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Godrej Properties Ltd
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Ladies and gentlemen, good day, and welcome to Godrej Properties Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Anoop Poojari of CDR India. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and thank you for joining us on Godrej Properties Q4 FY 2019 Results Conference Call. We have with us today, Mr. Pirojsha Godrej, Executive Chairman; Mr. Mohit Malhotra, Managing Director and CEO; and Mr. Rajendra Khetawat, CFO of the company.We would like to begin the call with opening remarks from the management, following which we'll have the forum open for an interactive question-and-answer session.Before we start, I would like to point out that some statements made on today's call may be forward looking in nature and a disclaimer to this effect has been included in this conference call invite shared with you earlier.I'd now like to invite Pirojsha to make his opening remarks.
Good afternoon, everyone. Thanks for joining us to Godrej Properties Fourth Quarter Financial Year 2019 Conference Call. I'll begin by discussing the highlights of the quarter and we then look forward to taking your questions and suggestions.We just completed the best ever quarter in GPL's history in terms of the value and volume of real estate we've sold. The total sales of the quarter stood at INR 2,161 crores, which represent a year-on-year growth of 105% and a quarter-on-quarter growth of 41% despite the third quarter being the previous best-ever quarter for residential sales.The volumes sold during the quarter of 3.7 million square feet was by some distance the largest amount of area GPL has ever sold in a quarter. The total value of bookings in FY '19 stood at INR 5,316 crore, with the second half of the financial year contributing 2/3 of the sales for the year.I'm happy to note that we've sold more than 1.1 million square feet with a booking value of over INR 900 crore in each of our 4 focused markets of: Mumbai, NCR, Bangalore and Pune. This has been possible through the combination of strongly performing new launches with INR 3,062 crore and sustained momentum in sales from existing inventory, which stood at INR 2,254 crore in FY '19.In the fourth quarter, Godrej Central Park in Pune, we sold more than 700 apartments with the total area of 575,000 square feet and a booking value of INR 316 crore. At Godrej Aqua in Bangalore, we sold about 387,000 square feet with a value close to INR 200 crore. Similarly, at Godrej Habitat in Gurgaon, we know it was launched in the last week of March, we sold more than 300,000 square feet for the booking value of INR 178 crore.On the commercial sales front, Godrej Genesis, our project in Kolkata registered sales of close to 200,000 square feet with a booking value of INR 82 crore in the financial year, and we now have only about 150,000 square feet of space remaining in that project.At Godrej BKC, we sold more than 25,000 square feet with a booking value of INR 88 crore, and we have now only 25,000 square feet in the project left to sell.While we have made good progress towards fully monetizing our commercial agency in BKC and Kolkata, we still have significant inventory in our Chandigarh projects, and one of the focus areas for the current financial year will be to achieve 100% monetization of all our older commercial projects.FY '19 has also been the best ever year for business development in terms of area added and the expected future profits from this area. We added 11 new projects with a salable area of approximately 31 million square feet. This includes the portfolio of 6 projects with 25,000 million square feet of saleable area in the Pune market, making us India's largest-ever business development deal, and we expect this deal to dramatically enhance our pricing and scale in Pune.We also added 2 projects in Mumbai in the fourth quarter. The first project is located at Bandra and has a development potential of 1.1 million square feet and provides us the opportunity to develop a high-value project in one of the most desirable locations in India.The second project is located in Vashi with a saleable area of 0.5 million square feet. Both these projects fit into our strategy of expanding our footprint in new micro market across our top 4 focused cites. Despite a very strong year for business development, we believe we can do much better to scale in financial year 2020 given the current market dynamics.We achieved revenue recognition of the 3 Phase I within 32 months, 1 year ahead of schedule, which significantly enhance the P&L numbers for the year. Our total income for the fourth quarter increased by 133% at INR 1,200 crore, our EBITDA increased by 327% to INR 2,314 crore and net profits increased by 271% to INR 157 crore. For FY '19, our total income increased by 57% to INR 3,236 crore, EBITDA increased by 111% to just under INR 600 crore and net profit increased by 191% to INR 253 crore.During the quarter, we delivered 1.6 million square feet of space across all cities, including the trees here in Vikhroli, Project Godrej Oasis in Gurgaon, Godrej Prana in Pune and Godrej Azure in Chennai.After a year of disruption, the Indian economy is consolidating again from recent reform. Never in the history of the real estate sector in India have so many significant events taken place within such a short period of time. While the initial days of the new regulatory environment for real estate going through a phase of transition, we now see an opportunity for disproportionate growth.Our sales performance has strengthened significantly in the second half of financial year 2019, and we expect to further scale our sales momentum in the financial year '20, given our exciting launch pipeline across the country, which has been significantly enhanced by new projects addition.Given the liquidity situation of the sector, which has become even more apparent in light of the NBFC crisis, the visibility on business development is the strongest we've ever witnessed, and we hope there are numerous positive portfolio enhancement announcements in the coming financial year.We believe our national presence, strong brand and robust project portfolio leave us well placed to capitalize on this opportunity.On that note, I conclude my remarks, and I'd like to thank you, again, for joining us on this conference call. We'd now be happy to discuss any questions, comments or suggestions you may have.
