Eldeco Housing & Ind. Ltd. — Call Transcript 2024

Aug 17, 2024

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CHANDNI
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Digitally signed by CHANDNI VIJ DN: c=IN, o=PERSONAL, title=9649, pseudonym=4ce0ea6706814cf99e394272ca0a6109, 2.5.4.20=91093c0d6ba1af4bc385ea8be4df8a6882774 b6d7f78217bf4b3eba276a070dd, postalCode=226016, st=Uttar Pradesh, serialNumber=74f0f260c4860dd16088d4c1b5f8fea53 325d3e968e31189a9c9e1c63ab7bc32, cn=CHANDNI VIJ Date: 2024.08.17 13:42:16 +05'30'

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“Eldeco Housing & Industries Limited Q1FY25 Earnings Conference Call”

August 13, 2024

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MANAGEMENT: MR. PANKAJ BAJAJ – CHAIRMAN AND MANAGING DIRECTOR

MR. MANISH JAISWAL – GROUP CHIEF OPERATING OFFICER

MR. SANJAY AGARWAL – GROUP VICE PRESIDENT, ACCOUNTS AND TAXATION

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Moderator:

Ladies and gentlemen, good day and welcome to the Eldeco Housing & Industries Limited Q1 FY25 Earnings Conference Call.

As a reminder, all participant lines will be in the listen-only mode. And there will be an opportunity for you to ask questions after the presentation concludes.

Should you need assistance during the conference call, please signal an operator by pressing "*", then "0" on your touch tone phone. Please note that this conference is being recorded.

I now hand the conference over to Mr. Abhishek Bhatt from E&Y Investor Relations. Thank you and over to you, Mr. Abhishek.

Abhishek Bhatt:

Good day, everyone. And thank you for joining us on the call.

Before we proceed to the call, let me remind you that today's discussion may contain forwardlooking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with a business risk that could cause future results, performance or argument to differ significantly from what is expressed and implied by such forward-looking statements.

Please note, the “Results and Presentations” are available on the exchanges and our Company's website. Should you need any assistance to receive them, you can write to us, and we will be happy to send them over.

Today on the call we have the Senior Management of Eldeco Housing & Industries Limited, which is represented by Mr. Pankaj Bajaj – Chairman and Managing Director; Mr. Manish Jaiswal – Group COO; Mr. Sanjay Agarwal – Group Vice President (Accounts and Taxation).

We will begin with the highlight of the Quarter followed by Q&A.

Now, I would like to hand over the call to Mr. Pankaj Bajaj for his “Opening Remarks”. Over to you, sir.

Pankaj Bajaj:

Thank you, Abhishek. Good afternoon, ladies and gentlemen. Welcome to our Q1FY25 Earnings Call. I am delighted to have the opportunity to share with you the progress and performance of Eldeco Housing & Industries Limited this quarter.

The highlight of the quarter was the launch of our luxury project Eldeco Trinity. With the total saleable area of more than 5 lakh square feet, Eldeco Trinity is a first truly luxury project in Lucknow. Apart from being a marquee project at a prominent location, the project will help elevate the Company's brand positioning for its other projects as well.

Though the bookings were off to a lukewarm start in the quarter, they have subsequently picked up significantly. As of today, the cumulative booking value is more than Rs. 100 crores. What has been encouraging is that the pricing has been much higher than our underwriting for the project. I am happy to report that, operationally, we have been consistent during the quarter. Our

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booking value has seen an increase of 89% year-on-year, reaching Rs. 59.1 crores in Q1FY25, up from Rs. 31.4 crores in Q1FY24. Our collections have been strong, showing 117% increase year-on-year with Rs. 55.3 crores collected in Q1FY25 compared to Rs. 25.5 crores in Q1FY24.

During the quarter, we handed over 114 homes to our allottees. All these possessions were offered before the contractual due dates or within the RERA timelines. Our construction spend during the quarter also grew by 105% year-on-year amounting to Rs. 35.6 crores compared to Rs. 17.5 crores in Q1FY24. This is expected to rise further in the coming quarters as we pick up speed for the construction of Eldeco Trinity. Our construction ecosystem in Lucknow is indeed the backbone of the Company.

