Ganesh Housing Corporation Ltd (GANESHHOUC) Q3 FY23 Earnings Concall Transcript

Ganesh Housing Corporation Ltd (NSE: GANESHHOUC) Q3 FY23 earnings concall dated Jan. 18, 2023

Corporate Participants:

Rajendra Shah — Chief Financial Officer

Ravi Kapoor — Corporate and Financial Advisor

Neeraj Kalawatia — Vice President, Finance

Analysts:

Rajat Gupta — Go India Advisors — Analyst

Puneet Gulati — HSBC — Analyst

Avinash Gorakshakar — ProfitMart Securities — Analyst

Jay Shah — Dolat Capital — Analyst

Amanjit Singh — Oculus Capital — Analyst

Ashish Kumar — Infinity Alternatives — Analyst

Gaurav Somani — Korman Capital Advisors — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Ganesh Housing Corporation Limited Q3 FY ’23 Earnings Conference Call hosted by Go India Advisors. 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. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Rajat Gupta from Go India Advisors. Thank you, and over to you, sir. Yeah. Thank you, Neerav [Phonetic] Good afternoon, everyone, and welcome to Ganesh Housing Corporation Limited Earnings Call to discuss the Q3 and Nine Months FY ’23 results. We have on the call with us today Mr. Rajendra Shah, Chief Financial Officer; Mr. Neeraj Kalawatia, Vice President, Finance, and Mr. Ravi, Corporate and Financial Advisors. We must remind you that the discussion on today’s call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that the company faces. We now request Mr. Rajendra Shah to take us through the company’s business outlook and financial highlights, subsequent to which we will open the floor for Q&A. Thank you, and over to you, sir.

Rajendra Shah — Chief Financial Officer

Thank you, Rajat, and good afternoon, ladies and gentlemen. We thank you all for joining us on this call today to discuss our Quarter Three and Nine Months Financial for FY ’22, ’23 operational and financial performance. I would like to begin by sharing my thoughts on current real estate environment, especially, in Ahmedabad. The current market trend is very favorable, and we believe that up-cycle in the real estate market is going to continue. Demand and upgrade to large homes, price hikes across the sector has been very well absorbed by the consumers even in a rising interest rate in environment. The salaried class and the users have — users are driving the demand in mid-income segment. Luxury market also continues to do well in — and history tells us that luxury market — luxury real estate market generally picks up in up-market cycle. The GIFT City has seen increasing demand from foreign investment and there is a high degree of interest from banking and financial sectors. We have occupied more than half of city’s real estate — city’s commercial real estate.

Coming to our quarterly performance. We are happy to report another quarter of robust performance. Our aspiration and focus for last few quarters were to deleverage our balance sheet. And we are very happy to announce that the company has become a net debt-free in Quarter Three Financial Year 2022-2023 from a peak debt of over INR6,500 million around 3.5 years back. On gross debt side, we have a minor debt of only INR143 million as we speak, which after cash balance and fixed deposit is negative debt position for the company. The company continues to maintain an extremely healthy debt-equity profile and other parameters when it comes to deleveraging the balance sheet.

Coming to our financial performance for Quarter Three and Nine Months ended December 2022. Our revenue for Quarter Three ’23 came in at INR674 million versus INR761 million in Quarter Three for financial year ’22. Slightly lower on account of high sales velocity from our project Maple Tree during that period. During nine months ended for financial year ’22, ’23, our revenue grew at 91% and came in at INR4,378 million versus INR2,293 million in nine months ended financial year ’21, ’22. Our EBITDA grew at 48% year-on-year and came in at INR475 million for Quarter Three financial year ’22, ’23, versus INR322 million in Quarter Three ended financial year ’21, ’22. During nine months ended financial year 2022-2023, EBITDA grew at 82% and stood at INR1,514 million, versus INR831 million in nine months ended financial year 2021-2022. Our PAT for Q3 financial year 2023 came in at INR303 million versus INR248 million ending in Quarter Three financial year ’21, ’22, registering a growth of 22% year-on-year in nine months ended financial year ’23. PAT increased at 38% to INR627 million versus INR454 million in nine months ended financial year ’21, ’22. Our finance cost was reduced by more than 60% or stood at INR179 million in nine months ended financial year ’22, ’23, compared to the nine months ended financial year ’21, ’22. Additionally, our collections for the quarter stood at INR307 million.

On the project update. Both our projects namely Malabar County 3 and Malabar Exotica currently under development were 100% booked. In Malabar 3 project, we have received RERA approval and permission to commence construction in February 2021. During 22 odd months actual construction post this approval, we are happy to announce that we have completed 100% construction in this project across six towers. It is also a reflection of underlying value in the company given that we have achieved construction milestone well ahead of scheduled timelines. We have applied for building use permission which is occupation certificate and expecting the same to get from Ahmedabad Municipal Corporation during this quarter itself.

