As CMD mentioned, ‘25 is an exciting year for us with INR60,000 crores of sales that is lined up for launch. That should give considerable free cash flows to the company and keep the debt levels and give us a significant cash flow for the business development.
PRESTIGE · Mar 2024 call
Prestige Estates Projects Limited analyst Q&A
And just to add on, for the launches that we did in FY ’24, of the 40 million square feet that we had launched, 31 million square feet was in residential and office retail hospitality contributed to 8.52. And out of the 20-odd million square feet of new launches, INR21,000 crores worth of new launches that we sold this financial year, INR15,600 crores was sold in office new launches and the balance was from the inventory.
Okay, now we are open for questions.
Thank you very much. We will now begin the question-and-answer session. First question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.
Hi, Irfan Ji. Hi, Zaid. My first question is on business development for this year we have spent close to about INR4,800 crores as per the cash flows. So for the year as a whole for FY’25, so with this INR2,000 crores which we have raised from RDR, so excluding that how much do you think you will spend on land, given that we have very limited inventory now in Hyderabad, which had contributed significantly to sales in FY’24? And incremental growth, which we see from 21,000, giving a 25% guidance almost like almost INR5,000 crores-INR6,000 crores. So how do you intend to make it up? So intensity of BD and also like which locations you are looking at, how much will be the total deployment for FY’25?
So the good news of Parikshit is that we’ve already got the land now. Even in Hyderabad, we’ve got two large parcels of land in Budvel, which we bought in an auction. And this INR2,000 crores which I told you about earlier, all the money hasn't yet come in. Now that money will come in. It's for acquisition of two more, for two parcels the land has come in. One is for our -- which was for the retirement of debt of Edelweiss in our Prestige Ocean Tower in Mumbai. And there's one more that we did was for Bangalore. There are two more properties that need to be bought, need to be tied up. And for this, the money is there. So it was just pre -emptive that we got the funding. And that is for Kamla Nagar in Delhi and also for a large tract of land in Goa. So once that is required, that will be utilized. Once that comes in, until then, we have just received as of today, only a sum of INR500 crores out of the 2,000 crores and not more. And then moving on, you asked me how we are able to reach the INR26,000 crores. As it is, like I told you, we've bought a INR60,000 crores new pipeline plus a INR12,000 crores inventory which is in various cities, all put together INR70,000 crores. With that, I think even if I sell half my stock, it will be INR36,000 crores. In spite of that, I've just given a guidance of INR26,000 crores to INR27,000 crores, which should be easily achievable. And I think we will surprise the market by doing more.
That means that there has to be some heavy lifting. Even from Mumbai, I think Mumbai, FY’23, we did INR2,700 crores of sales. ‘24, we did INR3,200 crores. So now since we have almost like a lot of premium launches coming up in Mumbai, so how do you think FY’25 will shape up for Mumbai in terms of sales?
See, Mumbai, we have Prestige Forest Hills and Prestige City. We are waiting for the MOEF. Because of elections, the MOEF has got delayed and the meeting which was even fixed for last week got postponed for post the election results. And similarly, Nautilus, even there the MOEF is pending. Now once that gets done, I think both Nautilus in Mumbai as well as the Forest Hills in Mumbai are large number movers. There’s a pent-up demand there because Prestige City in Mulund is almost, more, or less, out of the 1,600 units in Bellanza, we have sold 1,300 or 1,400 units. So just about 200 units are left over in different places. So Forest Hills will be a great number mover. Nautilus, there’s a huge interest in and the moment we launch it, even that should go. Even the Ocean Towers, one tower which was launched is like almost fully sold out. Now we are working hard to get the approval for the second tower and even the moment that comes with RERA registered, I think there’s a lot of interest in that. With this, we will get a lot of numbers for FY’25 from Mumbai. Similarly, in Bangalore, there’s a big pipeline. Hyderabad, there’s a big pipeline. Goa, we have a big pipeline. And of course, we talked about NCR. Even NCR, there are three large projects which are under approval, one in sector 150, one in Indirapuram and the other is in KG Marg. Once all these three gets done, there’ll be substantial revenue that will come from these projects also. So we are pretty bullish, we are pretty positive that all this will transfer to sales, and I think it will be easy lifting, not heavy lifting.
