at our presentation and what I observe is Uber Luxury seems to have picked up, I mean, fairly well for us this year versus last year, INR 76 crores to almost around INR 250 crores. What would you attribute this jump to? I mean, has there been any change in the way we've been approaching sales in Uber Luxury now? And where do you see this number next year in terms of trend, not necessarily the exact number, but in terms of trend? I mean do you see this to move up substantially or it will move up in line with your blended growth guidance that you shared with us?

So, Prem, so what we are talking about is Luxury obviously is doing sales much better than -- and faster than the sales of any mid-segment or we are seeing -- all of us are observing that sales of Uber Luxury segment is faster than the mid-income segment or the affordable segment. So we are all geared up towards that. That's why we want to launch even the Nepean Sea Road as early as possible. As I mentioned in my opening remarks that if you see BKC, in last 3 -- this year, we sold an inventory of close to INR 245 crores versus INR 203 crores sold in the previous 3 years put together. So what we sold in previous 3 years, we sold in the last year, which was more than that. And we see this momentum to continue, and you will see better sales, in fact, in FY '26 than what we have seen in FY '25.

Sure. No, sir, the idea was to try and understand -- I mean, as you rightly said in the last 3 years, I mean you did almost around INR 200 crores business ending in this year, we've done INR 245 crores, so have we changed anything in the way we approach sales because I mean the demand for Luxury has been there for almost 2, 3 years? After COVID, we saw -- I mean, the first segment that revised was the Luxury. But for some reason for us it took -- I mean it took some time to be able to pick up. So this year -- I mean, since it has been extraordinary, has there been any incremental effort that we've put in or this is organic -- I mean, it was supposed to be there, just that it took us some time?

So obviously, we are trying to put more and more effort when we were seeing not happening -- sales were not happening in Luxury and BKC. I think BKC took some slightly more time as well. One was -- and it's a mix of 2, 3 things. Obviously, we started putting more effort that why BKC is not picking up. I think BKC took slightly more time than the other luxury because it's a different market. And like there is not too much of market within BKC. So whatever market you see in Bandra, it is outskirts of BKC, and this is very, very luxury. And the target audience are much lesser. But obviously, once it has -- whatever we have done, it's working right now, and it is doing well, and we'll continue with that, and I think we'll continue to make this sales grow further in this year and going forward the next year onwards.

Sure. And sir, second question was on Borivali, the Eskay project. So I think -- I mean, now it would come under a special -- I mean, SDZ scheme. Would that make the potential change substantially and -- I mean would the original agreement still hold or you would have to kind of renegotiate because the numbers were changed, which is where the landowner could try and renegotiate with you or the original agreement still holds?

So agreement is stamp duty registered. Why would a landowner renegotiate? It is in the mutual interest, and I think numbers don't change because of this. SDZ policy coming in soon means, it was indefinite when it will come, this year or next year. But now since the policy is there, only the approvals will come faster and it will quickly start without changing any commercial. It has nothing to do with commercial.

We'll take the next question from the line of Ronald Siyoni from Sharekhan Limited.

Congratulations on good presales numbers and healthy revenue booking. Sir, on the Nepean Sea Road project, are we looking at adjacent line? And if yes, at what stage we are there? It can potentially double the project size.

So, Ronald, yes, obviously, we like to work with large projects and large scales. Obviously, we are trying to consolidate and make this project bigger size, 2 at the initial stage. We don't want to commit anything on that. We are working on it. But we are quite confident that we want to launch this project as soon as possible, either in Q4 of FY '25 or as early as early quarter or Q1 of FY '26.

Okay. And my second one and last one would be, sir, sales has been strong, but collections, barring, say, BKC projects, it has been a little bit slow during the quarter 4. So have you changed some terms with respect to payments, with respect to construction? Or are there any sales which have been going on? So just wanted to understand that.

Ronald, Prashant here. So, Ronald, as you are aware, we got the occupation certificate of Sunteck Maxx World in the last month of financial year FY '24, and those collections will -- are coming in the first quarter of FY '25 and -- second quarter of FY '25. So that's why -- that's the reason why there was a slight collection, which has been -- which has overflown to the next quarter and next financial year.

Also, you will see that that's why the collections in this year -- financial year and the net operational cash flow number will be much bigger, in fact, much, much bigger than FY '24.

Ladies and gentlemen, we will take that as the last question for today. I would now like to hand the conference over to the Chairman and Managing Director, Mr. Khetan, for closing governments. Over to you, sir.

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

Thank you, members of the management. We thank you for taking out time for Sunteck Realty's earnings call. You may now disconnect your lines. Thank you, sir.