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Ladies and gentlemen, good day and welcome to the Oberoi Realty H1 FY '23 and Q2 FY '23 Earnings Conference Call. We have Mr. Oberoi, the Chairman and Managing Director of the company; and Mr. Saumil Daru, Director of Finance of the company, with us for the call.
Please note that this call will be for 30 minutes. [Operator Instructions] And this conference call is being recorded. And the transcript for the same may be put up on the website of the company. [Operator Instructions]
Before I hand the conference over to the management, I would like to remind you that certain statements made during the course of this call may not be based on historical information or facts and may be forward-looking statements, including those relating to general business statements, plans, strategy of the company, the future financial condition and growth prospect. The forward-looking statements are based on expectations and projections and may involve a number of risks and uncertainties and other factors that could be caused actual results, opportunities and growth potential to differ materially from those suggested by such statements.
I now hand the conference over to Mr. Oberoi, the Chairman and Managing Director of the company. Thank you, and over to you, sir.
Thank you. Good morning, good afternoon, good evening to all of you as per the time zones from which you have logged in, and welcome to the conference call Q2 FY 2023, Half Year FY 2023 Results and Business Updates. Thank you all for taking time out for this call.
Before I begin, I would like to share with you a few quick business updates. I'm happy to share that we've had a very good quarter with Worli sales post the receipt of Occupation Certificate in June 2022. You have noted the substantial appreciation in realization compared to the earlier sales also.
There is a healthy increase in the residential top line and bottom line compared to H1 last year. This is despite the challenging macro economy locally as well as globally. Our Residential business continues to outperform on account of robust demand and lack of credible suppliers. Consumption levels in the mall are more than back compared to pre-COVID level. The annuity assets business is also witnessing a healthy margin. With this upcoming festive season and our planned launches, we are optimistic that the consumption trends in Residential and Retail will continue.
You all know that we will open this up for question and answers and happy to take it from there. Thank you. Both Saumil and I are present and happy to answer any of your questions.
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]. The first question is from the line of Parikshit Kandpal from HDFC Securities.
Congratulations on a very strong quarter on Retail sales especially in Three Sixty West. So 8 units we have sold this quarter so despite a huge 50% increase in pricing. I just wanted to understand how do you see the momentum for this project going ahead? Do you think [indiscernible] can replicate similar success in this project?
I can only tell you that this project time has come. Whoever visited the project, the only reason he does not buy or will not buy is because he doesn't have the budget. But otherwise, it ticks all the boxes. And we have a fantastic pipeline and virtually no competition because there's nothing that is ready and available. There would be people launching something which is probably 2 or 3 years away. Here you have an Occupation Certificate in place, lock and key, you move in instantly. .
And I want to tell you that like if everything goes well with God's grace, you will only be more and more pleasantly surprised going forward with every quarter.
Great. Just coming to the next question on launches. Vikas, you have said that in Diwali you look forward to launch Thane. So I'm not hearing anything on the ground there. So if you can update what is stopping us from launching this project and also if you can update on the opening of new towers in Borivali and Goregaon.
So as far as Thane is concerned, we actually have the show apartment ready, where literally we've covered it and kept. I don't know how many of you know or remember having read an article about the new eco-sensitive zone that had cropped up in August. Luckily, that died in the previous quarter itself. Supreme Court then again intervened and clarified. Mumbai, Maharashta are already defined its zone. And in another matter when the court was hearing, I think it was not brought to the notice of the honorable judge. And they passed an order saying that all the properties within X kilometers or something, wherever there is a forest, that work stops.
So literally, there was a lull. But luckily, the government moved quickly. The court's realized that they were not pleased, and they reversed it. So we are back on the saddle. And I hope within this quarter, we should be in a position to get going. I mean -- and the unfortunate issue was that nothing was happening when this court order was in place, so that also is resolved. And hopefully, I mean, again, fingers crossed, we should see within this quarter we start our work. We start our launches, both including Borivali. And even Borivali was the same issue, again, but now all of that is back and we are ready to go.
So [indiscernible] and Borivali, so all this may happen during this quarter?
Yes. Yes. Hopefully, yes.
Okay. Great. Just the last question, Vikas, on the business development. I think last year, 1Q FY '22, you spoke about adding smaller projects of redevelopment of INR 2,000 crores plus non-MMR some foray happening till now we are waiting to hear from you. So going ahead, if you can just highlight your strategy how we go about both the things because redevelopment is really picking up this time in Mumbai, and we are not there. And even MMR media reports do suggest you are looking out for something but have anything but still are you -- if you can touch upon these two points. That's my last question.
Again, like see, as far as BD goes, we are very aggressive on BD, whether it's a redevelopment or whether it's anything else. I don't want to -- like we are close to some redevelopment projects. In some of them, we have been awarded the contract, I think, like as a preferred developer. But I don't want to talk about it right now. We unnecessarily end up building pressure for my next quarter, what happened there. All I want to say is that we are very committed, very aggressive when it comes to any sort of development, be it redevelopment or business development also our new land parcels.