Okay. So just a last question on the commercial real estate. So we have almost 8 million square feet of total ongoing products supply coming up over the FY’26-FY’27. So if you can give some colour on how much of this is already pre-leased?
Yes, see, this is a work in progress. You see, my teams are working hard to even do pre-leasing. Normally, I did this building in Pune, it was a million square feet. When we started it, it was like blank. We didn't know who the tenants will be, how many tenants will come and from where they will come. As we were closer to finish, we got this client called Bank of New York Mellon and they leased out the entire building. In fact, what happened was our economic interest was only 69%, 31% was the landowner and the balance 59% was the company's interest. But then what ultimately transpired that we bought out the landowner's interest also, so the entire asset is now in the company's hands, the entire 100% asset and that's a good thing because then we can control the asset in a more proper manner and that is leased out. Similarly, in Mumbai, there's a lot of interest in BKC, there's a lot of pitch has been made to various clients, very large clients, existing clients in Bangalore and Hyderabad. So that's also happened. Like Cochin, we have done one development that's fully leased out. Even Outer Ring Road, there was a bit of a blip now, stress -- but now everything almost is fully leased out. We have some inventory in Bangalore near the airport, which is a Prestige Tech Cloud , but that's work in progress. That project is almost ready now and I think even that the teams are working hard. And for the under-construction projects also I think there is a lot of interest and as we progress, as we come nearer to completion, the demand will come.
Sure sir. Thank you and wish you the best. Thank you.
Hello.
Yes, Pritesh we can hear you.
Hello.
Mr. Pritesh, your line has been unmuted. Please go ahead with your question. We will move on to the next participant. It's from the line of Kunal Lakhan from CLSA. Please go ahead.
Hi, good afternoon. So my first question was on when we look at the target that you're setting out yourself for INR26,000 crores, INR27,000 crores. So one needs to also build a pipeline that in the subsequent years to sustain or even grow from here on. So wi th that context just want to understand like we spent about INR4800 crores this year on new land and BD. How should we look at this number in FY25 and going ahead?
We do have Kunal we do have a big pipeline. Apart from 25 we have a pipeline w hich should be on upcoming projects and also there's a big land bank. So I believe that it's all work in progress. Everything can't be spelt out there, but then there is a pipeline and we are very conscious about that and all this will all happen as we mov e along and if Amit wants to add up something, Amit wants to say something.
In terms of outlay for the next year it will be in the similar range of INR3500 to INR4000 crores. So that's what we are budgeting for 24-25 in terms of business development spent.
Sure. So INR3500 crores to INR4000 crores for the new land and plus like there'll be some pending payments towards existing land. Is that correct?
It includes those pending payments. So that's our yearly capex spent is ar ound that INR3,000 crores to INR4000 crores, which is what we anticipate for this financial year also. And Kunal, just to add on there is no dearth of deals in the market. As Mr. Razack has also said before our approach is very simple. We are cherry pickin g what we want to do and conservatively approaching these deals and the market is huge. If you just look at the Pune and NCR market, it's equal to the Bangalore market or even more. So I think once we get our bearings in these markets the deal flow is just going to ramp up even more and take that sales number even higher. I think your question must have been coming from upcoming we have 75 million square feet and we've showed 60 million square feet are expected to be launched this year. Yes, we'll try to launch as many of those as possible. It's very realistic. We're not just putting a number over there because we've been working on this for quite some time and capital has been invested in the last year in this project. Hopefully, some will carry on to the Q1 of the next financial year and there'll be more that we'll add on.
