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Indiabulls Real Estate Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of Indiabulls Real Estate Limited.
[Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Sachin Shah, President of Indiabulls. Thank you, and over to you, sir.
Thank you, operator. Good evening, everyone, and thank you all for joining us on the call today to review our Q4 and fiscal year ended 2022 results. Let me start by introducing myself.
My name is Sachin Shah, and I recently joined Indiabulls as the company President. Prior to joining Indiabulls, I was serving as the Chief Investment Officer of Embassy REIT. I'd also like to welcome Mr. K.G. Krishnamurthy, our recently appointed Non-Executive Chairman of the Board.
A short while back, IBREAL released its results for the quarter and financial year ended March 31, 2022. We have placed our quarterly financial statements and earnings presentation discussing our performance in the Investors section of our website at indiabullsrealestate.com.
Joining me today on the call is Mr. Anil Mittal, who has been the Chief Financial Officer of the company since 2014. I will start off with the business review, followed by a brief on the financial performance of the company by Anil. We will then open the floor to questions.
Business and operating highlights for Q4 and FY '22 include: we ended the quarter with new bookings of 0.5 million square feet with presales of INR 326 crores, which is a growth of 30% -- 34% by area and 77% by value quarter-on-quarter.
For the full year, our bookings stood at 1.7 million square feet with presales of INR 1,383 crores. Mumbai continues to be the dominant market for us, contributing 60% by area and 84% by value. We achieved collections of INR 333 crores in quarter 4 as against INR 292 crores in the last quarter, a 14% increase quarter-on-quarter. For the full year, our collection stood at INR 1,281 crores. During the quarter, our construction spend stood at INR 134 crores as against INR 111 crores in the last quarter, a 22% increase quarter-on-quarter.
For the full year, our construction spend is INR 435 crores versus INR 322 crores in FY '21, a 35% increase year-on-year. Construction spend to collection stands at 40% in Q4 versus 38% in Q3. It's 34% for the full year ended March 31, 2022. For the full year ended March 31, 2022, we also delivered approximately 1 million square feet of area across 3 projects versus 0.4 million square feet in FY 2021.
Net surplus from our OC and near-completed inventory and ongoing projects stood at INR 7,161 crores, with an estimated inventory value of INR 9,287 crores and pending costs of INR 4,946 crores. Overall estimated net surplus, including planned projects, stood at INR 8,708 crores.
Sold receivables stands at INR 2,822 crores as of March 31, 2022, of which receivables provides 2.5x cover for pending cost to be incurred on OC near-completed projects. Moving on, we're pleased to share that we've received the OC for one of our key projects, Sky Forest, which has unlocked a net surplus of INR [ 1,033 ] crores.
And it has unsold inventory right now today of INR 437-odd crores. This is an important milestone for the company as it unlocks near-term liquidity.
With respect to an update on the merger with Embassy Group and other business updates. The most recent development on the scheme of merger is that NCLT Bengaluru bench has approved the scheme on April 22, 2022, subject to approval by NCLT Chandigarh bench. You will recollect that [indiscernible] shareholders approved the scheme on February 12, 2022, and the company is awaiting the final hearing before the NCLT Chandigarh bench.
Further following developments have also taken place. The Board of Directors are in receipt of a request from the founder and existing promoter, Mr. Sameer Gehlaut, to reclassify himself as a promoter. Shareholders of the company approved the reclassification request on February 12, 2022. And accordingly, the company has filed an application with [ Savi ].
IBREAL has also currently shifted its offices in Mumbai and Gurgaon to locations as it looks to enhance flexibility and independence from the rest of the group. Also, as part of the merger process, companies have initiated discussions on integration with respect to projects and operations, accounting and HR policies, systems and IT processes.
We expect the merger to be fully completed between July and August this year. Our focus, as we move forward, is threefold: complete our OC near-completed assets, which will have released a large amount of near-term and visible cash flows, spend time and attention on the planning and design of our upcoming launches.
These include BLU [ Annex ], Sector 104, Thane Phase 2. And these have a gross development value in excess of a few thousand crores, and three, ensure a smooth integration with the Embassy Group as the merger comes to a completion. Strengthening our balance sheet will remain a top priority as we look to accelerate growth over the next 12 months.
In this context, I would like to inform that the company has recently concluded a fundraise of INR 865 crores, approximately USD 114 million to a qualified institutional placement. The placement witnessed nearly 50% of the demand from new investors, and 70-plus percent of the book was allocated to [ long OD ] investors.
We appreciate the ongoing confidence and support of the investment community in what has been an unprecedented institutional placement midway through a merger amid ongoing geopolitical headwinds in turbulent markets. This capital will play an important role in meeting short-term cash needs in supporting overall growth by completing projects which provide the most cash flow visibility.
These funds were primarily used towards retirement of certain existing debt, customer refund liabilities and towards construction of our ongoing projects. Lastly, during the quarter, the company had entered into a term sheet for disposable of land at Sector 106, Gurgaon. Subsequently, on April 8, 2022, the company entered into a share purchase agreement relating to the above disposal and has received an amount of INR 80 crores as advanced. The total consideration for the above disposal is INR 580 crores.
The fresh capital raise, cash sales from the above land sale and past project sales such as London assets and from the delivery and completion of projects such as Sky Forest will be sufficient at this time to enable the company to achieve its growth ambitions. We have a clear plan on execution and finishing projects in which these funds will have delivered.
