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Godrej Properties Ltd
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Ladies and gentlemen, good day, and welcome to the Godrej Properties Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Devrishi Singh from 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 '21 Results Conference Call. We have with us 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 will have the forum open for an interactive Q&A session. Before we begin this call, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation e-mailed to you earlier.I would now like to invite Mr. Godrej to make his opening remarks.
Good afternoon, everyone. Let me start by saying I hope all of you and your loved ones are safe and doing okay. Thank you for joining us for Godrej Properties Fourth Quarter Financial Year 2021 Conference Call. I'll begin by discussing the highlights of the quarter, and we then look forward to taking your questions and suggestions.As you all know, India is currently going through a crisis of significant proportion with its second wave of COVID, resulting in higher numbers of infections and deaths than any country has witnessed at any stage of this pandemic. From an economic standpoint, while this is likely to once again disrupt the first quarter of the financial year, we believe the impact will be lower than it was last year as we avoid a national lockdown and as construction sites are allowed to continue functioning. Our primary focus at this difficult time will be to ensure the safety and well-being of our workforce, including all the construction workers that remain at our sites. A prolonged second wave of infections and renewed restrictions could impact construction time line and regulatory approvals for project launches. While the situation will interrupt the improved momentum for construction pace and property sales in the current quarter, we expect the sector to continue its recovery in subsequent quarters.With a net cash balance sheet, we believe we are well positioned to withstand any temporary setback and invest for the future, which we continue to believe looks very bright. In March of this year, we successfully raised INR 3,750 crores in the largest ever QIP by any real estate company in India. Our equity raise was specifically timed to take advantage of a likely cyclical upturn in the real estate sector, and the proceeds will be used to fund exciting growth opportunities ahead. The current market dynamics, where the majority of the sector still faces liquidity challenges, provides us with an opportunity to utilize this capital to significantly strengthen our new project portfolio.From an operational perspective, the fourth quarter was GPL's best-ever quarter on many parameters. The highlight of our Q4 results was our highest ever cash collection of over INR 2,000 crores, which included collections of INR 214 crores from projects where GPL is the development manager. These collections led to a strong net operating cash flow of INR 785 crores. We've been able to generate our highest-ever residential collection of INR 4,389 crores in FY '21 despite the tremendous disruption in construction activity in the first half of the financial year, when we were able to collect only INR 1,115 crores.On the sales front, too, the fourth quarter was GPL's best-ever quarter in terms of the volume and value of real estate sold. We sold 3,602 homes during the quarter with an area of 4.2 million square feet and value of INR 2,632 crores, representing a quarter-on-quarter value growth of 77% and a year-on-year value growth of 10%. This ensured our FY '21 sales of 9,345 homes with a total area of 10.8 million square feet, valued at INR 6,725 crores, was the highest in GPL's history, representing a growth in value terms of 14% and in volume terms of 23%. We launched 7 projects during the fourth quarter and received a strong response to all of them. Our project, Godrej Woods in Central Noida delivered sales worth over INR 500 crores during the launch quarter, making it one of the most successful launches in India in the financial year '21. We sold more than 1.5 million square feet with a booking value of over INR 1,300 crores in each of our 4 focus markets of Mumbai, Puna, NCR and Bangalore. While our launches did very well with total sales of INR 2,175 crores during the year, we were especially pleased with our sales from existing inventory, which grew by 46% to INR 4,550 crores in financial year '21.On the operations front, we successfully delivered approximately 2.3 million square feet across 2 cities in the fourth quarter, including 1.17 million square feet at Godrej 2 in Vikhroli, 950,000 square feet at Godrej United in Bangalore and 170,000 square feet at Godrej Platinum in Vikhroli. For the full financial year '21, we delivered 6.5 million square feet across 3 cities, which is the highest ever for GPL in a financial year. The revenue recognition from these deliveries in the fourth quarter was muted because of 2 residential projects, one under the development management fee model and the commercial project is 50% owned by us and will be a leased asset. As a result, in the fourth quarter, our total revenue decreased by 60% to INR 508 crores. Our adjusted EBITDA stood at negative INR 72 crores, while the net loss stood at INR 192 crores. For the full year financial year '21, our total revenue stood at INR 1,217 crores, our adjusted EBITDA stood at INR 150 crores and net loss stood at INR 189 crores.The loss reported in the fourth quarter was due to 3 onetime charges to the P&L relating to provisions. The first of these charges was for the long-term incentive scheme payable to certain employees in financial years '23 and '24, subject to specific parameters being met. This amounted to INR 121 crores and was taken in FY '21 basis prudence and high likelihood of these parameters being achieved. The second of these charges amounted to INR 81 crores and was required due to our shift to the new tax rate, which required remeasuring our deferred tax assets. The last of the charges was due to a write-down in our legacy project including Godrej Prakriti in Kolkata, Godrej Palm Grove in Chennai and Godrej Alpine in Mangalore, amounting to INR 76 crores. Excluding these onetime charges to the P&L, the adjusted EBITDA stood at INR 125 crores and net profit would have stood at INR 37 crores in the fourth quarter. In the first half of the last financial year, with the impact of the pandemic and subsequent lockdowns uncertain, we adopted a wait-and-watch perspective for new business development, leading us -- leading to us only adding 4 new projects to our portfolio in financial year '21.Our business development pipeline is very strong, and we expect FY '22 to be an exceptional year for new project addition as deploying our recently raised capital will be a key focus. At the same time, we will be disciplined with our investment choices, and we'll seek to identify and secure the best opportunities across our focus markets. While there is no question that it's been a challenging year for the world and for India, and that risk to the Indian economy remains significant, we are encouraged by the resilience real estate demand has seen and are confident of being able to deliver sustained growth in financial year '22. Our ambitious and capable team, robust balance sheet and strong brand give us the confidence to weather the storms and continue to deliver sector-leading growth in the year ahead.On that note, I conclude my remarks, and I would like to thank you all 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 Prakash Kapadia from Anived Portfolio Managers.