And yes, one positive is that we took up a project next to our Borivali site. This was an SRA redevelopment. 95% of the site is now cleared, so this gives us a lot of heart that we being an organized developer, we're able to -- rather the SRA was able to see value. And we don't have any intermediaries. We have directly gone to the slum developers. We've convinced them that we are a good option, and they have vacated. Site is clean, and we are starting construction soon. And this is next to Sky City, actually adjacent to Sky City. So some more development potential here are getting unlocked now.
That is residential or commercial? Because I think you were doing commercial, standing to a 1 million square feet of commercial.
Correct. Correct. This is exactly commercial right now.
The next question is from the line of Puneet from HSBC.
Congratulations on good sales. Can you also talk about what is the update on the Glaxo land parcel and how is the leasing for the balance Commerz III turning out to be?
So again, thanks, Puneet. Firstly, on the Glaxo land parcel, now internally, we have two choices. One is either we do residential or we do commercial and a mall. So we need to take a call, and it's high time we do that. Both numbers look equally good. And it's a choice one needs to make what we need to go ahead with. We hope to now decide within this quarter and move on with that.
As far as our Commerz III, we are looking at topping up our construction by March and then one more year for the finish and operation. We are talking to larger occupiers. And there is a very, very good steady flow of demand, I mean, people who want it. Again, we were amongst the only few who probably built something post COVID. One, we were anyway committed, so we went ahead. All this we defied this work-from-home concept. I mean we didn't have a choice frankly, because we had committed. So we went ahead and built that. In hindsight today, we feel that we are lucky, we went ahead and made this development. So we literally have a few years of what you call lead from anybody who would want to start today.
So yes, again, no doubt of demand, and we are now getting ready with some of the mockups. And we've done visits, IPCs have come, we've loved the way the whole show played and really things have worked here from design point of view. It's absolutely top-class commercial building. It could be anywhere in the world, that sort of product, a little over 50 elevators and all really not done in India almost as yet, that sort of product. So very confident, not worried about it at all.
Great. That's useful. Saumil, just one question for you. In the cash flow statement for first half, there is a INR 650 crore change in loans and advances. Can you talk about what exactly does it relate to?
Sorry, which in the?
Cash flow statement for the first half, change in loans and advances of INR 650 crores, I guess.
The financing cash flow is only about INR 80 crores. So, and that's an...
Change in working capital part.
Operating cash flows are at about INR 150 crores. Investing cash flows is about INR 913 crores. Investing cash flow is the CapEx as well as some of those aspects which are there. So it's been pretty standard. I mean there has been no unnatural movement in all fariness point.
All right. I'll take it up separately.
We're happy to take up with you offline, but the investing cash flow represents the investments made in the capital assets. That's all.
The next question is from the line of Pritesh Sheth from Motilal Oswal.
So again on cash flows, Saumil, if you can. So operating cash flows were negative of INR 160-odd crores this quarter. While collections, we have seen it they were strong quarter-on-quarter basis. I can guess, I mean, there were some land or premium investments, if I'm not wrong. So if you can highlight on what projects and how much was the quantum?
So these are certain -- this represents both advances towards certain lands as well as for TDR. So once those transactions kind of culminate then I think we will be in a better position to discuss that with you, Pritesh. But as you are aware and we have told you all earlier also that for us, whenever we have these transactions related to land or related FSI, and unfortunately, for me, since that becomes a part of my current asset, it becomes a part of my working capital changes. And hence it reflects that number. But if you were to take out the impact of that, then this again is a very healthily positive number.
Sure. Absolutely. I mean you are clear on that front. And in terms of realization for Three Sixty West this quarter, we are seeing somewhere around INR 80,000 -- over INR 80,000 kind of number, INR 80,000 per square feet. Is it something like optically, I mean, you're taking it higher or that's the reference rate we can take it ahead? Because I think corporate rate is somewhere around INR 90,000 crores - INR 95,000 crores of targets since you have closed and have been reported in the media. So how should we look at the rate which -- on the [ syllable ] area that -- or that region?
So now everybody has moved on to RERA corporate, and everyone has moved to RERA corporate, and these rates are RERA corporate rates. So one other thing I want to tell you is that there are some other sales that are done previously who have been living on allotment letters and things like that. So you may see like discrepancies in sale value, but these would be pertaining to some old documents being registered today only because now occupation has come, some of the people were paying us only on allotment letter and all that. But the new sales are at close to 1 lakh, 1 lakh and 10 on RERA corporate.
The next question is from the line of Saurabh Kumar from JPMorgan.
