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Oberoi Realty Ltd
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Good morning, good afternoon, good evening to all of you as per the time zone from which you have logged in, and welcome to the conference call Q2 FY 2022 results and business updates. Thank you all for taking time to attend this call. I hope your family and you are doing well and keeping yourself safe. Before I begin, I would like to share a few updates. I'm sure most of you would have gone through our press release and would have seen that we launched our next phase of Elysian project at Oberoi Garden City on 28th of October. We received an overwhelming response from our customers and clocked in INR 787 crores of gross booking. The transaction [indiscernible] now for both ongoing sales of Elysian and our completed projects, Esquire, Exquisite, continue to be equally strong. Our Sky City project cost a cumulative booking value of INR 4,000 crores with a total area sold in excess of 2.5 million square feet. Mulund also continued its upward trajectory with Eternia and Enigma together crossing a cumulative booking value of INR 2,200 crores with a total area sold in excess of 1.5 million square feet. The sales growth across all our projects make us feel very optimistic, both in the overall demand environment, the volume recovery, along with the supplier site consolidation and also our ability to deliver quality, giving us immense confidence for the upcoming launches. I would also like to let you know that going forward, we would like to make our interaction more focused. And we will be opening the floor for question and answers straight away. With this, I will let the question-and-answer queue assemble, and I will be happy to address your individual questions. Thank you.
[Operator Instructions] The first question is from the line of Puneet from HSBC.
Congratulations on great bookings, clearly shows that there's a lot of demand for your product. My question is on Three Sixty West. We were expecting a similar performance there. That didn't happen. What's happening there? If you can give more color.
Thanks for the compliment firstly. We are waiting for occupation certificate to happen for Three Sixty West, and then we will start sales there. I am hoping that it should happen within the next 30, 45 days. Once that happens, you will see the momentum there on. So we have so much inquiry, and there is absolutely no resistance on price on that product. The product is absolutely complete now, and many of them are doing their interior finishing. So once we have OC, which, like I said, is another 30, 45 days away, you will see similar sales trajectory there as well.
Okay. And second, any update on Thane launch?
So we were hoping to launch Elysian more like September, but that happened in October. Now we are hoping that we will be able to launch Thane before December. So within this quarter, fingers crossed, everything's ready. Our plans are really just waiting for a few final approvals, and then we'll get cracking on that.
I'll come back in the queue, but last question. Any thoughts on price increases in your Goregaon project since there is a great amount of traction there?
So if you would have noticed the second phase has already begun with higher pricing. And there is absolutely no resistance on the price bit. We've been able to push prices up by INR 500 and INR 1,000 a square foot based on the view and other things. And not only that, we've increased the price even in Tower A. So to answer your question, it's imperative not only for me but most developers because the input costs are going up and whoever does not increase price, it will be very difficult for them to deliver the project. So I mean, I really would want to know how they would manage to deliver the project without increase of price given the fact that input costs are going up, commodity prices are going up. And we are likely to hit hyper inflation. So we are -- for that price adjustment, I wouldn't even call it price increase, it's just the increase in input cost that needs to be passed on.
The next question is from the line of Parikshit Kandpal from HDFC Securities.
Congratulations on a great phenomenal change in the Phase 2. So my first question is, last time you have said that business development on the redevelopment side, you are setting up a team and you're also looking to hire a non-MMR CEO. So any update on that?
Sorry, I completely missed your question. Can you repeat that question again, please?
You said on the last call, you had said that we are looking to build our business development team, a separate business development team for redevelopment project. And you're also looking to hire a non-MMR CEO for...
Correct. Correct. Correct.
So any update?
Yes, yes, yes. So we have -- we are close to closing somebody -- like we have hired somebody rather, but they are serving their notice period and so on and so forth. So we would wait for that to happen. I mean all companies have 3 months' notice and so on and so forth. So yes, that's happening as we speak.
Okay. And my second question was on HBS Realtors project. So you update there? How is the progress going on? And when do you think that project can be brought into the market?
Sorry, come again. I think your voice is blurring a little. I'm not able to hear you very clearly.
Yes, Vikas, is it better?
Better. Yes, a little better.
Yes. So I was asking that on the HBS project, the Shivshahi Society. So any update on that? How is the progress there? And when do you expect to launch that project?