On the “Business Development or Land Acquisition” front:

This quarter has been a mixed bag. As discussed in our last presentation, we are in the active process of aggregating land and three locations in Lucknow. We saw minimal progress on this front at two locations. However, at the third parcel, we have been able to aggregate about 46 acres of contiguous land. This will be a township format like Eldeco Imperia, but with a significant area dedicated to group housing or multi-storey apartments. We have engaged some of the best architects in the country to design an upmarket township on this land parcel. We hope to submit our plans for approvals in the current quarter itself.

Apart from this, the Company shall be submitting plans for approvals for two other apartment projects, including GH-4, aggregating about 5 lakh square feet in the current quarter. In conclusion, the trajectory of our Company is one of consistent and profitable growth.

Now moving on to our Financial Performance:

The consolidated revenue from operation was Rs. 29.2 crores in Q1FY25 compared to Rs. 24.8 crores in Q1FY24, a growth of 17.5% year-on-year. Consolidated EBITDA for the quarter was at Rs. 9.4 crores, a growth of 20% year-on-year. The Company's consolidated profit after tax stood at Rs. 8 crores in Q1FY25 as compared to Rs. 7.6 crores in Q1FY24.

With this, we will open the floor to questions, if there are any.

Moderator:

Abhishek Agrawal:

Pankaj Bajaj:

Abhishek Agrawal:

Pankaj Bajaj:

Thank you very much. We will now begin the question-and-answer session. The first question is from the line of Abhishek Agrawal from Prithvi's Finnmark Private Limited. Please go ahead.

Sir, my first question is, as you have launched Eldeco Trinity, which is roughly around 5 lakh square feet, and you mentioned another 5 lakh square feet would be launched. What can we expect the top line and when can it be achieved?

Top line in real estate as

I mean by GMV actually.

You mean sales booking, I think, is that right?

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Abhishek Agrawal:	Not sales booking, total GMV of this project.
Pankaj Bajaj:	Of which project?
Abhishek Agrawal:	Eldeco Trinity.
Pankaj Bajaj:	Trinity would be about Rs. 400 crores to Rs. 500 crores. And there because, as I mentioned, the
	per square foot price realization is high here. The other 5 lakh per feet is the spread over two
	projects is more than 5 lakh per feet. In fact, we have given the details in our Investor
	Presentation which we have uploaded. One is a project called Hanging Garden, which is about
	2 lakh square feet, a little over 2 lakh square feet. We expect the per square foot price relation to
	be Rs. 5,500 to Rs. 6,000. And there's another one called GH-4, that also we will be moving for
	approval, that's more than 3 lakh square feet. And that should also be in the similar pricing range,
	so that's another Rs. 300 crores total. So, between Trinity and these two projects, that should be
	about Rs. 700 crores to Rs. 800 crores.
Abhishek Agrawal:	Great. And the new project which will come in the future, so it is going to be in the range, or it
	will be type of Eldeco Trinity or we will see a bigger project or somewhere in this kind.
Pankaj Bajaj:	I have already mentioned in my opening remarks that we are aggregating land at three other
	locations. In two, we are seeing slow progress. The third one, I have already disclosed, the 46
	acres land has been successfully aggregated. And the size would be in fact bigger than Eldeco
	Imperia because the total saleable area will be higher, because it has group housing also. So, that
	would be a significant top line.
Abhishek Agrawal:	And are we seeing any increase in realization in the market we are getting right now?
Pankaj Bajaj:	Again, it's part of our investor presentation. So, last year our average realization was in the range
	of Rs. 4,500 square foot. The last quarter of last year, it increased to Rs. 5,500 square foot. And
	this quarter we have achieved Rs. 6,350 a square foot, that is largely because of Eldeco Trinity
	because it's queued in that direction. But you can see how remarkable the increase in per square
	foot realization has been. It's all there, Page 10 of the Investor Presentation, the top right the
	whole data is there.
Abhishek Agrawal:	Actually, I wanted to understand, means, we are seeing the increase in realization across the
	project or like it's only for the premium one?
Pankaj Bajaj:	So, it is across the projects, but of course the project category also matters. Eldeco Trinity is a
	much higher one in any case, but like-to-like also it is increasing for the last two, three years.
Moderator:	Thank you very much. The next question is from the line of Gunit from Counter Cyclical PMS.
	Please go ahead.
Gunit Narang:	I want to understand the timelines of project completion and handover for Imperia Phase-1, Twin
	Tower, Shaurya Arcade and Saksham.