[Operator Instructions] The first question is from the line of Puneet Gulati from HSBC.
And congratulations. Obviously, a great job done on sales and BD. And just trying to understand a bit on the financial side. The network for December 2018 seems to have been restated. Can you help me understand what's changed?
Yes. Puneet, this is Rajendra. So the Q1 network, what we stated was unaudited one. So at the end of the year, our auditors have relooked at the entire thing. And because of the 115, certain projects were reclassified, certain changes were reclassified. So that's where the change is happening. So like we said earlier, this isn't definite and this, as and when the reversal of revenue, which happens through 115, as they start coming back, like the 3 which has happened has already started contributing back to the network. So this will get -- come back over a period of time in the coming year.
Yes. But wasn't 31, December 2018 net worth already adjusted for 115?
No, no, it was adjusted even in the first quarter. But like I said, it was unaudited one. So once the final audited happened, that's when certain adjustments which auditors suggested to me, it took [indiscernible].
Okay. Great. Secondly, will it be possible to get some color on how much you would have invested to add these new projects to you portfolio?
I think, our net cash flow total estimates largely shows what has been invested in 2 lines and approvals for the quarter.
So that is largely for presale projects?
Presale projects.
Yes. The INR 688 crore is for the Pune and Mumbai, both? Or is there more to it?
The bulk of that is for the Pune project, yes.
Okay. And then there is nothing more that you need to pay for Pune?
No, that will be linked to the approval milestones, et cetera.
Okay, okay. Also, Magadi is now out. So have you been able to recover money from that partnership?
Sorry, I didn't get it?
The Magadi project, which you've...
[indiscernible] project.
Yes, but there was no investment there and...
No, no, no.
The next question is from the line of Abhishek Anand from JM Financial.
And congratulations on a great set of operational numbers. My first query will be on the slide where we mentioned the planned launches for FY '20. Firstly, no mention of any subsequent phase in Vikhroli. If we could get some clarity there. And secondly, we are planning to launch a 15.5 million square feet, if I include the subsequent phases as well. And last year, we were planning to do 14.9 million, so almost similar number. So -- and we eventually launched 12.1 million. So are we going to see similar performance? Or we expect -- should we expect similar performance next year for around INR 5,500 crores? Or just trying to see the trajectory of growth at least from the launch profile?
Yes, Abhishek, items posted in slide, I think there's a slight error. The Vikhroli is actually planned. I think they accidentally put point 2. Let me get that corrected. It was a little bit larger than that -- to launch that, but I think that is the new project. And I think certainly, we'll launch an area much larger than that. The total project, as we're talking about, we think, will be in the range of 2.5 million to 3 million square feet. Of course, not all of that would be launched, but I think the launch area would to be closer to 1 million square feet. But I think that will, of course, be finalized closer to the launch segment. So let's -- we'll have that corrected in the presentation. I think that -- we think it's a fairly robust launch portfolio. We certainly think it gives us the opportunity -- if all of these projects happen to go well for us this year's numbers. And I don't think definitely just putting in the area would be the best way to do it, Abhishek because we saw, for example, in FY '19, although the value growth was quite small over FY '18, the volume growth was very significant at 40%. So I think this year if we have projects like Bandra and Vikhroli launching, you could again see similar area much, much higher value. So certainly, I think, if we're able to execute on all of these launches, where we're reasonably confident of obtaining growth during the next 3 years. But, of course, we don't like to give any sort of any specific guidance for that.
Sure. No, no, that's very helpful. Secondly, of course, you mentioned Bandra project. Just wanted to understand -- of course, this is our first SRA project where we will be involved. What's the status of the project? What is the status of slum rehabilitation? How much -- if you are disclosing that, how much payments we have already done to the counterparty? And since we mentioned it launching this year, this will be helpful, actually?
Abhishek, this is Mohit here. So we are in the design phase of the project. We are at advanced stages of design. And we are targeting to launch it within this year. So, of course, we will also submitting approvals very soon. On the status of slum clearance, we have the LOI, and our partner is very well known for clearing slums in record time. So we're very confident that before Diwali, we should positively have the slum cleared up, and then subject to approvals, we would be ready to launch.
So Mohit, just a clarification. Do we require to construct -- sorry, not we. Does the counterparty require to construct the SRA building and then only then get the commencement certificate or we will get it beforehand?