In fact, you'll be surprised. My direction to my team is there's so much of positive cash flow that will come in the following year. The debt level will be below what it is today because that's what my ambition is, and I don't see it going up. I only see it going down. That's the game plan also. We have a strategy in mind. We've got a lot of where money has been sunk in on land wher e there's not much of spent on construction. We believe projects like Prestige White Meadows or Prestige Raintree Park where money has gone in for land and even in Prestige White Meadows where construction also has been done substantially. Once these get approved and launched it'll give us a huge amount of cash flow. Similarly, Indirapuram, similarly now in the Prestige City Hyderabad also in Budvel even there we've got a lot of money spent on land and that will come into positive cash flows. So we believe that the debt levels for the end of financial year 2025 of course there'll be blips up and down quarter -on-quarter, but the cash flows will be pretty robust, and we will try and bring down the debt level from what it is today.
Sure. Just one clarification on when you say debt levels will come down, you're talking about absolute debt levels or debt to equity?
Debt to equity.
Sure. Understood. And one last question from my side. Any update on the hospitality demerger and this thing that we are planning?
Yes, that's a work in progress. That's a good question. That's a work in progress and I believe that that's the way to go. That's where a lot of capex will be required for it. And once we do the demerger and we do an IPO that will give us additional bandwidth to grow the hospitality business because currently the hospitality business is booming and we're getting positive numbers from all the assets, current assets which are trading and we do have a huge pipeline of new assets which are either under planning or under construction or approval. So all this will definitely require fresh spending and hence an IPO will be the need of the day.
Sure. Any indication of the timeline this will happen in 2025?
Yes, we'll try and finish it in 2025 itself. There's no need to procrastinate. Hopefully, the team will work on it and make sure it happens in the next couple of quarters.
Great. Thank you so much and all the best.
Thank you Kunal.
Thank you. The next question is from the line of Abhinav Sinha from Jefferies India. Please go ahead.
Abhinav actually this quarter, the current quarter, the first quarter will be very soft. The reason is the approvals did not happen because of the election co de of conduct though whatever we've tried, it's quite a tough one. In spite of that whatever inventory we have and we had we are selling and in Bangalore we are in a near sold out position. But we hope that some more approvals will come through in this quarter itself. And then if we get the RERA, maybe we'll get some good numbers this quarter, but for sure the next and the next quarter will be quite defining. This quarter could be muted, but not so bad, but at the same time because of the election code of conduct and the process, it has really put us into a bit of a bind.
Right. Sir, on Bangalore market also, how are we seeing pricing now? Is it stable or still you're seeing double digit growth?
Yes. Pricing is something that I w ouldn't want it to go spiral upwards. We do have to have a balancing trick between the selling price, our costs and land price and all of it and still retain our margins and make sure that the company earns decent margins. Because if the price goes up too high, too fast, it's counterproductive. And then the entire customer offtake will be a little slow. So hence, we are very conscious on how we price our product. It all depends on our function of how our product is priced, on cost, on the overhead and also land and opportunity cost. And basically, so we're very conscious and we also look at what the market will accept. And I think we balance our pricing. And I think so far, the team has done a good number. Actually, prices have grown. If you look at the ave rage ticket price of this thing is now 10,000 plus.
Mr. Abhinav, does that answer your question?
Yes, I have another question if it is possible to do that.
Yes, Abhinav.
Yes. So on some -- on the longe r term, I just wanted to check on after the CEO's departure, banker's departure, what are your thoughts on having a professional CEO again or on the longer- term succession plan also, if we can have some thoughts there.
