PURVANSEQ3 FY2022February 11, 2022

Puravankara Limited

8,550words

151turns

15analyst exchanges

5executives

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Management on call

Ashish Puravankara

MANAGING DIRECTOR

Vishnu Murthy

SENIOR VICE PRESIDENT, RISK

Abhishek Kapoor

EXECUTIVE DIRECTOR, CHIEF EXECUTIVE OFFICER & CHIEF FINANCIAL OFFICER

Niraj Gautam

EXECUTIVE VICE PRESIDENT, FINANCE

Ayush Bansal

EMKAY GLOBAL FINANCIAL SERVICES

Key numbers — 40 extracted

35.4%

infrastructure, and logistics. The thrust on capital expenditure which saw a substantial hike of 35.4% from Rs 5.54 lakh crore in FY22 to Rs 7.50 lakh crore in FY23, will play a significant role in

Rs 5.54 lakh crore

ture, and logistics. The thrust on capital expenditure which saw a substantial hike of 35.4% from Rs 5.54 lakh crore in FY22 to Rs 7.50 lakh crore in FY23, will play a significant role in boosting the overall econo

Rs 7.50 lakh crore

t on capital expenditure which saw a substantial hike of 35.4% from Rs 5.54 lakh crore in FY22 to Rs 7.50 lakh crore in FY23, will play a significant role in boosting the overall economy, and that will create a bac

Rs 48,000 crore

deliver structural changes that will help unlock the sector's long-term potential. Allocation of Rs 48,000 crores towards the PMAY program shows the Government's determination to boost affordable housing. The c

rs,

. The residential market has been recovering with a strong sales momentum in the last few quarters, the resurgence of homeownership is continuing even after the second wave of COVID

17%

third quarter of FY22, Our Sale value has jumped to Rs. Six hundred sixty-six crores increase of 17% on a year-on-year basis and 12 % on a quarter-on- quarter basis. The area sold stood at 0.99 milli

12 %

value has jumped to Rs. Six hundred sixty-six crores increase of 17% on a year-on-year basis and 12 % on a quarter-on- quarter basis. The area sold stood at 0.99 million square feet, up by 9% compared

0.99 million

ase of 17% on a year-on-year basis and 12 % on a quarter-on- quarter basis. The area sold stood at 0.99 million square feet, up by 9% compared to 0.91 msft in Q3 FY21 and Q2 FY22. The Sale realizations have al

is and 12 % on a quarter-on- quarter basis. The area sold stood at 0.99 million square feet, up by 9% compared to 0.91 msft in Q3 FY21 and Q2 FY22. The Sale realizations have also improved to Rs.6,72

Rs.6,727

p by 9% compared to 0.91 msft in Q3 FY21 and Q2 FY22. The Sale realizations have also improved to Rs.6,727 per sq. ft. This is an increase of 7% compared to Q3FY21 and 3% compared to Q2 FY22. We sold 690

Q2 FY22. The Sale realizations have also improved to Rs.6,727 per sq. ft. This is an increase of 7% compared to Q3FY21 and 3% compared to Q2 FY22. We sold 690 units in this quarter which is an incr

tions have also improved to Rs.6,727 per sq. ft. This is an increase of 7% compared to Q3FY21 and 3% compared to Q2 FY22. We sold 690 units in this quarter which is an increase of 4 % compared to th

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Guidance — 20 items

Niraj Gautam

opening

“The announcement towards investments for urban planning and encouraging the states to adopt unique land parcel numbers will deliver structural changes that will help unlock the sector's long-term potential.”

Niraj Gautam

opening

“The estimated development potential of this project is 1.40 million square feet.”

Niraj Gautam

opening

“Secondly, we entered into a joint development agreement for a premium residential development of 3.85 acres of land in Magadi Road, Bangalore, the estimated development potential of this project is 0.54 million square feet.”

Niraj Gautam

opening

“Both these projects are under design and approval stage, and we will be launching these projects in the next two to three quarters.”

Niraj Gautam

opening

“On the new launch front, we want to update you that we have launched two projects during the quarter Tivoli Hills, a premium plotted development project in Bangalore and Palm Vista affordable premium residential housing project in Mumbai.”

Ashish Puravankara

“I think on a ballpark basis generally we are confident that at least 90% will be launched over the next three to four quarters, if I must break them into buckets, almost 40% of the projects listed here for launches have already got approval and have either got RERA or waiting for RERA approvals, so that 40% bucket is done, other 30% we already got approvals and applied for RERA right.”