HBS is a complex project. There are a lot of layers. I mean, unfortunately, for us, the society has signed as a co-promoter, and they've also mortgaged their property to the banks. And that needs to be sorted out before we can move any further on that. And we knew that there is a little bit of [ hair ] in the property, but not so much. So obviously, we are treading cautiously. Luckily, we haven't put any money in the project, but we want to make sure that whatever we take, we can deliver. So a few surprises, but like I said that we haven't invested money in it, continue to work towards cleaning it up and ensuring that whatever can be done to do the project is being done. And here, again, we have 192 members who need to understand that they have, in turn, created a lot of, I would say, hurdles in their own development by doing these two things. So we have to tread very cautiously on that.
But we continue to remain in the project, right? So we're trying to clean up and get it going.
You know, we -- like we continue -- it's a 2-party effort. It can't be singularly at our end. I mean the project needs to be viable for it to be paying off whatever has been created by the [indiscernible] developers. So we continue to look at it. But like I said that it'll need both the society and us to ensure that this is sorted out.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
Yes, just talking about the pricing environment. How are you thinking about other sites, more specifically Borivali, Mulund and Worli as well?
On the pricing front, Borivali, we are continuing to maintain pricing. We have enough margin there. So is Mulund. And in Worli, like I said, that we were able to -- we feel that we are able to push the prices higher. One, there is hardly any competition. The product is ready. Once we have OC, we will be able to command that price. So this is where we are on the 3 projects on pricing.
So you're not thinking of taking any price hike in Mulund or Borivali.
Not really, not in Mulund and Borivali. We are continuing to maintain the pricing. And in fact, if you see in Goregaon, we had started Elysian tower, much lower than the existing product. And we don't have any supply -- almost any supply left in Esquire. So the first project that'll get ready is now, whatever, 3, 4 years away in Goregaon, and people realize that. So at one end, there is a huge traction on the ready product. Booking also happens to be doing well. What we tried to communicate in our press release was that between January and October, we were able to sell INR 2,700 crores' worth inventory in one single location. And this is a very big high. By the time we finish this year, I mean, if things go well, we could probably be crossing INR 3,000 crores in one calendar year out of one project. And that genuinely gives us the confidence that going forward, ORL can actually achieve significant numbers when all these projects start really throwing numbers, including Thane. I mean we want to set ourselves up for the volume game in all these projects. I mean even in NCR, I mean, our idea is that each project should ideally give us INR 1,000 crores. And as the project progresses, it should actually end up giving us anywhere between INR 2,000 crores and INR 3,000 crores. So this is what really our effort is all about. And we want to tell the market or demonstrate to the market that like the run rate at which we were originally envisaging the INR 500 crores and the INR 800 crores every year out of single project can really be pushed. It may not be to INR 3,000 crores, but certainly to INR 1,500 crores and INR 2,000 crores. And we now have that belief and aspiration to do that in other projects. And yes -- so it's really the idea.
Okay, good. And just one more question, and that is on the balance sheet. How do we see the next 12 to 18 months in the sense that if you keep in mind the construction cost, the CapEx for mall and offices, et cetera. Do you think the residential cash flows is going to be sufficient to fund that? Or do you think the leverage is going to go up over the time period?
So as far as the office goes, we already have debt in place . And it's a long-term debt. It's -- to repay is 11 years. It's sub-9%. So it's really cheap. And it's easily taken care of the rentals that we have already committed, where we have been committed by our tenant. So that's absolutely no issue. The residential cash flow will certainly take care of its own development, that's one. We also want to use the residential cash flows in buying new land parcels. Our strategy has always been that we hypothecate the receivables of these ready assets to banks, take money and buy a land parcel, like what we did in Thane. So Esquire cash flows literally funded the entire acquisition of Thane. And once Esquire sales are done, Thane will literally be sitting free of debt on ORL, which is amazing, and it will start throwing cash for itself. Similarly, we have enough receivables out of Mulund and Borivali once these projects are ready. So we can even do the same thing there and use that cash flow. So going forward, I don't see any additional debt or rather any big debt. All the growth will very easily be managed out of the cash flows that come in. A few top up here and there, again, because we are building these annuity assets. They do get built at the back of certain debt, but otherwise, we don't need. I mean, all are -- look at Elysian, I mean INR 750 crores, anywhere between 35% and 40% of cash will come to us. A lot of these are construction-linked sales. So that money will come in. And it kind of takes care. I mean A and B have taken care of all 5 towers literally of Goregaon. And then imagine the inventory that will get ready, even if, let's say, one doesn't sell, but that's not the idea. The idea is like to continue to sell. So this is how it is. It's very conservative, nothing surprising for anybody. We aren't changing our strategy at all, as such. I think the aggression will come more out of sales, which you saw in Elysian and other projects. And that's exactly what we want to stick to.