Let me hand over now to Anil Mittal, our CFO, to expand on some of the financial highlights for the quarter and full year ended March 31, 2022.
Thank you, Sachin. Good evening, everybody. Financial highlights for Q4 for FY '22. In a consolidated revenue for [ Q4 ], FY fiscal year '22 stood at INR [ 273 ] crores versus INR 356 crores in Q3 FY '22. Adjusted EBITDA for Q4 FY '22 stood at INR 58 crores versus INR 19 crores in Q3 '22, a 200% increase quarter-on-quarter.
Margins stood at 21% for Q4 versus 32% same quarter last year. The interest and finance charges of Q4 FY '22 stood at INR 24 crores versus INR 34 crores last year, a 20% decrease year-on-year. Financial highlights for the full year ended March 31, '22 include consolidated revenue stood at INR 1,541 crores versus INR 1,662 crores in FY '21.
Adjusted EBITDA for FY '22 stood at INR 276 crores versus INR 476 crores last year. The interest in the finance charges for FY [ '22 ] stood at INR 110 crores versus INR 228 crores last year, a 52% decrease year-on-year.
Moving to other financial update. Our gross debt is at INR 1,310 crores and adjusted for the liquidity [indiscernible] our net debt stands at INR 1,500 crores. Overall, our group liquidity remains strong and is in excess of INR 305 crores. Our average cost of borrowing is 10.7% with debt [ equity ] ratio of 0.4x.
As I conclude my remarks, I would like to reiterate that our company has a strong balance sheet and sufficient liquidity to meet operation and expansion plan. And we continue to be favorably positioned to capitalize on growth opportunity. Thank you. Over to Sachin for his concluding remarks.
Thank you, Anil. So to summarize. We continue to make multiple positive steps, be with the ongoing merger, reduction in debt over the operations of our business. We have a good pipeline of projects, and land banks are key raw material that we look to churn quicker as we move forward. It has been a challenging transitionary phase for the company, with the merger taking longer than expected due to COVID and other factors.
I would like to reassure our employees that I feel optimistic of our future, and that both Gurgaon and Mumbai should play an important part in the growth of the company as we move forward to be part of a larger platform.
To our stakeholders, I assure you that senior management is focused to ensure a smooth and quick transition. So our attention moves to execution and new launches as we look to be a leading real estate developer of residential and office assets in India. I will now hand over back to our moderator for the Q&A session.
[Operator Instructions]
The first question is from the line of Manish Agrawal from JM Financial.
Sachin, if you could please update us why the merger timeline has been delayed, if you could just explain it. Earlier, we were expecting more of a June kind of a timeline.
Manish, look, as you know, the merger process is driven as an NCLT process. And given kind of what India experienced again in January, February, the [ course ] has been slightly slower than expected. Having said that, as I was saying, Bangalore has finished the NCLT process. Chandigarh has finished the second hearing and that order is also in hand. We are just waiting now for what is the report from the ROC and [ VRD ] and the tax departments before the final wearing does take place. Post that, the merger is completed. So I would definitely say that we are now weeks away from a merger being completed as opposed to months.
That's clear. Secondly, if you could just explain how the debt profile would look [Audio Gap] would be the key -- if you could just talk about Sky Forest and like services of ?
So are you saying how the debt profile would change post merger or pre-merger?
Post-merger and then 1 year for going forward.
Sure. Post merger, we believe the combined company would have roughly INR 6,500-odd crores of debt. While the company would have INR 6,500 crores of debt, it would also have roughly finished inventory of almost INR 5,500-odd crores. So our OC and near-completed projects both from the Indiabulls and the Embassy side, the value of that is roughly INR 5,500 crores, in terms of net surplus.
So the idea is that even though day 1, you're starting with a debt number that is slightly higher. Over probably the next 12 to 24 months, we expect that debt to reduce by more than half, just based on kind of the finished inventory that we have, that's 2.4 million square feet from the Indiabulls side and roughly 3 million-odd square feet from the Embassy side.
Sure. And in terms of sales velocity, where do we see going forward for next year FY '23, both the entities some time?
So I think once the merger is over and we are kind of in a steady state, what we are expecting to look to achieve is roughly INR 2,500 to INR 3,000-odd crores of sales per year. That's our target, that's what management would like to see. A lot of that is coming from our finished inventory.
So again, it's not something that -- where we have to develop the asset. It will be a finished asset. So I think that's really kind of the target that we're looking to kind of achieve once it's a combined entity.
And does this INR 2,500 crores, INR 3,000 crores sales include a launch of Indiabulls BLU and Juhu also?
No. What I've kind of spoken about over here is mainly our near-completed OC assets. Anything that we launched, and those are projects that the company is looking to launch early in calendar year 2023, that would be in excess of those numbers.
And we have two transactions, particularly one is Gurgaon land parcel, which -- where we have received INR 80 crores and INR 500 crores is due. So what is the status on that? When should that money come in? And lastly, the erstwhile Indiabulls promoter is also expected to repay the company. So when is that expected?
Sure. Let me take that first one. The proceeds for 106 are expected, possibly in the next kind of 2 to 3 months. The definitive agreement has been signed. The company is still in possession of the land as well as no registration has been done, but there were certain CPs that needed to be met.