Ashish Puravankara

“As far as our commercial development is concerned, we have a potential of about 6.5 million square feet of commercial space already available with the company for which we have started the projects and now are looking for sort of platform partners, JV with Keppel currently we had one commercial project and we have a residential project with which Keppel Purvankara had given on joint development to provident housing which is ongoing which is done well.”

Ashish Puravankara

“The commercial project we took a call two quarters ago to exit that, so Keppel is taking over that entire commercial project.”

Ritesh Sheth

“Hope to see many strong launches for next year.”

Dikshit Mittal

“Sir just to confirm that you have indicated launch pipeline of 18 million square feet, and you mentioned that 90% will be launched in three, four quarters or may be lower than that?”

Risks & concerns — 5 flagged

Do you think that is a reasonable thing to happen or might be difficult?

— Tirath Muchhala

So the third wave really caused disruptions early on somebody on the call asked why the projects get delayed and largely in the industry I think third wave had impact because one officer was felt sick then the other officer then the whole office was shut down for some time and then departments and so on so forth, so what happens is this kind of causes really this time it has been minimal compared to the second wave which was really, really difficult for all of us I think in many ways.

— Abhishek Kapoor

First one was of course is complete lockdown, the second was difficult because a lot of loss of life happened and we were not ready with the vaccination and all of that, this one was in that sense there was no loss of life but only disruption was shorter, but very aggressive because you had a lot of people falling sick at the same time and isolating themselves and so on so forth, so things just become slow to move that is the only disruption that happened.

— Abhishek Kapoor

Thankfully it was a minimal impact and now pan India basis, cases are coming down and including Bangalore and Mumbai, the market which we are present cases are almost coming to an end t and economy is coming back to normal and we hope that this kind of environment will continue and there will be no impact of the COVID further.

— Niraj Gautam

As I mentioned in my opening remarks, we are cognizant about the increase in prices, if you look at our construction cost comprise of 40%, 45% of the sales price and for example a 10% increase in the input cost may have an impact of 4% to 5% on margin.

— Niraj Gautam

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Q&A — 15 exchanges

Good evening. Thanks for the opportunity. Firstly, on the launch side so very strong pipeline for FY2023, so there was a couple of projects which are pushed out from Q3 launch to Q4 okay, so overall in terms of launches how confident are we in terms of launching these projects because there are few of your peers are facing issues in terms of approval so just wanted to check you know how many launches, we can see coming in next couple of quarters?

Ashish Puravankara

Thank you for your question. I think on a ballpark basis generally we are confident that at least 90% will be launched over the next three to four quarters, if I must break them into buckets, almost 40% of the projects listed here for launches have already got approval and have either got RERA or waiting for RERA approvals, so that 40% bucket is done, other 30% we already got approvals and applied for RERA right. The balance is what is in the approval stage, so this is that statistics. Fairly confident of at least hitting a 90%, 95% number in the next three to four quarters. Right and these So

Good evening. Sir just to confirm that you have indicated launch pipeline of 18 million square feet, and you mentioned that 90% will be launched in three, four quarters or may be lower than that?

Ashish Puravankara

Yes, I mentioned three to four quarters. Okay, because if we see the current last five, six or maybe this quarter also, the launch has been pretty muted like if you compared to other players in the similar region in terms of launches as well as sales so there is a muted performance, so any particular reason for that and how are you confident that in maybe in next four quarters you can launch around 18 million square feet? That is where I had given some color, yes in the past two quarters there were a few delays in approvals, because of COVID various other reasons etc, but like I gave approxima

Thanks for the opportunity. Sir I just want to break, you have open for sale close to five million square feet and then not open for sale is again close to five million square feet and then you are talking about some 18 million square feet is the launch pipeline going ahead so just to ask on this front that we have been pretty slow in terms of sales velocity in last three quarters, but what sort of number that you are looking at for let us say FY2023 we might be closing this year at 3.5 million square feet hopefully, but next year what is the target in terms of sale that you put up for yoursel

Ashish Puravankara

One correction in that when you say 18.12 is the developable area so that is the developable area to just give a sense of how large the projects are. The saleable area of that is 13.16 million so it is not 18.12 point one. Point two, on a sustainable basis from our ongoing projects under construction we have demonstrated, we are able to hit a run rate of anywhere between 3 to 3.5 million square feet. Now the minute you add launches to that right during the launch and again if you see the last four years in eight out of ten launches, we have been able to sell anywhere between 35% to 50% of the

Firstly, I wanted to know if you could give some outlook on the plotted line in terms of margins and revenue?