So we will get -- no, the IODs and everything -- before the construction of this building, our construction will be linked to the construction of SRA building. So it's plinth-to-plinth kind of working. And here also, the way we do it is, yes, they can control over those particular aspects, which affects our development.
Sure. So we will be constructing the SRA?
We won't be -- it will be someone else constructing it, but cash flow is something where we will be taking control over the development.
Okay, okay. And LOI, et cetera, is available with us?
LOI is already in place, and that's again announced the transaction.
Sure. Perfect. And lastly, if I'm looking at our realization in Tranquil, our Kandivali project entries, I see a decline, whereas there is increase in Godrej Infinity. Especially, in Tranquil, I see a material decline? So could you...
Decline in terms of...
In terms of realization?
See, there is 2 kinds of inventories, which are there in Tranquil project. One is facing the National Park, which is a very premium inventory. The other inventory is facing the slum, very, very negative inventory. But pricing difference is pretty sharp in these 2 inventories. So it depends on which side of the stock was sold. Given that this is the last phase of the launch and we had more of a slum-facing inventory, the realization might be lower than the previous phase. So that was just -- there is nothing to worry about that.
And Godrej Infinity, we saw a material jump in realization. So is there a price increase there or there's a mix change?
I don't know if there's been any big movement in prices in either [indiscernible]
We just clarified that.
Yes. Because it's almost a 10% increase from what we reported in third quarter. So just trying to understand that.
The next question is from the line of Mohit Agrawal from IIFL.
So my first question is, I'm trying to understand that now that we get a lot of deals, a lot of deals may be distressed and I'm trying to understand what is the distressed element in this deal? How do we read that? So is it only -- where all is it reflected? Is it only reflected in the higher share in the project or a lower upfront value? Or have you kind of increased the IRR benchmark that you taken? So could you give some perspective on that, that will be helpful? So what parameters have changed? Let's say, a deal which would have come 2, 3 years back versus now, how has that changed? And how will that reflect in our profitability going forward?
Yes. I think a couple of things. First of all, I think the kind of deals, the location of the deals, the kind of developers who are willing to partner on deals is what it probably changed the most and I think some of these locations like Bandra, et cetera, which we think are fairly outstanding locations. I think the scale of the Pune deal, for example, 206 project deals simultaneously, again, we think is quite exciting. We obviously do think valuations are also attractive, but we've always said that beyond the point there isn't more -- much more we can do on valuations we could also, obviously, ask our partners to make a fair return on their investment. But I think our focus is on using this period of opportunity to improve the total share of profits that are going to add some of these projects to improve the quality of locations that we're entering and toward our absolute terms improves -- increase the quantum of area and projects that we're adding to the portfolio. Of course, we will, where possible, also improve the terms of the deal, but that has, I think, a natural limit we should also understand.
Okay. And going back to a previous question on Vikhroli. So you said that this number will be higher than 0.2 million square feet. Just trying to understand that probably could you give a guidance or just an idea on what could -- how you could see this spanning on a long term? So could you see this like a steady state 1 million square feet kind of a number going forward? Or do you think that -- sir, what are the options of annual absorption of the residential or mixed use in that market over the next 5 to 10 years?
Yes. Well, I think, even over the next 10 years, my sense is that it will change dramatically because 1 million square feet, as you mentioned, would be a reasonable number for today. But our sense is that as we establish hopefully in the 12 years is one of the most desirable locations in the city. That itself will create more form factor for people wanting to come here, which in turn will increase the absolute sales possible here. So if you look it at it, obviously, very different in terms of something like Gurgaon and NCR. I think, obviously, completely changed in terms of what the scale is today versus what the scale may have been 15, 20 years ago. So I do think in Vikhroli, we will see something similar with both -- as we deliver more real estate and we get some of these other asset classes like retail, hospitality as we've been doing, that will create the form factor and allow us to further increase demand. And I think in the shorter run, I think, that's 1 million square feet per year on residential seems like a reasonable level to target.
The next question is from the line of Tanuj Mukhija from Bank of America.
And firstly, congratulations on a great set of performance once again. My first question was Godrej Properties has had a long-term ROE target of 20%. Would you say that you are on track right now to achieve a 20% ROE target in the next 3 to 4 years? And if yes, and what are the levers that would drive improvement in ROEs?
Yes. I think, broadly, we do feel we're on track. Obviously, a lot of the work that needs to happen to make sure this impacted in the first -- is something still ahead of us. But we do think if we look at the kind of projects that is there, I think, this year, as we look at the kind of lots we're seeing on the sales side, we do think those are some footsteps you need to achieve this. Similarly, if you look at the timeline, it's a project where [indiscernible] was delivered on the construction side is one of the key areas of levers that we have in our disposal to achieve this. I think the only thing that will happen that are negative to our plan is probably some of the accounting-related issues are in there, the 115 for now that we will only recognize at project completion, which, I think, provides some natural stress to that. Also, I think, the amount of capital we want to deploy in some of the new products have been increased. As these lease revenue recognition will -- clearly, we think deliver this ROE is a critical part of delivering this ROE aspiration. But in the short term, we'll obviously increase the capital employed without any P&L impact. So I think those are 2 of the things that could delay it slightly, but certainly, we think overall the progress we've made over the last 2 years since we announced that journey and growth have been positive and well aligned with achieving it.