I had 2 questions. Given that we've seen the second wave coming, and our key focus markets, be it Pune, Mumbai, Bangalore, what is the consumer behaving this time around versus last time? Is buying a house now not being prioritized? Is it being deferred? Or is closure taking more time? That was the first question.And secondly, we've seen a higher contribution from existing inventory to total sales due to new launches, will that trend continue? And what is the pipeline for FY '20 in terms of regulatory approvals? PD? Given whatever you're sensing in micro market, if you could give some color that would be great.
Yes. I think on the pipeline for FY '22, I think it's quite strong and as per presentation, we, of course, have a number of projects that we hope to launch during the financial year, both new projects as well as new phases of our existing projects. Beyond what we've mentioned in the presentation, we also have several other projects where approval time lines are somewhat uncertain. So we've kept them out of the guidance we've provided. But we do continue to hope and expect to launch them during the financial year, including new phases in Vikhroli and hopefully, our redevelopment projects in Mumbai, like the one in Worli and possibly we see increased momentum, hopefully, even in the one in Bangalore.So I think the launch pipeline, in terms of new projects there looks quite positive, and we'll do our best, of course, to get as many of those launched as possible. Our experience basis, the first wave of the pandemic last year, is that the things that suffer the most as a result are regulatory approval time lines, as government offices are either not functioning in normal ways or focusing their attention rightly on the most pressing issues related to the pandemic. So we would expect to see again perhaps some delays in the current quarter for 2 regulatory approvals. We've of course, learned the lessons on construction, labor strength at sites and are doing our best to retain construction workers this time around. That said, I think we have already seen a 25% or so reduction in construction workers from their recent peak over the last 5 to 6 weeks. So that's certainly something that we're going to have to work hard to counter and make sure we can continue with construction. On the sales side, I think while certainly we would expect to see this quarter be impacted. Obviously, there's very large scale prices unfolding. Even people's ability to visit projects, to even take decisions in this environment, will be somewhat impacted. I don't think, overall, from an industry perspective, it will be quite slowdown we saw last year first quarter. But it will certainly be, I think, a slowdown of strong momentum that was visible in Q3 and Q4 of the last financial year. That said, I think all the parameters that we think led to the recovery in the second half of last financial year, including low interest rates, including the pandemic's focus on the importance of a home, and particularly a modern home, where you can have amenities and things within your development if you're not able to go out as much as you usually do. We think all of those will continue to drive a resurgence in property demand beyond the period of this immediate crisis. I think most expert forecasters, as you know, suggests that the peak in India for the second wave will be sometime in the next couple of weeks. And that after that, things will start gradually improving. So we do expect a significant impact in the first quarter, but a recovery beyond that. And I think we were able to see last year that you can make up for lost time in this sector. We had almost no new launches in the first half of the financial year. But because of the strong launch pipeline we had in the second half, we were able to deliver strong growth in booking value despite those constraints. So we continue to expect a pretty strong financial year, and we have a good pipeline both on launches as well as new business development. And if anything, I think the current crisis will again strengthen the level of business development opportunities available. So we'll, of course, do our best to ensure current operations are maintained at the highest level possible and that we also use this opportunity on the business development side.
That's helpful. And Pirojsha, important to mention some of launches in Bombay would happen sometime so assuming Mumbai [indiscernible] the overall value growth was higher than the [indiscernible].
So I wasn't able to hear you too well. Mohit, will you take that?
Yes. [indiscernible].
Sorry, I mean myself wasn't able to hear you properly.
Yes, yes. You mentioned about some of the launches in Mumbai, which could be possible sometime this year. So assuming these launches go through, the value growth will be much higher than the volume growth for FY '22, right?