The next question is from the line of Samar Sarda of Axis Capital.
I had a couple of questions. One, on the Three Sixty West. I understand the project is converted from like 1991 DCR to 2034. So if that's the case, any approval related payments were done in quarter 2 or quarter 3?
So thank you so much. Thanks for asking that. Yes, we have converted our project from 1991 DCR to '34, which means we have taken all the earlier approval areas that were free of [ FAR ] into FSI, and we have made the requisite payment before August because that was one window where we were getting to pay at the discounted price. So that's being done. And this is why we thought that because we are now gold-plating the project so much, why not wait on the OC and then sell these in the market.
Fair enough. And the second question was with regards to Elysian. Like you sold roughly 46%, 47% of Tower A and now 40% of Tower B. I understand most of the units sold in Tower B are 4 BHKs. So any likelihood of the next tower happening in this fiscal? Or you would want to push it next fiscal that you've seen so much demand right now?
If you see Tower A, we did sell similar numbers, and then literally in the next 6 months, double that sale also. When we [indiscernible] Tower A, also, we had similar numbers and then the sales continue. We are hoping that Tower B also the sales will continue. And we have Thane in our hand. We've got to take momentum in Three Sixty West. We will probably be launching another tower in Borivali because, again, Borivali is also doing well. We've got higher flows of Mulund that will come into play and all that. So not really. I mean, we may not -- we will not launch another tower in this financial year for sure. But we have many other launches lined up, and we'll keep our company busy with that.
Great. And just one last question, if I may. Now that the market is improving, like a lot of your peers who are not doing well or also trying to sell stock probably much cheaper. So do you think this will affect like land deals you're looking at, a, either with developers whose projects are stuck or even with landlords where they are realizing that the market is going good, there might be tight increase probably a year down the line, and hence, land prices might go up a bit?
I don't know how many people will be in a position to buy land. Like I said earlier, that is,, developers don't factor in the increase in cost and continue to sell at the same prices. They were not able to make money, then I don't understand with increase in cost and delay and adding to the interest cost, how will they literally even deliver. So that is one question mark. And I would like for myself to know how all other developers are doing, people who have defaulted or not lived up to their word. Are the customers going back to them? If the answer is no, then this really leaves very few of us, I mean, let's say, 20 credible developers in India to literally build all of India.And so given that, I don't see that land prices will go up, and one will have enough time to really look through and pick a good land parcel, pick a good seller and only then do deal.
The next question is from the line of Kunal Lakhan from CLSA.
Since we have made the hire for the CEO for the non-MMR market, there must be a solid plan here, right? So I just want to understand how much capital do you plan to deploy in non-MMR projects here over the next 3 to 5 years? And how much do you think the markets -- these markets will contribute in terms of sales?Also, do you think that the non-MMR projects would have the same margins as our MMR projects?
So firstly, we want to take a baby step that would be anywhere between 2 million and 3 million square feet of one site. We want to build a team and then do it. We put [ our dot ] on 100 years. We want the company to live its lifetime and not mine or your lifetime or our lifetime. So we want to be very calculated. We want to be very conservative about this. We will take 1 or 2 projects at best. It won't be more than 2 million to 3 million square feet. And our investment will be less than INR 1,000 crores. And -- so that's the strategy really.
Sure. And what kind of ROIs would you expect from [ Commerz ]?
You don't -- again, even the NCR market, there are very few quality players. Again, it's out of good quality players. And we feel that it will really appreciate the fact that this is a professional company, a company that has delivered quality and in time. I think we will be able to get the desired [indiscernible] and similar margins that we didn't anywhere in Mumbai.
Sure. That's helpful. Secondly, any update on the leasing demand for Commerz III? And also any update on the REIT plans for your rental portfolio? [Technical Difficulty]
Yes, we'll call you back.
Ladies and gentlemen, we lost the line from Mr. Oberoi. We request you to please hold while we're reconnecting. Ladies and gentlemen, we have Mr. Oberoi connected. Over to you, sir.