In Malabar Exotica project, we have received RERA approval and permission to commence construction in July, August 2021. During 17 odd months period, we have managed to complete more than 40% of the project and we have been progressing ahead of the scheduled completion. Our planning for this project is nearly — our planning for the new project is nearly completion, and we will be able to launch these projects very shortly. As of December 2022, we have no inventory in ongoing project. Also ending December 2022, we have unsold completed inventory of 0.1 million square feet, which we value at around 40 million. On the strategic initiative partnering with Tishman Speyer for development of SEZ first phase, which would be a commercial development of around 1.2 million square feet of gross leasable area, the master plan is under progress and we will soon be rolling out our plans for the — in related to this project, including layout plan and floor plans. We have — as we mentioned earlier, this is Tishman Speyer’s first project in Ahmedabad, which will enable us to collaborate for the SEZ development, property and lease management in a phased manner.

Having worked with global giants like Meta, Amazon, LinkedIn, J.P. Morgan, Accenture, Nike, and some of the very, very notable Indian blue-chip companies, Tishman would bring along with them practice of international standard for benchmarking, monitoring project progress and quality assurance. They will also liaison with various agencies in project development, design, and leverage its wide international network for development and marketing of SEZ project.

To conclude my remarks, real estate sector prospect remains very strong with a cohesive improvement in demand, supply and prices, continuing investment in Ahmedabad and surrounding areas in manufacturing, IT and other sectors, coupled with the emergence of GIFT City as a global financial services center has contributed to attracting international talent resulting in size of property demand. We are confident about our trend to — about this trend to continue in Ahmedabad. And with our superior execution track record and strong project pipelines, we are confident of achieving significant profitability in coming years.

With this, I request the floor to be opened to questions and answers. Rajat, can you take over, please?

Rajat Gupta — Go India Advisors — Analyst

Yeah. Please [Speech Overlap]

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Puneet [Phonetic] from HSBC. Please, go ahead.

Puneet Gulati — HSBC — Analyst

Yeah. Thank you so much and congratulations on good numbers. My first question is with respect to your project ongoing and planned. So, you said there is only 0.1 million square feet which is unsold. So, what are you going to do for next couple of quarters?

Rajendra Shah — Chief Financial Officer

Thank you. See, we — though we have — we don’t have much of inventory which is left in completed or ongoing project, however, we are planning to launch a few projects. I’ll just give you a brief about those. About 4.5 lakh square feet of residential project called Retreat is underway. And apart from that, we will be soon launching SEZ project, which is in partnership with Tishman Speyer, which will have about 1.2 million square feet of gross leasable area, minimum. This area may increase, but 1.2 is minimum what we will be constructing over there. So, these two projects are there in immediate pipeline. Apart from that, we — there are other projects which will come in. But these two things are for immediate development.

Puneet Gulati — HSBC — Analyst

So, what is the stage of approval for Retreat now?

Rajendra Shah — Chief Financial Officer

Retreat, we are approaching last leg of approvals, meaning Raja Chitthi, or permission to start construction is something which we are expecting. Once that comes in, we need to apply for RERA and start with construction.

Puneet Gulati — HSBC — Analyst

So, what kind of timeline are you looking to launch this?

Rajendra Shah — Chief Financial Officer

About — conservatively, I will say two, maximum two, two and half months. But it can start in a month’s time also.

Puneet Gulati — HSBC — Analyst

Is RERA giving approvals so fast?

Rajendra Shah — Chief Financial Officer

Yeah. RERA generally takes about a week after you apply to them.

Puneet Gulati — HSBC — Analyst

Okay. That’s good to hear. And on the SEZ project, can you help us understand the business model? What’s happening there? I mean, would you sell? Would you lease? And what kind of investment will you need to put in and what kind of money will Tishman put in ultimately?

Ravi Kapoor — Corporate and Financial Advisor

I’ll take the question. The SEZ comprises of both the processing and non-processing zones, both. At this point in time with the processing zone, we are looking at more on the lease model along with the Tishman Speyer that they will be constructing and they’ll be leasing out the entire property. And for the non-processing, it would be the residential. That will be on a sale model basis. This is — the first one is only for about two towers at this point in time, like what Mr. Rajendra just spoke. But going forward, it’d be not necessarily be the same model even for processing zone. It can be a mix of both leasing as well as sellout.

Puneet Gulati — HSBC — Analyst

So, two towers worth 1.2 million square feet, right? Is that understanding correct?

Rajendra Shah — Chief Financial Officer

Yeah.

Ravi Kapoor — Corporate and Financial Advisor

Yes.