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Pankaj Bajaj: All of them are completed. We applied for a completion certificate. I think one or two of them, maybe one of my colleagues can answer that question. We have already received the completion certificate and others we have applied for the completion certificate. So, suffice to say, in a couple of months, all of them would receive completion certificate. Gunit Narang: So, I mean, should we expect majority of these revenues to flow in Q2? Pankaj Bajaj: See, revenue recognition has nothing to do with completion certificate. It's got to do with the handing over of the unit. But most of these units will get handed over in Q2, if not, then in Q3. Gunit Narang: Can you share the maximum revenue potential from these four projects? Pankaj Bajaj: That data I would not have ready. If anybody of my colleagues has it, they can share it. I do not think we have it at that level. Gunit Narang: What percentage of units in these four projects on an aggregate basis would have been sold? Pankaj Bajaj: 90% have been sold. That data, Gunit, is also there in the Investor Presentation. Slide number 14 you will get all, Gunit. Just look at slide number 14, there is a total saleable area, the area which has been booked, what is the booking value, what has been collected, what is balance to be received, what is unsold, it is all there in granular detail. Gunit Narang: Perfect. Sir, basically, the revenue recognition from all four should happen in FY '25? Pankaj Bajaj: Yes. So, just can you repeat the project names, Twin Tower, Saksham, Imperia Phase-1 and which was the fourth one? Gunit Narang: So, Imperia Phase-1, Twin Tower, Shaurya Arcade and Saksham. Pankaj Bajaj: Yes, all of them should happen, yes. Gunit Narang: I believe, for Imperia Phase-1, the revenue potential was about Rs. 150 crores, Rs. 65 crores year for Twin Tower and, about Rs. 10 crores, Rs. 12 crores for Shaurya and Saksham. Pankaj Bajaj: I do not remember off hand, but the data is there in slide number 14. Moderator: Thank you very much. The next question is from the line of Anjali, an Individual Investor. Please go ahead. Anjali: Sir, I have two set of questions. One is about the sales strategy. So, do you have an in-house team for the sales? Or do you collaborate with external agency for the marketing and sales of our project? Pankaj Bajaj: It's a combination of both, Anjali. We have an in-house team and also we depend on partners who we call channel partners, basically our agents. These are RERA registered and they are registered for the project. And they sell on our behalf, and they get a commission for the same. So, it's a combination of both.

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Anjali: And the second question is regarding the cash flow front. How much cash do we have currently, which will help us to acquire more land parcels? Pankaj Bajaj: Sanjay, if you are on the call, please answer this question. Sanjay Agarwal: You mean to say what is the cash in hand as of now? Anjali: Yes, apparently. Sanjay Agarwal: As of now, Rs. 140 crores of balance is with the Company, out of which close to Rs. 60 crores is stuck in RERA bank accounts, and rest is with the Company for free use for future projects as well as for ongoing projects. Anjali: So, we would be using this entire cash on hand to acquire lands in the future? Pankaj Bajaj: It would be concurrently used for ongoing projects as well as for future aggregation of project lands, and other purpose. These are not the only two purposes of cash, there could be dividend as per the dividend policy of the Company. There is little debt also on the Company. So, it's fungible, it can be used for anything. Moderator: Thank you very much. The next question is from the line of Reshma Jain, an Individual Investor. Please go ahead. Reshma Jain: Congratulations on the launch of Trinity project. Sir my question is, what are the other projects, new projects that we are planning to launch this year? Pankaj Bajaj: I think, Reshma, I have already touched upon that. We are submitting at least three projects for approvals, GH-4, Hanging Garden and new project of over 46 acres, which we have not named as yet. So, depending on how quickly we get the approvals, we should be able to launch them. My estimate of the approval timelines is four to five months from now. Moderator: Thank you very much. The next question is from the line of Mannan Patel, an Individual Investor. Please go ahead. Mannan Patel: Congratulations for good launch. Sir, first question is regarding Latitude 27, so looks like the area that is launched, or saleable area of around 5 lakh square feet, only around 2.2 lakh square feet has been booked and it's still 2.4 lakh or 2.5 lakh square feet is remaining. So, are we facing some challenges in selling this project or how do we think about this? Pankaj Bajaj: On the contrary, we are very happy with the pace of sale. Please note that out of 5.16 lakh square feet of the total sellable area, 44,000 square feet is allotted to our partner. That's again there in slide number 14. Of the balance, we have not yet launched, open for booking about one tower, south one which is I think about 1 lakh or so square feet. So, practically we had only about 3.75 or 3.6 lakh square feet to sell. And that this product got launched only three or four quarters ago, and we have already sold, I think, more than 60% of it. The pace sale we are very happy with it.