We're working on completing those CPs, getting the approvals. And there will also be a final kind of press release [ ad ] that will go out in the papers. That's a 30-day process. So I'm expecting probably -- let's hope, in the next 90 days, we can complete the prospects for 106.
With respect to the London receivables, let me just kind of maybe walk you through that a little bit in detail. The original purchase price was in excess of INR 2,000-odd crores.
Over the course of the last 2 years, while the COVID was kind of rampant, [ Sameer ] has paid down almost 2/3 of it. Roughly, 60 million of pounds is remaining that needs to come into the company. Management met with [ Sameer ], and he explained that the delays have been due to COVID. He is expected to finish this project in the next few months and has assured the company that those funds would come in before December 31, 2022.
So there is a binding kind of share purchase agreement with the promoter. It's under U.K. law. There are certain rights that [indiscernible] has under that agreement as well. But I think the key point out here is that while [ Sameer ] face delays of almost 18 months, I think what he's asking for is an extension of up to 9 months to pay these funds down. And we expect these funds to be fully repaid before the end of the year.
And would there be any interest, which is [ shared ] on this extra 9 months?
So as for the agreement, there is a 5% British pound interest rate that kicks in from April 1, 2022.
The next question is from the line of Samar Sarda from Axis Bank.
Sachin, I had a couple of questions. One is with respect to the launch of BLU. So any new launches will happen only post the merger and the name change? Would that assumption be correct?
I think, that assumption is correct not so much because the company is holding back. But I think as you look at any new launch, there's a lot of planning that needs to go behind that. There's MOEF approvals, there are RERA approvals that are required.
And so I think this naturally -- the timeframe is such that the new launches that we're looking at, be it Thane kind of Phase 2, be it Sector 104 in the North or the BLU [ Annex ], they will naturally happen post kind of the merger being completed.
But would you not want to launch it under the Embassy brand, which you cannot do right now?
Yes. Of course, as a combined platform, we want to launch it against -- in the Embassy brand, but I think it will happen naturally. It's not because we are holding back. I think it's just -- the timeline is such that the merger is going to get completed weeks from now and the approvals are probably still a few months away. But they will be launched under the Embassy brand then as a merged entity.
Okay. Just before I move to the next question, a follow-up on BLU. The [indiscernible] land, which was earlier planned to be here the commercial building with [indiscernible]. I understood that was a [ non-committed ] with Bharat the existing group project. So would we need the consent of 2/3 of the current 336-odd units to be able to launch a residential project there?
We actually have approval out here from all flat owners to launch residential out here. So I don't think we need to go back and ask for any further approval like here.
Great. And on the NCLT process, like any -- like I might have missed it, likely date for next hearing with respect to NCLT Chandigarh? And would that be the last hearing of the last quarter call with regard to the entire process, at least on the merger?
Yes. The next hearing in NCLT Chandigarh will be the last hearing. That will be the final order that gets passed by NCLT Chandigarh. And then post that, you probably need roughly 3 weeks for the swap to be effective and then what would eventually be one publicly traded larger platform.
Okay. And you did allude to the money from Mr. Gehlaut coming in, like although it's a contract and -- is there any like fallback or security, which Indiabulls Real Estate as a company has because the money has been delayed for like [indiscernible]? Any other security which Indiabulls needs to keep or have right now with respect to Mr. Gehlaut's money coming in back to the company?
No. Look, I think one, as I said, it's a contractual undertaking by Mr. Gehlaut to the company to pay these funds back. Like I said, the share purchase agreement is under U.K. law -- sorry, [indiscernible] law, very similar to U.K. law. Also, it's a situation where he has actually paid for 2/3 of the asset. I'm sure he wants to just finish this as well.
There have been discussions also in the past that have taken place between management and Mr. Gehlaut as well as with respect to [ G.T Nirvani ] and Mr. Gehlaut, where the new incoming management also feels quite comfortable that this will be repaid by the end of the year.
The next question is from the line of Jeevan Patwa from Sahasrar Capital.
Yes, Sachin. If you can just give me one more -- once again. So initially, the debt was around INR 5,500 crores from the Embassy side and INR 1,000 crores from the Indiabulls side? So it was INR 6,500 crores. Now, we have already got INR 850 crores from QIP, right?
Yes.
So that we adjusted or we haven't adjusted it?
No. So we've used some of it to pay down the debt, okay? We have also -- we're using that money towards construction. There are certain also liabilities such as customer refunds and RERA obligations that are being met through the debt. So at the end of the day -- and there's also always kind of proceeds coming in as we sell more and more units that is going down to pay down the debt as well.
So what I believe will happen is day 1 when the 2 companies combine, we should have debt somewhere, let's say, -- I mean, it's roughly I'm giving numbers of INR 6,500 crores because this is a forward-looking number more so than kind of the past. We will also have cash in the system.
We should have money from the land sale as well, 106, that's roughly INR 500-odd crores. We should have the London receivables probably coming by the end of the year of roughly INR 620 crores. And now that Sky Forest has received its OC over the course of the next kind of, I'd say, 9 months -- 6 to 9 months, we should receive another INR 1,000 crores from Sky Forest as well.