Puneet Gulati — HSBC — Analyst

So, fairly large towers here. And what is the economics here? I mean, who is going to bear the construction cost and what is the percentage sharing between you and Tishman?

Ravi Kapoor — Corporate and Financial Advisor

No, there’s no sharing as such between Tishman and us. The entire thing belongs to GHCL only, Ganesh Housing. The construction cost is therefore to be borne by Ganesh Housing only. They are helping in two things majorly, and that is the construction itself, that is, they’ll be the DM there, as well as — that is the development management, and on the leasing it out also. They’ll be getting large because they have experience in leasing out these kind of properties all over India, and of course, the world, and therefore, they’ll be helping in getting the lease of all these premises. So, that’s their contribution, for which they get paid. But the entire revenues and profitability is of Ganesh Housing only.

Puneet Gulati — HSBC — Analyst

Okay. So, this scenario will become your annuity portfolio for 1.2 million square feet?

Ravi Kapoor — Corporate and Financial Advisor

Absolutely correct. Absolutely.

Puneet Gulati — HSBC — Analyst

And what are the rentals you’re looking at?

Ravi Kapoor — Corporate and Financial Advisor

Well, it’s been flexible. At this point, it is very difficult to say, but it can be much higher, at least 10%, 15% higher than the normal rentals which are prevalent in this market because of the kind of a building that we are planning, as well as because Tishman Speyer is involved in this.

Puneet Gulati — HSBC — Analyst

So, what numbers can one generate?

Ravi Kapoor — Corporate and Financial Advisor

I think it would be around INR60 per square feet or so, around that. It could be little higher too. But we are being a little conservative at this point in time. Once we see the traction in the first few, then we’ll be able to tell you the exact numbers even with more confidence. But IRN60 seems to be definitely fair, which is as I said, much higher than the normal rentals.

Puneet Gulati — HSBC — Analyst

And apologies, I’m not very familiar with where this land parcel is. If you can guide…

Ravi Kapoor — Corporate and Financial Advisor

We’re at — yeah, if you — this is a new — this is a place where actually the entire development is happening in Ahmedabad at this point in time. It is called the Vaishnodevi Circle. It is on the SG Highway, Sarkhej-Gandhinagar Highway. And the city has been moving towards that now. So, a lot of development is happening in and around there. So, that’s the new CBD, because Adani’s Shantigram is close by. We’re here. Reliance is coming with their corporate office that side. And a lot of Zydus hospital is — I mean, Zydus office is just on the circle itself. So, that’s a place where the CBD is moving and that’s where this SEZ is. Therefore, we believe that it would be moving very soon, that area itself.

Puneet Gulati — HSBC — Analyst

And will it be competing with GIFT City in any way?

Ravi Kapoor — Corporate and Financial Advisor

No. It cannot be compete — actually, it is complementing GIFT City. It is not competing with it. GIFT City is quite far from there. Do you want to add anything?

Neeraj Kalawatia — Vice President, Finance

I just wanted to add here. See, if you see the primary motive for the GIFT City is basically to promote the international finance trade. And predominantly, the beneficiary for that will be the BFSI and your exchanges as well as foreign controlled AIF funds. And if you see the numbers which are increasing their year-on-year and continuously are from these three segments only. And once they set up, primarily our target market will not get impacted because of the booming piece and the GIFT City.

Puneet Gulati — HSBC — Analyst

Understood. That’s very helpful. Thank you so much and all the best.

Operator

Thank you. The next question is from the line of Avinash Gorakshakar from ProfitMart Securities. Please, go ahead. Avinash, may I request you to unmute and go ahead with your question, please?

Avinash Gorakshakar — ProfitMart Securities — Analyst

Yeah. I think — I wanted to understand the ongoing projects, sir, which are going in Ahmedabad. If you could give some color on the kind of average prices which you are getting. I mean, just to get a flavor of how the real estate market in Ahmedabad is faring. You mentioned in your opening remarks that despite rising interest rates, demand is not affected. So, if you could give some idea about what are the kind of average rates are prevailing currently? And what is the kind of outlook for the next two to three quarters?

Neeraj Kalawatia — Vice President, Finance

Yeah. Thank you for your question. See, if you see in our projects where we are operating, our current prices are ranging from somewhere around INR3,800 to INR4,500. That is how we are pricing our projects. On a overall, if you see from Ahmedabad perspective, during year 2022, the average pricing in Ahmedabad were somewhere between INR3,000 to INR3,200, which is basically because of their low pricing pockets are also there in Ahmedabad, plus there are the medium segments are also there which are operating. If I average out, these are like lying between INR3,000, INR3,200. So, even if you compare with a city like Bombay, INR3,800 to INR4,500 is pretty cheap in terms of the pricing of any real estate sector. So, that way, we are seeing the absorption also is coming very nicely even with the price hike during last calendar year.