Okay. The second question was, also there's been very good traction in terms of presales by Godrej Properties. Are you seeing any pricing power in any of your micro markets? Could there be a case of price rise in any of your micro markets in FY '20 or beyond?
No. Look, I think that will be linked to the overall market performance. I would say in most markets, we are premium to most of the developers in the area. Of course, that will depend a little bit in which area and what other developer might compare us to. But I think typically, we personally have a pricing premium and that's a very significant volume premium. But in an absolute sense, we can't be dealing from the market. While we can get some amount of premium, it obviously can't be stretched beyond a reasonable point. So I think we will need to wait for a market recovery to see pricing really starting to move. I think there is a good place to be made that you will see the market starting to improve this year or next year, which has obviously now been in 6 or 7 years of residential downturn. You've got affordability now, it's the best it's been since probably 2002 or 2003, with interest rates having come down 300 basis points. Peoples' income in the last 5, 6 years probably, I mean, increased 33% and property prices in most places remaining quite flattish. So I think all the underlying factors that are needed for the next bounce back are probably in place. There have been some of these external shocks like demonetization burst and RERA, GST, now more recently this HDFC liquidity environment that I think have continued to push back the recovery, and we're still aware we may be still another a year to 2 away from a recovery. But I think when it comes back is when you will start seeing, obviously, volumes pickup even more substantially and you'll see pricing start to improve.I think, seeing it from the company's perspective, what we're very focused on is that there's 2 avenues available towards the growth. I think one is obviously the sector itself growing, and we believe that represents a huge opportunity for us over the next couple of decades as India continues to organize, continues to grow economically and see if the sector continues to do very well. But in the short term, while this is happening, I think the second opportunity is the one that we were more focused on, and that's the opportunity to grow our own market share to make sure that we're doing whatever we can to consolidate the industry to enter as many new micro markets as possible within the top tier cities. And we're relatively satisfied with the kind of progress we've made on that part of the journey over the last couple of years.
Okay. If I could squeeze one more question. Could you please give us the revenue recognized and the margins realized at Trees in this particular quarter? And lastly, what are the pending collections from Phase I of Trees?
So Tanuj, revenue recognition was around INR 900 crore. This is the total income recognized in the quarter. And the margin is around 35% to 36% over there.
Okay. Sir, what are your pending collections at Trees?
Collections, I think, whatever is based on the OC, that collection because the OC has come in the previous quarter. So it should be around 10% to 15%, should not be more than that. It's a little down on the outer side. It should be around 10 to 12 percentage is what -- the collection pending over in Phase I, where total recognition has been done.
The next question is from the line of Kunal Lakhan from Axis Capital.
Again, congratulations on a good set of numbers. Just on our strategy for Pune. I think, last year, we had seen some serious acquisitions there similar to what we had done like in the NCR market in the previous years. So just want to understand like what's the strategy there? And what's our outlook on Pune market per se?
So I think for all of the top 4 markets, which again are, from our perspective, Mumbai, NCR, Bangalore and Pune, the goal is to enter as many new micro markets as we can. We believe in each of these 4 markets, despite now having achieved some reasonable scale, that there remain huge amounts of untapped opportunities. For example, to use Pune as an illustration. Prior to this transaction, we actually had about 3 projects in Pune and frankly, not the most ideally located project for the most part. And despite that with those 3 projects, we have been named as the #1 or #2 position in terms of most residential inventory sold by developers in an individual year. So we think now with these 6 new projects, we think there are largely better-located projects combined with our existing projects, that gives us an opportunity to very quickly ramp up our market share in Pune towards hopefully a very significant degree.I think the goal is similar across all of these 4 markets. The quality of execution during the year was clearly different. I think the single build in Pune made it the best city in terms of our business development performance. I think we had a decent performance in places like Mumbai, NCR, where we added very high-quality locations in Bangalore, in Noida and [ Sector 43 ]. And frankly, in a city like Bangalore, we have 4 years of business development with no meaningful new projects added. I think the good thing is the visibility in all 4 markets from a business development perspective continues to be very strong. The team extremely focused on it. So hopefully, we can have a better round this year from a business development perspective this year. And I would say, overall, when we look at a national level, I think, last year was an excellent year for the development.