So if you kind of look at it, while we have debt of roughly INR 6,500 crores, we'll have proceeds of roughly INR 3,000 crores to offset that debt.
Okay. So by the end of this year, so FY '23, it should be around INR 3,500 crores. It should come down at that level, correct?
By the end of FY '23?
Yes, March '23.
Look, it's tough to predict exactly what numbers. But I'd say, probably first year, just because these mergers take a little longer. And as we kind of get into the swing of things, my sense is year 1, [ debt ] will be around INR 4,000-odd crores. And then post that by year 2, we should be able to reduce it even further somewhere between INR 2,000 crore to INR 2,500 crores.
Perfect. And so the inventory or the surplus from the finished project that we are seeing, so -- what was given in the presentation, so that's been somewhere around INR 8,500 crores, right? And that does not include the new launches. That's where the value is around INR 5,800 crores. So that's action to... Yes, go ahead.
No. So Jeevan, let me -- yes, what you're looking as a complete surplus number of 8,500 -- INR 8,700-odd crores, that includes the planned bucket as well on the Indiabulls side. So that does include the BLU [ Annex ] tower. But that INR 8,500 crores does not include any of the Embassy's assets. Today, what we are looking at, the company present, which is the fiscal year ended results in quarter 4 for FY '22, are all stand-alone numbers of Indiabulls.
Indiabulls. So if I have to combine -- it's on the combined entities, so how much would be the surplus?
So on the combined entity on the -- so -- okay, let me maybe take a step back out here. On the residential side, the surplus for Embassy for the near-completed and OC assets is roughly INR 3,500-odd crores right? That's only the 3 million square feet out of the 53 million square feet that Embassy is bringing to the portfolio -- to the platform, right?
Then, Embassy has decided that another 7 million square feet of residential assets -- and it's got 42 million square feet of commercial assets.
So if you look at the residential asset, the planned assets of 7.8 million square feet, the surplus on that is roughly INR 2,500 crores, right? And then the commercial asset, which is the 42 million square feet, that's a tough one to -- today kind of quantify because...
I basically wanted to understand near-completion and OC kind of projects on the Embassy side. So that INR 3,500 crores, that's what you're seeing?
Yes, I did.
Yes. So that is INR 3,500 crores. And on the Indiabulls side, it's INR 8,500 crores?
No. So Indiabulls INR 8,500 crores includes your ongoing in your plan. If I look at kind of just the near-completed, it's roughly INR 2,000 crores.
Okay. So total INR 5,500 crores is combined surplus in the finished or OC kind of [ seat ]?
Exactly.
Yes, okay. And that should accrue over the next 2 to 3 years?
We're looking to try to get that out over the course of the next 24 months.
The next question is from the line of Ritwik -- sorry, [Rithvik Seth ] from one of financial consultants.
My question is on the Indiabulls projects, which are ongoing, which is on Slide 24. So we have mentioned that there is a surplus of about INR 5,400-odd crores. So is this -- are these 5 projects under construction or the construction is not happening currently? Firstly, I wanted to know that.
Yes. So while we say these are ongoing projects, as you can see, BLU Estate & Club is the fifth tower at the Project BLU. That isn't planning in design phase. So that construction has not started, but we expect to start as saying probably calendar year 2023, first quarter. Indiabull's Park ] is under construction. As you can see, it's already sold 3.7 million square feet, unsold is 1.2 million, right?
Thane also, as you can see, it's already -- the first phase is sold, and as I was mentioning, we're looking this year to launch a launch Phase 2. The Gurgaon project, that Sector 104. Now, what's happened out here is it initially started selling product, but over time, that project did not move forward. What we've done is actually anyone who had come into it before, we refunded their money.
And now, we're looking to launch roughly 6 of the 18 acres, that would be roughly 1.2 million of the 3.8 million square feet, possibly in the next -- by the end of the year, or again, like I said, early next year. So that's a project that will again get launched, and at least 1.2 of that 3.8 will get launched pretty soon.
And then your last project is your Gurgaon, 109, it's a commercial building. There's very little left to be sold out there. The project basically needs completion. But that's got a good amount of sold receivables that needs to come out of that project. So the focus would be on that.
Okay. Okay. So basically, what I was trying to understand is that because we'll have to fund the projects which are near completion and then move on to ongoing projects and with some constraint on the liquidity side, would it be fair to assume that these projects would have to be kickstarted and then the sales will start and then the receivables will come in? Would that be a fair understanding?
So look, our focus, as I said earlier, really is the OC near-completed on both sides, the Embassy side as well as the Indiabulls side. We want to focus on the 2 million square feet, 2.1 million square feet that's unsold on the Indiabulls' projects because that itself has a pretty large net surplus to provide roughly INR 1,800-odd crores. And those projects are, again, very late stage -- a lot of them have their OCs.
So that's kind of the Indiabulls portfolio. That's what we're focusing on in the immediate future. At the same time, on the Embassy side, they have 3 million-odd square feet, which is now, I'd say, 99% complete, and all of them have their OCs. [indiscernible] just got its OC last week as well.
So again, the focus out there would be how do you sell and market and liquidate almost 3,000 or INR 3,500-odd crores of inventory that's finished out there. So that's what will be the revenue generator and the cash flow driver out here.