The thoughts are actual ly contrary to the perception; we have professional CEOs in every segment of the business. For the office, I have Jaggi Marwa, who heads the office business. I have the Mumbai head CEO, Tariq Ahmad, who runs the entire Mumbai operations. I have got Mr. Swaroop Anish, who heads the residential business. And I have Mr. Mohammad Ali, who handles the retail mall business. Similarly, now, among the promoter group, I have got Zayd Noaman, who is now going to take care of investor relations, funding, financing, and all of it. He has been in the business for a pretty long time. And he is pretty well -versed at how things will work. Now, Amit is now really cutting out his teeth and doing his job as a CFO and he is performing well. Plus, in the NCR region, another promoter, director that is Sana Rizwan, is going to take care of NCR. Hence -- and in hospitality also, we do have Mr. Suresh Singarvelu, who is quite a senior gentleman and who has been doing the hospitality business for quite a long time, of course, supported by two promoter directors. One is Mr. Zaid Sadiq and Omar Jung. So hence, I believe there is a pretty well -rounded team that is there and there is no vacuum of any sort including on the production side. We do have two promoter directors, that is Faiz Rizwan, who has quite a lot of energy and youth and he handles now the purchase and production along with my brother Rizwan. And of course, we have Mr. Gopal, the very senior most gentleman. Of course, in Mumbai also, we have the engineering team. So I beli eve that redundancy is not required. As things go by, we will see. In case if there is a need, we will definitely fill it up. It is not that we want to run a very shoestring operation if the company needs to be strengthened with some more resources. As time goes by, we will strengthen the resources.
Great. So, thanks and all the best to the team.
Thank you.
Thank you. The next question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.
Yes, thanks for my question. And congrats on some great performance in SR24. Our first question is on the pipeline. So, Bangalore, you keep on adding projects nothing too much to worry on that. But specifically in Hyderabad.
No. Hyderabad, I've got a good pipeline. Chennai, I've got a good pipeline. And even now, Mumbai, I have a good pipeline. Plus, now the thing is we've also more or less concluded a large transaction in the Pune market because I believe that's where again there's potent ial. So we are not trying to spread ourselves too thin. But the potential was there, and this will be handled by my western region. So, I think the pipeline is there. We are conscious that there's no sense in hanging on to a huge amount of so-called land bank and not launching. We do believe we have to be quick we have to have projects we acquire; we need to bring them to the launch pipeline like now Indirapuram, we tied up just about a quarter ago. Now we want to bring that to the market soon. Now we've got not even KG Marg, we want to bring that to the market soon. So once those get launched in the next pipeline, we'll start this like Zaid very rightly said, every day there's offer for projects but we cherry pick and only select the best of the best. So, I don't think there's any dearth of opportunity. It's only trying to do things properly without spreading yourself too thin.
Sir, our pre-sales have been great. We have also capitalized well on the cycle. So in the next two years, can we see yearly sales of INR30,000 crores before the market actually peaks out?
Ashutosh, we'll make you INR30,000 crores in FY '25 but I'm not guiding. I'm only saying 26,000 but I'm very sure the team will touch 30.
Okay, thank you, sir. And my second question is on closures of deals in Pune and Gu rgaon residential market. So both are big residential markets and we have been trying for some time. So any updates on these 2 markets?
Yes. Pune, as I told you, we have closed out one transaction which will get formalized in the next month or so. And that's a large ticket one in the sense it's a joint development, so there's not any major cash outflow. And we do have a local partner who's undertaken to get all the approvals, everything. We just have to give the scheme. So I believe that will be a big number mover for us there again. So I can't reveal more details than this, but it's all work in progress.
Okay. And anything on Goa market, sir?
Goa, yes. Now we've already bought one piece of land and that's getting registered as we speak in Goa. And then we also have – we've got two large piece of tracts of land. One is now the one that in Goa I'm talking about, the seascapes, prestige seascapes. That's a combination of plots, villas, and high -rise apartments. That sh ould get launched if everything goes well by August, September.
Okay, thank you, sir.
Thank you. The next question is from the line of Pritesh Shah from Motilal Oswal. Please go ahead.
So my question was I wanted a little more on pipeline specifically in Mumbai, Hyderabad, Pune which we were talking about. Hyderabad, you answered in a bit, and I heard that. So just on Mumbai, after these couple of projects launches, right, how do you think the pipeline is coming up in terms of other micro-markets in Mumbai apart from South Central? So just your comment on that and Pune, which you were talking about last quarter, where are we progressing on that front?
