Prestige Estates Projects Ltd
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Prestige Estates Projects Ltd
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Ladies and gentlemen, good day, and welcome to the Prestige Estates Q1 FY '24 Investors Conference Call hosted by Axis Capital Limited. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Samar Sarda from Axis Capital Limited. Thank you, and over to you, sir.
Thank you, [ Yousuf ]. Good evening, everybody. As always, we have the senior management of Prestige Estates for the post results conference call. Mr. Irfan Razack, the Chairman and Managing Director; Mr. Venkat Narayana, the CEO; and Amit Mor, the CFO.
We'll now hand over the call to the management for the initial comments.
Hi, everybody. This is Irfan here. Hello, Samar. I think I'll hand it over to Venkat to just summarize what has happened during the quarter, and then I'm available for any questions.
Thank you, sir. Thanks, Samar, and good afternoon to all of you. We have had exceptional quarter. We had a great beginning for the fiscal FY '24. The total sales for the quarter stood at INR 3,915 crores, up by 30% year-on-year. Collections are at INR 2,741 crores, up 28%. There is significant growth in average realization per square foot, up by 20%. They are at 10,244 when it comes to apartments and 5,000 when it comes to plots.
We have sold 2,276 units this quarter at a run rate of 760 homes per month being sold, aggregating to 3.83 million square foot of area. Q1 this fiscal, we had 1 launch. Though our launch plan for the fiscal is huge, we had 1 launch in the form of Prestige Lavender Fields, which was instant sellout. There's a great response and significant amount of contributions for this quarter sales have come from that project.
Mumbai continues to contribute at a good run rate. We had INR 600 crores of sales from Mumbai coming in. [ INR 450 ] crores of sales have come from Prestige City at Mulund and the balance have come from -- between Prestige Jasdan Classic and at Mahalaxmi and the Prestige Pali Hills at -- Prestige Daffodils at Pali Hills.
In terms of completions and launches, we had overall 3.11 million square of launches. That's 1 launch our Prestige Lavender Fields. And we have completions of 5.9 million square foot spread across 4 projects. So this is [indiscernible] and Prestige City. This is Marigold product development project. This is Elysian, Bangalore in Bannerghatta road and Prestige Mulberry Shades out hospitality projects.
And the launch pipeline for the rest of the year is very robust. We have a large project coming off a launch in the form of Prestige Park Grove in Bangalore, the Prestige City at Hyderabad, Prestige Pallava Gardens at Chennai, Prestige Bougainvillea Gardens at Noida, which is going to be our maiden launch, first project launch for NCR region. We look forward -- we're looking forward. We're exciting. We're looking forward for the rest of the year in lease launches. And with this, I think we'll continue with same momentum maybe better than what we have done in this quarter.
Moving on to financial highlights. This quarter had a little dip in overall revenue recognition. We had total top line. This is leased, as all you know, to the completion of the project. We don't have much of a completed inventory. So the instant recognition of revenue by way of selling of completed inventory is not there any longer. So whenever we sell the inventory, this is just launched are ongoing.
So they come for estimation only when the project gets completed. So therefore, we had only 1,963 crores of revenue coming from the financial turnover. Total EBITDA stood at 812, PAT at 317. The percentages that you see are driven by exceptional items, which is with respect to REIT units that we hold on a retail portfolio. When we sold our malls to Blackstone, we continue to hold 15% of those malls and we converted that into [ units ]. And we also invested a little extra money.
And around 4.5% of the overall REIT because we did mark-to-market of those units from original cost to where they're currently getting traded, there's an exceptional item that got recognized, which contributed to the extent of INR 240 crores to EBITDA and INR 210 crores to PAT. So therefore, you see EBITDA number at 41% and PAT at 16%.
Leaving this aside, in general, because the fixed expenditure is almost same quarter-on-quarter irrespective of the booking to INR 3,000 crores or INR 4,000 crores of top line, or INR 1,963 crores revenue we have in this quarter. That continues to be same. Therefore, you will see a slight change in dip in the profit margin even after removing exceptional item because there's some queries that had come in this regard. Therefore, I'm making sure of this opportunity at the opening remarks itself to clarify to all of you.
Now moving on to the construction spend and cash flows. The overall construction spend for this quarter has been at INR 1,774 crores, split between various segments of our business. Residential and commercial, which are developmental businesses, residential primarily, we have spent around INR 1,200 crores. Commercial office-based projects we spent INR 350 crores. Retail, we have spent INR 75 crores, in hospitality around INR 165 crores. there has been overall trend and there is lot of money that we have invested towards the new land acquisitions and take buys that's almost around INR 1,300 crores during the quarter.