But at the same time, over the course of the next 2 years, we can't stop our ongoing projects. So we'll have to be judicious but continue to spend on these projects because that will be then the next kind of set of projects that will be, kind of, on for delivery and completion.
Right. So we'll look to get the surplus from the OC [ received ] near-completion and then invest that money into the ongoing projects and then further go ahead with the planned projects. That would be...
Exactly. So there will be a CapEx plan over the next 2 years that we'll have. And at the same time, because we're generating a lot more liquidity and surplus, what we'll do is basically use these funds to also start paying down debt.
Sure, sure. Okay. And sir, my second question is on the fixed cost for the merged entity. What would be the fixed overheads for the merged entity on an annual basis?
I think it's tough -- too soon to kind of predict right now on a stabilized basis what that number would be. But I think, I would assume the first year, the number would be slightly on the higher side. It'd be between -- my sense is INR 175 crores to INR 200-odd crores, and this includes kind of just employee expenses as well as kind of all other overheads out there.
Sure, sure. Okay. And lastly, can you throw some light on the 42 million square feet of commercial assets that Embassy will get in? What would be the game plan there? And how do we plan to fund it over the next 3 years?
Right. Look, I think the Embassy 42.5 million square feet. That's a lot of commercial -- it's all in Bangalore. And while Bangalore continues to be the largest absorber of office space, and what we're seeing right now, too, is there's a lot of interest out there to grow, there are several RFPs out there in the market. which are at late stage for quite a large amount of development.
My sense is that we have to look at this 42.5 million square feet, we have to examine it, we have to see how much of this can actually be built as commercial in the near term, and how much of it might need to be actually changed to also residential as well as plotted, just to churn capital quicker out here. That's really the only goal out here.
So for example, there's a project called Embassy Knowledge Park Summit, which is 216 acres. I think the plan out there was around 50 acres of residential and 150 acres of commercial.
But we might need to see as we kind of launch this project, how much more could be residential initially because I think one of the key things that we want to look at is not to sit on too much raw material over a very long period of time. We want to see how we kind of churn this into kind of cost of moving cash flow out there.
So it's -- we don't have a game plan yet for the 42.5 million square feet today. But as we kind of move along and we start looking at these land parcels and start looking at kind of planning and design, I think we'll have a much better sense on kind of how much is commercial, how much is today and how much gets converted into residential, and we move forward that immediately.
I would request Mr. [ Seth ] to rejoin the queue for follow-up questions. The next question is from the line of Ankit Babel from Shubhkam Ventures.
Sir, my question is again on this commercial projects. Now, in your January presentation, you had mentioned that the planned commercial projects have an annual rental potential of around INR 4,000 crores. Just wanted to understand, by which year you see this potential goes actually from -- how many years would it take?
Right. So look, what I was saying exactly the same thing because our commercial portfolio is quite large. It's 42.5 million square feet. There are two things that could happen.
One is, you look at developing this entire thing as commercial and you get to that kind of INR 4,000-odd crores rental income. The second thing is that you might decide that you want to take some of that commercial and want to churn it quicker and move it into faster-moving residential.
Having said that -- maybe I'll kind of just walk you through the economics of what 1 million square feet of commercial development could look like, right? So let's say you're building 1 million square feet out here at roughly INR 5,000 a square foot that cost roughly INR 500-odd crores. You probably need 30% equity, which would be INR 150-odd crores of that INR 500 crores.
When you build this 1 million square feet, what you have is an asset that initially, let's say, rents at INR 65, INR 70. Having said that, Embassy has 3 parts that are much higher than this number. Embassy GolfLinks, I believe, is roughly INR 140 to INR 150 a square foot. Embasssy is INR 100 to INR 110 a square foot, and we have Embassy TechVillage, which is INR 90 to INR 100 a square foot.
Having said that, because these are new greenfield developments, I mean just taking an assumption out there of INR 65. That will give you rental income of roughly INR 78 crores a year. At a 90% NOI level, that would be roughly INR 70 crores of NOI.
If you assume an 8% cap rate on that, it would work out to roughly INR 878 crores of value, lest your debt repayment of [ 350 ] gives you an equity value of roughly INR 550-odd crores for every INR 150 crores you are investing to build 1 million square feet of commercial.
Our plan is, while we want to kick-start commercial, it will take some time to get our master plans done and get all our approvals, but at some stage, what we love to do is to be -- to develop at least 1.5 million square feet of commercial per year.
No. So again, what I need to understand is, how much time will you take to construct all this 42 million?
So I think, to be clear, again, if I'm building 1.5 million square feet a year, that's the amount of time, 42.5 divided by 1.5 million feet. But my goal is not to sit for that long, it's to convert some of that 42.5 million square feet into faster-moving residential as well.
Okay. So what will be your debt, once you finish this?
It's too early to kind of predict what my debt level would be building 42.5 million square feet. But it will be recycling of capital, so I don't think the debt levels will go that high.
Okay. Okay. And at INR 2,500 crores, INR 3,000 crores of sales per year, with a debt of around INR 6,500 crores just post merger and even at INR 4,000 crores, will it be profitable?
Yes, because look, I've got INR 2,000 crores of cash also on day 1 when the merger -- sorry, INR 3,000 crores of cash sitting on day 1 -- not day 1, but when Sky Forest proceeds come in, the land sales, London receivables and the QIP proceeds. So I will have that level of cash. And I'm looking at roughly generating another kind of INR 4,500 crores or INR 5,000 crores of net surplus from my, like I said, OC and near-completed projects as well.
