Sunteck Realty Limited (512179) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Sunteck Realty's Earnings Conference Call for Q1 and FY '25. We have with us today, Mr. Kamal Khetan, the Chairman and Managing Director of the company; Mr. Prashant Chaubey, the Chief 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 call 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 under expectations and projections and may involve a number of risks and uncertainties and other factors that could cause actual results opportunities and growth potential to differ materially from those suggested by such statements. I would 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 earning conference call for the first quarter of the financial year 2025. We have started FY '25 on the strong note with a several positives. I would like to share 5 key highlights before our CFO, Prashant Chaubey, speaks on the financials. We did INR 500 crores of presales in Q1 FY '25. This is 30% year-on-year growth with contribution from all projects. BKC project recorded INR 110 crores from the above. I'm happy on the momentum pick up at BKC as it is also directly close to our operating cash flow surplus. With a strong start to this financial year, we remain confident to achieve 30% to 35% growth in presales for the FY '25 as we had guided at the beginning of the year. Our operating cash flow grew slightly higher at 32% year-on-year and stood at INR 100 crores during the quarter. With higher sales in BKC, 2 big project completion in FY '25 and higher presales, I am confident Sunteck will deliver a stronger operating cash flow surplus growth in FY '25. Balance sheet continues to remain strong. We remain a net cash-positive company. Gross debt is down over 60% since FY '22. To date, at 0.09x, of the equity, and it is less than one quarter cash collections. On execution, we have made a significant progress with completion of Sunteck Maxxworld at Naigaon and hand over units to almost 2,500 families. This marks a major milestone for us as cumulatively, we have delivered more than 5,000 apartments in Sunteck World, Naigaon, over the past 2 years. The second project, Sunteck City 4th Avenue at ODC, Goregaon West, is also nearing completion and shall be delivered in FY '25, well before the stipulated time line. And lastly, happy to share progress at 2 of our major upcoming Uber Luxury projects. We have activated our investments in Dubai. Our project in Dubai is likely to be launched in the next 12 to 15 months in FY '26. It has the potential of generating over INR 9,000 crores of sales and our investment in the project is just around INR 250 crores for 50% of the profit share. Just to give you an idea that the project is in most sort after location of Burj Khalifa Community area in Downtown near Dubai Mall. The Nepean Sea Road project, a second project, which is a Nepean Sea Road project, is progressing well and is in one of the best locations of South Mumbai. It is on the sea with an uninterrupted lifetime sea view. We are in an advanced stage of planning and started the process of site clearance. The project has a potential of INR 2,500 crores of gross development value. We are excited about this positive development and with low inventory months setup projects, we are likely to launch more in the coming quarters. We continue to be aggressive in identifying more opportunities, which aligns with a high equity multiple philosophy to further exponentially expand our portfolio. I will now hand over the call to Prashant Chaubey for more information on earning performance of Q1 FY '25. Over to you Prashant.

Thank you, sir. Good afternoon, everyone. I trust you have had the opportunity to go through the -- our latest results and the investor presentation, which are published on our company website and the stock exchanges. I would like to take this opportunity to share a brief update on financial and operational performance of quarter 1 FY '25. The key details are as follows. We sold INR 502 crores worth of area in quarter 1 FY '25, which is a 30% growth over quarter 1 FY '24. Collections for quarter 1 FY '25 stood at INR 342 crores, which is a 19% growth over quarter 1 of FY '24. The strong collections has resulted in a net operating cash flow surplus of INR 100 crores as against INR 76 crores in quarter 1 of FY '24. Operating revenue in the P&L grew by 348% year-on-year for the 3 months ended June '24 to INR 316 crores in comparison to INR 71 crores in the same period in the last financial year. This was because of recognition of revenues from Sunteck Maxxworld, Naigaon and BKC projects. Our core EBITDA stood at INR 79 crores. However, except for a onetime charge, it would have been close to INR 170 crores. Adjusted for this, our core EBITDA margin is close to 50% and reported EBITDA margin shall be close to 40%. We were expecting certain height approvals to utilize additional FSI in our existing development at Sunteck City Avenue 2 at ODC Goregaon West and with this, the related costs were inventorized in the balance sheet as we do not want to wait any further for the same, we have now amortized it in the P&L. We reported a net profit of INR 23 crores for the quarter ended June '24. Our net debt to equity stood at minus 0.01x EBITDA cash surplus of INR 39 crores. Our total GDV, excluding presales already done stood at INR 37,480 crores. Thank you. With this, we open the floor for questions.