But if you look at operationally, we had INR 2,716 crores of collections from the development business. And we spent INR 1,182 crores on construction of developmental business. And after subtracting the landowner payment, sales and -- sales and marketing expenses, employee admin expenses and everything, we had operationally very positive net cash flows at INR 1,000 crores. And the remaining money that we've invested is towards the acquisition.
The point that I would like to highlight is to -- we've been seeing a significant amount of growth in our retail numbers. Most of you have tracked year after year from pre-COVID year of 3,800 to we moved to INR 5,000-plus crores of sales and then to INR 10,000-plus crores of sales from last year, close to INR 13,000 crores of sales, and this year, we get it for more. Substantial amount of money that we have invested in development, the acquisitions for the new launches between 5, 6 projects at Bangalore, which is getting launched, as we mentioned, Prestige Park Grove. Prestige City, Hyderabad, Ocean Towers Marine Lines, Prestige Nautilus at Worli and there is 1 more project that we took over from the fund belong to other developers.
And the 400 between these 5, 6 projects have invested around INR 3,000 crores towards business development. And all of these projects will be launched from now to maximum period of 15 months or so. So a lot of unlocking will happen from these investments as and when these products get launched. The reason for a slight increase in the rate also is driven by this kind of acquisition that we have done, which, according to us, will set up a good way for us to club good numbers in terms of presales and also help us grow if the demand and the momentum continues in the same fashion.
The macroeconomic support, grow on that number next year. Because, as you know, in the real estate, we can't buy land today and launch tomorrow. There is always a lead time. So these investments will result in great presales numbers, this year and as well as next year.
With this brief, I would like to open the forum for question and answers.
We will now begin the question-and-answer session. [Operator Instructions] First question is from the line of Pritesh Sheth from Motilal Oswal.
First question is on INR 1,300 crores land investment this quarter. If you can provide some breakup of on which all lands what is spend for because in the pipeline, obviously, I don't see any new projects getting added. But definitely, it would be for some older projects. So if you can just help me with the breakup or some key investments that includes that INR 1,300 crores.
Sure, definitely. Yes, you are right. This is towards the balance payment that we have to make for the projects, which are already in pipeline. Those include Prestige Nautilus at Worli, Prestige Ocean Towers at Marine Lines, Prestige Park Grove that we're going to launch and 2 projects at Electronic City as well as Bannerghatta Road. And INR 175 crores of additional investment that we have made into REITs to consolidate our holdings with the retail REIT. So this is being the breakup -- broad breakup of sales investments happened during this quarter.
Sure. And what was the idea behind investing some more in this? I mean, was it part of the agreement that we have already signed up?
So we had some convertible instruments. So option is either to get them redeemed or get them converted into the units of the REIT. And those were part paid. So we made the balance payment and took those things. That's a small amount compared to the percentage that we own.
Got it, got it. And in terms of our cumulative CapEx outlay, there has been some increase this quarter. So obviously, since we added Mumbai commercial projects, I mean, hiked up a stake there. Some bit of that increase would have come from there. So all of the additional spending required for Mumbai commercial projects is now part of that INR 16,000 crores of total outlet?
Right. If you're specifically asking after we bought out the partners last quarter with that increase to the CapEx, that means we'll have to incur the construction cost on that portion also whether it's been captured. Answer is yes. It's the number that you are referring to.
Sure. And I mean, is the estimates now pretty much there in terms of the total spending? Or there might be some revisions based on eventual designing that we achieved for total portfolio, I'm asking? Yes.
Spends are frozen, unless there is a significant cost increase with respect to raw materials like steel, cement during the construction, these numbers hold good. And some contingencies also have been provided.
Sure. Got it. And one last on launches. So Ocean Towers and Nautilus, both should be launched this year. Are we on track for that?
That's the plan.
And that would be a full launch at one go rather than at phases, right? Or how are you planning to do it?
Will be full launch at one go.
Sure. Got it. And any idea on total GDV that we are trying to launch this year with the projects that you highlighted earlier in the call?
Specifically to Mumbai in the last 2 slides. Other projects if you see the share...
In total. Not specific to Mumbai, but in total.