Yes, see these are...
Mumbai is a much higher price market.
Go ahead, Mohit.
Yes. The -- obviously, by Mumbai launches are high-value launches, especially launches like Worli and Bandra. So in case they come in onboard, then they will have a significant effect on the value growth.
[Operator Instructions] The next question is from the line of Puneet from HSBC.
Yes. Congratulations on good sales. I have 3 questions. The first one is you've given an employee incentive program for '23, '24. Is it possible to get some sense of what kind of targets are being set for '23, '24?
Yes. Actually, this is not a new program, this was a program we launched in FY '18, which was a 5-year program that ended in FY '22, so the current financial year. It's actually linked to the stock price performance and also have several operating parameters that needed to be met. Based on the visibility of -- or high likelihood of that being met because of the stock already crossing the target we'd set during the fourth quarter, we, from a prudence perspective, have taken the charge to the P&L in the fourth quarter, whereas the payout for this, if any, will be decided basis final evaluation of the planned performance at the end of the current financial year and with payouts made equally in FY '23 and FY '24.So from a cash flow perspective, the payments will only be in those financial years, but from a P&L perspective, we've taken the charge now this is the last year of growth can be achieved. And of course, if they are not achieved because of developments during this year, when those amounts would come back into the P&L. And if they are achieved, there will be no further P&L impact.
Okay. So this is for target for FY '22, not '23, '24?
Correct. This was a plan we had put up for our senior team launched 4 years ago with a 5-year duration and with payments in the sixth and seventh year and a long-term incentive.
Got it. Got it. My second question is you raised a substantial amount of capital last year. What is the time line that you see you will take to deploy this capital?
No, I think we expect to deploy it between this financial year and the next financial year. I think we -- a couple of things that we will look at here. On the one hand, I think, obviously, we've raised capital to fund rapid growth. We do believe that there's a period of time here where sales have recovered largely for the sector, notwithstanding any new developments because of the second wave. But where liquidity conditions for developers remains very tight and as therefore, there will continue to be deals available on what we think are attractive valuation. So we specifically raised the capital to kind of address this time line, and do believe this won't last indefinitely because as sales continue to improve, business development markets in terms of land markets will also get tighter. So we would like to try to deploy most of this in the next couple of years.At the same time, we obviously want to be prudent. We want to understand if there are any changes to that hypothesis that will be required because of what we're currently seeing in the country. Our current expectation is that there won't be, but certainly, we will have an eye on what's happening and make sure that we're being prudent about the deployment and focusing on getting the right quality of deals and not rushing to do deals because we have the capital available. But I think our current visibility would suggest that we should be able to deploy a lot of it within the current financial year and next financial year.
Okay. The third one is you've talked about 20% ROE. How do you think about it on the expanded capital base?
Yes. I think clearly, on the expanded capital base, this gets -- time line to this gets pushed out quite considerably. I think obviously, we should be able to demonstrate -- we think financial year '23, we've been saying, is a year we expect meaningful inflection upwards in our P&L and cash flows. We think we can continue to grow bookings and cash flows this year very strongly and have reasonable earnings. But we really think something meaningful in the P&L will be starting from next year onwards. But clearly, on the new capital, I think the way to think about it is if we take a couple of years to deploy it, and even best case time line from there on would be another 3 to 4 years to see any P&L benefit from that deployment because we'd have to, of course, get the project, go through the regulatory approval and design phase, launch the project and fully deliver on before the P&L is benefited. So I do think that, that guidance on an overall balance sheet gets postponed quite significantly because of this capital raise. But obviously, we should be able to demonstrate clear movement towards that goal through much stronger margins and actual P&L from next year onwards.
Okay. Okay. That's helpful. If you don't mind, last one, how are you looking at the valuations on the land side? Have the deals become more attractive versus FY '20?
No. I don't think the deals have become more attractive than FY '20. I think FY '21, despite the massive shocks to the sector in the first half of the financial year, we have to remember it was a year that ended on a fairly strong note for the sector. I think most developers saw quite rapid growth in the second half of the financial year, and not just growth over the lower pandemic base, but even growth year-on-year over the pre pandemic numbers. So I think the general hypothesis prior to the second wave -- not hypothesis, the general sort of ground reality prior to the second wave was that conditions were improving in the sector, demand was picking up across various price points, uptake was quite high. And that -- there obviously, developers with land are also able to notice that, and we're not, I think, further lower in prices over FY '20. Now what impact this second wave has? I think it's probably say, a little bit early to comment on. Our sense is that as things stabilize from a dynamic perspective over the next couple of months, as they hopefully will, you'll see something similar to last year where property sales do quite well. So I think we remain quite optimistic beyond the first quarter of how the sector was there. And therefore, do feel that now is the time for business development because as markets continue to improve, land markets will tighten as well. But given the scale of the liquidity challenge in the sector, even prior to the pandemic, there certainly will be significant opportunities, we believe, over the next couple of years.