[Operator Instructions] First question is from the line of Puneet Gulati from HSBC.

Congratulations on good presales momentum also on the new project. Can you help me understand the broad economics of the Dubai project? How much did it cost you to build? And how would the money flew in from India to design and back from Dubai to India? Is there any tax implication or [indiscernible]?

So this project is in 100% subsidiary of Sunteck. We have invested close to approximately just INR 250 crores. So it is quite asset-light model. And the project is, obviously, I've said in my opening remarks, it's in the heart of the Downtown in the Burj Khalifa Community, near Dubai Mall. And so most of the money obviously will come from the presales. Just for the maybe a little bit more investment in the beginning and no incremental investment, we are looking at them very clear. Some small money for the launches and all which may be required, which may go from India, which will be negligible with respect to the size of the project. . And cost is -- obviously, the cost of the project is around INR 2,000 crores, and which most of it should come from the presales. And we all know the Dubai market is doing extremely crazy well there on the launches, the projects are getting sold almost to the 100% tune of and -- but this -- and bring this project in the heart of the -- once again at the cost of reputation, heart of the Downtown next to Dubai Mall, we don't see any problem there.

Okay. So INR 9,000 crores GDV is the INR 2,000 crores construction cost. And from that, we should look at your share at 50%. And what will be the time to complete? And who will be the construction partner there?

So we are identifying the contractors. So one thing I'm sure you must be knowing Dubai today has the best of what we struggle in India to find a contractor, Dubai has best of the world's contractor working in Dubai. It is an international now capital of the world. So we don't see any problem in finding a contractor to do construction. And we will not be doing construction ourselves as what we do in India. So we are very clear on that.

And who is the partner in time to complete?

The partner is group call MAS. M-A-S. .

And time to complete?

So time to complete should be 3 to 4 years.

That's great. And secondly, if you can talk a bit about the progress on the IFC platform? Is there anything that you're likely to conclude? And plus, if you can detail the launch plan for this year?

So IFC, we have already done a platform, you must be aware. We remain committed to that platform and build on that partnership, we are in process of evaluating the right project and obviously, hopeful of closing it soon.

[Operator Instructions] The next question is from the line of Abhinav Sinha from Jefferies Group.

Congratulations to the team on a great quarter. So first question is on Nepean Sea Road. Where are we in the approval process? And do you see the launch this year or maybe next year?

Abhinav, can you repeat your questions, please once again, if you don't mind?

On Nepean Sea Road, where we are on the approval process and what are the launch time line?

So Nepean Sea Road, we have vacated almost most of the tenants there, and we are clearing the site and approval is in the process -- approvals are in the process. We are at the also advanced stage of designing of the project. As far as launch time line, I have already mentioned in my last quarter call that we should be looking to launch this in either Q4 of FY '25 or Q1 of FY '26. That is at the cost of reputation. I've mentioned that earlier in the last quarter call also.

Right. Okay. Sir, secondly, for our growth guidance for this year, it's been a good start. So just wanted to check, a, how much unsold inventory do we have in all of the projects, which is launched but not sold barring the BKC one? And what is the launch pipeline looking like?

So to start with your second question first, our launch pipeline. So the launch pipeline, we have lined up a few launches in obviously the coming quarter. The combined launches of the Sunteck for this year, what we are planning is close to the GDV value of INR 5,000 crores. But we are looking at one new phase launch of Sunteck World in Naigaon, one new tower launch in Sunteck Sky Park at Mira road, one new phase, again, a launch of 5th Avenue after now as we are almost completing 4th Avenue. So 5th Avenue at ODC Goregaon West and 1 or 2 more new towers in Sunteck Beach Residences, our SBR project, plus again in 1 or 2 more towers in Sunteck Crescent Park at Kalyan. So with all these obviously strong launch pipelines and sustaining sales, and again, to repeat combined GDV value of close to INR 5,000 crores, we expect our presales to grow 30% to 35% in FY '25.

