Signatureglobal (India) Limited analyst Q&A

The first question comes from the line of Pritesh Sheth from Axis Capital.

First is on the launches, 8 million square feet you talked about, while you said 6 million square feet in 37D and 4 million square feet in Sector 71, that's a massive supply for that market at one shot. So how are you planning to phase this out over the next 6 months or a couple of quarters? Yes, that's my first question.

Sure. So Pritesh, see, the critical aspects for the company is to bring any land stage inventory to launch stage because there's a lot of planning and approval-related activities which need to be completed. So out of -- so when we are saying there's land-stage inventory, which is roughly 24 million square foot, the good part is that almost two third of it is coming to a launch stage, just within the span of next 3 to 4 months. So that really makes a lot of shift in the quality of land stage inventory, which is there with the company. Also, Pritesh, we do intend to do the construction of these large projects at one go. So we'll not go tower by tower. So we'll hand out construction contracts at one go because we are very comfortable with the financial -- current financial position of the company. And we do intend to do the construction of these projects at one go. These will not be phased over multiple phases. As far as sales are concerned, see, there is not much new sale coming in the Sector 71 market. So we are amongst few large supply creators in the Sector 71 market. And hence, we are very positive as far as the sales offtake is concerned. And even on Dwarka Expressway, the way the entire infrastructure is concerned, we've done large scale projects in the past. So we may do some cosmetic sort of phasing is possible that we may launch x number of units first, which would be reasonably large, and we do a second small phase within a short of time, but it's -- fundamentally, this is one project. This is not like project which has to be launched across multiple phases over, let's say, 12 or 18 months. By and large, besides the marketing optics, this will remain one single project.

Got it. So 4 million square feet from Sector 71 and another 4 million from 37D is how we should look at in terms of launches in second half for now?

Yes. Pritesh, just to add on. See, what we've also done is that, see, in general, the pricing in the market has gone up. See, the simple reason is that while projects have been launched in these middle income category, a lot of inventory has come in the upper mid segment. But what we've really done with both of these projects is to launch projects around 1,800-odd -- so earlier, let's say, launches were being done with an average size of about 2,200, 2,300 square foot. We are now launching projects with starting apartment sizes about 1,800-odd square foot. we've tried to ensure that the ticket size remains attractive, and it's affordable for the end user to participate in these launches.

Got it. Just a couple of follow-ups on this, right? I mean you mentioned that amongst the inventory that we have launched since Feb '24 till now, there's INR5,000 crores worth of inventory, which is left in the project. If you can split that up between Sohna, SPR and 37D, that could be helpful. And looking at the last launch that we did in Sector 71, which were also not a sellout, right? We sold like 55%, 60% worth of inventory, how do you consider -- how are you expecting the velocity for these 2 launches? While you said financially, you are okay, I mean you are well strengthened to manage such a large-scale construction. Is your underlying assumption that probably construction spend would be ahead of collections, and we are okay to take some debt if needed, but we want to go with a large size launch in the market?

So Pritesh, I hear you and kind of like 2 broad questions that if this inventory was INR5,000 crores, why are we doing these larger launches? And what is the nature of unsold inventory, which stands in the company right now. And thirdly, you're talking about financing of these projects, correct?

Yes.