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In fact, the pace of sale is much ahead of the pace of construction. So, we are on the second or third floor as far as the structure goes. And we are already 60% sold. And we still have one tower yet to open, for technical reasons we will open that maybe six months from now once we shift the sales gallery to under construction towers, and the area for that last tower becomes available. So, I do not think on the velocity or sales there's anything to worry in Latitude 27.

Mannan Patel: So, sir, one suggestion, on the same slide if you can add the area that is launched, then it will make it fairly clear.

Pankaj Bajaj:

Yes, we can do that. I think that is quite doable.

Mannan Patel:

And sir, you mentioned about the three projects that we are planning to launch, and in terms of square feet, would you have any idea of number of phases from the existing projects that we may launch during this year like Latitude you mentioned, your launch of tower.

Pankaj Bajaj: If you look at the slide, slide number 14, the total saleable area of the ongoing projects is 31 lakh square feet. Out of which 18 lakh or 19 lakh square feet roughly has been booked, and about 12 lakh square feet is available. So, all this is either available or about to get shortly available, so this is all there. So, even in Trinity 4.8 lakhs square feet it says unsold, but one tower we are holding, that includes one tower. As soon as the earlier towers come to a stage when they are reasonably 60% booked, we will open that tower. So, this 12 lakh is available to the Company to sell over the next year, year and a half. The new projects add 5 lakh, 5.5 lakh square per feet over GH-4 and Hanging Gardens. Manish, can you help me with the sellable area in the new project in Lucknow, the 46-acre project?

Manish Jaiswal: Sir, I do not have off hand number, but I think we broadly did some math, that's around 15 lakh square feet was the combination that was coming. Pankaj Bajaj: So, please mind, Mannan, the project is still under planning, not approved. So, that number can change. But as a ballpark if we take 15 lakh square feet there, 12 lakhs which is existing inventory, another 5 lakhs is coming. So, we are looking at 32 lakh square feet of inventory which is nearly available to the Company, and you know what our average realization was per square foot.

Manan Patel: Absolutely, sir. That's very helpful. And sir in terms of getting approvals and all, has that pace improved over last few quarters? Because I understand it was a bit slow going in last couple of years, so has that improved or changed?

Pankaj Bajaj: As a very broad comment, it varies from project to project, because there are project specific issues. But as a very broad comment, this approval process has become more predictable, generally. And not only UP, all over the country, the approval processes are predictable. We can put timelines with more confidence now. I have already spelt it out that I expect the new approvals to take about four to five months, six months maybe if it gets delayed. So, that's what we are hoping for.

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Moderator:

Thank you very much. The next question is from the line of Raj Singh, an Individual Investor. Please go ahead.

Raj Singh:

Sir, can you please tell how much expenditure we are planning to incur for the upcoming launches?

Pankaj Bajaj:

Can you just expound on the question, what is meant by expenditure to be incurred on the launches? You mean the launch expenditure or the cost of the projects, what are you asking?

Pankaj Bajaj:

Sir, launch expenditure, CapEx.

Pankaj Bajaj:

CapEx, how would you define CapEx in our business? Would you include the cost of land and cost of construction or what would you include in it?

Raj Singh:

Yes, sir, exactly, the cost of land and the cost of construction.

Pankaj Bajaj:

I do not have that number, but generally those numbers are there, we have disclosed the total square footage that we are going to build. And those numbers can be derived from our balance sheet, I think. It varies from project-to-project in terms of cost of land, and cost of construction is more or less similar, but cost of land really varies from project-to-project. If you are really keen, we can get back to you on this. I do not have this number off hand.

Raj Singh:

Sure sir. Sir, another question, so what is the competitive landscape in Lucknow? And how are you able to push forward your projects against others?