Sure. That's helpful. But I'm just trying to understand that because Pune, I mean, typically absorbs about 30,000, 33,000 units in a year, and we have a very serious inventory, which we'll bring to the market may be over next 2 to 3 years. So in terms of market share, and if I look at like the way -- the traction that we have got in the past projects, it looks like we'll have to -- either the market field should be going up significantly in terms of absorption or it's probably Godrej will be like doing some -- or achieving some serious market share in the region. So...
I think, clearly, obviously, we've -- I think for this strategy to work in any of these cities as the market itself is relatively flattish, we will obviously have to grow market share. But I don't see that as a very daunting task considering that our market share in most of these markets is anywhere between 1%, 2%, 4% or 5%. So I think with our brand name, with hopefully the kind of product insights that we can bring to any new project launch, we can continue to deliver our track record of residential launches being successful. And I don't see any reason why the market share can't even very significantly grow up -- go up from current level. And as I mentioned, when we look at a portfolio like this of 25 million square feet, we're really talking about kind of a 10-year portfolio. It's not that all of it is going to get sold obviously in the next 2 or 3 years. And certainly, over that length of time, I would also expect to see a big contribution from the market itself ramping up.
Sure. That's helpful. Secondly, a question to Rajendra. Just -- you just mentioned in the previous comment that the margin on fees was about 25%.
35%, 35%.
Sorry, 25%? Yes.
35%.
35%?
Yes.
Okay. But it just -- in the March quarter, our EBITDA margin, if I exclude the other income, it's around 16-odd percent. And even the PBT margin is in single digit. And I was trying to reconcile these numbers with the Q3 '17 numbers when we were actually first recognized, Trees Phase I. And the margin profile back then was significantly higher than what we have reported in Q4 '19. So just wanted to understand how we should look at the margins first of all? And secondly, like Trees being one of the better margin projects, does 9% PBT margin going ahead -- I mean, considering we still have some legacy projects, which could come to revenue recognition, how do you look at margins going for the next year and even post that?
So, Kunal, as you rightly said, we still have this legacy project and that's exactly what has happened in this quarter, it has pulled down our overall margin in spite of Trees giving us 35% to 36% margin. Since we are unlocking the inventory as per our strategy, those inventories are getting unlocked either at the breakeven or just above breakeven, which is not a very great margin. And because of the 115, there has been total re-recognition of the revenue like BKC INR 1,100 crores of revenue has been re-recognized, which is at 13%, 14% margin. Same as, we have sold around 2 lakh square feet out of Genesis, which is a commercial, which is at the breakeven. So if you account for all those, the margin is pulling down.On your question on The Trees, Trees are always between 35% to 40%. We have also guided that The Trees margin would be around 35% to 40%. So as you go towards the end of the project, towards the OT, your thoughts and other things get finalized. So more or less, it will be around 35% to 40% because we have chosen high price inventory like penthouses and all in those Phase I still to be sold. So that will make up for the margin. And going forward, obviously, as -- I know the -- as a strategy, we have been unlocking the legacy projects. Really some more time will be required like Pirojsha mentioned. So new areas is something which we will have to take head on to unlock the capital over there. So that may also depress our margin in spite of some good projection like Trees giving us a higher margin. So maybe over a period -- in 2, 3 quarters, you will be able to start reporting...
Kunal, this is Mohit here. I have here a couple of things, which you had asked. First, what's going to happen in future? So if you look at the current project profile, which we are adding, the margin profile is significantly higher for these new project additions, and we feel that as these projects come into recognition, it will make a big difference in the profile.
The next question is from the line of Abhinav Sinha from CLSA.
Sir, first question is on the business development part. So the scale of the best that you have taken sort of seems to have gone up. And -- I mean, is there a limit that we have there as such? I mean, can we take INR 1,000 crore-plus bets also?
No. Look, I think this thing will have to be calculated better. We'll have to understand the risk and upsize the risk. But yes, so I think the scale of the company has also obviously gone up over the last 4 or 5 years. I think we have now, I think, established confidence in our own abilities on a lot of these areas. We would like to see a similar period of opportunity where capital is very set in the industry. If they have the right opportunities where we think we can generate adequate risk-adjusted results, we'll be happy to put more capital to work.
Right. And sir, should we see the INR 2,500 crores resolution in more as an enabling one or do -- it can be actively utilized as such and on near-term?
No, this is -- a little bit of both on this. Directionally, it's [indiscernible] any actions for the decision of this. We want to go ahead with any kind of fundraising is something that we haven't realized that yet. A lot of this still depends on how the market environment on the business development side is looking. I think, clearly, for the current set of deals and kind of normal pace of business development, we don't feel we need any kind of equity there. And we'll obviously be quite hesitant to have it in the coming year. At the same time, we've commented that we think this current period is the best to move opportunities that may not come again over the next 10 years. And we're continuing to see the kind of opportunities and do believe that more will be available. We would like to consider hedging some equity and do it in a way that we're not raising it after the fact and after we've already made a huge amount of investment. So I think it's something we will have to keep monitoring on a quarter-to-quarter basis. For now, it's going to be a late evolution, but I wouldn't rule out the possibility of what -- considering earlier if market conditions continue the way they are.
