Sunteck Realty Ltd

NSE:SUNTECK

Earnings Call Transcript 2023-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to Sunteck Realty's Earnings Conference Call for Q1 FY '23. We have with us today, Mr. Kamal Khetan, Chairman and Managing Director of the company; Mr. Manoj Agarwal, Chief Financial Officer; and Mr. Prashant Chaubey, Senior Vice President, Corporate Finance and Investor Relations. Please note, this call will be for 45 minutes. [Operator Instructions] This conference is being recorded and the transfer 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 related to general business statements, plans and strategy of the company, its future financial presentation and growth prospects. These forward-looking statements are based on the expectations and projections and may involve a number of risks and uncertainties and other factors that could cause the actual results, opportunities and growth potential to differ materially from those suggested by such statements.

I now hand the conference over to Mr. Khetan, the Chairman and Managing Director of the company. Thank you, and over to you, sir.

[Kamal Khetan, executive]

Thank you for joining Sunteck Realty's First Quarter Earnings Call for the financial year 2023. Hope each one of you and your family are safe and healthy.

At the outset, similar to previous quarter, I would like to reiterate yourself to the guiding principles of new Sunteck, what we call Sunteck 3.0. The Sunteck 3.0 focuses on 3 key priorities: one, maintain a strong balance sheet and cash flow; two, continue to do marquee acquisitions in line with our business development strategy; third, building an exceptional team. In the quarter gone by, we have achieved a strong growth in both presales and collections. This continued strong operational performance has enabled us to generate close to INR 600 crores of operating cash flow surplus on a cumulative basis for the past 2 plus financial years.

I'm happy to note that in the quarter gone by, we successfully launched our one of the more new growth engines, Sunteck's Beach Residences at Vasai West. I am delighted at the overwhelming response received by the project. We are also eyeing launch of other projects in the upcoming quarters. This will enable us to maintain strong growth in the pre-sales as well as the collections.

On the execution front, construction is full swing at all our projects, namely Sunteck City 4th Avenue and Sunteck City Pinnacle at the ODC, Goregaon West; Sunteck MAXXWorld and Sunteck OneWorld at Naigaon; Sunteck BKC 51 and Sunteck Icon at BKC junction; and Sunteck Crest at Andheri.

Business development has been one of the core trends of our company. We intend to continuously leverage this trend of ours just like the 23 million square feet of acquisitions we have done post the first wave of COVID-19 pandemic. Our endeavor is to do similar acquisitions going forward over time. I'm very proud of the team that we have built at Sunteck in the last 15 years, and we are laser focused on strengthening it further.

I will now hand over the call to our CFO, Mr. Manoj Agarwal, for his comment. Thereafter, I would be happy to answer your questions, if any. Over to you, Manoj.

[Manoj Agarwal, executive]

Thank you, sir. Good afternoon, everyone, and thank you once again for joining us today and taking out your valuable time for Sunteck. Hope all of you are safe and well. The financial and official numbers have already been published on the stock exchanges. I believe all of you must have gone through the same. Now I would like to highlight the key financials and business performance numbers.

Our pre-sales grew by 89% on year-on-year basis in Q1 FY '23 to INR 333 crores compared to INR 176 crores in Q1 FY '22 last year. Collections grew by 66% year-on-year basis in Q1 FY '23 to INR 285 crores compared to INR 172 crores in the last year. With respect to the financial highlights, we have reported a consolidated revenue of INR 144 crores in Q1 FY '23 compared to INR 93 crores in Q1 FY '22. Consolidated EBITDA for Q1 '23 is INR 45 crores as compared to INR 21 crores in Q1 FY '22. Consolidated profit after tax for Q1 FY '23 is INR 25 crores as compared to INR 3 crores in Q1 FY '22. EBITDA margin for the quarter stood at 31% as against 22% in the last year same quarter.

We can now open the forum for questions from participants. Thank you very much.

[Operator]

[Operator Instructions] First question is from the line of Adhidev Chattopadhyay from ICICI Securities.

[Adhidev Chattopadhyay, analyst]

Firstly, congratulations to the team for a great start to the year. Sir, you had alluded in the last quarter of an INR 1,800 crores sales guidance for the year. Obviously, the Vasai launch has helped us in the first half. So could you outline what are the other launches for the rest of the year? And if you could just quantify what is the GDV of the launches, the value what we'll be launching during the rest of the year? That is the first question.

[Kamal Khetan, executive]

So Adhidev, as you see, we have already launched SBR. And from there we've got a very overwhelming response. So initially, if you see, most of the sales were from the 3 growth engines of Sunteck, which is BKC, ODC, and Naigaon.