Abhishek Kapoor

The total potential here is about 2.3 million square feet that we have typically as Niraj mentioned earlier the margin is anywhere between 30% to 35% in plotted development and we are looking at in terms of topline we are looking at somewhere around 1000 Crores from this 2.3 million square foot. Okay and you launched one project in Mumbai so would you see the average realizations going up? There are two projects in fact in Mumbai, one is in Chembur that obviously the realization is higher and the other one we are just in the process right now, we just launched which Niraj spoke about a little

Thanks for taking my question. Firstly, congrats for releasing a good amount of capital from the sales of land.

Niraj Gautam

Right. One was about the sale to Godrej that we did how we expect more cash to come soon and how much would that be? There is another Rs.170 Crores expected to come from that transaction that is dependent upon the getting the additional FSI approval for the project which is under process we have already applied for the plan approval and as soon as approval comes and FSI is loaded, we will get the money from Godrej. Do you think that is a reasonable thing to happen or might be difficult? It is a reasonable thing to happen, it is per the government norm of additional FSI .it is very the basis be

Good evening. I wanted to understand your outlook on the debt, we have been continuously reducing it, what is the long-term outlook for the next year?

Abhishek Kapoor

We have been stable as well as our debt numbers are concerned and if you see what we have been able to achieve in a big way has been the reduction in cost of debt especially in the last one quarter over three to four months. We see that further marginally getting better, but the way is really the right way to look at that is the debt per square foot of the square footage in the marketplace, so in that context our debt will continue to reduce because the quantum of square footage we are going to take through the market is going to be substantial and as the sale proceeds come in obviously and th

Thank you for taking my question. Sir, my first question pertains to the land parcels, you already have a good presence in southern part of India, are you looking towards some more land parcels in other parts of the country, or you will focus on these areas itself as in different parts of India or southern part, can you please give a light on it?

Abhishek Kapoor

Yes, so we are very, very focused on south and rest of India and that will continue to be there, our major focus is going to be between Mumbai, Pune, Bangalore, Hyderabad, and Chennai. That is the key driver for us, and we will go deeper in these markets. We believe that Mumbai will give us value per square foot and that is also going to enable us to get higher realization per square foot and add value whereas the square footage will be lesser, Pune again is very much like Bengaluru, so we will continue to scale up our operations there and similarly between Chennai, Hyderabad, and Bangalore. O

Good evening and thanks for the opportunity. I have two questions. The first one is off late you have entered the plotted development business, what is the kind of market that you are looking at in size terms?

Abhishek Kapoor

Plotted development, we have total pipeline of about 5 million square feet of which 1.4 million has already been launched which we mentioned in Tievoli Hills and the rest of the projects are very, very visible in terms of launch in fact another project which is Tree Heaven is already under launch. There is one more which is the South Bay which was mentioned earlier is already in RERA the sanctions come so that will go into launch in this quarter itself and the others are already in the sanction stage, so we are very, very bullish about the plotted development because we believe that there is a

Good evening, everyone. Coming to your launch pipeline Provident accounts for around 42% and Purva Land is 22%, so what would be the ideal mix that you would want to have in the future with which you would be comfortable?

Abhishek Kapoor

From the point of view of square footage we will continue to see Provident and Puravankara contribute equally up to about 40%, 40% and about 20% will continue to remain as Purva Land. Okay so that will continue? Yes. Coming to your geographical locations, 45% share is coming from non-Bangalore like outside Bangalore so do we see this number rising down? Yes, very much we see this number rising especially for the west as we sign up and launch more deals, more projects, we definitely see it scaling up. Okay and this general overall demand environment what would be your thoughts on that, your out

Thanks for the follow up question. Sir, on the commercial projects what is the potential rental income that we are looking at may be from next couple of years perspective so if you could provide some timeline and some rental potential that could be there for the company will be really appreciated?