The next question is from the line of Abhinav Sinha from Jefferies.
Yes. Good to see the sales number and the cash collections. So a couple of things I wanted to ask. One, are we seeing some impact already on the cash collections as we go forward? Are your customers asking you for deferrals in payments?
Nothing of any huge concern at the moment. I think the main concerns, as I mentioned, is that we've seen a 25% reduction in construction labor. We've recently launched some incentives for contractors and for labor at our site to try and retain as many as possible, and we don't see the situation of last year repeating where we have lost 75% of the construction workforce at the worst stage last year. So this year, currently, it's 25%. We don't expect it to get much worse from here, but certainly, there's no way of knowing that for sure. So I think the impact on cash collections will be more from those milestones somewhat keeping because of the lower construction labor and from customers being unwilling to pay. And so far, I think we're not seeing anything surprising on the collection side. Mohit, anything you want to add to that?
I'm of the same view.
Okay. And since we are on this, Mohit, also, maybe you can help us. Are there some markets that are lagging, say, NCR has higher labor lag and something like that?
It's across, actually, markets where we're seeing that the labor strength is following. But as Pirojsha said, we have spoken to contractors. We are working on some kind of incentives for labors for them to be retained, and we are seeing positive traction, early signs of that. So nothing significant across geographies, from a term perspective.
Okay. Secondly, on the P&L for the current quarter and also in this context, the stake increases that you have done. So I wanted to check, I mean, has the state increase in the Avenues project had any impact on the revenue for fourth quarter? So that's one. And secondly, for the land payment outflow that we have seen, what all does it include in focus?
So Abhinav, it's not a major impact on the P&L because it was the -- most of the revenue has been recognized. So it was a natural state buyout and exit to our JV partner. So it doesn't have a major impact. Whatever the residual P&L will be left out where now it will come 100% to us. Sorry, what was your second question?
Sir, secondly, on the outflow for the land payment during 4Q.
Yes. So in the fourth quarter, what the -- well, outflow was majorly on a milestone payment and like we have to make certain payment in our Okhla project, which is around INR 100-odd crores. So aggravate 50% payments was made in last financial year, 50% was balance, which we made into this financial year. Chandivali, there was a TDR payment, which we made. Similarly, there were some Noida payment, authorities payment in Sector 43 which we launched. Accordingly, some small, small, small, which is a time-linked or a approval-linked or even linked payments were made into quarter 4.
And the CIDCO option is paid for? Or it will continue?
No, we have yet to pay. We have just bidded. we have won the bid. So that also is linked to certain milestones. So we have paid INR 5 crores, balance will be linked to the performance of CIDCO on certain milestone.
Okay. And finally, if you can, Pirojsha, maybe guide us a bit on what to expect from the BD front next year, in terms of geographies? Or maybe the sort of stakes you are looking at? Or even the locations? Are you looking for more premium projects now?
Mohit, do you want to take that?
Sure, Pirojsha. So on BD, I think that strategy has been working very well, and we would like to continue on this strategy. We would -- if you look at even in the last few years, we have focused on city-centric properties. So we would definitely follow the same strategy. Follow the same strategy of taking higher equity stakes in our joint ventures and opportunistically look at buying out land if valuations are very attractive. So a lot more of the same, Abhinav.
The next question is from the line of Kunal Lakhan from CLSA.
Yes. Just on the collections front. So we had like a good collections under this quarter. Was there any one-off or anything in the collections? Because the INR 2,000 crores on a INR 2,600 crore sales, it's like almost 77%, 78% of sales, which historically, that number has been a little I mean significantly lower than that. So just trying to understand whether this run rate is sustainable or was there any one-off in this?
Whatever -- yes...
A lot of this was actually pent-up, which was there from Q1, Q2. If you see Q1, Q2, the registration had come to a grinding halt. So that created a backlog construction was evenly hampered. So in Q3, Q4, we really ramped up the construction and lot of billing milestones were achieved in Q4. So it was a lot of the backlog of registrations and also it was a good progress we made on construction sites, which helped us achieve those customer milestones.
Sure. Sure. That's helpful. And we do it...
Cash collection still continue to be strong in this financial year. Again, there could be some small disruptions in the first quarter. But even some of these sales we've done on payment plans, like we did in the first quarter of last financial year, a lot of those payment plans will now create quite a bit of cash flow in this financial year and next financial year. So we do expect to see collections growing even faster than booking value in the current financial year.
Sure. That's encouraging. On the sales side, we've clocked a 14% growth in this year. How should we look at FY '22 in terms of internal growth target? And beyond FY'22 as well.