Rajendra Shah — Chief Financial Officer

So, basically, just to sum up what Neeraj has said, despite of price rise, the price point needs to be very attractive to customers at large. However, there are pockets where prices are very high by Ahmedabad’s standard would mean, somewhere in Bopal Ambli you can achieve rate of about INR10,000 a square feet on chargeable area, whereas in — if you are at far off places, like Adani Shantigram or somewhere around that, you would get somewhere about INR4,500 to INR5,000 rupees a square feet as a sale realization. So, I think this would give you a broad range of price range in which market is operating in Ahmedabad.

Avinash Gorakshakar — ProfitMart Securities — Analyst

Anyway. Thank you very much.

Rajendra Shah — Chief Financial Officer

Yeah.

Operator

Thank you. The next question is from the line of Jay [Phonetic] from Dolat Capital.

Jay Shah — Dolat Capital — Analyst

Hi. Thank you for the opportunity.

Operator

Jay, sorry to interrupt you. Your voice is echoing. May I request you to speak through the handset?

Jay Shah — Dolat Capital — Analyst

Yeah. Sure. Hello? Yeah, is my voice audible now?

Operator

Yes.

Rajendra Shah — Chief Financial Officer

Yeah.

Jay Shah — Dolat Capital — Analyst

Thank you for the opportunity. I have a couple of questions. So, first is both our residential projects are booked and we don’t have much inventory as well. Have seen players like Godrej emerging really strong, done extremely good in terms of sales booking for their new project in Ahmedabad, and are very confident of upcoming projects in Ahmedabad as well. So, why are we not launching new projects and planning it for later down the year? So, first question is that.

Rajendra Shah — Chief Financial Officer

Sure. So, we are in process of launching our Retreat project. And once we have launched our SEZ project in processing zone — in non-processing zone, we are underway meaning, on our drawing board, there is a plan to launch a phase of non-processing zone, which will be mostly residential. So, in fact, there is there is under current, and we are planning to — in short time, you will see one residential project in terms of Retreat and other residential project in terms of development of non-processing zone in SEZ, which will be mostly residential is also underway.

Jay Shah — Dolat Capital — Analyst

Okay. And secondly, just wanted to understand what would be the outright land sales cumulatively? We might have done in last three-four quarters, both in terms of area and value. Also, what are the locations where we sold this land and what’s the rationale behind selecting these locations as land parcels?

Rajendra Shah — Chief Financial Officer

So, Jay, just to answer you, meaning, like — we have collected certain land parcels and when you are aggregating certain land parcels, you generally see to is that those land parcels have to be contiguous. So, that it will give you a good plan for development. However, in the process when you are left with certain land parcels which are not contiguous and which are not part of your core development, you would like to monetize those land parcels. So, basically, these are those land parcels which are selected for monetization, which have been sold in past two to three quarters. However, meaning quantum of how much area, which place these are sold, these are sold near Godhavi is the area where these non-critical lot — land parcels we were owning which have been recently sold.

Ravi Kapoor — Corporate and Financial Advisor

Let me just add to that. See, the model — sorry, you were asking something more or should I go ahead and answer it?

Jay Shah — Dolat Capital — Analyst

No, please, go ahead, yeah.

Ravi Kapoor — Corporate and Financial Advisor

Yeah. The model, business model of Ganesh Housing is to develop as well as have a land parcel which can be sold. So, the buying happens at the time where the future growth potential is seen. And therefore, the buying happens at a very low price and as and when the development happens around that area, and if that land is not for self-development, that parcel is sold. So, as a part of the business model itself, certain land areas are sold as land itself and certain land areas are developed and sold to put projects on to that. So, the land sales which have been happening are in those areas which were bought when development was envisaged at the moment the price around that went. Because it was not for self-use, it has been sold. So, it is a part of the business model that we keep following.

Jay Shah — Dolat Capital — Analyst

Okay. Got it. And just wanted a clarity on the area and the value of the land parcel in last three or four quarters.

Neeraj Kalawatia — Vice President, Finance

See, value will be around INR300 to INR350 somewhere. The area exactly, we don’t have detail right now with us.

Jay Shah — Dolat Capital — Analyst

Okay. Thank you.

Rajendra Shah — Chief Financial Officer

Thank you, Jay. Thank you. The next question is from the line of Sourabh Gilda from Motilal Oswal. Please, go ahead. So, we’re moving to the next participant. The next question is from the line of Amanjit Sethi [Phonetic] from Oculus Capital. Please, go ahead.

Amanjit Singh — Oculus Capital — Analyst

Yeah. Sir, am I audible?

Rajendra Shah — Chief Financial Officer

Yes, Amanjit.