Okay. So the 2 big projects. That is the Prestige Park Grove, the overall top line is around INR 7,000 crores. Prestige City at Hyderabad will be again equivalent to INR 7,000 crores. Prestige Pallava Gardens at Chennai and Prestige Bougainvillea Gardens in Noida, both would be equivalent to around INR 4,500 crores. And these 2 major projects, let me open that sheet for you. Ocean Towers and Nautilus put together would be around INR 9,000 crores.
Got it. And we have now a good clarity on Bougainvillea Garden launch in Noida, right? This is...
Last 3 weeks, there are significant developments with the authorities at Noida. And they have formed a committee, and the committee has formed some solutions to address whatever the issues that have been pointed out with respect to sport cities. And next -- they're putting up a resolution plan in the next meeting. With that, we are hoping that sanctions will come...
Next question is from the line of Adhidev Chattopadhyay from ICCI Securities.
My first question is on the Delhi Aero City Hotel. Could you just tell us what is the status of this project? And by when do we see the hotel becoming operational?
Maybe 2025 in December. 2025 is the scheduled date.
Okay. So this is like FY '25 or FY '26 just to...
December 2025 and the hotel, and December 2024 is the office component.
FY '25 will be office, FY '26 will be hotels.
Okay, okay. And sir, just to follow up. Since you have done some stake buyouts now for partner in the Mumbai projects, we also have a 50% stake in this project as well. So in this project and other projects where you still have the partner share, can we expect some more stake buyouts in the next 12 to 18 months over here in that portfolio?
With a case-to-case basis, on a need base in case the [indiscernible], obviously, he'll start diluting his share. As of now, there's no such discussion. But obviously, when we are funding more and the partners unable to fund then obviously, we'll have to dilute him. But as of today, a partner has committed that he will bring his contribution wherever required. And when it doesn't come, obviously, it needs to be done.
Okay. Okay. Sir, and just final question is on our debt levels. In our analyst meet, we had given a roadmap on how the debt would pan out over the next 4 to 5 years. Now that we have done the stake acquisition. So considering all of this, would you like to revise like in terms of where our debt numbers would be possibly in the next 12 to 18 months in terms of in absolute terms?
As of now we have robust cash flows coming in from the residential business. And also the debt on our hotel portfolio as compared to the investment that has been made and the value of the hotels is very minimal. So in all of this, we will definitely have some positive cash flows. And this will help us to go through this.
And if at all any debt is required to complete the CapEx projects we are on, yes, the debt will come in, but the balance sheet is strong enough to take that debt. And as and when the projects get completed, it will start fortifying. So I don't see any stress in that moat.
Just to add to Chairman is mentioning is this quarter, we've guided in terms of debt equity ratio. So what happened this quarter, as I mentioned, is our turnover number is low. But as you know, what we have told during the last, not last, earlier years will certainly INR 40,000 crore, INR 50,000 crores worth of unrecognized revenue. Revenue recognition will start coming in.
Once the top line increases, automatically, net worth will go up and debt equity will be back. So this is only transition. But by the time we reach FY '24, we'll be where -- that level where we have guided.
Okay. So just to end, so the X, the any stake acquisitions or debt should be around INR 7,000 crores to INR 7,500 crores in absolute net debt towards the end of March '24. Is that a reasonable assumption to work with?
Yes, yes. But having said that, that will still continue to be at whatever we have guided at around 0.5.
Next question is from the line of Parikshit Kandpal from HDFC Securities.
Congratulations on a decent quarter. Just wanted to update on the Mumbai BKC project. So has the project achieved the financial closure of the -- after the partners take buyout?
Yes. Both the projects BKC as well as Liberty Towers, we have done the financial closure. We are in the process of documentation now. We've not yet drawn the money. I think we'll complete the documentation and start drawing the money by end of this month.
And has the work started because the BKC projects are still showing in the upcoming, so not moved to the ongoing projects? I think last time you said that you are already appointed a contractor. I think L&T as you know wanted this contract. So if you can update us on the status of the project.
The work has started. We are already doing filing. The excavation is going on. L&T is the contractor. So whatever work is happening, it's money from our contribution of equity. And the moment the financial closure gets done, that much more gunpowder will be available for use.
Liberty Towers is already in the ongoing project. BKC is moved, but then in this quarter, so you'll see that from upcoming to ongoing by end of this quarter. This is as of 30th June what we see.