Abhinav, Prashant this side. With regards to your first question of the unsold inventory, in our ready-to-move-in project in BKC, our unsold inventory is close to INR 1,200 crores. And in our ongoing projects, the unsold inventory is close to around INR 1,600 crores to INR 1,700 crores. And in terms of the cost to be incurred for our ongoing projects, it is close to INR 1,300 crores to INR 1,400 crores. .

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

Congratulations on the successful numbers. So I have one question regarding your presales guidances as well as the EBITDA guidance for FY '25 and also for the next [indiscernible]?

You're not clear. Can you mute some instruments around you? I think there is a problem.

Am I audible?

Yes, ma'am, better.

So I just wanted to know the presale guidance for -- presale as well as EBITDA guidance for FY '25 and also for next 2 years.

So Riddhi, as we have already spoken in our opening remarks, we are looking at a presales growth of achieving of 30% to 35%. That is what we are targeting. And in terms of our EBITDA margin, those numbers are already published in our presentation, and you can look at it from there.

Sir, would you provide for FY '26 and FY '27 as well, if you could give some ballpark for that?

Riddhi, we are looking at -- on a continued basis, we are looking at 30% to 35% growth year-on-year.

Okay. Okay. And also, for Dubai project, sir, if you could provide, like, are we going to launch phase-wise the project or if you could elaborate more on that?

So Riddhi, Dubai, you can't -- that it's a one single land parcel. And you can't have the phase-wise kind of a thing. So I think we will launch at a time. It's one single project with maybe one tower or 2 towers, and that's how it is. So it will be launched at one single time.

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

Just on the cash flow clarification perspective. So would it be fair to assume that had the collection from BKC not been accounted for the operating cash flow would have been negligible? And if that is the case, why should that be?

So Puneet, Prashant this side. Your understanding is slightly incorrect. It's basically when you are looking at the cash flow -- from a cash flow perspective, you have to consider the cash flow from all the projects that we are getting. And in certain quarters, the cash flow from one project is higher than the cash flow in the other quarter. So if you look at the number on a yearly basis, like last year, we did INR 484 crores of operating cash flow surplus, before that we did INR 428 crores of operating cash flow surplus at which time, my collections from BKC was very negligible. In fact, it was nothing. So I would say that you should not look at it from just one quarter perspective. It has to be a more like a 3 quarter perspective that then only you will get to get the -- know the right picture. However, BKC collections are definitely helping us in our operating cash flows.

Understood. Just a one quarter anomaly here this time?

Yes, yes.

And secondly, in respect to your BD cost for the projects that you already have in hand, what is the balance to spend on BD?

So Puneet, the balance cost to be spent on our BD of our existing projects is 0, is nothing.

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

My first question is on your business development. So sir, currently, how many projects are we evaluating? And what would be the total GDV of these projects?

So yes, Biplab. So we are evaluating, obviously, a couple of projects. You all know market is good. We have obviously a strong BD team. But it will be very hard for me to disclose anything on this call that what are these projects and what will be the GDV value.

Okay, sir. That's -- my second question is, sir, from the ongoing projects, what would be the receivables from these ongoing projects from the sold units?

So Biplab, Prashant this side. The receivables from the ongoing projects is close to around INR 2,300 crores to INR 2,400 crores.

The next question is from the line of [indiscernible] Gupta from [ Berewood Capital ].

Given the guidance on FY '26 and FY '26, you think as well you were saying you expect 30%, 35% growth to continue, just talking about what are the drivers of this presale growth continuing. Also on the GDV, year-on-year the GDV is growing above 40%. So basically, is this GDV growth that you think will be to continue 30%, 35% growth? What are the trends you are seeing that give you confidence that you can obtain this not just in '25, but also in '26?