Gearing target at 1.5 is still -- you are okay with that?
Yes.
Yes? Okay. Secondly, on the Bandra deal that you have done. So -- I mean, Bandra as well as the Barshi one. Are there some significant pending payments, which you still have to make next year or we are done with that?
Yes. But I think particularly with Bandra, we've got [indiscernible] it has to do with any brand [indiscernible]. And a lot of the payments relates to the regulatory approval. So there won't be significant payout, but I think the period for recovery would be much shorter than your typical project.
Right. And what sort of product exactly we're looking at? I mean, INR 50 crore apartment, INR 20 crores, so what's the range here?
Yes. Abhinav, this is Mohit here. So we are looking at a product, which would sell in the market. So we are not looking at these ultra-luxury products. So we are targeting products which will, I would say, work with the middle class or a premium middle-class segment. And typically, our products would be in the range of INR 5 crores to INR 10 crores kind of an apartment. So it will be a -- I would say, affordable in the segments, which we are talking about.
So broadly, the 1,000 carpet remains the ceiling as such, 1,000, 1,200 carpets?
Yes, you're not too far away from that number.
Okay. And sir, and finally, on the sales itself. So we had a very high Q afterwards, right, in FY '19. So what are we expecting? And any sort of early bird projects that you have for the financial year?
So we're lapping in terms of term loan that we did and the first half NCR as we did last year, it's put unnecessary high burden on the second half. I think very happy that the team was able to deliver against that high burden, but I think we'd much rather start with the bank discussions. As for now, I think our visibility looks very strong, but of course, still linked to some regulatory approvals and so forth. And there will be some projects that actually I need -- big ones that will be in the second half like Bandra, Vikhroli, et cetera. But I think visibility is pretty good for us to understand.
The next question is from the line of Parvez Akhtar from Edelweiss.
Congratulations on a great set of numbers.
Can you be a bit loud, please, Mr. Akhtar?
Congratulations for a great set of numbers. Sir, just one question from my side. Apologies if I missed it, but would it be possible to get the pending commercial inventory in Kolkata and Chandigarh?
Sure. So Kolkata is another 1.2 lakhs square feet to 1.5 lakhs square feet. Chandigarh is still 4.5 lakhs square feet of inventory to be sold. And BKC has sort of come in to give another 25,000 square feet of balance we're going to get rid of.
[Operator Instructions] The next question is from the line of Manish Jain from GormalOne.
My question was primarily on Mumbai as a focus market, excluding Vikhroli. Given the kind of launch that one can expect from Bandra, do you see a similar kind of BD pipeline in Mumbai? I'm just trying to look at do we have kind of visibility the way we did Pune kind of deal? Because Mumbai so far has been a little bit of laggard within the 4 focus markets as far as the BD side is concerned?
Yes, I think that's probably a fair assessment, Manish. I think we also feel that Mumbai performance last year could have been stronger both from actual sales perspective. BD, we actually do have some sites at a fairly advanced stage and a lot in the pipeline. So I think we're confident of bringing that to a fairly high level. And certainly, I think a lot of the deal flow right now is actually in Mumbai, which I'm quite excited about. And I think unlike past couple of years, there are some very exciting locations within Mumbai. So hopefully, we can have some more good years on that front in the coming quarter.
And second was looking at the outstanding deal terms in Pune on a large volume and value of deal. Is that the kind of trend that we are looking at and we have clearly seen INR 2,500 crores, you just mentioned earlier in the call? I think -- is 20% ROE, don't you think is a very conservative number? I understand that when these projects get launched and there's a transition phase where it quickly gets issued earlier. But on a sustainable basis, on an existing INR 2,500 crore net worth and we are planning to raise INR 2,500 crore, even though it's an emerging resolution?
Yes, Manish, first of all, I honestly don't think we have plans to raise INR 2,500 crore, even if it's an emerging resolution. Even if we're going to raise, I highly doubt we would look at raising that kind of quantum. On the ROE thing, while, obviously, I believe 20% is the absolute maximum, but can be achieved in the business? I think that's a very fair and, I think, aspirational level to get to. I think if we are able to get there over the next 3 or 4 years, I think that would be a strong achievement. And we think that would be a very self-sustaining, value-creation engine if we can combine that 20% ROE with the kind of scale we're aspiring to. And firstly, once we get there, I don't think anyone's going to stop pushing us out to look at further improvements, but I do think that that seems like the appropriate kind of midterm goal that we expect. And again, we'll obviously continue to keep pushing ourselves to do better.