Second question is on the sir, Ocean Towers. So we have bought out the partner stake, but the area share has gone down quarter-on-quarter. I think in the last presentation, we had about 1 million square feet of area. Now it is 0.81. So why is that?
There was a partner in Ocean Towers. This is a bought out land. We took it out from Edelweiss.
That land is 100% bought in Ocean Towers.
Quarter-on-quarter why the area share has gone down, I mean, 60% is our economic interest.
Economic interest also has been the same. It's been -- from the beginning, it's been the same. It's just that in the final, whatever the sanction times that we have submitted for the approval, there could be a small difference, so about 1.35 total developable area and 0.81 is our share of the area. It has been the same. There is little change in the final drag that would have taken place.
Our economic interest is 60%. So who has the balance 40% in this?
So this is done in entity called Prestige Projects Private Limited, where earlier HDFC was holding the stake and that was bought out by the family office. So this project is happening in that...
So 30% will be the main entity, and I think 40% is the family office.
Family office of -- whose family office? I mean is there some other investor, third-party investor?
Proposed family office. No, just to tell you, Prestige Projects Private Limited PPPL has -- is SPV that had 60% from the listed company, 40% was held by [ Hedgecare ].
[ Hedgecare ] stakes when they were exiting at that point in time was bought by -- from [ Hedgecare ] directly by the family office. This was 3 years ago. And this project is executed in that SPV because we had cash flow from that SPV.
Okay, sure. And sir, our debt has now already gone up revenue that is at INR 4,400 crores. Our debt is I think INR 6,400 crores. And we have about INR 17,000 crores of CapEx to be incurred, including all hospitality, retail and office. If I assume that -- even if you assume that 30-70 mix or even if I take 50-50 mix so the CapEx that will go up almost INR 8,000 crores, INR 9,000 crores. So we may end up somewhere the debt number of INR 15,000 crores, INR 16,000 crores by that time all these assets get completed. So is it the right assumption that you may touch close to about INR 15,000, INR 16,000 crores of debt?
Few things that we need to look at because of the growth that is happening in development business, especially residential, which is unprecedented. If you have to have growth from INR 5,000 crores to 10,000 crores, INR 10,000 crores to INR 13,000 crores, and this year, we're looking at INR 16,000 crores to INR 18,000 crores. And we need to have that much of inventory to sell and also the projects and the planning for the next year because there is always a lead time.
So our investment to business developments have significantly gone up. That's why across 5 projects that I mentioned, our outflow has been INR 3,000 crores. All of these 5 projects will get launched from quarter-on-quarter in net 12 to 15 months, that money will get unlocked.
I want you to see our Slide 15 where the free cash flow that we can generate from residential business, as I mentioned, residential developmental business, even this quarter, we had 1,000-plus crores of operating positive cash flows. The ongoing projects have got a surplus of INR 8,500 crores.
Upcoming projects had surplus of around INR 21,000 crores. Yes. Both put together close to INR 29,000 crores, INR 29,000, INR 30,000 crores of free cash flow that we can generate from residential. So this is the potential. So even if we are to fund 1/3 from residential to CapEx project and borrow the remaining from the bank. By that time, the commercial projects will get completed, we'll have enough cash flows to pay back those money and retire the debt or go lease until discounting. If you look at why is the debt number high? And what is that we are doing with that money? And how are we meeting the growth?
But your resi debt at INR 4,000, I mean, will it be the peak? Because I understand you will have [ LRD ] on commercial and you are going almost to INR 4,000 crores of rental so which itself is huge and can support the debt number on the CapEx especially on the LRD side, it can support it. But primarily on the residential debt, which is at INR 4,400 crores. So how do you see that behaving over the next few quarters?
So what you said is correct. Overall, whatever we have to spend, we have to spend. But what you need to look at also is if you have to spend that much of money on a CapEx portfolio, we will have an overall rental income of INR 3,500 crores. If you apply 8% cap on that, roughly the value of that will be around INR 45,000 crores by itself. That is the -- a new portfolio they may have.
And the debt, whatever you are mentioning, we may have to incur to build those? Absolutely, yes. But with that debt outflow or construction cost, look at the value that we are creating.
But the only question is whether you will monetize the part of that rental portfolio of 45,000 crores even a 10%, 10% can give you a large INR 5,000 crores, INR 6,000 crores worth of roll down in terms of capital and reduce the debt significantly.