Now getting SBR additional as a growth engine to the portfolio of Sunteck, that itself we are confident, with additional one project we will be able to achieve change what we have given the sales guidance. Over and above, if we are able to launch obviously, 1 or 2 more projects, the sales will only go upward from there.

[Adhidev Chattopadhyay, analyst]

So if I'm understanding correctly, you mean another INR 500 crores, INR 600 crores of incremental sales annually should come from this project? Am I understanding it correctly?

[Kamal Khetan, executive]

Yes, easily INR 400 crores to INR 500 crores we should be expecting. We have already done these kind of sales in the last 1.5 months or 2 months into our launch, we have already done the sales of -- title of SBR, we have already achieved sales of INR 225 crores, which was in less than 2 months.

[Adhidev Chattopadhyay, analyst]

Okay. Fine. Sir, second question is on business development pipeline. You alluded in your opening remarks that you are still looking at adding land bank across the area. So are you facing micro markets and any quantification of what sort of deals you can expect during this year?

[Kamal Khetan, executive]

So we are looking very aggressively. Obviously, it will be too early to disclose. There are a couple of deals which are, I can say, at an advanced stage. But I can only say we are trying to balance the portfolio across all the segments, like from the luxury segment to mid-income segment and also the affordable segment. So we have -- yes, the acquisitions are in line that. We can balance our portfolio so that the growth is proportionately across all the segments.

[Operator]

The next question is from the line of Yashwant Shetty, individual investor.

[Yashwant Shetty]

So my name is Yashwant Shetty. [indiscernible]. I want to know that in the balance sheet of March 2022, inventories are showing like about INR 4,000-odd crores, and in the latest presentation of quarterly results, so we can see that BKC is holding INR 1,500 crores of standing flats or something inventory. So may I know like it is already included in this INR 4,000 crores or it is a separate one?

[Manoj Agarwal, executive]

The question that you have asked is the market value of the BKC inventory. The INR 4,000 crores of inventory that you see in the balance sheet, that is the book value of the inventory. So there BKC will be -- out of that INR 4,000 crores, BKC is total INR 700 crores. And the value that you see in the presentation, that is basically the market value of the BKC inventory.

[Operator]

The next question is from the line of Aditya Mehta from GK Capital.

[Aditya Mehta, analyst]

Sir, I have 2 questions. The first one is, is there any limitation on the number of projects we can launch simultaneously in a financial year. Because if you see the launch side of SBR, it was around 500-odd units, if I'm not wrong. So is there any limitation on the team front that we have [indiscernible] on the team side that we cannot launch [indiscernible]?

[Kamal Khetan, executive]

I don't think that is the case. Because for that micro market, you cannot launch like 5,000 apartments at a time. So that is the reason. Looking at the demand and supply. Obviously, Aditya, we saw that the demand would be -- it seems the market adoption capacity won't be more than 500 apartments in that micro market. Accordingly, we launched that many apartments and we have got a very good response on the same. Obviously, we have done our homework, and we have seen that how much adoption can happen and accordingly we did the launch, okay?

[Aditya Mehta, analyst]

Okay. So going forward, can we launch 2 projects simultaneously in a quarter, because we have a huge lineup of projects?

[Kamal Khetan, executive]

Yes, we have done in the past, and we continue to -- we will do it, obviously. We have done in the past. And if there are 2 projects to be launched simultaneously in the same quarter, we will do, definitely.

[Operator]

The next question is from the line of Pritesh Sheth from Motilal Oswal.

[Pritesh Sheth, analyst]

So just to clarify, SBR, Vasai, contributed around INR 225 crore of sales this quarter?

[Kamal Khetan, executive]

Yes, SBR is INR 225 crores.

[Pritesh Sheth, analyst]

Okay. And what is the status of a couple of projects in Borivali or Kalyan and the project development. I mean, you have given the pipeline about when we are going to launch it, but at what stage we are right now to have that visibility that we are going to comfortably launch within our stipulated timeline that we have decided?

[Kamal Khetan, executive]

So Pritesh, these are all at, obviously, various stages of approval stage. And we all know that there are always uncertainties in terms of getting the approvals. Approvals are not in the hands of the company, although we are trying our best to get the approvals. But looking at the past track record of Sunteck that how fast we have turned around when we took our Naigaon, and how fast we have turned around SBR after the acquisition of the project.

Similarly, we are looking at the similar speed, and we'll try to turn around these projects also and try to launch them ASAP. But I cannot give you exact definite time line, because of the approvals, how much time it will take. But I can say at least we can be looking at 1 launch in next 1 or 2 quarters, minimum 1 big launch out of the new acquisitions. From the old acquisitions, the launches will continue like from Naigaon, the additional phase, from the ODC, maybe the additional tower from, let's say, SBR, again, launching additional towers in SBR, which is -- so all these existing projects that will be launching. But the new launch, definitely we are looking at least 1 launch in the second quarter or the third quarter.