[Operator Instructions]
The next question is from the line of Sudarshan Mall from [ Dhunseri Investments ].
My most questions have been answered. Sir, just some color on this that while we have fairly good visibility on the cash flows from our near-completion projects, just wanted to understand what was the need for this QIP that will be done at such lower levels, fairly but high level of dilution we have done at fairly low levels?
And from that, we have not also aggressively repaid debt. So just wanted to get some texture on that.
No, I think one of the things about capital base, sometimes is you might have the best intentions and wanting to do it at what might be the perfect time for you, but it's not necessarily supported by the macro markets. And we were out there considering raising equity, and we felt there was a window of opportunity out there to raise the money. As you can see, since then, tides have turned quite drastically.
And so yes, on one hand, while I can understand that people feel that maybe this equity was not -- why raise it now and why the dilution at these levels. But I think it's also important to keep in mind that we are shoring up the balance sheet. We're looking at the larger platform, soon.
And we want to have a runway out here to be able to execute on our game plan. And if we do that, I think there's a lot of value out here. So there might be some short-term pain out here to kind of eventually have the liquidity to be able to kind of execute on our plan.
The next question is from the line of Jeevan Patwa from Sahasrar Capital.
One thing I want to understand, so we have created a platform with foreign funds as well. So how are we going to use that platform? Can you just elaborate on that?
Yes. So we have an AIF and office development platform with Ivanhoe Cambridge on the Embassy side. And so that will roll into the merged entity, once this is complete. The idea is that it's an 80-20 platform for up to 500 million, yes, between the two entities.
And so while EDL would invest roughly 100 million into this, a scenario could happen where some of our land parcels get sold to this platform. And then EDL, eventually the merged entity, EDL, would come into it for 20% of the equity.
And the idea really is to it using someone else's balance sheet to grow the business quicker. The return on equity for that 20% also would be actually kind of, I'd say, supercharged because you're earning kind of fees, you are earning promotes, back-ended promotes out here. So it's just really -- it's a different way of kind of growing the business, very similar to kind of what Godrej has done with its fund as well.
There's such a low price today, so will Blackstone or Mr. [ Virmani ] or Embassy will look at taking some more funds in the company?
I think it's tough to comment on Blackstone's behalf on this call. But I think Blackstone is coming in as 11% shareholder and is committed to being in the business and being an important part of the business.
With respect to Mr. [ Virmani ] putting in more funds, I think the one thing known to [ Virmani ] is committed to putting in funds if the business requires it, to grow the business. So I think with that, I could definitely speak on his behalf.
The next question is from the line of Abhinav [ Bhandari ] from Nippon India.
Just one question. From next 12 to 15 months perspective, just trying to get a broader idea of our outgo in terms of construction spend, settlement of liabilities, any pending land payments and new business development. All these 4 buckets put together, what could be a broader outgo?
I would request you to give me one more quarter to kind of come back on that. It's been tough. I mean I know what [ exact ] numbers are, but it's tough to kind of marry the two.
But the one focus, obviously, is on a -- like I said, existing OC and near-completed. For those projects, there is very little spend that needs to be done between the two companies. My sense is roughly -- it's roughly INR 900-odd crores for the next year or so, in terms of construction costs.
I think one key area where we'll also have to look at is certain loan principal repayments will happen over the course of the next 1 year. As you can see in the IBREAL deck, it says, in less than a year, there's roughly INR 964-odd crores of the debt that needs to be repaid.
So that's also something that's on top of our mind, with respect to kind of refinancing those loans or paying those down from cash flows from sales. I hope that answers your question, at least partly. But I think by the time the [ projects are ] over, we'll be able to present a much more detailed kind of combined integrated plan, with respect to project spend.
Sure, sure. I get a broader sense. One -- just one follow-up is, how is the Juhu project shaping up? And when can one expect the launch there?
Yes. So yes, as we've obviously discussed this in the past, as you know, that's been done by Embassy right now, but that's part of , and that will roll into this entity. So it will be part of what will be a combined EDL as we move forward. But the idea is that, look, it's a fantastic site, 2.5 acres on Juhu Beach on Juhu Tara Road. I think Embassy is looking to launch that by Q4 FY '23.
The next question is from the line of Dixit Doshi from Whitestone Financial Advisors.
A couple of questions and one clarification. So if I see your presentation, you gave the average selling price in the last presentation you have given. So that was around INR 30,000 for a BLU. So am I missing because I think everything is getting sold above INR 50,000?
Yes. You're looking at -- this is on salable square feet, what 50,000 is on RERA [ corporate ], that's a difference. And [indiscernible] it was at the same number.
Okay. Two questions are, firstly, on the Embassy side. So whatever commercial properties Embassy have, currently, do they have anything which is receiving the rent, completed inventory? And also, whenever we construct in the Embassy, the commercial property, we always look to sell to some REIT or we also have a thought process, where we will continue to own it and on the rent on it?
So look, while again, you're asking on for questions with respect to Embassy. As you know, this is an Indiabull's earnings call. But just to give you some sense, Embassy or the combined entity at some point would look to develop an asset.