True. The thing is these options of monetizing always exist, which we did 1.5 year ago with Blackstone yielding portfolio, some of them under construction, we can do one more the excess that business to strengthen the relationship further in investing some more of our assets. There are other PE investors who want to evaluate our ongoing office and retail portfolio. But then that's a difficult choice to make as to when is the ideal time? Is it now when the assets are under construction? Or is it when the assets are ready? Or should we at all do these kind of divestments? Or should we go and list on a public platform?
So these options exist. One thing I want to reiterate and assure all the analysts and the investor community is that the quality of the assets that we are building are world class, the second to none and there will be the sort of project is the value creation that is happening. How to unlock, there's always an option that is available. We can do it now if we choose to. We may get lesser value or do it once they are ready, we may get better value go to public markets once and for all we may get even better value.
So total maybe $5 billion of value, you are opened of the asset value of INR 40,000 crores, which you said, to potentially you're open up to like $1 billion kind of unlocking, maybe INR 7,000 cores, INR 8,000 crores if there is an option. And the only timing has to be decided based on how you feel would be the right time, right? So is it the right assessment?
Absolutely, yes.
[Operator Instructions]
Next question is from the line of [ Ronit Kapoor ] from Systematix Group.
So this is regarding your Mumbai projection volume. So the volume micro market has a lot of supply coming up. There's almost 10 million to 12 million square feet coming up like specifically the [indiscernible] redevelopment projects. So a lot of mid-income housing is coming. So you have 2 projects in Worli.
One is Nautilus and the Jijamata nagar. So what configuration are you looking at in these projects? And like do you feel the velocity of sales will be reflected given the large amount of supply coming up?
See, Nautilus will be purely residential. But Jijamata, yes, there will be a mix of residential large retail base as well as a hospitality asset in that because it's all of 17 acres.
Of course, there's a lot more time and a lot more work needs to be done on Jijamata is going to see the light of day in the next 1 or 2 quarters. There's at least a good 6 quarters away. In the meanwhile, Nautilus is almost ready. And the type of location we have, I think, is second to none with great spectacular view. And the design itself, we have done it in such a way that is neither too large or too luxurious and not too small. So I believe that there will be a good appetite for it, and it is going to find a good response from the market.
So in Jijamata Nagar, I would say, like you're looking at a mix of commercial as well as residential. But I'm saying like what -- are you looking at mid-income housing given that...
A complete mix that Jijamata Nagar, there will be a mix. It's a different type of product that will be done. We still honestly haven't put pen to pencil. Of course, there will be a large component of redevelopment also there because we have to rehabilitate the slums also. So yes, it's a very different type of project. It will be a mixed SKU completely mixed SKU on how even by that time when we reach at that time, maybe even a small component of some service offices or something may also come.
But it's to be purely -- pure luxury housing only. Right now, we are concentrating on seeing how we can get the land cleaned up. But Nautilus is ready, Nautilus in the next couple of quarters. And Ocean Towers, of course, will get done this quarter.
And in terms of logistics that you plan to ramp up the stake like 26% in Jijamata and I think in Nautilus also you're holding around 40%, right?
Nautilus is there. The listed company is entirely with the group. It's not with any outsiders and...
So HDFC has exited completely...
Yes. HDFC has exited, yes.
Yes, yes. Yes.
Okay. And one more question on the Mumbai front. Are you planning any retail projects like in any detailed margin pipeline?
That's the one that when Jijamata happens, there's a good sort of potential for that. But then it all remains to be seen how finally the planning happens.
Okay. And the last question on the hospitality front. Like you -- your occupancy rates especially for the JW Marriott Golfshire were dragging down the occupancy for your entire segment. So have they improved this quarter. Like any update on that?
I didn't get the question.
So JW Marriott Golfshire Hotel was dragging down your occupancy for the entire hotel segment. So are there occupancies improve for the hotel segment this quarter...
Dragged down the occupancy in the sense?
Hotel occupancy like...
No, no, no. JW is not low at all. It's a different product altogether, and the pricing itself is a resort pricing. So it's a different positioning.
Next question is from the line of Puneet Gulati from HSBC.
And congratulations on good performance. My first question is why enter into an agreement where there is a family ownership in one project and company ownership at the other, given that you have the entire business will be done within the listed entity?
When we were doing the Prestige City, which was in the SPV called Prestige Projects Private Limited. List Co had a 60% stake, and [ Hedgecare ] had 40% stake. The overall holding cost of 60% for the List Co was around a little under INR 100 crores, 60% cost, INR 100 crores. When [ Hedgecare ] wanted to exit, there was around INR 440 crores for 40%.