Pankaj Bajaj: That's a general kind of question. As you know, the real estate industry, market is quite fragmented everywhere in the country. No single player tends to dominate the market in any micro market. Same is the case in Lucknow. Having said that, over the last three, four years, there has been a trend of consolidation in the industry where the bigger players are getting better market share. And because we have been around Lucknow for a long time and done a lot of work, we are one of the leaders in the Lucknow market and we are a beneficiary of this trend.

The reason for these trends are many, because people want to buy from the bigger and more trusted brands. They want to see the track record. They are more assured of quality and timely delivery. So, that competitive edge is there with the larger players. At the top, Lucknow is not very crowded. There are about three or four players. I would not like to name my competitors here. But there are three or four players who between them are becoming bigger in Lucknow.

At the same time, the market itself is growing quite well, the Lucknow market, as I keep saying, because I think it's at an inflection point. And for not only these top three, four players, but even for the smaller players, there's enough space. So, it's not really very competitive in that sense, because the market itself is growing at a rapid pace. So, everybody is doing well as long as you are delivering quality, delivering on time, pricing it reasonably and the project design is something which the market likes.

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So, I am not worried about the market side. As I have mentioned in many of the last calls, the main constraint right now for the last two to three years has been the supply side, how do you get developable land which is compliant in all forms, which gets the approvals, which does not have a title risk, and at a reasonable price and offer it to the market. As long as you do that, there is enough and more demand. So, I do not know if that answers your question.

Moderator:

Thank you very much. The next question is from the line of Varun Gupta, an Individual Investor. Please go ahead.

Varun Gupta:

Sir, my question is on the revenue visibility for the financial year '26. So, most of our projects are either supposed to be completed in FY24 or in FY26, late FY26 and FY27. So, for which all projects the revenue will be accounted for in financial year '26?

Pankaj Bajaj:

We usually do not give that kind of guidance because completion certificate is not in our hands.

Varun Gupta: But based on the expected completion, because that is there in the Slide 14, but I can see that either the completion date is of financial year '26-'27 and FY24, nothing is there for FY25.

Pankaj Bajaj:

You are right about that; real estate is indeed a lumpy business.

Varun Gupta: Or are we planning something like a new project for a shorter duration? Pankaj Bajaj: No, our management strategy is not geared towards showing some completion every quarter. I mean, if it is the case that there are less completions in next year then so be it, we will live with that. I mean, we will not do projects because we have to show some completion. I do not think that's how it works.

Varun Gupta: Because you need to meet the working capital also, like the running expenses for the Company. So, I think some kind of.

Pankaj Bajaj: So, these are long gestation projects, each project takes four or five years. And the working capital is supported during the period that the project is getting built. You have 70% designated accounting RERA, and there's 30% account. That 30% account is more than enough to take care of the working capital needs.

Varun Gupta: And my second question is on the Eldeco Trinity. So, by when we are targeting to sell this project? Because there is a pipeline of 6 lakh square feet also coming in, and you are also aggregating a huge land like 62 acres. So, is there any target?

Pankaj Bajaj:

No, Varun, these are not very big targets. It's not a huge land. It's not less, it's not more, and it's a reasonable amount of land. It's not something that we have to worry about that we have so much supply coming in that we need to, we are under no sales pressure. It is very reasonable kind of inventory pipeline that we have. There is no pressure to sell it out fast, and there's no need to hold on to it either. So, it's a continuous process during the life cycle of the project. As I answered in one of the other questions, by the time the project is finished, nearly 90% to 100% is sold out, and that is what I expect in Trinity as well.

