Signatureglobal (India) Limited analyst Q&A

The first question comes from the line of Murtuza from Kotak Securities.

Just a question from my side. Just want to get a sense on how we should think of the improvement or the trajectory of collection and construction cycle. Starting with Sector 37D Deluxe in March '24, we did make that shift to the more premium sort of housing segment. But your construction spends have remained in the INR4 billion to INR5 billion on a quarterly basis. Your collections is also in a narrow range, and I'm not getting -- picking on quarterly numbers. But we would have expected an improvement. So if you could give us some sense on how we should think of it over the next few quarters. Also, for instance, if you could take us through some of the sort of Sector 37D or Titanium SPR, et cetera, in terms of what is the kind of construction spends that have happened there? What is the level of collection in percentage terms that is there? So just some sense on how we should think of the trajectory on both construction and collections? We would have liked to see a more aggressive sort of ramp-up, just trailing the sales trajectory that we've had so far.

Sure, Murtuza. Thanks for bringing this up. And it's very relevant and very interdependent. So as construction activity picks up, collections also tend to improve and vice versa with more collections and liquidity, you spend more on construction. So yes, this is one of the most relevant factors. We've -- as a strategy, see, before we launched Deluxe DXP, the strategy was more to work with, I would say, not really Grade A contractors. These were a tiered below Grade A contractors, and they used to be very heavy in terms of our own procurement support or our own project management teams were very active as far as these comparatively smaller contractors with whom we used to work while doing affordable housing and even while doing middle income -- sorry, mid-rise -- lowrise of comfort. However, over the last year, we've onboarded greater contractors. So for instance, in Deluxe DXP”, we've onboarded Ahluwalia Contracts. As far as Titanium is concerned, we've onboarded Capacit'e. And for our project Twin Tower DXP, we've onboarded Arabian Construction Company. So as of today, we have a fairly good and strong civil team, construction team in place. And also, we are working with these larger contractors. So the intent is clearly to spread our own capability and to increase the construction spend on a quarterly basis. We definitely are confident that during this year itself, you will see an increased activity on both these activities, whether it is construction or collections. As far as giving an instance for example, Deluxe DXP, we've collected, let's say, we launched it in last May 2024. We've collected close to, let's say, INR850-odd crores since then within that single project. And in terms of hard construction itself, we would have spent more than INR200-odd crores. We've incurred more than, let's say, INR100-odd crores in terms of EDC/IDC costs. So we've fully paid the EDC/IDC cost. So Deluxe as an example, land is fully paid, EDC/ IDC is fully paid. We've spent about INR200-plus crores on construction ever since the project got launched. So the idea is to grow as fast as possible. But yes, it is construction, it is brick-and-mortar business and hence, those challenges turn up. As far as Titanium is concerned, we've collected between INR450 crores to INR500-odd crores. This project was launched in June last year. At the same time, we've spent more than INR100 crores on construction of this project and multiple other expenses have been incurred to fast pace the construction on this. Even in Cloverdale, we are intending to take Capacit'e onboard because it will be advantageous to have the same contractor who's managing Phase 1 and Phase 2 of that development. So, clearly, collections are happening strong on projects which are getting launched. Construction spends are moving up as we are progressing.

Rajat, if I were to follow-up on that, is that the transition where these larger contractors, which sort of initially took some time and you should see the pace of construction activity and therefore, your spends and collections picking up faster? Would you say that's a fair observation that maybe it was a transition that you were doing in the last 12 months, both in terms of the product offerings as well as the contractors and you should see that have a pickup. I mean, I'm looking at the consolidated number of INR400 crores to INR500 crores construction spend. Would it be reasonable to think that maybe that moves to INR700 crores, INR800 crores quarterly run rate over the next few quarters?

Murtuza, that understanding is correct. I'll just rephrase it a little that -- see, we are going through a phase where we are doing this massive completion of the erstwhile projects. There's still projects which are in that affordable category. There's still projects in the low-rise floor categories. And now there are these high-rise, more premium projects which are being completed. So there's like a bunch of things which are currently happening. But a lot of our capability is getting freed up as some of these erstwhile projects are getting completed, which were -- which don't show up a lot in value terms, but in volume terms, it's not too bad. We've completed, for instance, almost close to 1.5 million square foot within this quarter itself. But this transition, you're right, yes, it's happening. And it will take some more time before we are working purely on projects which are, let's say, in that price range upwards of INR8,000 to INR9,000 a foot, and hence, it will be more visible. However, in volume terms and in work terms, yes, a lot of it is going throughout all of these quarters. But yes, INR700 crores, INR800 crores per quarter does not seem to be like a very steep target. We'll achieve it towards, let's say, in the coming calendar year, we'll be reaching those quarterly numbers.

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

Congrats on a good quarter. First question, I think how would you read the response that you have got for Cloverdale? I think we have got INR1,700-odd crores of contribution out of roughly INR2,500 crores, INR3,000 crores what we would have launched, okay? So overall velocity looks lower than what we did last year with Titanium. I understand there is a luxury tower in this launch as well, which is more of a INR5 crores, INR6 crore ticket size, which would be slower. But how do you see overall response -- how would you read this overall response? Was there a conscious effort to cut down on the speculative demand that we were looking in that project and hence, a little lower velocity? So yes, first question on that.