So we will update you with, obviously, that the new FY '26 guidelines to you slowly. But we all know whatever growth we are talking about in FY '25, which is only from the existing projects. We have not even considered Nepean Sea Road and Dubai into this, because both those projects are going for the launch. We are considering that if we make out on Q4 for the Nepean Sea Road launch. Still, we are confident that we will achieve 30%, 35% presales growth from our existing projects, because we are launching in every project, because they're left with very little inventory for all the existing projects. So we are launching new phases and new towers in every project. . So -- and that -- and our -- this existing projects, which we call our growth engines, these are projects with the inventories of like 6 to 7 years and 8 years. And obviously, while we are talking this, we are also talking about that our BD are -- right now, our GDV value is INR 30,000 crores, which we are saying that we will continue to add and we'll make it to INR 60,000 crores over a period of next 2 to 3 years. And before even completion of FY '25, we have added this INR 9,000 crores of GDV from our Dubai project, so -- which has already taken us close to INR 40,000 crores. So I think that explains itself. It is self-explanatory that to achieving this 30%, 35% growth year-on-year on the presales for the next few years is very easily possible.

Got it. Got it. Basically, I was saying FY '25, we got 30%, 35% growth from your existing portfolio just launching new inventory there and then next year, you'll have the impact of launch of Burj Khalifa and Nepean Sea Road, which is INR 9,000 crores of total GDV. And so then that will help you continue this growth into the next 2 years essentially.

Yes. I think that growth will be, in fact, ideally, it should be more than -- and plus there is many more projects, which are only -- which we have already -- acquisition has been done, but it has not been added to the GDV value. So if you -- to just give you one more example, let's say, Borivali, Eskay Resort, which is also there plus there is a Bandstand, which is there, plus there are a few more projects, which we are contemplating to, which I don't want to disclose before we complete the transaction, 3, 4 projects, which are sizable projects and which we would like to as soon as we close those transactions, we would like to disclose it to the market.

That's helpful. That's helpful. And maybe just last question from my side. How like do you import Dubai and Nepean Sea kind of large projects in terms of year 1 presales? Do you thinking of when you launch them in FY '26 that will be a big boost year-on-year to sales? Like how do you think about sales expectations at Dubai?

So we want to be conservative when we are giving our guidance, which we have maintained at 30%, 35%. We all know is, obviously, the launches in Nepean Sea Road and Dubai, looking at the current status of the market, obviously, we may achieve much more than 30%, 35%, but we don't want to overcommit and then under deliver, we are very clear on that.

The next question is from the line of Kunal Lakhan from CLS Group (sic) [ CLSA Group ].

Just a clarification on the Dubai project. So the INR 2,000 crore construction cost includes approvals as well as sales and marketing or it would be over and above this?

No, I think that includes most of the costs, which includes your sales and marketing and approval costs as well as your construction cost, which is we are talking about almost close to AED 1 billion, so which is quite enough for SSI, which is for a sale area, which is close to 1 million square feet.

Understood. Understood. And secondly, on the Borivali project, what is the status there? And what will be the launch time line?

So Borivali project, you know Kunal, I think when we are even a little bit uncertain, we don't add the project. We follow this discipline of not adding the project to the GDV value. And hence, I would like to refrain myself to give you any commitment or any time line about that. The moment we see the possibility of approvals getting expedited, obviously, we would first like to add it to the GDV value and then come up with the time lines.

The next question is from the line of [ Sunil Sonawane ] from Sharekhan Limited.

Congratulations on great set of numbers. Sir, I had a question regarding BKC sales and [indiscernible] a good improvement. So has there been a change in terms of strategy in terms of selling or pricing? And what kind of outlook you can give there, whether this one way should continue going ahead? Or this would be a lumpy each quarter? And there will be some targets with respect to BKC?

Prashant, this side. So if you see in BKC in the last 12 months, we have done a presales of close to INR 355 crores. And this is against INR 203 crores that we did in previous 3 financial years all put together. So overall, you know that momentum has definitely picked up in BKC by quite a margin. And we are quite confident that this will continue and it will keep on continuing.

Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to Mr. Kamal Khetan for closing comments.

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 once again. Thanks. Bye. .

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