Yes. So see, as far as the unsold inventory is concerned, if I have to categorize it basis the nature of the development, then in the group housing or high-rise apartments, there is about, you could say, 2,800-odd crores of inventory, which is still unsold. In the mid-rise -- low-rise flows, there's about INR850 plus crores of inventory, out of which certain floors are blocked as well. It's not that we've opened up all floors to sale and hence, that inventory is lying. This is primarily in Daxin. There are certain floors which are yet to be opened up for sale and hence, this inventory -- while it's getting counted as unsold, it is -- we've not lost it as well. And there is certain plots, industrial plots, both in Daxin and City of Colours, which is worth, let's say, INR750-plus crores. So this is bulk of the inventory, which is yet available with the company. But there's a gap between what is with the company and what is getting launched. Amongst the group housing, there are still a lot of apartments which are larger size, like Titanium, we were doing apartments as large as 3,600 square foot, there were quite a few penthouses which are there in each of those towers. So the inventory which is left out will also comprise of the these larger-sized apartments. What we currently intend to do and launch is inventory, which is smaller in size and hence more affordable for the buyer to participate. So that's on the inventory side. And see, we've always maintained that is a very challenging task. It takes its own incubation time line effort and capitalization. So in the housing market, the bulk of the capitalization does take place while you are acquiring land and seeking approvals on those land parcels. Demand side, the reason why I brought up the cumulative sales, the reason was that since February or March, if we -- whatever we've launched, 80% plus has already got sold. And when we are doing these larger launches, see, the intent is that it can get consumed over a 12-, 15-month period. The intent is not that as we launch it, all gets sold. But at least we've cleared a big critical milestone of creating that supply. So that's what I would suggest that it gets rightfully understood. As far as construction is concerned, see there has -- in recent past, we've not seen a situation that we've launched something and we've not achieved financial closure basis, the sales getting made. Having said that, the overall cash position of the company is quite strong, whatever projects are getting completed are throwing up cash and that's why the net debt stays where it is. If you look at the last 2 years, ever since we got listed until date, I can share those numbers separately, but our portfolio has risen dramatically and the net debt is constant. So let's say the capital has grown 2x, 2.5x in terms of portfolio size and the net debt remains the same, that clearly indicates that a lot of it has been funded out of organic cash flows. And we also did one round of fundraise from the markets, and we've never had that intent of going again. And there was no need to kind of raise for the equity money from the markets, which still remains the situation. But we are confident of achieving good sales and these projects funding their construction on their own.

Got it. And just to -- I mean, you mentioned that you are preparing these projects to sell within 12 to 15 months. So just to clarify, will that be your underlying assumption that whatever we are launching, we are able to sell in 12, 15 months, that should be a good number to achieve?

See, there are two sets of lines, Pritesh, there is launches which are being done, and there are absorption which happens over a span of time. This is real estate, and it should be -- and this has been the assumption. See, maybe last year, we launched 1 or 2 projects where just at launch, we managed to sell everything. But that can't be the assumption from a company perspective. We've always supposed to plan for a more pragmatic sales scenario that as we launch since these are -- this is inventory worth INR2.5 crores, INR3 crores, INR3.5 crores, it will take certain time for it to be consumed. But since we're launching it as a single phase, you can also appreciate that we are confident that all of this is getting sold within a finite set of time. Exact number of months, see, no one knows. But yes, this is definitely -- we are very positive that during the second half, we'll be able to achieve good sales and meet up our annual guidance.

The next question comes from the line of Saishwar Ravekar from ICICI Securities.

Hello team. So my question is like the ongoing portfolio is heavily dependent on affordable and mid-income housing. So while forthcoming pipeline emphasizes on group housing and premium segment. So my question is basically like how does the revenue recognition profile has evolved in upcoming fiscal when these projects will complete, since the absorption rate definitely changed. So if you can guide us?

So see, there is almost 9 million square foot of inventory, which is coming to close over the next 5 to 6 quarters. Then some of our newer projects had mix of both plotted development as well as low-rise developments. So in both of our large projects, like Daxin is almost 125-acre project, where this in between INR1,500 crores to INR2,000 crores worth of plotted development, which we've sold. Likewise, in City of Colours also, it's a large township with a lot of plotted development. So in the manner of completion, we'll first see this 9 million plus getting completed. Then there are these developed plots, which are kind of getting completed and hence, even that revenue recognition will kick in. Post that, there are almost closed -- there are more than 2,500 low-rise floors which are -- which have been launched and bulk of them sold in the project Daxin. So that is -- that will get completed. And post that, some of these group housing projects, which we've launched over the last 15, 18 months, they will also come in queue of completion. So it's not that we are only relying on group housing projects and hence, the revenue recognition is getting pushed by many years. So there is multiple inventory. And every year, we'll see a mix of that getting completed. Lately, you'll see the pattern in revenue recognition and profit margin. The portion of middle-income home completion is getting higher. And hence, the GP margin is improving. So if we do a like-to-like comparison with the previous year, our GP margin has gone up to 29% versus 23%. The simple reason is that the proportion of low-rise floors has increased versus affordable housing projects. And we are now left with 5 or 6 affordable projects, which are kind of getting delivered over the coming quarters. And hence, once we are done, all the balance completion will have a very strong GP margin accruing against those projects.