The next question is from the line of [ Manish Gandhi ] as an individual investor.
Congratulations on all the front. My first question is, so Bandra is our second project in slum redevelopment. Though we don't do the slum part, but I would like to know is there any big opportunity for us opening in this kind of slum projects, which earlier may not be there? And Mumbai, most of the land, which you are planning, city-centric. So slums are the big opportunity there. Just want your view on that.
Manish, Mohit here. So Manish, we are looking at actively opportunities both in open land in redevelopment space and also in SRA space. Of course, we entered into the project with a clear strategy that all of the risk related to SRA or redevelopment is kind of mitigated. So that strategy would continue even going forward. And in case there are opportunities within the SRA space, which meet our risk guidelines, we'll be very happy to look at them.
Okay. But do you feel that this kind of market has given you entry in -- which seems like a difficult to enter or crack that thing?
So we don't want to expose ourselves to the SRA business asset. We would want to focus on development of the SRA business, and we would partner it with good partners like we have done in past on these SRA projects.
Okay. Fair enough. And my last question, second question is, so what is your view on student housing and co-living space with enhanced activity you see in this space and most of the players talking about adding thousands of bed capacity in the next 1, 2, 3 years? And you know -- we know what has happened to the commercial real estate in the parts of the world. So do you feel it will help clear inventory for the sector in the next 2, 3 years, which we might not have thought? I just want your views on that?
I think these are good concepts, which are at early stage. So I think it's difficult to make a very specific comment about whether student housing or co-living, as a concept, how much it can pick up. We are also evaluating some of these things internally and talking to partners if -- some of our projects can be -- look at doing some of these interesting concepts. But I will say, is that the concept, Manish, still needs to be proven before we can really look at it then to a large scale.
The next question is from the line of [ Namit Khurana ] from Edelweiss.
Firstly, congratulations on a strong quarter and a strong year ended. So most of my questions have already answered now. Only one question. We've been hearing on some issues with respect to disbursement to local builders. So just wanted to understand if at all it is going to affect our projects under the DM model?
No, I don't think. So what we do is we make a provision into our DM agreement that the project has to be funded by the DM partner -- by the landowner. And as and when we launch, we have a full mechanism, whereby the moneys are separately kept in the escrow, so that the project can push and doesn't get suffered. So obviously, there is effect in the market, but as of now, I don't see that we will have that issue of funding to the DM project.
The next question is from the line of Saral Bhansali from Enam Investments.
So I had a question on Vikhroli. You talked about the incremental 2 million square feet that they are talking about in the next phase of launch. So I understand that, now, the 35 acres that we own out of the whole Vikhroli land parcel, how much of this 2 million is going to come on that land parcel? And how much of it will be under the DM agreement?
Yes, this streamlined part that we're talking about is going to be under the DM arrangement. And all of this new project is under that structure.
Okay. And it will continue like that in the foreseeable future, is that correct?
Yes, that is the current understanding.
Okay. Just one more question. About the fact that under the Godrej brand, we are selling products, which are, let's say, this Bandra project, and we are selling projects in Chembur and in other micro markets, which may be at very, very different price points. So have you ever considered using sub-brands or a strategy to differentiate the market based on the price points that you are selling at?
Yes, we have considered it. In the past, we have thought having us pre-build for a brand and sort of differentiating the project, level brands makes the most sense. Interestingly, actually, currently, at the outset of a major marketing, Saral, we are having some external support also in addressing just this question. So we are revisiting that question and we'll hopefully have an answer in the next few months. I think there are pros and cons to both strategies. So we'll have find to the right mix for us, but that is something we're kind of studying at the moment.
The next question is from the line of Dhaval Somaiya from Phillip Capital.
Congratulations for a good set of numbers. I was just trying to get a favor of -- with Prana and Azure getting realized in FY '19, I would like to understand the breakup of that INR 14 crores of profit and loss from JV partners? So what would be the Azure's contribution and Prana's contribution?
Well, first, this is the share of profit. Like, there are projects, which are under profit sharing, thereby we will -- we would get only our share of profit over -- in our P&L. So it's a summation of all my JV projects. Yes, so there is a -- and all the marketing expenses, which you -- because of India try to get expense out -- those are expensed out. So this is -- the next is what keeps coming to the P&L. So that's why this is a negative for all the new launches, which has been there in other JV projects.
Okay. Okay. So going forward with more of the profit-sharing projects getting okay and getting recognized, you will see these numbers are thankfully going up in the, I guess, within 2 years?
Yes, absolutely. Absolutely.
The next question is from the line of [ Manoj Dhawal ], as an individual investor.
Congratulations for a very good number. Sir, what do you see the role of market revival in this Godrej performance taking no -- what do you see how much is the role of market also reviving? Or it is the market is still not reviving at this stage?