No I think it's -- yes, I think as we sit in the middle of this crisis, it's a little difficult to project that with much accuracy. I think we'll all have to keep an eye on what's happening and see what the effect is. Our best estimate currently would be that we'll see a muted first quarter, given what's happening. But as we saw last year, that can be quite quickly made up for, through new launches and increased momentum, once things turn more positive. which we expect it will from the second quarter on. We certainly expect to deliver booking value growth over FY '21. Whether that growth is relatively modest or very high, I think it's a little hard to say given the current environment. So I think we'd probably prefer to comment on that next quarter.But absent this current situation, we were expecting a 20%-plus booking value growth, that might still be achievable if the medium-term impact of this isn't very severe, but I think it's a little premature to comment on that. And certainly, over the medium term, we think booking value growth and earnings growth should be very robust. If you look at it just with new capital raise we did in the fourth quarter, should allow us to more than -- to increase the scale of our operations by more than 50% once this capital gets deployed, and that's leaving aside the natural growth the business could have enjoyed aside from that. So certainly, we'd like to see the scale of our operations increased many fold over the next 4 or 5 years. In the immediate term, I think in FY '23, we hope to cross INR 10,000 crores of booking value that's next financial year. So those are some of the numbers we have in mind.
Sure. That's very helpful. And my last question is to Rajendra. Rajendra, if you can throw some color on like how the revenue recognition has been? I think Pirojsha mentioned in the beginning that there were 3 projects which got completed, and 2 were DMs and 1 was a joint venture. But if you can give a breakup of like what was the revenue recognition? I'm trying to understand that DMs typically on the margin front should be better than our development projects. And considering the top line in terms of absolute number itself was in upwards of INR 400 crores, just trying to understand why even if we exclude the impact of say, one-offs and given the other income, the margins are still a little softer than the demand?
The majority, again, this time was from Trees residual, whatever it is, the balance for completion and there was an AOS handover which happened on obtainment of OC for Godrej 2. So there was a recognition of an FSI into the book, so that contributed majorly. Apart from that, we had inventory in Planet Godrej, which got sold out. Plus there is another small project Genesis or Central, which are our own projects get contributed into the top line. Otherwise, one line item, Kunal, you know it passes through daily project, so it doesn't contribute to the top line. So these were the 3, 4 main items, The Trees was the biggest.
Sure. But Trees would be like a 35% kind of EBITDA margin right, or probably even higher than that. So there was given again like...
So Trees -- mostly the residual bit which was a development residential portfolio was completed. It was not much. Like I said, there was an AOS handover, amenity open space because of that, we got the recognition. So yes, this was -- that was a higher margin project. But obviously, like we said, it was offset by other legacy projects, which we have taken a write-off. So that's why you see the margin muted.
The next question is from the line of Kunal Tayal from Bank of America.
Great. Pirojsha, a couple of questions from my side. The first one is, now that volumes have been good in the sector for, give or take, 6, 9 months, Do you spot an opportunity for price hike in projects? Or will that still have to wait for -- later in the cycle? And then the second one was, as we look to deploy this expanded capital over the next couple of years, like you said, would you still be targeting an IRR of 20%, 25%? Or could it be different for this latest count?
Kunal, I think on the pricing front, while certainly there may be opportunities, project by project to look at some increases and there -- we have taken some such, I think it's still way too early to consider it meaningful at a portfolio level and certainly at an industry level. I think we probably need to see a few more quarters of sustained volume pickup. And obviously, this current crisis the country is facing is going to create some interruption as well. So I think the pricing outlook is -- if the crisis comes under control this quarter, and improved momentum resumes, certainly in the second half of the financial year, we think we might be looking more at the industry level price increases. As of now, while both us and competitors on individual projects have seen some price movements, I wouldn't -- I think it's too early to consider any kind of industry-level movement. I'm sorry, your second question now? I'm forgetting.
I was asking about what would be your IRR expectations from the projects that we're looking to get into in the next couple of years. In the past, your target range in the range of 20%, 25%.
Yes. I think similar targets remain, obviously, different categories of projects might vary a little bit, but certainly, the expectation will remain quite high. We do think that while the sector has strong -- some improvement in the second half of last financial year, that conditions for most developers on the liquidity front remain very tough. This second wave will obviously only worsen that. So I think the opportunities to deploy capital if those kind of returns should remain.
The next question is from the line of Girish Choudhary from Spark Capital Advisors.
Yes. A couple of questions from my side. Firstly on the deliveries. In fiscal '21, if I exclude commercial projects and also the quarter the development, that was around 3.4 million square feet of deliveries. And if I see this number in FY '20 was around 5 million square feet. So going ahead, what is the schedule like in FY '22 and '23? Any internal estimates or numbers will be useful here. So that's my first question.