Amanjit Singh — Oculus Capital — Analyst

Okay. So, firstly, congratulations on the good set of numbers and becoming net-debt free. Sir, I’m a little new to the company. So, please, pardon me. Sir, just on this Tishman project, right, just wanted to understand how did this partnership come into being, like, so have they done other projects in India? Did they approach you? Or what were the synergies that you identified? And a little bit on the commercials that you mentioned. So, for the sales and marketing and the DM, what will be the basis of payments, sir, like, in the sense, would it be a percentage of rentals or how would it be?

Rajendra Shah — Chief Financial Officer

So, thank you, Amanjit. Basically, see, Tishman Speyer is known as a reputed, one of the very well-known global brand to construct AAA-graded commercial buildings. They have done number of umpteen number projects in U.S. and other geographies. And their clients, as we mentioned, are who’s who of world. So, basically, it was — if you see as compared to Tishman Speyer, Ganesh Housing has been a conservative developer who is based out of Ahmedabad and we have completed very large development of real estate in Ahmedabad. However, as far as dealing with global — globally reputed, meaning, occupants, we wanted some sort of support from any global player who would be — who would be doing networking with them, so that we found in Tishman Speyers. And Tishman Speyers when they wanted to came to Gujarat they wanted a strong local developer, because they have very good execution capability, however, a person who is owning some critical mass of land at very, very significantly located project and land is something we — they were looking in us.

So basically, who approached, who is not so very significant, but these are synergies which get us together and I think we are looking at very, very long-term relationship with them. They have — they are already present in Pune and Hyderabad and doing work and they have to credit some of the notable Indian blue chips, which are their client, apart from global giants, which they already cater to. So basically all in all, it will be a win-win for both Ganesh Housing and Tishman Speyers. And coming to your —

Amanjit Singh — Oculus Capital — Analyst

Right. Sir, what is the exclusive partnership that was helped for Ahmedabad?

Rajendra Shah — Chief Financial Officer

Pardon me.

Amanjit Singh — Oculus Capital — Analyst

Sorry, sir. Just, I’ll let you complete the previous answer, sir.

Rajendra Shah — Chief Financial Officer

So — and coming back to you said, meaning, what kind of development management fees or lease management fees they would charge us, it is negotiated based on certain mass of development, the DM fees and leasing — lease management fees actually is a function of what kind of lease rental we are going to receive. So I think I have answered your question. If you have any further question or one second, Niraj wants to add something.

Neeraj Kalawatia — Vice President, Finance

Yes, just to add here, if you see, we are occupying around 64 acre of land in SEZ area, since this will be going to the first phase, it is always in the interest of the company from a longer prospect also that we kick off the first phase yourself with a very reputed player, so that the unlocking of the land from the rest of the area will be easier for us, in terms of commanding the better rental also, in terms of developing the balance area.

Amanjit Singh — Oculus Capital — Analyst

Got it. I appreciate sir. Sir, is this like an exclusive relationship, in the sense, can we enter with any other player in the region in Ahmedabad or is it like an exclusive tie-up that you have?

Rajendra Shah — Chief Financial Officer

No, right now, they have or we don’t have any exclusivity. But this is — it is understood and it is ethical practice to how generally eliminate your relations with one or two large developer, which is meaning that kind of unwritten but understanding is — they’re between both the parties that, yes, once we have tied-up with Tishman Speyer, we would not generally enter into development management arrangement with somebody else. And once they have entered into DM relationship with Ganesh Housing. Within good radius of area, they would also not enter into these kind of arrangement with other local developer.

Amanjit Singh — Oculus Capital — Analyst

Got it. Sir — and just any rough idea on the timelines of this 1.2 million launch?

Rajendra Shah — Chief Financial Officer

Next three to four months, because we would like to — we would like to invest longer time in planning and make it so much meticulous that execution becomes very smooth. That is our experience. So if you see with Malabar County-III and Malabar Exotica project, which we could complete ahead of time only because of our meticulous and thoughtful planning.

Amanjit Singh — Oculus Capital — Analyst

Right. Sir, what would be the construction period dfo you envisage once you launched it?

Rajendra Shah — Chief Financial Officer

We would expect somewhere about 30 months to complete at least 50% of gross leasable areas that is about say, 600,000 square feet. And for launching of another 600,000 square feet, we will — we can’t tell you date right now, but we will see as the things go ahead.

Amanjit Singh — Oculus Capital — Analyst

Got it. So sir, we can see revenue coming in from this projects, you can say probably the end of FY ’24 or early FY ’25.

Rajendra Shah — Chief Financial Officer

Yeah, I think earliest could be ’24 — earlier could be ’24, however, even if that pre-leasing or LOI can get signed earlier, yes.