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Varun Gupta: And on this Bareily project, so currently we have like 260-odd square feet still left, and I think the sales there is slow. So, is there any reason for that. Pankaj Bajaj: Not really. So, if you look at the total saleable area, it's about 8 lakh square feet, so we have nearly full of 80%, it's not really of worrisome situation. Moderator: Thank you very much. The next question is from the line of Priyam Poddar for Value Equity. Please go ahead. Priyam Poddar: Basically, I would like to ask two questions, so we are pleased that our average realization that has slowly inched up from Rs. 4,500 mark to now close to Rs. 6,300 plus. So, does the management see that these realizations are sustainable? That is number one. Pankaj Bajaj: So, the major increase has been because of skew in the product mix. It is largely because of Trinity. So, there is an organic increase which happens quarter-on-quarter, which has happened in the last many quarters because prices have gone up for many reasons, increased demand, increase cost, etc. So, that is one part, and that is an organic number. The major shift has happened because the product mix has changed this quarter, largely it is Eldeco Trinity. Now if you ask me, is it sustainable on every quarter? No. The product mix size skewed once; it will not skew every quarter. Our bread-and-butter business does remain the township format on the outskirts. So, it is not going to increase at this way because of the product mix skew it is getting reflected as a huge jump in this quarter. I think it's nearly a 30% jump this quarter. And real estate prices have not jumped 30% in the last quarter, if that is what you are thinking. Priyam Poddar: Correct. So, if you can just highlight what range that we should see in the coming quarters? Pankaj Bajaj: So, it should be in the range of Rs. 5,000 plus, it depends on what gets launched in that quarter. I have already indicated that for GH-4 and Hanging Garden it will be Rs. 5,500 plus. For the large township projects, it will be around Rs. 4,000 plus. But it's too early to say these things, if it's closer to the launch then the pricing is decided.

Priyam Poddar: Sir, last question from my side. So, how do you see the growth trajectory for the next three to four years? And your strategies for the same, sir. Pankaj Bajaj: No change in strategy. It's the same strategy. It's the same consistent strategy. Do not try many new things. We're not going to make malls in Lucknow. We're not going to do like 1 million square feet IT parks or something like that. If you look at this Company, it has been doing the same thing over and over again, and the profitability has only been increasing. That's what we want to continue to do. So, that's on the strategy part.

And the next three, four years, already our DD pipeline and the square footage under development has been transparently disclosed in the presentation. You can just add that and see how it looks over the next three years. And suffice to say, we have enough inventory for the next three years.

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Moderator: Thank you very much. Next question is from the line of Gunit from Counter Cyclical PMS. Please go ahead.

Gunit Narang: Sir, I would just like to understand the margin profile of Imperia Phase-1 and Twin Tower. So, are these luxury or high-end projects? I mean, since we did not have any, big launches in FY24 or FY23, are these expected to give us higher margins year-on-year? Can you please share some thoughts on that? Pankaj Bajaj: So, again, go back to slide number 14. You have the sellable area in Twin Tower, and almost the total price per square foot realization also can be derived from the number there. So, it cannot be termed a luxury product. It's a premium project in the Lucknow context. You can say that the realization has been Rs. 4,500 a square foot, so it cannot be called luxury. Nor is Imperia luxury, if you look at the total value of area booked and you see the sellable area, it's not luxury. It's our bread-and-butter business, which is Rs. 4,000, Rs. 4,500 a square foot kind of product, historically. Now, obviously, that number has gone up. I have forgotten what your second question was. Gunit Narang: I mean, if we look at the margin profile of these projects, should they be in line with the 35% kind of margin that we are making? Or should we expect them to be better, because these are like bigger project in terms of scale? Pankaj Bajaj: No, no. So, even though the per square foot price realization in these products is not very high, but the profit margins are quite good historically for all Eldeco projects. The reason is that we are very efficient in land procurement. So, in both these projects the land which was procured was at a very reasonable price which adds to the profit margins. So, profit margins are good, even though price realizations are not over the top. Gunit Narang: Sir, I agree to that. But since these are large scale projects, I mean, do we have some more leverage in terms of margins? So, I mean, we have been doing like 35% margin. So, what I am asking is should we expect margins to be better than those levels directionally from these two? Pankaj Bajaj: In these two projects? Gunit Narang: Yes. Pankaj Bajaj: No, I do not think you should be expecting more profit than that. Gunit Narang: So, 35% is reasonable but? Pankaj Bajaj: I cannot answer specifically for a project. But in general, I would be very happy if I can continue to make 35% of profit margin, that will be a fantastic business, hardly any business in India gives you 35% margin. Moderator: Thank you very much. As there are no further questions, I would now like to hand the conference over to the management for closing comments.

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Pankaj Bajaj:

Moderator:

No further comments from me. Thank you everybody for joining us today. I look forward to sharing our progress in the quarters to come.

On behalf of Eldeco Housing & Industries Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.

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