I don't have that number off hand. But clearly, I think a reasonable way to gauge this would be to look at the past year sales and launches and assume a roughly 3-year lag between when projects are launched and delivered. Of course, it could be a little bit more or a little bit less, depending on the specific project. So clearly, we would expect, as I mentioned, particularly next year, to see a significant increase in delivery, which is why we've been saying that FY '23 is when we think the P&L will start seeing an upward inflection. Because a lot of the projects that we've added under the structure where economic interest is higher, have really been added since FY '18. And those projects, by the time we've launched them and we get some delivery, I think a lot of those deliveries will start in financial year '23.So I think we did -- as I mentioned in the earlier remarks, sales of about 10.8 million square feet in financial year '21. So with a 3-year lag, we would expect those projects to get delivered. Similar to last year, we did 8.8-or-so million square feet. In a couple of years, that would be kind of the number here. So I think the best way to look at this, we look at launches in a roughly 3-year time frame from launch to deliver.
Got it. Got it. Secondly, on the collections, again, good efforts here on achieving a record of quarterly collection. So if I look at the total collections of INR 2,000 crores this quarter, so how much would have been from sales of this quarter itself? Just to get a sense on -- because there was an earlier comment that there was a lot of pent-up collections which came in. So that -- this number will be helpful.
Rajendra, do you have that data?
Girish, we can come back to you on this data. Exactly how much was from the quarter collection and how much was from the previous quarter. We can come back to you.
But usually, it's quite insignificant from an in-quarter sales.
Yes, that's right, Mohit.
Okay. And just one more, if I may. In terms of the inventory write-offs we saw for the legacy project. Is the entire amount provided for? Or is there something more expected from these projects or any other projects? So -- yes.
So what we do, Girish, is we look at the market situation, what are the prevailing markets. As you know the standards, we need to take the lower of cost or market value, whichever is less. So depending on the market prevailing prices, we have taken this write-off. So as of now, we feel it is adequate. However, if the markets worsen further, we may have to reassess. Because this is an ongoing process, we have to reassess this every quarter. But as of now, I think for this project, what we have taken, I think that would be it. We don't need to have a further write-off in this one.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
Great year, Pirojsha, under very trying circumstances. Quick one is on Godrej 2. How are you seeing the leasing environment, given such a high-quality completion in locations in Vikhroli? I would have thought that it will get leased out very quickly so...
So Sameer, I think we're very positive on building and how it turned out, and what we're hearing from customers and their interest. Obviously, from a timing perspective, it was a little unfortunate that the building got delivered in the middle of the pandemic. I think leasing, as a whole, has taken a bit of a hit last year, and will continue to I think face a little bit of challenge this year. Given what we're seeing on the dynamic, a lot of work from home happening. Our own offices, for example, have been barely open at all over the last 13 months.So it's not too surprising to us that things have been a little slower than we would have liked. That said, we think we can get to about 70%-plus leasing in the building. Financial and the remaining next financial year. I think again, from a qualitative perspective, what we're hearing from clients, very happy. And I think we've got a couple of major leases already locked in with leading tenants, like Amazon and Best. The pricing on the building is also quite attractive. I mean with leasing around INR 160 a square foot on salable area. So I think nothing was that concerns us a lot. Obviously, we would like it to be a bit better had the pandemic had not impacted us. But I think it's the temporary delays. We're also now in the process of building a Taj Hotel in Vikhroli, so I think once that's up and running, we expect the location to get even more established. And I think the leasing we expect will be completed by next financial year.
Okay. Great. And the second question is on the new launch pipeline for fiscal '22. I mean you have taken quite a few Mumbai projects off the chart. It's not only Worli and Bandra it's also, Ambernath, Vashi, et cetera. So just wondering, is it project-specific issues? Or is it a city-specific in terms of regulatory delays, et cetera?
So I think that Mumbai does tend to be one of the most time-consuming city from a regulatory approval perspective. I think we don't obviously have to have a chart like we did at the end of this financial year, with as much read in the launch guidance as we ended up at this year. So I think we've tried to be a little bit more conservative in terms of what we're guiding. Obviously, the focus internally remains very high on getting these launches done, and then obviously adding them back in at a later stage. But we wanted to stick, from a guidance perspective, to the ones we were most confident on.
Okay. Great. And Pirojsha, I think the most the biggest value driver for Godrej good hereon would be how you deploy the capital and there have already been a lot of questions. So just a couple of more from my side. On one side, I see transactions such as Sanpada, 1.5 acres, which is quite small and related -- relative to your wallet size. And on the side, you have about INR 1,400 crores sort of deferred payment Ashok Vihar-type project. So where does this sit in terms of your size criteria? Would you be doing quite a few INR 500,000 crore transactions? Is that the way we should think about it?