And we'll look to monetize it not by [ stratus ] selling it, but it will be by selling it to someone like Embassy REIT or could be any other REIT or could be a large international or institution investor. So the idea is to build, lease and then sell it to like a buyer of these type of assets. We are looking for stable income.
One thing that is being discussed is, at some point, would a combined entity give a ROFO, which currently Embassy Property Developments have with Embassy REIT. But personally, I feel that makes a lot of sense for this combined entity because I'd love to have a relationship with a buyer of assets.
And I think it will make sense for Embassy REIT as well because they have a ready kind of pipeline of assets coming to them on a kind of a regular basis.
So -- but again, the price has to be right. There's a lot of related party checks that would go into it. Two independent valuations would need to be done, minority shareholders from both companies would have to vote on it. I think there are a lot of checks and balances, but yes, of course, that would make sense to kind of have...
Okay. And secondly, in terms of Indiabulls residential property. So when you mention these planned projects, this -- all these projects does not include the extra land bank, and what we are planning to do with that 3,000 acre land bank of Indiabulls?
Yes. So all the numbers that you see on the Indiabulls side, do not include the land bank numbers. I think we're just getting our arms around what the development potential and what we can do with the land bank. As you know, 106 was 40 acres, which got sold for [ 580 crores ]. I wouldn't like you to extrapolate those numbers, but I think there's valuable land out here West as well as North India.
And I think we need to spend a little bit more time kind of putting our plan together on that. I think the focus right now was on near-term liquidity, near-term visibility of cash [ flow ]. And with that, we, I think, come up with a plan of which projects to attack at least over the next 12 to 24 months.
Okay. And last question from my side. What kind of project -- how many projects we are planning to launch in FY '23, combined both, let's say, Indiabulls and Embassy on the residential side, in terms of square feet or even the value is fine?
My sense is, in the next FY '23, what would happen is you'd launch [indiscernible], which is BLU [ Annex ]. That, for Indiabulls, is roughly 900,000-odd square feet. If you kind of look at that 30,000 number that you were talking about, that actually gross development value would be at least INR 3,000-odd crores. You'd also maybe look at launching 1 million-odd square feet in Sector 104.
If you kind of look at the gross development value of there, it'd be close to INR 1,000-odd crores. You could also look at launching possibly Phase 2 in Thane. We've got to do a little bit of work out there, but my sense is that itself would be another INR 1,000-odd crores. So there's a lot of value in some of these new projects that we're looking to develop soon.
So these -- might come this financial year and plus whatever Embassy would be launching like Phase 2 or any other project?
Exactly, exactly. And I think this is a slide in the deck, it's Slide 17, which covers this. But out of those 5 projects, I've taken 3 of those. And I'm talking about those because in my mind, those 3 are the key ones that we could look to launch in the next 12 months.
And this INR 2,500 crores to INR 3,000 crores of sales per annum we are targeting, we are not including this. We are predominantly -- that we are targeting from OC received or near-completed inventory?
Yes, that's true. That's true.
The next question is from the line of [ Anil ] Agarwal from AAA Investments.
My first question was actually on the prices for Q4, right? So is there any conscious call that we pick in, in order to reduce the price to increase sell-through because BLU prices for Q4 shows 26,000 and so on, it's lower for all the other projects?
Look, it's a good question. I think what it is, at least reflects for BLU, has been some of the last remaining units, right? So in a project, you generally have price that kind of goes up until a certain level when you're left with basically the units that are not wanted, right?
So we -- I think in BLU today, we have some 7 units left to sell, basically our podium units in Tower D. And so the price reflects some of that as well into consideration.
Right. But for the new launch, you expect the prices to hold at 30,000 and above?
Absolutely impact, hopefully, even more so than that.
Right. And in terms of cost escalation, how are you seeing that play out? I mean, I know you have a number in fact in terms of the pending construction cost, but do you see an upside risk to that?
We actually have accounted for that in some of our numbers because at such late stage of completion, we had to kind of look at kind of what's going on, with respect to that. A lot of them is also contracts are in place. It finishes more so than kind of steel at this point. So -- and what we've also seen is while there is a spike, it has settled down a little bit since then.
So I'm hoping that this spike is temporary, doesn't affect us too much. And we can come out of it hopefully sooner rather than later. So in the long run, it doesn't affect our profitability too much.
Right. And on the Embassy sales, I mean, just trying to understand that last year, they sold about INR 400 crores of inventory at [ BCTR ] at INR 3,500 crores of inventory that you want to sell, say, over the next 24 months. So how do we bridge that gap between there in where we want to be?
Right. So what I understood on the Embassy side and has also been on the Indiabulls side, is that a lot of projects and to blame out there, which has taken longer than expected to complete but now are complete. And so the key focus area actually for both companies was over the last year, especially, I know Embassy had focused on it, was completing what was 95% complete but had taken longer than expected to actually get delivery done.
And I think that changes really the perception of how someone looks at your project. And so what today you have is roughly 3 million square feet of finished inventory, which maybe last year would have been 3 million square feet of inventory that was 95% complete.
But even though it's at 95%, going to 100%, it's only 5% more because these projects have been there for some amount of time. The entire perception in the market changes once you get to an OC level. And that's really why we feel that we can hit INR 2,500 crores to INR 3,000 crores.