Yes. I don't think the market itself or actually if you're talking about last year's numbers has contributed much as the market remains driven towards the end of the year from a sector perspective. But as we highlighted, including the year on the whole, I think there's 2 opportunities that JPL can benefit from at the moment. One is the overall sectoral growth. And while that has been nonexistent in the past 3 years, we think that will be a very strong contributor to growth over the next few years. But the second opportunity that has very little to do with the market is how our project execution is doing, how our own portfolio addition is going, how our own efforts to gain some consolidation and improve our share of growth. And I think most of the sales performance that you've seen in the last 2 years in reflective of that, that we came through [indiscernible] of adding new projects, bringing those projects to market, improving our market share. But certainly, it would be exciting to start with both those factors from producing at the same time.
Great. Great work. Secondly, can you give some color on -- I know Mumbai has a -- every location has different demand and supply. Can you give some color on what's the demand scenario new INR 5 crore to INR 10 crore in Mumbai presently?
So Manoj, it's difficult to answer this question on a time basis because it depends on the location. But I think, if you are talking about Bandra or South Mumbai, then in this segment, there is a sufficient demand.
The next question is from the line of [ Himanshu Zaveri ] from [indiscernible].
Congrats on a great set of numbers. I just wanted to ask regarding the Panvel project as from what I see, we're only launching around 5 lakhs a year -- 5 lakh square feet. And is there any particular reason why you are going slow on this project? And what is the news on the extra exercise in that project?
So [ Himanshu ] this is Mohit here. So we are looking to evaluate whether we should transition to the new [ ICP ] policy, which has come in, which significantly gives the FSI benefit. So that's the reason we are currently launching limited phases and then this is the final call on that subject, you will take the next call on this project.
Yes, because from what I see if we launch more, also, we can sell easily because that project is...
That's correct. But I think there is a huge FSI benefit which is coming. So we're just evaluating the trade-off based on that.
Okay. And what are the new projects we are looking at? The Chembur case study is one. I think we are close at closing that deal, I guess. And the Delhi-Ashok Vihar I, the article which had come in the newspaper, is there anything over there? Or it's just until you don't confirm, you don't comment on it?
So right, I would like to refrain from commenting on both of these transactions as we haven't signed them. But that's -- so once we have clarity, we can come back on these things.
Okay, okay. And the last one. I would just like to understand, as a company, we're doing different -- what we are doing different as in the current liquidity scenario? It's quite -- pretty tight and most builders are finding it tough even to sell their ready products. So from what I feel we, as a company, apart from our brand, we are like selling even the -- immediately as we launch the projects. So what are we doing different as a company apart from our brand, which we have already built?
I think -- I don't think there's any one big new mantra, it's a combination of things that hopefully we're getting right from -- everything from selecting the right locations, to understanding things like infrastructure and supply/demand coming in that location, to spending a lot of time figuring out what's the right kinds of products into our own research and our understanding from our other projects. And then obviously, over the years, we've also built a strong sales engine in the company both in just the project, but at a city level, national level and into our national sales efforts. So I think that certainly contributes. But I really don't think there's any one factor, it's a combination of all of these. Some of the areas we spent a lot of work on. For example, during the last financial year was even focusing on Net Promoter Scores from all our existing customers, working to improve that, working to make sure that we're sort of the best regarded developer in the country from a customer's perspective. We think some of those factors that we are able to get right were really the bigger drivers of future performance for any of the kind of short-term operational or financial indicator. So I think it's a lot of different things. But the center of all that is kind of focusing on getting the right product for the customer and the right product you fill in overall.
And then, please, can I expect any deal like the Vikhroli clear land, which we bought before sometime? The main profit driver will be if you buy some more land in this land parcel rather than the DM model because I know the current structures for the DM model, but in future, is there any chance? Or you can't comment right now?
I think the best is to assume that the current year is not all that clear. If there's a way to improve things on the future, we'd always look at that.
The next question is from the line of Tanuj Mukhija from Bank of America.
Just one quick question. In the current stress scenario for the entire sector, would you be open at acquiring a developer or per se any under construction project?
I think, first of all, yes, do I really, but I think there's a very high degree of caution on the benefit to it. So it more likely we will continue to see projects that are reconstruction being added. So certainly, if we're seeing there are access or balance, we can also look at opportunities that are under construction, and we have seen such projects and including some of the ones that we've added historically. And on the entity level, again, it's something we're open to, but we'll be very cautious about it at the same time.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their closing comments. Thank you, and over to you.
I hope we were able to answer all your questions. If you have any further questions or would like any additional information, please do reach out, and we'll be happy to be of assistance. On behalf of the management, thanks, again, for joining us today.
Thank you very much. Ladies and gentlemen, on behalf of Godrej Properties Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.