Amanjit Singh — Oculus Capital — Analyst

Got it, got it. Sir, you mentioned your current realizations in the city at about 3,800 to 4,500. So what was the similar number, say, last year just to get a sense of the appreciation that has happened?

Rajendra Shah — Chief Financial Officer

So, about — when we launched it was about INR3,300 — so INR3,300 it has ramped up to almost past INR5,000 now. So because it was INR4,500 when we sold it last, however, prices have continuously increased post that. So right now, if we were to sell similar properties, it would get you more than INR5,000.

Amanjit Singh — Oculus Capital — Analyst

Okay, understood, understood. Sir, is there any opportunity that we have in the GIFT City as well, sorry, I’m not aware of the entire land parcels that you possess. But do we have any development opportunity there?

Rajendra Shah — Chief Financial Officer

No, GIFT City, we do not have — we don’t own any land parcel. However, just to mention this SEZ project what we have, actually locationally it is very, very — if somebody is aware of Ahmedabad, he would understand. This is bank on Vaishno Devi’s circle, so accessibility from SP Ring Road and SG Highway is excellent.

Amanjit Singh — Oculus Capital — Analyst

Got it, got it. Sir — and so in your vision, so you mentioned you’re looking at 8 million square feet across various projects in four yours. So if you could just help us get a sense of what will be your annual launch run rate like in terms of 1 million square feet and a rough mix of this, so how much would be commercial, how much would be SEZ, just a broad regional breakup?

Rajendra Shah — Chief Financial Officer

So basically, our mix is something which will be driven by market dynamics. Once we are able to launch part of our SEZ, thereafter, it is up to us as to what kind of non-processing zone area we want to launch or what kind of processing zone area we want to launch. We would time and plan our mix in such a way that it is optimal for that market’s consumption. However, if somebody wants to give you some sort of idea, our next planned projects will be roughly about 40% commercial, roughly about 60% residential.

Amanjit Singh — Oculus Capital — Analyst

Got it, sir. Sir, and on the residential bit overall, so what is your approximately you think the launch dates, because as you said, we don’t have any inventory anything unsold or completed. So will you be trying to become more aggressive in terms of our launch date just to give visibility?

Rajendra Shah — Chief Financial Officer

No, no. We — for visibility, we don’t need to launch even a single new project, because by other means and other revenue streams, we have been managing our revenue and bottom line very well. However, it is our passion for doing construction, going ahead with delivery of fresh players and our new products that we will be launching new projects. So as we — as I have told earlier in next one or two months, we would be launching with our Retreat, which is the residential project. And about two to three months, we would be launching our commercial development of SEZ. Mr. Ravi who would like to add just about.

Ravi Kapoor — Corporate and Financial Advisor

So it’s a matter of time when the ball starts rolling. When we say that we say that certain projects are announced, let’s say, this is both commercial and residential. Once that — once the approval comes, they’ll come for a bulk approvals, right, and we will be launching one after the other. So from the next two to three months, let’s say, the kind of a project launch and also capitalizing on that and monetizing on various aspects will be a continuous exercise as we see for the next five to seven years because there are more than two, three projects which are in the pipeline. It has — as you just mentioned the planning takes more time and once a plan is done, the execution happens. So from the time these things will start executing, it will be a roll on for a continuous period of time one after the other.

Amanjit Singh — Oculus Capital — Analyst

Understood, sir. Thank you so much for answering all my questions. All the best sir. Thank you.

Ravi Kapoor — Corporate and Financial Advisor

Thank you.

Operator

Thank you. The next question is from the line of Ashish Kumar from Infinity Alternatives. Please go ahead.

Ashish Kumar — Infinity Alternatives — Analyst

Thank you, sir. Sir just wanted to understand couple of things. One is that, while you have done a good job in terms of becoming net debt free, what will be the peak capital requirement for your IT SEZ, because obviously you are building it for that thing? And what was the peak capital requirement for the project?

Ravi Kapoor — Corporate and Financial Advisor

So we expect that each phase of meaning 600,000 square feet, which we are going to launch immediately would cost somewhere about INR300 crores. There we may need, meaning even if we have debt equity ratio of say 60-40, we may need somewhere around INR100 crores as the new meaning capital to be invested. And we have enough resources to meet even that.

Ashish Kumar — Infinity Alternatives — Analyst

Sure sir. And just to understand on the residential project also, do you expect a peak capital requirement? But I’m just trying to understand the cash flows. Because from your current two projects, I think because you have received 100% of bookings. I think your future cash flow may be only INR50 crores, INR60 crores?

Ravi Kapoor — Corporate and Financial Advisor

Yeah, for resi, we hardly require any — meaning any financial support or any debt. Because as we speak, meaning we have kind of investors who are kind of waiting as to when we will be launching a new project and they are ready to pre-booked — pre-booking is something which we generally discourage. And internal accruals will take care of I think entire project cost.