[Pritesh Sheth, analyst]

So it should be like -- [indiscernible]____2748__ Kalyan, or...

[Kamal Khetan, executive]

So our endeavor is to launch all projects together, but it will be very difficult which one will be the first, telling frankly, Pritesh.

[Pritesh Sheth, analyst]

Okay. And secondly, on your business development, obviously, you have continued your focus there. But after that 23 million square feet, which we acquired post COVID, we have slowed down a bit. I'm not criticizing. But are we right now focused on launching the existing pipeline we have, then we are looking at more business development 1 year, 1.5 years afterwards, or we continue to look at BD and continue to build our pipeline from there?

[Kamal Khetan, executive]

So Pritesh, definitely, there is nothing like that because the launches are going on, we will not acquire, or when the acquisition is going on, we will not launch. Obviously, both have to go hand in hand, and the growth has to be across everything, in every department. So obviously, we are not looking like we'll do acquisition after 1 year or we will do now launches. It is all going hand in hand, I can say.

[Operator]

[Operator Instructions] The next question is from the line of Parvez Akhtar Qazi from Edelweiss.

[Parvez Qazi, analyst]

Thanks for the great performance. A couple of questions from my side. First, when do we expect the completion of the 4 under-construction commercial projects that we have currently? And the second question is to Prashant, what is the balance inventory currently left in the ODC project?

[Kamal Khetan, executive]

So I'll answer the first question, and I'll leave the second question for Prashant. Parvez, as far as completion of all the 4 projects, Sunteck Crest, we are looking to complete it in second quarter or maximum Q3; if not Q2, Q3. Similar is the situation for BKC Icon and BKC 51, both the projects on the junctions of BKC, it will be in Q3 or maximum Q4. And maybe the fourth project, Pinnacle, might go for the next financial year. But otherwise, 3 projects, we are looking to complete in this financial year itself.

[Prashant Chaubey, executive]

Parvez, the 3 projects that we have launched in ODC, that is Avenue 1, Avenue 2, and 4th Avenue. In all these 3 projects put together, we have close to around INR 800 crores of unsold inventory, which is pending to be sold. This does not factor in the balance receivables. And over and above this, Parvez, we have close to 4 million square feet of additional potential, which is yet to be developed. So this is the status of ODC.

[Parvez Qazi, analyst]

And if you could also give the unsold inventory number for Naigaon?

[Prashant Chaubey, executive]

Yes. So Parvez, in Naigaon, Sunteck WestWorld and Sunteck MAXXWorld, there is hardly any inventory which is pending to be sold. And in Sunteck OneWorld, we have close to INR 500 crores of unsold inventory, which is pending to be sold, and this does not factor in the balance receivable which we have to receive from the sold inventory. So that is the status of the ongoing projects. And the additional launch yet to be launched area is close to 8 million square feet.

[Operator]

[Operator Instructions] Next question is from the line of Kunal Lakhan from CLSA.

[Kunal Lakhan, analyst]

Kamal ji, can you please give us a status on the Borivali project, the land [indiscernible] resort has been cleared [indiscernible].

[Kamal Khetan, executive]

So Kunal, Borivali project, obviously, the land -- once they already shut, in fact, the club and all. And then the COVID came, obviously, and approvals got slightly delayed, and that's where the approval was taking time. So in fact, we voluntarily allowed the landlord to start the club once again. But we are now expecting the approvals to come. Hopefully, looking at the current situation and the way the approvals are moving, I think we are looking to get it cleared in maybe next 1 or 2 quarters. And if that comes, obviously, we will be all excited to launch the project.

[Kunal Lakhan, analyst]

But the club is operational you said?

[Kamal Khetan, executive]

Yes, the club is operational. That does not require -- they can just give 2 months', 3 months' notice and then shut the club.

[Kunal Lakhan, analyst]

Okay. My second question was on our BKC. You have not seen much of a traction in the last year or 6 quarters or so. When do we think -- we can see some traction picking up in this project, because we are like sitting on ready inventory and it's been a while. So how should we look at monetization of this project now going ahead?

[Kamal Khetan, executive]

So last quarter, if you see, Kunal, we have sold 1 apartment in Signature Island. I can only say this, Q1 we could not sell anything, but Q2 the traction is very good. And I think we will at least conclude, if not 3 deals, at least 2 deals in BKC.

[Kunal Lakhan, analyst]

And sir, lastly, on the business divestment side, the last few projects that we acquired were on the outskirts of the city. How should we look at the development or strategy going ahead? Will we still pursue project outskirts of city limits? Or will we look at projects within MMR region.