Maybe the first year slightly less, but as we go to the second year, we can definitely hit that because it's projects that are now completed and what your marketing has kind of finished inventory out here. So you can really play around with it and move that inventory, which you don't have the luxury of as when a project is 95% complete.
And on the liquidity front, I mean, there are some near-term liquidity constraints that you've also been alluding to when we have a large land bank. I know you've offered a little bit of time, but I mean, given that landbank and what [ 104 ] and 106 have gone for, don't you think that's something we need to look at a lot more aggressively to pay down debt and ease the balance sheet condition?
Absolutely. We are looking into it for the 3,000-odd acres. Obviously, [indiscernible] 3,000-odd acres. Nasik is a huge chunk of it, that's 1,400-odd acres. It could be an attractive location for industrial purposes. It could be a very attractive location for someone coming in to set up their manufacturing units out there.
So I think there is work going on out there. And we will, hopefully, over the next several months, come up with a plan on what to do out there.
Right. But in your estimate, I mean, what would be the value of the INR 3,000 crores? I know that's a slightly speculative number. But say, in your sense, what would that value of the land bank be today?
Well, I think -- listen, let me not speculate out here because it's land. As you know, land can vary quite a bit, either direction. I think that there wouldn't be -- give you guys a number out here on kind of this land value on stuff that's sitting as well. And I think let us work on that, and let's work on our plan. And then maybe I think we'll come back to investors with a plan for certain land parcels.
Right. So maybe let me ask this another way. I mean land parcels that are sort of equivalent to a 106, how much of that land is part of the 3,000 acres?
No, I think the way to look at it is probably Slide 22. You can see the land parcels, how many acres each one is. And you can see what the cost of land paid is. A lot of this was done at least more than 10-plus years ago. So I think just using those numbers, at least you have a sense that the book base is today is INR 562 crores.
And the other thing I just want to correct you out here that 106 was not part of the 3000 acres. It was part of the planned projects. So that -- what you see is a surplus coming out of the planned projects on the IBREAL side. But that's coming in as a land sale number. So I just want to correct you on that.
The next question is from the line of V.P. Rajesh from Banyan Capital.
Just a clarification on the 60 million pounds loan, should we expect some part payments during the year? Or should we expect one bullet payment during the year as you said earlier?
Look, we've not had discussions on part payments. So what we are expecting is the full payment to come in on or before December 31 this year.
Understood. Okay. And then in terms of your ongoing projects, are there any projects that are likely to miss the RERA deadlines or are currently in default on their RERA deadlines?
So we do have certain past projects, which have missed the RERA deadlines, such as Enigma and Centrum. And what we are doing is we've cleaned it up quite a bit in the last several months. And we're looking to kind of get those settlements done as we actively look to hand these projects over to the RWAs.
So in my mind, these are two very late-stage projects that we are looking to hand over, and we're looking to solve the problems and get out of these assets. And in fact, just these RWAs are now in contact with Embassy services directly and are looking to kind of basically use them for facilities management.
I see. And then on the Lucina project, what kind of sales velocity are you observing there?
Sorry, which one are you talking about?
Lucian [indiscernible], which is, I think, from [indiscernible].
Yes, sorry, Panvel, right? So what is the question on that?
What kind of sales velocity are you seeing in that project?
Look, again, on that project, I think we need to -- the sales velocity has dropped, even though it had -- it sold quite well. If you kind of look at Panvel, we're -- just give me the numbers. Yes, so I think we've sold 0.08 million average base selling price of roughly [ 135 ]. You have INR 4,500 per square foot out there but in terms of ], in terms of number of units left to be sold.
Can I come back to you on this? I mean point question you asked. Can I come back on exactly this?
Yes. Yes, my last question is that on the NCLT process. Do you foresee any circumstances under which this deadline could be pushed beyond September 30?
I don't expect this. I don't expect it. The way it has moved now, it's almost at the final stages, so I don't expect it.
Just on Panvel, there were 35 -- see Phase 1 is completely sold out. Phase 2, there are 3,500 units and roughly 2,750 units have been sold. So roughly 750 units left to be sold. I think we got to sit and work out a plan out, just so how we can move this inventory quicker. So again, that would be one of the focus areas for FY '23.
The next question is from the line of Niraj from [ NJ Investments ].
My question is related to the near-completed projects that you have listed on Slide 23. So if I'm not wrong, both those projects, the one at Savroli and -- why is that long over due, right?
Yes. Savroli has different phases to it, but [ Vizag ] roughly has, as you can see, pending cost of INR 48 crores. So that's definitely a project that we want to finish this year and hand it over.
Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand the conference over to the management for closing comments.
Well, thank you, everyone, for joining and listening to this call. It's been the first earnings call that Indiabulls has done to date. We expect to continue these as time goes by, as we are reaching a conclusion out there with respect to the merger. We hopefully, in a larger platform, want to bring about a lot of different changes.
Some of these, you can see already today in the company with respect to K.G. Krishnamurthy being on the Board or in terms of the reporting that's come out this quarter. But again, I think the goal is, we want to move towards a plan where the combined entity meets all standards of corporate governance that you'd expect out of it. So with that, I'll sign off as well, but thank you, everyone, for taking the time to listen to us today.
Thank you. On behalf of Indiabulls Real Estate Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.