Unidentified Speaker —

Also just to add here, if you see both the projects are 100% booking. But the collection happens over a gradual manner depending on how the construction —

Ashish Kumar — Infinity Alternatives — Analyst

How much is the fresh collection sir, cash flow, if you — cost required because most real estate companies actually give that depreciation at how much is the fresh cash flow that you expect on the remaining period. Obviously because the revenue recognition for everybody is different, so would appreciate if you can give us some estimate from next investor presentation and how much is the collections required and how much is expected and how much is the costs expected to complete the project?

Unidentified Speaker —

See, in terms of the revenue recognition if you see for a listed company, which are now — has to go through the Ind AS requirement revenue recognition happens post view only.

Ashish Kumar — Infinity Alternatives — Analyst

I understand, I understand that sir. I think the question is that from a cash flow follows a very different policy as compared to accounting, right, and every project has a different requirements in terms of cash flow when you ask for the money and when the booking amount comes, some tend to send — sell more on different schemes on the project, right. What will be helpful is if you can give us from a cash flow perspective —

Unidentified Speaker —

Thank you for your suggestion. Yes, we will implement these from next presentation —

Ashish Kumar — Infinity Alternatives — Analyst

So if you can do that, it will be helpful sir.

Unidentified Speaker —

It is a very good suggestion, we will definitely —

Ashish Kumar — Infinity Alternatives — Analyst

So that we know how much is the cash flow. The second thing was sir, there was — was there any reason because Ahmedabad from whatever residual line of Ahmedabad real estate market, the real estate market in last two years for Ahmedabad was booming. But we didn’t have any launch. So was there any reason why we decided to go slow on the launches?

Unidentified Speaker —

Two, three reasons.

Ashish Kumar — Infinity Alternatives — Analyst

We have a very good land bank already, sir.

Unidentified Speaker —

Yes, sure, sure. Two, three reasons which I would try and explain. One is next in launch is SEZ project and SEZ is a project where some of the government policies were not clear at state-level and central level. So we recent — it has been recent development that what kind of FSI, what kind of flexibility which will be a available in terms of occupants and all those things have been recently provided. Apart from that, you would be aware that recently, there was election in State of Gujarat, which has affected approval process for almost about two and a half to three months delay is caused only because of that.

Because since November, right up to recent development, which is end of December because of taking over by new government there were approvals, which were not issued to any newer projects. So basically all in all, these two things. And once SEZ is a sizably big project, which will give us visibility of next seven to eight years to come, because we will be launching projects in a phased manner in SEZ. Planning for that and joining hands with Tishman Speyer who has given us changes in design feedback which are very good and which we wanted to implement with full kind of full hearted way.

So all in all, these three prime reasons are such that which has caused kind of a delay in launch of new projects. However, we will — I’m sure we will recoup this delay in launch of projects by faster execution because right now whatever planning we are doing is so meticulous which will save us very long time in terms of execution.

Ashish Kumar — Infinity Alternatives — Analyst

Okay, thanks a lot and wish you all the best from me.

Unidentified Speaker —

Thank you. Thank you.

Operator

Thank you. Next question is from the line of Gaurav [Phonetic] from Korman Capital. Please go ahead.

Gaurav Somani — Korman Capital Advisors — Analyst

Thank you for the opportunity. Sir, I wanted to understand.

Unidentified Speaker —

Gaurav, I think, yes, your voice is not very clear to me.

Gaurav Somani — Korman Capital Advisors — Analyst

Can you hear me now, hello?

Operator

Can I request you to speak through the handset?

Gaurav Somani — Korman Capital Advisors — Analyst

Yeah, can you hear me now? Hello.

Operator

Much better. Thank you.

Gaurav Somani — Korman Capital Advisors — Analyst

Hello, am I audible now?

Operator

Yeah, Gaurav, go ahead.

Gaurav Somani — Korman Capital Advisors — Analyst

Yeah. Sir, I just wanted to understand when you decide on the project, do you have any return metrics in mind like a target ROE which you think should generate over the life of the budget or any other written metric which you look at?

Unidentified Speaker —

No, return metrics is generally, meaning, Is kind of deceptive at times, because if you are looking at leasehold property for development, your returns will be different, again see project payback period is completely ignored if you are looking only at kind of return on investment. So basically you — there are many other parameters which are to be looked at other than only return on investment kind of peak investment required, peak debt, which is required kind of turnaround time, which this project will tale, or meaning title to the land, what would be — what would be time which will be required to secure approvals and RERA approval are sectors which are other than this which have to be considered.