Sorry. Sorry, can you repeat your question, please?
So, Vikas, what I was asking was, basically, we are seeing some improved sentiments around inquiries for office spaces. So if you can give us an update on the leasing demand for Commerz III. And the other question is any update on the REIT plans for your rental portfolio.
Okay. So firstly, the good news is that there is no cancellation or there is no -- like, our existing lease continue to be strong, that's the positive. We continue to now get inquiry for new offices for Comm I and Comm II. That, again, is a positive. As far as Comm III is concerned, we haven't started marketing. It's a little too early. We are in the process of creating like a show office and so that we can extend to build how this is going to eventually look. And I must say that it's really, really coming out well. We're now, I think, on the 17 on the 18 level, and we are doing our external facade, and the building is really looking gorgeous. So I don't see any problem there. As far as the REIT goes, we want to have a critical mass and only then we will do that. Until then, we'll continue to add it to our income of ORL as a rental portfolio like what we do.
Sure. Just a follow-up on that. By when -- at what stage would you open Commerz III for leasing?
So again, we haven't proactively done that, but maybe -- probably the beginning of next year or probably first quarter next financial year. Something like that.
The next question is from the line of Pritesh Sheth from Motilal Oswal.
So first question is on the CapEx that we have done this quarter as well. Last quarter, I think we have somewhere around INR 700 crores of payments for [ FFIN ] commercial CapEx. This quarter, we are seeing similar numbers. So just a bit of detail into that. And what is the expectation for this year? How much would be -- you would be spending?
So can I get let Saumil take this offline with you because these are in details. But I'll let Saumil that separately with you.
Yes, Pritesh, Saumil here. Can we discuss some of these subsequent to the call?
Yes, yes, sure. No problem. No problem. And with regards to the society development, I don't think you have taken one project, Shivshahi, where you have... [Technical Difficulty]
Hello?
I've again lost him, sir. So...
We'll move to the next question. The next question is from the line of -- the next question is from the line of Amandeep Singh from AMBIT Capital.
Vikas, firstly, on your Mulund projects. So as these projects witnessed healthy traction in 2Q, we note that there has been some impact on pricing versus the last couple of quarters. So firstly, can you help us with your thoughts on the same? And also in October month, we note that the [ Sheth Developers ] had launched a project next to yours, which witnessed a healthy traction during the same month.So consequently, if you could give us some sense on how has been the last month for you?
So for us, last month has been exceptional. In fact, in all projects, you will see it in our next quarter, number one. Number two, there is no reduction in price in Mulund. If at all, these must be lower floor flats sold. And hence, you would see a lower number, but there is no reduction in price. And none of these sales have affected our velocity in Mulund. So we've done really well. We continue to do well. And again, the clubhouse is almost complete. Show apartments in the building are complete and people are now going there and really seeing the difference in quality that we have brought in, and you'll see that. I mean -- and our apartment sizes are also very different from what [ Sheth ] is offering.
Sure. Sure, that's helpful. And secondly, you indicated your plans of outside Mumbai. So just a continuation on that. Will it be possible to give us some sense on what would be the business model, like land purchase or JV, JD initially?
So we prefer doing land purchase, and we would like to stick to that. Even if it's a JD, then it will be only area in return. We don't want to have a very complicated relationship with land owners. We would rather value the property and give them area in return and be done with it. We don't want to do any other model.
Sure. And just lastly, on the commercial bit. Will it be possible to help us understand how has been the physical occupancies at your assets currently? And any sense on the fresh lease-ups at, say, Commerz, et cetera, picking up?
So physical has been good, I would say, most offices are working anywhere between 50% and more percent of people walking in. I see now -- like our office is working like a regular office. I think most people are now going back to office. And I mean this is exactly what is very heartening. I feel we saw a big -- like offtake in residential. The next in line is commercial and which is not too far away. You will see similar stories, people back to office with a vengeance.
Ladies and gentlemen, this was the last question for today. I now hand the conference over to Vikas Oberoi for closing comments.
Thank you, everyone, for taking time out for this call. We take your feedback very seriously. We really like interacting with you. I hope you like this new format, which is really focused on question and answers instead of we giving you a commentary . Thank you again. I wish all of you a very happy Diwali and a prosperous new year ahead. Thank you again. That's it.