Yes, Pritesh, thanks for asking this. So Pritesh, we were very confused last year, if you really ask us because it was very euphoric and we were very scared of the kind of book which was -- which could have been created. We tried to mitigate it in various ways. But yes, we were a little apprehensive of very investor-led demand when situation was such that if we've launched about 1,000 units and we got 5,000 applications, which was the classic case of Deluxe DXP. So that was a very, I would say, confusing situation. Right now, I would say it's more mature, the market is behaving in a more predictable manner that if you're launching a housing project where the average ticket size of unit is between INR3 crores to INR4 crores which is not very steep, but yes, it's not like very low as well. So it's somewhere in the middle. So for a product like this, yes, as we launch a project, it's been a usual trend in Gurgaon that on launch, developers have always managed to offload some reasonable amount of inventory. But yes, we are fine if you launch a project and it takes, let's say, 3 months to 9 months or 12 months to offload that inventory completely. We are absolutely fine with that situation. So we are happier with the current quality of book being created and the manner in which the offtake is happening vis-a-vis the previous year.

Got it. And that iconic tower, which this project has, GDV of that would be how much like INR700 crores to INR800 crores for that tower or lesser?

We can share that separately. Yes. -- so there were 2 towers actually, which were of 3.5 BHK, which were very well located within the project. I think over there, we've received the maximum response, followed by the iconic and the 3 BHK towers.

Sure. Got it. And just on this collection question from the previous participant. See, right now, I think we are spending INR500 crores. I believe the cost of construction is 40% of the total revenue. So if we continue to spend that, we should be reaching INR2,000 crores of collections. By when do you think we will reach that? And whether it will happen that scale up -- gradual scale up towards INR2,000 crore collections will happen from Q2 onwards or Q3 onwards? If you can exactly try and point out the direction of that recovery, that would be helpful.

See, some of the projects, Pritesh, which we are now launching have bulky sort of collection pattern because they are milestone based. While when we used to do affordable and low-rise floors, they were more time linked or they were more predictable sort of pattern around it. Currently, it's predictable, but yes, it's more of milestone level, milestone based. We expect Q3 to be a fairly good quarter, both Q3 and Q4 from a collection standpoint.

Got it. And Q2 would still be similar what you have done in Q1 or a little better?

Q2 will be a little better, but not like significantly better. It will not be like a game changer sort of a quarter from a collection standpoint.

Got it. Got it. And just last on the business development. Now with that last phase of 10, 15 acres that we have in Sohna, the Daxin project, post that, how do you see business development there? How much potential in that location there is still left, which can provide us a longer-term visibility of that micro market contribution in our own presales. And while we have decent enough pipeline for Sector 71, but once we are done with this 93 acres, which also took us a good amount of time to acquire from the landowners, is there more potential with same landowners that we can unlock in future once we exhaust this pipeline? Or we'll have to look at some different opportunities in that market to maintain our share?

So see, as far as 71 is concerned, out of this 93 acres, the Titanium and Cloverdale put together is about 21, 22 acres, okay? So we're still left with 70 acres. I would -- it's safe to say that a bulk of the land is still unutilized in Sector 71. After -- beyond this 93 acres also, there is a potential to acquire some more land parcels. We can definitely add another 3 million to 4 million square foot worth of developable potential within Sector 71 itself. As far as Sohna is concerned, see, the land is available, okay? But since we are acquiring this from some of the smaller landowners, it is a little time consuming. So I don't think going like acquiring another 100 or 150 acres is nondoable. So it is definitely doable, but yes, it will take some time. So any of these acquisitions, which are happening, will help us create fresh supply in the coming financial year. So it is definitely not for this financial year. But yes, to say that Daxin can have potentially a 100-acre Phase 2 launch, I would confirm that, yes, that's definitely on the cards.

The next question comes from the line of Sourabh Gilda from JM Financial.

Yes. So you highlighted INR170 billion worth of launches, and we are already done with INR40 billion at Sector 71. So just wanted to get a sense of the balance projects where those will come from? And now that we are done with the new phase at Titanium, is it fair to assume that the balance will come from the other 2 focus markets of 37D and Sohna or do you expect another phase at 71?

You see, there are 2 larger launches which are planned during this financial year. There's about 3 million to 3.5 million square foot, which will come up in Sector 37D. And there's another 4 million, which will come up in about 71. That will make good bulk of our launch target for this particular year. Both of these launches are -- the approvals are at fairly advanced stage. We are quite confident that we'll be able to come up with these launches within this calendar year. So by, let's say, October, November of this year, we are fairly hopeful that -- this is all approval based, yes, but by October, November, I'm hopeful that both of these launches must have happened. So while we launch these projects during this year, we'll get some good time to sell the inventory as well. But it's not that there's a very long list of projects which have to be launched. So there are these 2 larger launches, which are planned for the balance part of this year.

As there are no further questions, I would like to hand the conference over to management for closing comments. Please go ahead.

Yes. Thanks, everyone. Thanks a lot.

Thanks a lot for your time. Thank you.

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