And at that point in time, when you have 60% holding coming to you at less than INR 100 crores. So by 40% at INR 440 crores did not make meaningful sense. And at the same time, we did not want them to go and sell it out to an outsider and bring one outside equity partner. We had those cash flows. We said, okay, at that number instead of that going for an outsider why can't we look at it, we took clearances, what are the compliance and that money -- rightly so because instead of List Co investing INR 440 crores to just get extra stake, that money got invested in various other projects on the business development happened. Once the project got launched, there was a surplus cash flows in that SPV cell.
So that SPV invested in a couple of projects. That is how some projects have come into the SPV. When we did the financial transaction in that SPV, there is a concern on upstreaming of cash flow till the project gets completed. So therefore, that SPV with the additional cash flow that was there after the project got launched invested those money and acquired 2 other projects.
So which are those one is Ocean Tower. Is Nautilus also part of similar structure?
Nautilus has also been part of a similar structure, yes.
And who owns 60% of Nautilus?
List Co owns 60% of it. It's one SPV that is doing all this.
Sorry. No, List Co owns 40%, right, of Nautilus. Sorry, I couldn't hear you.
List Co 60% when it comes to Ocean Tower, 51% in Nautilus.
Okay. Presentation reads 40%. Okay. Secondly, what are your thoughts on future business development? What kind of capital are you likely to allocate over next 2 years for business development? And what is the balance to spend for any business development activities that you have already done?
We have enough in pipeline for the fiscal FY '24 and FY '25 to launch. Now if any business development activity if we have to do this year, that is going to be for FY '26. And to clock numbers of INR 18,000 crores to INR 20,000 crores of sales on an average, I think investment in the business development should be in the range of INR 4,000 crore to INR 5,000 crores a year.
INR 4,000 crores to INR 5,000 crores a year. Okay.
It's considering the mix of JVs and outright price and all of that.
Right. Understood. And in terms of cash flow for Jijamata Nagar, are these already a part of your upcoming cash flow projections? So this amount of roughly INR 5,000 crores, is that all? Or there could be more potential in terms of the area to be sold?
No. As of now, we get there when we are actually planning. Right now, we are looking at master planning and also cleaning up and acquiring the entire land. We've not gone to the details of exactly what should be the composition? What's the mix and all of that. Now if you choose to exploit more and do only for sale, these numbers can go up.
Okay. So INR 5,000 crores is your share of cash flow from sales? And what will be the construction cost that you'll have to spend on the 3 million square feet?
3 million square foot?
Yes.
It will be just around INR 5,000 -- INR 1,500 crores.
Okay. But your attributable cash flow is only INR 5,000 crores and you will have to spend INR 1,500 crores in this situation?
I'll just get into the slides. Yes, Mumbai, overall, 3 million square foot.
Correct.
The total number is [ INR 65,000 crores ] which we pay. The total cash flows have been shown.
So roughly INR 20,000 crores? On INR 20,000 crores, you have 26% stake, which is INR 5,000 crores. But you will have to spend...
So 20 is also proportionate, right? So 3.05 multiplied by INR 5,000 x 26% So we spend around INR 400 crores, our share of spend.
Okay. Only -- so on INR 400 crore investment, you get basically INR 5,000 crores. Is that how one should read it?
Proportionately, yes. Some amount of land costs have been incurred on the balance whatever need to be incurred will be incurred, that will also be proportionate again.
And how much is that likely to be just to understand the potential of the project profitability?
We need to spend another INR 150 crores to INR 200 crores.
And how much have you already paid for it?
It's lower INR 150 crores.
Seems to be a super deal. Okay.
[Operator Instructions] Next question is from the line of Kunal Lakhan from CLSA.
Venkat, you said earlier that in our spend on GDS would be about INR 4,000 crores, INR 5,000 crores annually. And if you look at our cash flows or rather like operating cash flow run rate, which is again in the INR 4,000 crore to INR 5,000 crore run rate annually, and then we have a CapEx of INR 15,000 crores, which we'll spend over the next 5 years or so, 4 to 5 years. How -- I mean, realistically, where do you think the debt will peak out here at what levels in absolute terms? Because again, like these cash flow numbers look quite aggressive.
Kunal, see, right now, INR 1,000 crores of free cash flow that you see is at the current run rate that we are operating. The business development outlay that we indicated is for the presales of around INR 20,000 crores run rate. It's much, much more than the current operating level. That also is a mix of some JVs and also outright price, all put together. The outlay that we need to have.