[Kamal Khetan, executive]

So it's not -- Kunal, if you see, it's balanced. Even out of the like 3, 4 projects that are -- the Borivali Eskay Resorts has been within the city limits. And if you look at Vasai, which is again a mid-income segment project, although it is on the outskirts, but going forward, as I said in my opening remarks also, and one of the questions I answered just now, that we are very clear we want to balance the portfolio, looking at even uber-luxury segment, mid-income segment, and affordable segment. So obviously, to get into mid-income segment and uber-luxury segment [indiscernible]____3553__, obviously, the more deals have to be within the city limits.

[Operator]

The next question is from the line of Prem Khurana from Anand Rathi.

[Prem Khurana, analyst]

Sir, most of my questions are already answered. Just a couple from my side. So one was, I mean, just now [indiscernible] recently delivered our WestWorld project in [indiscernible] 2-odd million square feet of area and [indiscernible]_any learnings that you had from this [indiscernible] deliver and [indiscernible] launch or projects in let's say Kalyan or Vasind. And were you able to kind of stick to our costs that we had in [indiscernible] when we started with this project?

[Kamal Khetan, executive]

So good question, Prem. In fact, if you look at -- I think we were very cautious because this was our first project where we were entering into the affordable project. And I think that made us actually more conservative, and we were very, very cautious. So the one thing what we saw that, in fact, since we were very cautious, I think what margins we were looking at in the affordable, it was 15% to 20%. I think now it is upward of 25% and close to 30% EBITDA margin, so which is very -- I feel, being there, we have been very good.

And I think completing -- so cost increase has been already offset by the increase in pricing. And I think what paid us is the good quality of construction and the speed of the construction and the timely delivery of the project. I think that if we maintain that for our future projects, I think we will always be commanding premium. And if you look at in Naigaon, I think we are commanding the highest premium, I think at least 25%, 30% over [indiscernible] in that micro market. And I think if we continue to get the quality and the construction within the time line, I think we will be able to deliver all our projects with better margins and better brand.

[Prem Khurana, analyst]

And [indiscernible] was on the [indiscernible].

[Operator]

Sorry to interrupt you. Can I request you to speak a little louder?

[Prem Khurana, analyst]

Yes. So am I audible now?

[Operator]

Yes.

[Prem Khurana, analyst]

Sure. So my second question was on Beach Residences that we recently launched. So I think the total development potential is almost around 5-odd million square feet of area. I think 5 million square feet single location only group housing would be kind of a dense project. And then there will be too much of high rises, right? So do we have any plan and how do we intend to have mix and match, like related to various product categories, retail luxury, I mean, villas or plots, or do we intend only high rises at Vasai?

[Kamal Khetan, executive]

So we have to look at -- Prem, the size of the 5 million square feet is within 50 acres. It is not on 10 acres. In Mumbai city, most of the developers are doing like 5 million square feet on 6 acres, 7 acres or 8 acres. So this is 5 million square feet on 50 acres of land. So obviously, we'll be doing a lot of [indiscernible] and villas and towers and everything. And not -- definitely, we will like to leave a lot of green areas. So for that, obviously, we'll do tower. And we'll do highrise tower for the sake of luxury, but not for making it congested or over high density. It's for making it in fact more greener and more better and more beautiful.

[Prem Khurana, analyst]

Any mix in mind as of now? Or is it still [indiscernible] in terms of mix that we would like to have in terms of luxury villas or different kind of apartments that you would want to offer. We'll start with 2 and 3. So I mean how are the configurations related? I mean whenever you launch your incremental phases, would we stick to 2 and 3 or there will be 3 and 4, and how much of these would be luxury villas? That's it from me.

[Kamal Khetan, executive]

So we are seeing in fact good things. One thing we are seeing is there is a huge demand for bigger and the larger apartments. So definitely now from 2 and 3, we may gradually move to 3 and 4. And maybe then with a 4, bigger apartment, and maybe more luxury. So we are seeing there is a good traction for [indiscernible] bigger ticket size. There is more demand for 3 bedroom than the 2 bedroom. In fact, there are a lot of inquiries from people that do you have 4 bedrooms or a larger 3 bedroom.

So obviously, now the new launches will be in line with the demand. And there is definitely a lot of demand for that last -- although we didn't launch this time, we wanted to see the demand. And whenever now looking at the demand, we'll look at also launching the villas, etc. And we want to be flexible as and when -- looking at what kind of demand, we will like to cater to that demand, but not compromising the luxury quotient of the project.

[Operator]

I would now like to hand the conference over to Chairman and Managing Director, Mr. Khetan, for closing comments.

[Kamal Khetan, executive]

Thank you, everybody, for attending the call. And if you have any further questions and queries, you may please call Mr. Prashant or our CFO and we will be always available for that. Thank you once again for joining us today, and please be safe.

[Operator]

Thank you very much. On behalf of Sunteck Realty, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.