Now, as I told you, Mumbai, we have a good, strong pipeline just now. As I said, we always like to tread softly. Now let these 2 big launches happen. We would like to see the response. There are opportunities, like in central Mumbai, we're also working on the JijaMata Nagar, which is now, I think one-fourth of that slum is now getting cleared. And by August, September, the entire place will become a flat ground. It's a big responsibility, but we need to do that. And we have to build 4,000 rehab homes, which the team has really worked on, the architects are in place. So that's central Mumbai. But now we are also conscious that we need to get in a product which is appealing to the mid-income group. And hence, we are looking at various opportunities in Thane, in Panvel, and other places. But there are many opportunities, but we don't want to make commitments till the current commitments that are on hand get launched, and we get ourselves a little free.
Sure. That's helpful. Second on the margins, this quarter, specifically on residential segments. So we have a sharp increase at 34%. Anything specific to look at, and what should be the sustainable margins on the sales that the company is right now doing? Should one assume in that sense?
Amit will answer this question. Amit.
Hi, Pritesh. In the current quarter, we had 2, 3 project completions which had higher margins, which has resulted in an increase in margins. Going forward, most of our projects are in the range of 30%-35%. So EBITDA margin should remain at 20%-23%.
Sure. That's where the average for the full year was?
Yes.
Okay. And just lastly, I'm not sure if you have answered, but what should be the capex spend this year and next year? If you can guide on that number, some range on that side.
This year, we have spent INR2,300 capex, which includes INR1,600 on commercial, retail around INR250 crores, and hospitality, INR450 crores.
I'm asking for FY ‘25 and ‘26. What should be the number one should assume?
In the range of INR2,500-INR3,000 crores per annum.
Okay. Sure. That's helpful. Thank you. All the best.
Thank you. The next question is from the line of Parikshit Kand pal from HDFC Securities. Please go ahead.
Thanks for the follow -up, sir. So you've been talking about land acquisitions across India, but one place where we have still not heard anything from you is Gurgaon. So how do you think that market will pan out for us in this year? Are we looking to break any deals there this year and potentially launching something by the year end?
Hi, Parikshit. This is Zayd. As mentioned earlier, we're in the process of seeing many deals and evaluating them. There is a huge pipeline that we see of deals, but we're cherry-picking what we like. And more importantly, we want to stabilize and launch our project in Indirapuram, and then this will follow. So for that region, I think we have our eyes set and focused right now, and then we'll definitely pick up something in Gurgaon.
Yes, we will be looking at a format like that, because it's a large township.
Okay. And just the last question now, sir, we have two big commercial assets now. I think both the projects and I think both in BKC have now moved into ongoing, so even the Ma halaxmi is there. Do you think that at the right time we look at maybe now we have bought out the partner here ? And we're at 100%. So are we looking t o maybe raise some capital and de -risk this project ? Because these are large layouts with large rental potential. So do you think it'd be appropriate maybe before they're ready? We look at raising some capital here from private equity, and then maybe in a long time we have plans for a lease, so then monetize it through that.
Yes, I mean, there are various ways to do business, and definitely you're saying long -term plan is to maybe once we have a complete scale in both in the retail as well as in the office space, and we've got a target of almost INR4,000 crores top -line rent by 2028 -29, as well as a INR600 crores top-line rent in retail. And I think that's the time we will plan to do a REIT like how we are now planning to do a hospitality IPO. That's the only way to do it.
But sir, no plans to do any, I mean, pre -REIT kind of capital raise, I mean, maybe a stake sale to private equity funds, a couple of assets where we've already like gone up.
We've already done the stake sale, so it is not there yet, but the whole idea now, game plan is to create the, like we said, Office 2.0 and Retail 2.0. We will do one of some of the best retail assets and the best office assets, make them mature and at that time we'll think of listing them or taking them for a REIT. But it's all work in progress but you never know in life what happens. But as of now, if you're asking me, currently there's no such thoughts.
Okay, sir. Thank you, sir.
Thank you. The next question is from the line of Chetan Sharma from Systematix Group. Please go ahead. Hello, Mr. Chetan, your line has been unmuted.
My question is regarding the verticals, sir. Can you please give me guidance regardin g the verticals of office retail and hospitality and services? How do you go about it?