Now if that be the number, there's enough amount of residential cash flows that we can generate to reinvest. You -- when the project is -- this quarter, we have got INR 1,000 crores of positive cash flows. But the quarter in which we have completions, a lot of money comes at the time of handing over, that quarter positive cash flows will be a lot higher. So it also depends upon what is getting launched. And so majority of the cash flows in this quarter are from the sale of Lavender Fields.
Whereas booking amount only has come. After that installment money will keep coming. So we are confident that we will be able to generate around INR 2,000 crores of -- a little around INR 2,000 crores, INR 2,500 crores of positive cash flows from developmental business...
Sir, just going by the numbers that you are putting out, right, say, 30%, 35% operating cash flow margin on the collections even if you assume the INR 20,000 crores of presales and assuming that collections also like reach INR 20,000 crores which generally is about 80% odd. We would still be in that INR 6,000 crores -- INR 5,000 crores, INR 6,000 crores of operating cash flow range. And then again, still the spend on INR 5,000 crores spend on land and then INR 5,000 crores on CapEx maybe. It just still looks a little bit of stretch. And this does factor in your residential cash flows, right?
Yes sir. Still we stabilize at those numbers. If you look at some of these projects, I'm looking at the current market values. Project where we had deployed outflow last year, we are selling at 20% less than what we have sold this year.
Now, don't look at only cash flows, look at the margins that we generate also. That's why I said cash flows could be lumpy. We hold 15%, 20% of the project in the completion. And when we sell that quarter with no additional outflow because construction must have been over, projects must have been completed, if you look at our completed inventory from last quarter to this quarter, it's down by INR 1 billion.
So like that, because we didn't have much of completion this quarter, if you see. And the quarter we have high completions and where complete inventory gets sold, there's no construction obligation -- completed inventory. So all of it will be free cash flows. So you look at overall, don't look at a particular quarter.
Sure, sure. My second question is on when we highlighted our -- this whole growth plan on the annuity business and the kind of CapEx that we were planning, we did put it out as a strategy that will do part strata to manage the debt levels. Has anything changed over there? Because now actually, we are doing a reverse of that, like we are actually buying out stake instead of doing startup. So just any change in the strategy or we'll still considering doing strata in future in these assets?
Definitely don't want to do strata. If at all, we do something, we may induct somebody as an equity partner at some point of time or the other.
Sure, sure.
Kunal, just answer your earlier question a little more in detail. You can see a residential ongoing and upcoming. We have given you free cash flow that we can generate. Okay. So INR 2,900 crores across our ongoing and upcoming, which is a huge number.
So that will be over a period of next 4 years. That means around INR 7,500 crores of free cash flow a year. Even if we are to deploy around INR 4,000, INR 4,500 to INR 5,000, we still will be left with INR 2,500 crores of positive cash flows.
So these are still pretax, right and pretax and pre-overheads, right, these cash flows?
We have considered overheads and taxes. If you see the Slide #29, it include all the payments, sales, marketing, overhead taxes is after a free cash flow of INR 1,000 crores is after [indiscernible]...
No, no. I'm talking about the free cash flow that...
Yes, we [indiscernible] under the rate change, current numbers have been factored in.
Okay. Fair enough. And my last question was on you said earlier about bringing in equity partners. Just on that front, right, when we last -- when we divested our stake to Blackstone, we were nearing debt levels of about INR 9,500 crores. We are currently at about INR 7,500 crores, right? At what stage would you look at doing that at the asset level or even, say, doing equity dilution at the entity level, if at all?
Kunal, one thing when you're comparing, we should also compare the current operating -- scale of operations in the current market. When we had INR 8,500 crores of debt from Blackstone, our presale numbers, the peak that we are reached was INR 5,000 crores.
Our business was operating at INR 5,000 crores. Now we are operating our business at INR 13,000 crores. And maybe hopefully, if all goes well as planned, this year, we'll be at around INR 16,000 crores to INR 18,000 crores. So in that, like you should see these numbers, our quoting numbers are completely different because they come for revenue intimation as when the projects get completed. But the scale of operations right now is the...
Next question is from the line of Saurabh from JPMorgan.