Abhishek Kapoor

So it is a mixed bag as I mentioned earlier but having said that these projects are just starting to construct and some will start during this year so from the point of view of rental income we are not looking at anything less than between three to four years to start completing these projects and starting the income from these projects unless we do starta sale which is very few, but having said that we are looking at anywhere between three-and- a-half to four years to be able to see any rental coming from these assets. Okay, but for any ballpark number on that what could be the potential of t

Good evening, Sir. This is Abhishek. Just want to understand what is the difference between plotted development and apartment with respect to economics for the customer and the pedigree of customers choosing it so basically, I want to understand how much is the customer paying high price compared to the apartment in the same micro market?

Abhishek Kapoor

So, the way we look at this and the consumer profile we have looked at, so a lot of them are families, end users when we recently launched our Tivoli project in Devanahalli, these are customers who are looking at buying the land and building it over a period of time. They are not some people who will on immediate basis move in there once the plotted development is completed anywhere between three to five years they will continue to build on their pieces of lands and from the cost point of view if you look at it ,cost of land and ownership of land is very, very big because technically you own t

Thank you for giving me this opportunity. If we see other players in the industry in comparison to them our growth has been slow, what is the reason for that Sir?

Abhishek Kapoor

For us last three years if you notice has really been so about three years back two-and-a-half three years back we were very heavy on ready to move in inventory so we had enough ready to move in inventory to liquidate, our launches were commensurate to the kind of inventory we had, so you do not want to add inventory when you have significant RTM so really the focus was to liquidate those and if you see that over the last two-and-a-half three years we have brought that down considerably from 2.5 million square foot to almost 400000 square foot today, which basically means that now we have a si

Good evening and thank you for taking my question. I just wanted to understand are there any benefits that this budget has for the real estate sector could you throw some light on that if there are any measures that will help the real estate sector?

Niraj Gautam

There is no specific correlation, however, if you look at the government's focus on infrastructure development, the government has announced the increase in the investment in infrastructure to the extent of f 7.5 Lakh Crores that will have a cascading effect on the entire economy and particularly on the real estate sector. Governments continued focus on affordable housing, is proven by the announcement of Rs.48000 Crores for the affordable housing sector. Third, the government also announced that they will collaborate with the state government and formulate a mechanism for the digitalization o

Thank you so much again for taking my question. Sir I have a couple of questions on other expenses, so my first question pertains to the marketing expense what is your marketing expense for the quarter in terms of say percentage of sales and as the sector is on an uptick do you think you know it would go up in the coming quarters?

Niraj Gautam

I will explain to you, our consolidated other expenses for the quarter is Rs.74 Crores, out of this Rs.74 Crores, close to Rs.21 Crores to Rs.22 Crores related to the sales and marketing expenditure, about Rs.40 Crores is related to project and rest are general overheads. other expenses related to the projects are getting inventories and hence it has no bearing on the immediate P&L for the quarter, however, marketing expenditure and overheads has a bearing on the P&L for the quarter. Marketing expenses needs to be looked at as a percentage of total sales booking received for the quarter Okay S

Thank you ladies and gentlemen for your attention and time I hope me, and my colleagues have answered all your questions; however, if you have any further questions, we are always available for a call and discussion. Thank you once again for joining this call and wishing you all a very happy weekend thank you.

Management

Speaking time

Abhishek Kapoor

Niraj Gautam

Moderator

Ashish Puravankara

Amish Gupta

Ritesh Sheth

Dikshit Mittal

Bajrang Bafna

Bajrang Bhafna

Tirath Muchhala

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Opening remarks

Ayush Bansal

Thank you. Good evening, everyone. I would like to welcome the management and thank them for this opportunity. I shall now hand over the call to Mr. Niraj Gautam for the opening remarks. Over to you Sir.

Niraj Gautam

Thank you Ayush. Good evening and warm welcome to all of you. I hope you and your family are staying safe and doing well. Thank you for joining us for Puravankara Limited third quarter FY2022 earning conference call. My name is Niraj Gautam, I am Executive Vice President Finance of Puravankara Limited. The quarter presentation and financial results ended December 31, 2021, have been uploaded on the stock exchanges. I will start with a brief update on the business and highlights for the quarter and nine months following that my colleagues and I would be delighted to answer any questions and you may have and suggestions that you would like to give us. The union budget presented earlier this month promises to be a growth-oriented and future- forward budget that is expected to develop the country's economy, infrastructure, and logistics. The thrust on capital expenditure which saw a substantial hike of 35.4% from Rs 5.54 lakh crore in FY22 to Rs 7.50 lakh crore in FY23, will play a signifi

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