So just two questions. One is comment on the Worli, your recognized revenues of INR 3,300 crores. So there is margin, correct me if I'm wrong, is it just 18% of this project? What am I missing here?
Sorry, what the margin is?
So you recognized INR 100 crores of JV income, right?
Correct.
So effectively at the project level, you would have recognized INR 300 crores, one-third will be your share, right?
Correct. So basically, what happens over here is our share of profit over here -- I mean, sorry, on the P&L side, it is about 32.5%, Saurabh. So that is what a kind of take, and that is at the gross level. So then out of that, you take out -- so you take out multiple things of expenses as well as taxes. This is not a full consolidation in all fairness. If you'll see, it's also single line item which are there. So this is a share of profit net of tax which flows into ORL.
I agree. My point is the net margin on the project will be about 10-odd percent. This is because you've recognized INR 100 crores, the project profit would have been something like INR 300 crores on a recognition of INR 3,300 crores. Is that...
So basically, what has happened is as far as the earlier ones are concerned on the INR 3,300 crores, we have already been recognizing revenues from the last year itself, Saurabh. So it is not the entire INR 3,300 crores which comes into play now.
In this quarter, it is only the INR 600 crores which comes into play because, again, when I received the OC in June, that's when I kind of trued up the financials and I had a share of profit till then. And after that, every quarter from here onwards, what you will see is only revenue recognition and the corresponding profit element of that from that quarter.
Okay. So the incremental margin will be how much on that? We were thinking of something like 60-odd percent. Will that be...
I'll also work that out and come back to you.
Okay. Got it.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
Saumil, just on the previous question, this INR 100 crore profit recognition that you have done to Three Sixty West, is it on the revenue recognition basis or a collection basis? Because collection was INR 400 crores and revenues were INR 600 crores. So just wanted...
It's of revenue recognition basis, Sameer. For all of our projects, including Goregaon, Mulund, Borivali, our revenue recognition always proceeds on the basis of agreement values, and it has nothing to do with billings or collections. So accounting will work at a corporate level on an accrual basis. So we consider it on the basis of that and not the cash collection.
Okay. Got it. Very clear. And the second question is on the two rental assets, Commerz III and Borivali Mall. Can you just share with us how much CapEx is or construction spend is left to be done? And how much has been done on both these projects?
So for that, I'll have to get more deeper into some of these numbers, Sameer. But I'll take the stab at doing that and I'll come back to you separately?
Okay. Just broad level would have been okay.
About INR 400 crores each.
Is pending, is it?
Yes. One second. Just give me a second. Let me come back to you on that. Now I have some numbers over here, but you want to know the balance spend, right?
Yes, that's right.
So let me come back to you on that.
Okay. And one final question. Vikas, how are you thinking about the prices going forward? And did you -- aside of Three Sixty West, did you take any price action in 2Q?
So I want to tell you all that, frankly, input costs have gone up, right from manpower to material, to approval, to all other costs have gone up. So we have to increase prices. Worli is already out there. We have increased prices in Goregaon. We have increased prices in Borivali and in Mulund, in fact, across. And there is no choice. There is no option, really.
And I really fear and wonder how other developers are going to deliver if they do not increase prices because costs have gone up. And interest costs have gone up from developers also. So there is a huge input cost. We had to take them up, and we have done that everywhere.
Vikas, you're talking about 2Q specific or you're going a little bit more further?
Going forward. I mean we have taken our decision only a week ago, and we've now like already passed it on to the new buyers now. Obviously, we don't increase prices for flats that are sold. But wherever we haven't sold, the inventory will have to go at a higher price. .
Really, I mean we are doing the math and wonder how these guys are able to sell and will deliver. That will become a question mark. And that actually worries us because then, again, developers get a bad name.
Yes, sure. Vikas, just to conclude on that, so this increase has been, say, roughly 1st October onwards. And if you can just quantify, is it roughly about 3% to 5%? Or is it -- what kind of a price increase have you taken?
So we increased this only a week ago, so I wouldn't say it's from 1st of October. It is probably somewhere around 10, 12th of October. And some where we've increased 5%, some where we've increased 10% and so on. So it's not like a standard increase.
Different projects have been given different treatment. And like also depending on different stages of the project, we've gone out and done that. Like Borivali, we hardly have anything to sell today. In our tower A and B, if you see in Goregaon, we hardly have anything to sell. And if you look at the comparative product, which is Exquisite and Esquire, they are selling at a particular price.
So what we've also done is we've been prudent, we've discounted the value of the existing apartment, and we have given him the benefit of pre-booking and all that. And we made a attractive proposition, but he has to appreciate that the ready apartment is selling at an X price, and this is discounted to that value today. And that value is certainly higher because all the ready product is sold and it's selling today at 40,000 and 50,000 on corporate in Goregaon. And there are no -- I mean, and there's no drought of buyers there.