Yes. I think we would like to do a larger number of -- a larger number of big projects. But we are quite clearly of the view that relatively small projects do also have a place. I think one of the things that I think is important to understand in the sector, that from a sales perspective, your overall ability to deliver is quite dependent on the number of micro markets that you're present in. Because if you're overly concentrated in a handful of micro markets, your growth is somewhat limited by the natural demand in those locations. So we have intentionally been following a strategy of trying to enter as many micro markets as possible.So for example, Navi Mumbai is a market we wanted to enter for some time. There are not typically too many large land parcels available there, which is why we were okay with doing this smaller project in that location. And I think we continue to believe that there is a place for these kind of projects. We don't want to do any very large projects because again, for several reasons, including a bit to grow scale by entering other geographies, also ability to sell that much in 1 location. All of these, I think, make it that if there are benefits to having multiple projects in different micro markets.At the same time, we've obviously been looking to increase the kind of number of larger projects we're doing whether Ashok Vihar or Worli or Bandra. And we are looking at some opportunities of that type as well and certainly expect those kind of projects to be more common for us going forward also.
Okay. Pirojsha, one final, if I may, and that's maybe slightly more promoter side and less on the company side. So any updated thoughts on your 10% stake from your family office in [ Shobha ]?
So nothing, nothing, nothing further on that. As I said, that's more an investment opportunity that the family office saw in I think stock prices in general and in the sector got to unrealistically low levels. I think knowing them as a competitor, we know there are obviously a good company and that the valuations there were trading at were quite attractive. But no, nothing, I think, from a GPL perspective.
The next question is from the line of Swagato Ghosh from Franklin Templeton.
Yes. So on the employee incentives, can you just clarify, apart from stock price, what other parameters were they linked to?
Yes. So the basic scheme was linked to stock price, and the way we designed it was that we certainly expect for the scheme to open up. We expect a minimum 20% a year compounding of the stock price, and then it escalated a bit above 20%, up to 26 or so percent different threshold. We also said that we expect some minimum gap between our own stock price performance as opposed to the realty index performance of at least 10% compounded per year. So that threshold has also been met. And then from an operational perspective, we said we expect to be amongst the top 3 developers in the country from a scale perspective and also at a minimum imputed return on capital employed. So as of now, availability is that all of those will be delivered, and that's why we've taken this provision this year as opposed to in FY '22 and FY '23 from a prudence perspective.
Okay. So what was the minimum return on capital that you were targeting back in 2018?
I think we've -- again, the scheme was designed linked to the stock price. I think -- I forget the exact details on the minimum duty return on capital. I think it was in the low to middle double-digits, and that threshold has been met as well.
Okay. So no, I'm curious because back in 2018, we were actually talking about the 20% ROE thing, and because this is a significant payout compared to our usual run rate of employee spend. I've expected that there was probably slightly more aggressive financial parameters linked, like -- which should have been the target when we had rolled this.
Yes. I think one of our thoughts back then and have actually turned out given some of the equity raises, et cetera, is that using only return on capital, given the uncertainty on where the capital base would be, would create challenges. So we had, at that stage and perhaps like rightly or wrongly linked it mainly to stock price performance, judging that, that would be the best all-round indicator of how the company has progressed.And we did keep these model hygiene metrics that we're not -- the stretch was to be on the stock performance and that we expected to at least 20% to 25% growth rate and at least the compound in excess of 10% above the index. And we kept these scale and operating parameters more or less hygiene to make sure at least what was currently being delivered was at least marginally improved, not try to create stress on these financial results, so that's how we had thought of it.
Got it. Fair. And so one quick follow-up going forward, if we have any similar incentive, then can we expect certain like financial parameters to be like targets and maybe slightly stringent ones at that?
Yes. I think we are actually -- I think we found this long-term 5-year incentive, a good tool to kind of align the unit on the objectives of the company. While obviously, the current scheme is still open, and I think we'll know where that ends up by the end of this financial year. So that would be the time line, if at all, we would think of a new 5-year scheme ending in FY '27 or whatever. And I think if we want to do a new one, it would be linked to actual profits delivered given now the company is at a more mature base, the capital base is fully in place. And I think we're quite clear on the profitability objectives. So I think it would now be focused on that as opposed to linked to the stock prices, the last one was.
The next question is from the line of Murtuza Arsiwalla from Kotak Securities.
Yes. Just a couple of questions on the balance sheet. We see the inventory number on the balance sheet move from INR 2,000 crores to INR 4,800 crores. I would assume most of [indiscernible]...
I'm sorry, Mr. Arsiwalla, your voice is breaking up, sir. We can't hear you very clearly.
Is it better now?
At the moment, it is. May I request you to please repeat yourself.
Yes. So the question was on balance sheet the inventory has moved from about INR 2,000-odd crores to INR 4,800. I would assume most of this is because of the land acquisitions done during the year. Could you highlight how much of this INR 4,800 would be land purchases, which is still not launched, et cetera?And the second is a smaller one is on the other noncurrent assets, financial assets. That number has moved from about INR 300 crores last year to about IR 350 crores. So any color on what that number would be, what that underlying would be?