Chetan, speak up a little louder, please. I can't hear you. I couldn't hear you at all, Chetan.
Yes, my question is regarding the verticals. Can you give any guidance on office retail and hospitality or service residential for FY’25 and FY’26?
No, we've given a guidance. See, I can't give you earl y guidance on office and retail, but we have set a vision for office up to FY’28, almost INR3,800 crores of top-line rental, and for retail, INR580 crores of top-line rental up to FY’28. And I think these are pretty realistic numbers and pretty achievable. This is Also, we've given a breakup on how we are going to achieve it, so that's also there in our presentation.
Thank you. The next question is from the line of Shivam, an individual investor. Please go ahead.
Sir, can you just provide us with some the PAT percentage and the EBITDA percentage numbers for the pre-sales that you have done, and what will be it in the future?
Shivam, the PAT percent age, the EBITDA percentage, as Amit already told you, will be hovering around at 30%. And PAT, like you've seen now, it's from a single-digit PAT, it's grown to about 13 %, 14%, maybe 17 % as we go along. And I think it remains on the similar lines, unless there's some huge cost overrun in terms of material costs and other things. I think we should be able to retain those for the next two years to three years at least.
What would be the PAT percentage on the FY’24 pre-sales that you have done?
It's there now. We've been talking about pre-sales. Pre-sales are also similar, Shivam.
It will be similar, the 11%.
No. PAT percentage, as I told you, between, 15% to 17% should be the thing. And Amit wants to add something to you.
It will be in that range, Shivam, around 14% to 15% PAT percentage. The overall margins will be, the gross margin will be around 30% to 35%, EBITDA margins will be around 23, and after all my overheads and all that, the PAT percentage will be in the range of 14%, 15%.
What we do, Shivam, we p rice our product very sensibly. There's no sense in overpricing the product and having no takers. Hence, we are very conscious that while the company has to earn a decent margin, we don't overprice it and then make it redundant.
So 14% to 15% of PAT margin you'll be targeting in FY’25 pre-sales that you're targeting around INR30,000 crores. And that's what you're targeting?
Just to add something, if you're looking from the financial year, 24 %. That is not the right benchmark because we are spending quite a bit on overhead sales and marketing which gets debited to P&L. But what gets recognized as revenue is what I did somewhere in 21, 22. So it's not comparable. So once my sales stabilize at 25 ,000, 30,000 levels, my overhead percentage will come down and my margin and my PAT percentage will go up. So on a stabilized basis, you can expect 14% to 15%.
How much are you willing to target for FY ’25? Like you said INR26,000 crores is your pre - sales guidance for FY’25. So what PAT percentage will you be targeting conservatively?
The answer is the same.
14% to 15%, right? Hello?
Yes, tell me.
Yes.
Okay, thank you.
Thank you. The next question is from the line of Yash Gupta from Think Side Advisory. Please go ahead.
Sir, my question is on launch pipeline. For FY’25, we are looking for around INR60,000 crores of GDV. So, sir, this will be the new normal for the company in FY ’26, FY’27. Again, we will look to see like launch of INR50,000 crores, INR60,000 crores on an every year basis or FY’25 will be a little bit on an exceptional side?
This could be exceptional because we've been working on this for some time. And you see, 60,000 is the target. We may do 60, we may do 50, we , may do 55. As I said very clearly from the beginning, it depends on the approval process and getting that within the timeline. There could always be some gaps. So, if I have to get the numb er that we're looking at, we have to target that type of launch pipeline. Otherwise, we will not get those numbers. So, I believe that the potential is huge, and I think we should always target that year-on-year between, 40,000 to 60,000.
Okay, thank you, sir.
Thank you. As there are no further questions from the participants, I would now like to hand the conference over to the management for their closing comments.
Thank you very much once again for a very insightful co nference. You had a lot of good questions. Thank you for your support and thank you for anything else you need. I think both Amit and Zayd and Mohit are there to answer any doubts that you have. You're most welcome. You get the answer. Once again, thank you for the interest shown in the company and the support you've given us. Thanks so much.
On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.