You've seen how A and B tower have been sold out. So that -- and we hardly have anything in A and B. Now obviously, when we launch C, we will think of a price strategy and then do that. And it's very difficult for us to do it, I mean, frankly.
The next question is from the line of Kunal Lakhan from CLSA.
Hi Vikas and Saumil. Firstly, on the Thane project, you still sounded a little apprehensive in terms of launch in this quarter. I thought that issue is resolved, as you said. So what could happen that could make the launch spillover to next quarter?
Frankly, it's just sequencing whether -- nothing really, nothing. Actually, nothing. I mean, I don't know why you're making it out to be apprehensive. I mean one has learned to kind of build in some cushion just in case it doesn't happen then probably, but there is really no apprehension. Actually, I did not even think. But because you're asking me, I'm saying that maybe it just become our second nature to be a little more cautious when we commit. And like surprises like these just keep coming, and that's it. But otherwise, there is really nothing.
Sure, sure. And secondly, on Worli, right, so we have around, say, unsold inventory of about 150-odd units now?
No, less than that.
Less than that. We have sold about 75 -- 77, out of totally close to about 200.
So 125.
Okay. So what will be the monetization time line that you would be looking at to -- I mean, going by the current traction that you are seeing the pipeline of inquiries that are there, what kind of time line you're looking at monetizing this project?
This surely will qualify a forward-looking statement. And okay, all I can tell you is we are committed to selling. And like I said, there's tremendous demand. We are probably the only one with full position there and loving all the attention we are getting from the buyers. We respect that, love that and want to honor that also and want to continue to sell it. Don't want to become complacent, but like I said, there's no problem. I mean, I genuinely don't want to put in a time line, but the product is ready, ready for people to enjoy, and we certainly won't come in there. We'll be happy to sell.
In your opening comments, you did mention that the only reason why people are not able to buy it is because they can't afford it. So how do you look at that with context of the price hikes that we have taken?
No, no, I didn't say that they cannot afford it. The only reason they will not buy, as and if somebody comes in, it is so compelling as a product that he will want to buy it. I mean you don't buy it only because, let's say, the person who is coming in doesn't have the money. Barring that, it ticks all the boxes. That's what I meant. So it's not about -- and there are plenty of people. I want to tell you all that nobody seems to be buying this one apartment. People are buying 1, 2 and 3 apartments, amalgamating them, joining them, making a duplex out of it and all that. It really is like a splurge of real estate volume.
People are buying 12,000 and 14,000 square feet and making -- I mean, I'm telling you, I have been to people's homes, and it's such a delight to see them make their own version of the shell that I give them and live so beautifully. So really, it's so amazing to see. And these are people with deep pockets, bringing their own set of designers. They've been there, seen the world. They bring the best of the world and put it in.
So again, I must say that very, very fulfilling apart from the fact that it's making us money, it's very fulfilling to see that how people are adapting to what we have made. The entire outer living area or the inside apartment, no building has one floor plate, which is 5,500 or 7,000 square feet at single level. And when people make a duplex out of it, it's 15,000 and 12,000, the effect is something else, beautiful. Like really, I must say that really feel good about it.
Sure. And my last question was on -- so if you exclude, say, Worli this quarter, our overall sales excluding Worli were about INR 550-odd crores, which was lower than what we sold last quarter or even in previous quarters, right? Especially like projects like Borivali and Goregaon, where they usually sell well, were quite tepid this quarter. How should we read this? And what's the outlook there going forward?
So you should read it very nicely and happily because there is really nothing to sell in Borivali and Goregaon, which means that we have to make a launch. I mean here we have to launch our next phase. And we have so much demand for the next phase, I can't tell you. I mean actually, there are people who are telling me, you know what, I don't care when you open, take my money. And listen, I can't do that. I need to follow a certain decorum and that's how I will do it. So because we haven't launched, we haven't sold, I mean, whatever was like the remaining apartment that was sold. And now we have tremendous demand. I mean, people available for new purchases.
So Elysian, it shows that we have about 1 million square feet odd of inventory, unsold inventory.
Sorry?
Elysian, it shows that about 1 million square feet odd of unsold inventory. So wouldn't that be...
That is -- like you're talking about the entire A, B, C, D.
Yes, the launched inventory.
Yes, Kunal, I think 25 lakh square feet, out of that, we have sold 15 lakh.
We have sold 15 lakh square feet. There is 10 lakhs. But in all fairness, this building is also going to take another 4 years to build, Kunal. So we have got that time period over which also we can sell the balance.
Yes, 60% is sold.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Oberoi for closing comments.
Thank you all for taking time out for this call. We look forward to hearing from you on an ongoing basis. Please feel free and reach out to us or our investor team for any other additional questions that you have. Thank you, and happy Diwali to everybody. Thank you again.
Thank you. Ladies and gentlemen, on behalf of Oberoi Realty, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.
Thank you.