Just 2 questions. So 1 is Venkat around this commercial project in Bombay, in Worli. So what gives you confidence that this takes off because that area has a lot of oversupply. And your ex-JV partner is actually struggling there. So I mean, so when you did your market research around this Liberty Towers, what gives you this confidence that this can be done? Because this is the first project which will -- the first large one which will come up here in Bombay.
So if you can just talk about that. And any risk [indiscernible] put in there? The second is just on this cash flow slide, what is this INR 109 crores in the finance cost? I mean, is it the other income? Or is there something else?
No, no, it definitely -- I mean the type of products that we are doing, I think I thought Venkat would answer that and he is looking at me to answer this. We are completely confident that it will meet a huge response, not a small response so nothing to worry on that.
The kind of development that we are doing, given the specifications and the future is still building, we're confident that this will be much sought after building, and we don't have any second thoughts on that on our own analysis before [indiscernible]. In fact, there's a lot of contemplation that happened, a lot of suggestions that came saying that we should make the residential project because...
In fact, there's a lot more residential. So I didn't want to go through that route at all.
So that's what I want to get to as to what kind of research did you do to kind of come up with this conclusion that there is demand for 4 million square feet office space.
Not 4 million. It's 2 million in Mahalaxmi. I really believe that -- and for a brand-new building with the brand-new infrastructure and the type of product that we are making, there will be quite a lot of demand for it because not only the existing new demand, but there will be a lot of relocations that will happen because everybody would like to have a new office for themselves. And it will definitely do well. We have done our work and I don't think we have any doubts from it.
And sir, to answer the other question the INR 109 crores. That is partner [indiscernible]
The partner has put -- I mean, that cash takeout from the partners? Okay. And just 1 question sir. So on this Aero City, what is the debt in that still?
In Aero City, the debt is INR 1,250 currently.
Total debt in that PSV, right?
[indiscernible]
Next question is from the line of Atul Tiwari from Citigroup.
Just 1 question. I mean, obviously, Prestige has been launching and selling and delivering a lot of projects over the past 10 years. We have always seen it has been the best in the sector. But obviously, in the last cycle, even though we were selling a lot of the debt buildup and then we had to sell our rental projects.
So I mean what we are doing differently in this cycle because very frankly, I mean, 1 recipe for disaster in the sector has been ramping up the residential business with the help of the debt that we have seen across the companies over the past 15 years. So I mean, if you could share your thoughts on that point and what we are doing differently this time to make sure that the debt is sustainable and there are no cash flow issues later.
There are 2 things. One of the reasons why debt has gone up compared to where we were is also the pace of growth. Raising additional capital by way of any dilutions, et cetera. We are meeting this growth either through internal accruals or debt. You would have seen in the past year on year, if you look at 3 years ago at INR 5,000 crores to now around INR 16,000 crores is 3x the growth, 300% growth.
And we need to gear up for it. And on the second is -- please look at the residential free cash, I mean, there were concerns earlier also, we are looking at creating these assets, which are much more valuable than can give much more returns than our borrowing cost and what the amount of money that we are borrowing.
So at any given point in time, while answering to earlier question, I said, the options exist for us to bring in a partner and reduce the debt, or complete this asset and bring in or sell it to somebody at a higher value or create this and go to the public markets and unlock your capital. So these options exist. See, we're not taking this money and investing in some lands, which are futuristic, which can be monetized 10 years, 20 years, 30 years from now. That's not what we're doing.
The [indiscernible] with every year, every quarter, we've been showing the growth in terms of operations. And every bit of this money is going to take the organization to the next level of growth. So the asset that we are creating in the free cash flow that we are going to generate out of residential will definitely take care and there is 3, 4x more work than the debt that we carry in the books.
The overall debt that is available right -- that is in the balance sheet right now is equivalent to our free cash flow from the ongoing projects. So all of it if you have to use it to repay the debt, debt will be 0. But we also need to look at the growth.
Ladies and gentlemen, we will take this as the last question for the day. I would now like to hand the conference over to the management for the closing comments.
Thanks, everybody. It's been quite an insightful interaction. We definitely have heard you, and we've also understood the concerns. But nevertheless, we are quite confident in what we are doing. And we are sure we're going to bring more and more value as we go on to the company.
And believe me, residential is doing well. It will continue to do well. There's no question of any doubts in our minds on that. There is enough demand in the market, and there is a lot of consolidation also, which is helping our cause. And by share delivery, there is a confidence, and that's why customers are coming to us as compared to any other developers. So that helps our cause.
On behalf of Axis Capital Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.
Thank you.