Okay. As far as the inventories is concerned, you are right, because it has moved from INR 2,000 to INR 4,800 because of accounting for the land, like the biggest is the Ashok Vihar. We had we have to account for the full land cost, whereas the payment is deferred over the period of 7 years. So that INR 1,500 crores of land cost is sitting into the inventory. At the same time, there is a trade payable which is going up. So you can just cross check that. So it is becoming a gross loss accounting. So similarly, we have done a lot of land purchases like RK Studios, Chandivali, Faridabad, White Field. So all those land costs has actually increased the inventory level. What's your second question?
And on the -- the other noncurrent assets, the number has moved from about INR 300 crore to about INR 750 crores. So we have a lot of...
They have moved to?
INR 753 crores. So almost a INR 750 crore jump I guess.
Yes. Because what we have done, the money which we have received for QIP has been [Technical Difficulty]. Hello? Yes. Am I audible?
Yes. You are audible now, sir.
Yes. So the money which we have received in QIP, they are powered into fixed deposits. These are all long-term fixed deposits. So as per the requirement the -- it gets [Technical Difficulty].
The next question is from the line of [ Manish Gandhi ], an individual investor.
Yes. I hope you all and your families are safe, and I would like to congratulate team for fundraising and highest ever yearly presales. So my first question is about our strategy for MMR. Just a little bit of repeat also, but in last 2 years, what I have noticed that we have done more or equal presales in Pune compared to MMR. Though it is a great achievement for Pune, but how do you think company can achieve same level of success in MMR, which is by far the largest market in India and very important to have much larger market share for GPL to achieve our ambition. And continuing in the same question, related to launches in MMR, I have noticed that in FY '21 and even in FY '22, our new launches are only where we have 100% share. And many important JV projects, as you mentioned before, Vashi, Bandra, Worli, Taloja, Ambernath for some reason are delayed. So is there a special issue in permission in JV projects you are facing and you will be looking at more 100% projects in MMR to tackle this problem? Because like our ambition, we have to be INR 5,000 crore plus in MMR going forward, right?
Absolutely, Manish. I think it's a great question. I think we -- if we're being frank, would share your disappointment with our MMR performance over recent years. I think we have done decently, but nowhere near up to the potential the city offer. We've made some changes, including -- we've got a new CEO in the MMR region, who's focused on building the scale we want to see in this region. We fully agree that the potential is above INR 5,000 crores over the medium term. I think on the approval front, yes, there have been a lot of projects that have faced delays. Frankly, though I think outside purchases, it's not that there's a natural difference. It's that we will only buy the land typically once we're very clear on the approval time line, whereas JV, we will often put a small amount of capital and be more willing to take certain approval risks and wait for those to come about, given that we will not have deployed any significant capital in those projects, whereas in our track purchases, we obviously will be very focused on ensuring approval time lines are quicker. That said, I do think we need better work in MMR both business developers to get provide projects. We can launch within 12 months into the portfolio. And then making sure, obviously, those are successful from an operational standpoint. So I think the team is very focused on turning around this MMR performance and delivering strong growth. We do believe we have all the ingredients in place needed to do that. So hopefully, we can start seeing results over the next couple of years.
Yes. I'm sure you will do, and there is a lot of market gap in MMR. So we have to fill that gap. And my second question, again, see, even in the second quarter call, you also mentioned that on Bangalore, we're going by the -- I'm -- my question is on the BD. But first, I would like to congratulate what you have done in NCR and Pune. Now because of this pandemic, the Bangalore, the structural story of the technology and the start-up is -- could be a huge opportunity for the next 10 years. And you mentioned in Q2, Mohit mentioned that we were exploring Pune platform-type deal. So can you please share your strategy in BD for Bangalore in the next 1, 2 years in little bit elaborate manner?
Mohit, do you want to take that?
Sure, Pirojsha. So the strategy is same, [ Manish ] that we would like to gain significant market share in Bangalore. And as you rightly highlighted, we already are the market leader in Pune and NCR. No reason why we should not do the same in Mumbai and Bangalore. For Bangalore, if you see the strategy, we have added multiple projects in the areas which you would like to 1 was in White Field other was in Sarjapur. And there are multiple new opportunities we are evaluating in Bangalore. So one can see a rapid growth in Bangalore portfolio. On that specific deal, which you're mentioning, there are multiple deals we keep evaluating. And right now, we are individually looking at individual deals that portfolio deal right now is not visible. But a lot of individual exciting opportunities are available in Bangalore, and we are trying to find more projects there.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
Thank you all very much for taking the time to join us today. We hope you and your families continue to stay safe. I hope we've been able to answer all your questions. Of course, if you have any others, please reach out to us, and we're happy to be of assistance. All the very best, and stay safe. Thank you.
Thank you. On behalf of Godrej Properties Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.