Okay. One more question. One of your peers -- you must have heard this. One of your peers has taken entry in the Mumbai market. So you are also thinking for expansion, like geographic diversification.

No plans as of now. So we wish best of luck to everyone who is entering new markets, whether it's people from NCR going to the Mumbai market or other players coming to the Gurgaon market because see, there is huge scope. The fundamental simple each of these geographies have like a country-size population. For instance, NCR in itself has close to 40 million people. So there is a massive amount of work which is there for all organized players. And if you see it as a theme, as an industry over the last 4 to 5 years, growth has been consistent across board. Balance sheet position has improved for multiple peers. And I think people are seeding newer markets. We still are focusing on some of these larger launches in our key markets. But at future stage, once we are close to entering any new market, we'll keep everyone posted about it.

The next question comes from the line of Pritesh Sheth from Axis Capital.

So just a couple of questions on the cash flows overall. So we have done collections of INR1,900 crores versus guidance of INR6,000 crores. If I look at your presentation, we have pending collections of INR2,200 crores from the ongoing projects. Another INR18,000 crores worth of inventory you have sold from inventory launch since Feb '24. And then you have another INR12,000-odd crores of sales expected in the second half. How would you bucket your balance collections in these 3 categories, ongoing recently launched and upcoming so that we can build that confidence in the numbers to come in second half in terms of collections?

See, from an overall perspective, Pritesh, ongoing and recently launch will give us numbers anywhere between INR4,000 crores to INR4,500-odd crores whereas INR1,500 crores will come out of the new -- the launches for the year, where if you look at the overall numbers, we've done about 22%, 23% of GDV terms launches as yet. Q1, we had done a project in Sector 71. Q2, there was no launch. But Q3, Q4, we are planning 2 large launches. So, about INR1,500-odd crores is expected out of new launches, whereas about INR4,000 crores to INR4,500 crores, anywhere in that range is expected out of the existing set of projects. So that's our plan for the year.

And bulk of that till now, I mean, INR1,900 crores has come from ongoing and recent, while new launches, obviously, there was a large launch in the first quarter, that would have contributed about INR500 crores till now?

North INR500 crores, I think that's not the number which has come as yet. But as of now out of this INR1,900-plus crores, INR1,960-odd crores, you could say about -- around somewhere in the range of 85% to 90% has come out of the erstwhile inventory, whereas you could say about approximate 10%. We can share the exact number, between 10% and 15% come from newer launches. But as these launches mature over the span of time, that's why I'm saying that overall, about 25% of the overall collection is expected from the newer launches.

Got it. And in terms of the spending for construction, you expect these numbers to remain same in second half and probably ramp up next year with the launches that we'll have in second half. So how do you expect the overall construction spend for this year and OC generation in this year?

So construction will go up, not in a massive way. We spent about INR900-plus crores during the first 6 months, INR940-odd crores during the first 6 months on construction. I think that number should be between INR1,000 crores and INR1,100 crores for the second half of the year. I don't think it will cross INR1,200 crores, but it should be in that range of INR1,000 crores to INR1,100 crores for the year. So with enhancement in collections in the second half, a lot of it will trickle down to the operating cash surplus for this year.

As there are no further questions from the participants, I now hand the conference over to the management of Signature Global India for closing comments. Over to you, sir.

Yes. Thank you, everyone, for joining today's call and taking out time. Thanks a lot.

Thank you, everyone. Thank you, sir. On behalf of ICICI Securities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.