Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Godrej Properties Ltd (BOM:533150, Financial) achieved its highest ever net profit in Q1 FY25, amounting to INR 520 crores.
- Booking value grew by 283% to INR 8,637 crores, marking the highest quarterly booking value and volume across listed developers in India for the second consecutive quarter.
- Net operating cash flow grew 737% to INR 988 crores, supported by a 54% increase in collections to INR 3,012 crores.
- The company added two group housing projects in Pune and Bengaluru with an estimated booking value of INR 3,000 crores in Q1.
- Total income for Q1 increased by 25% to INR 1,638 crores, and EBITDA increased by 237% to INR 774 crores.
Negative Points
- There are concerns about potential delays in project approvals in Pune and Mumbai due to upcoming elections.
- The Ashok Vihar project in NCR continues to face delays due to issues related to tree removal and court matters.
- The company has a high gearing level of 71%, raising questions about future capital allocation and potential equity raises.
- There are risks associated with the volatility in quarterly customer collections, which can impact cash flow predictability.
- Concerns were raised about the potential impact of delays on underlying IRRs, although price appreciation may offset some of these effects.
Q & A Highlights
Q: Pirojsha, my first question is on your margins/profitability. Given what you've seen in Q1 and the way pricing has been behaving more recently, would you expect us to anchor our FY25 and '26 expectations around FY24 levels? Would you suggest an upward bias to that?
A: Thanks, Kunal. Of course, the effort will be to continue to improve margins, and we'll continue to provide that pro forma P&L information on an annual basis. In Q1, I think we are very happy with the kind of number we've seen. There's a similar but slight uptick in margin over FY24 levels. Given the high booking value, we think the imputed return metrics are at a very attractive level. But certainly, we will continue to provide that on an annual basis. And I think FY24 is probably reasonably -- I think it will be reasonably close to FY24 levels this year as well, but hopefully, we can improve it a little bit.
Q: From an area perspective, we are actually doing a pretty big number now on a quarterly basis in terms of sales. So I wanted to check if there's any tinkering you think you would need to do on the delivery side, just to make sure that project completions, et cetera, would keep up pace over the next 2 or 3 years?
A: Kunal, thanks for the question. Essentially, you're right, where our scale has multiplied and what we've been doing is a lot of investments have been given on the capability side. You would appreciate we always had our own structure where we had strong execution teams. In fact, we're the only company which has a site head operating model. So it's something like a bank branching model where you have a self-sufficient unit to lead scale. But over the last, say, 9 to 12 months, what we've done is we've kind of invested in building up capabilities on certain engineering and execution side in various zones as well as in HO because we could clearly see this as a lead indicator for us in the future. And coupled with that, we've also managed to bring some very good contractors in projects which we've seen sort of had slowed down. Like Godrej Reserve, we've got listed in it a very prominent contractor. So yes, this is something has been in our radar for good last 12 months, and now we are almost ready to execute the strategy.
Q: Your progress in NCR and Bangalore has been there for everyone to see. Specifically on Mumbai and Pune, I think the presentation shows that by and large, you sort of converted 10% of your launch pipeline to actual launches in Q1. How are you sort of thinking about your ability to push through rest of the stuff in the pipe? Also noting that Maharashtra could have elections towards the end of Q2, start of Q3.
A: If I take a step back and give you a sort of a background and then maybe give you a year end picture, see, Mumbai zone has been a very strong turnaround we've seen in the last 2, 3 years. It used to do about INR 1,500 crores to INR 1,600 crores in FY '22, in FY '23 it doubled to about INR 3,000 crores. Last year it became the second largest zone in GPL and did about INR 6,500-plus crores. And the good thing is that all the great work of BD in the preceding say 18-odd months has given us a strong pipeline, which is getting into launch. So coming to your specific question from the very short term, which is 3 months to, let's say, 6 months, we have a series of projects, which are a bit coming along and some of which we've almost secured the approval and some of which they're in almost last leg of approval which hopefully will be coming on time. And to give you a sense, we will have a new tower launch coming up in Godrej Reserve which has been the highest selling project for not just Godrej Properties, but entire Mumbai market, so I'm hoping that will be a very good launch. We have something coming up in Bhandup and Khalapur as slotting launch. So yes, we have a robust short-term sort of a pipeline. Again, similar trends we are noticing in Pune as well, we have a series of launches planned in Q2 and some may move to Q3, but looks to be very much within the quarter. To give you a sort of sense we have sort of a large important cluster launch in Mahalunge and looks to be more or less secured approval, last stage of approval is in process, Manjri, and then there is a low probability to medium probability of some retail in one of the Koregaon projects that we had acquired. So yeah, we're reasonably confident, Kunal, that we will see. Agnostic to this two zones, I would say generally in our business, we would appreciate, it's a combination of approval timeline. And if the approvals are in advanced stages, either certain launches happen in this or the other quarter, but more or less kind of secured.
Q: Do you see any risk of delays in approvals in Pune and Mumbai given the upcoming elections?
A: Yeah. I mean internally, we have, frankly, a larger set of approvals that we continue to do that, and we do see in any approvals, there is that risk. But the ones that I talked to you right now about, it was most likely high probability kind of cases. Yes, there is always going to be that risk, but it seems very likely that these should come in, more or less 80% of these will come in.
Q: If you can talk a bit about the projects which we've been waiting for a while, Ashok Vihar, Worli, what is the progress there?
A: Yes. So I think that, unfortunately, continues to be a bit delayed. The essential issue there is the trees on the site and how they are to be treated and at NCR unfortunately, over the last 12, 18 months there has been a huge focus on tree removal and there's several matters in the court. So it is taking longer than we expected to get that approval. We're, of course, working full steam on it. But I think visibility in terms of exact timeline, frankly, is not currently available, and it's not likely to be a kind of this quarter, next quarter launch, but we're hoping to do it by Q4, if possible, but to be perfectly frank, that has moved slower than we would have liked. Of course, I think given the number of projects we've added both at NCR and elsewhere, we are quite confident of our ability to be able to make up from any gap in short-term sales by the delay of that launch.
Q: Does it -- has it impacted your underlying IRRs given that there is a delay on the other side, there could possibly have been an
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