So all in all, one cannot give any fixed kind of I would take only projects, which are giving me more than 30% IRR, then I would be deprived of kind of rental projects which might be — which won’t be giving me good returns. However, in terms of buyer they might not be well. So basically we will have to look at all these parameters in order to select whether we will go ahead with acquisition of this project or not.

Gaurav Somani — Korman Capital Advisors — Analyst

So, we don’t target any minimum return on equity say 15% for any project as such sir?

Unidentified Speaker —

While the past has seen — has shown us that the equity return have been around the 25 to 35 ranges between that as because of the reasons you said. Yes, there is a ballpark is a ballpark number which is there on — in the mind, which should be like maintaining the targeted equity returns and therefore it translates to around 25% to 35% of return on equity has always been maintained all this while. And in the future also, all these projects which are looking at, will continue to ease that kind of a thing, whatever may be the parameters decided, we are sure that we’ll be within this range for sure. So you can in way way the targeted equity is around 25% to 35%.

Gaurav Somani — Korman Capital Advisors — Analyst

Got it. Sir, on this debt reduction of INR50 crores, can you give a rough sense on how much has been done to cash flows and how much has happened through land sales?

Unidentified Speaker —

All land sales are cash flows, right. So the question is, it’s a combination, It’s been over a period of two, three years. So the entire debt has been retained — repaid out of the cash accruals out the profits of the company and profits do consist of both the inventory which was there for the last couple of years before the COVID times. And the good parcels of land, which is a part of the business model. So it’s a combination of both.

Gaurav Somani — Korman Capital Advisors — Analyst

Yes, the question was, how much has happened to pure land sales are not to the project sales basically, the Lexington project which is —

Unidentified Speaker —

No, it all comes together. So actually the land sales have been a contributory in the last two, three quarters, little more than the inventory sales, let us say, and that’s the reason where maybe the last two, three quarters, it could have been coming out of the land sales more, but over a period of time, the last two years, it’s a combination of profits from the entire three verticals, whether it is the new development launch projects, which gives us a surplus cash flow or the inventories which were there, which has given the surplus cash flows or the land sales, which had given us the cash flows.

Gaurav Somani — Korman Capital Advisors — Analyst

Okay. Sir, what is the cost of debt?

Unidentified Speaker —

Cost of debt 13%?

Unidentified Speaker —

Somewhere around 12%.

Unidentified Speaker —

12%.

Gaurav Somani — Korman Capital Advisors — Analyst

Right. Thank you sir. That’s it from my side.

Operator

Thank you. The next question is from the line of Rushab Shah from [Indecipherable]. Please go ahead.

Unidentified Participant — — Analyst

Hi, thank you for the opportunity. I just — I wanted a clarification that you mentioned that for the first phase of SEZ, we are having — we will be having a cost of around INR300 crores for 6 lakh square feet. So that comes to around INR5,000 per square feet, the development cost. So isn’t it on a very higher-end compared to what we are doing for the residential projects earlier?

Unidentified Speaker —

So, yeah. Thank you, Rushab. First of all, this is going to, what we are, meaning, what we are trying to construct here is a Grade A building which has not been seen in Ahmedabad. And these — this will have flat slab construction with more than 3 meter floor-to-floor height. With spread-out beams, which will give floor plate of roughly about 30 or 1,000 square feet. These kind of construction Ahmedabad has not seen, we would have commercial buildings, which are called, meaning, superior commercial buildings, but kind of construction. What we are envisaging would take that kind of construction cost and we are going to have this as a — at least as a gold or platinum rated buildings, so that we could attract global — globally known players to Ahmedabad.

And this is not a — it is not right to compare cost of construction of conventional residential building to Grade A commercial building, because costs would be very, very different, kind of still requirement will be very different than what what are generally used in residential. So I think INR5,000 a square feet is a good reasonable number of cost per square feet, kind of specification which you want to achieve or kind of what we are envisaging.

Unidentified Participant — — Analyst

Okay, okay, got it, sir. Is it possible that because it’s just the first phase, the cost would be higher and when you launched the second phase, this can eventually go down also. Is it a possibility there?

Unidentified Speaker —

No I think consistently, it will be at least about INR5,000 a square feet.

Unidentified Participant — — Analyst

Okay, okay, got it. And my second question was with respect to the townships, is there any update regarding the Godavari township that we are planning since long. Any timeline or approval which is there in place. I mean, if you can guide on it that.

Unidentified Speaker —

We — it is in the planning stage. However, since we we are kind of bid conservative, I would not like to or say any timelines to this, but as we go along whatever is their immediate in pipeline is something what we have discussed, but for township, right now, we do not have any plan to meaning, we do not have any debt to — debt for — specific debt for launch.

Unidentified Participant — — Analyst

Okay, okay. Thank you so much.

Unidentified Speaker —

Yeah.

Operator

Thank you. Due to time constraint, we’ll take the last question from the line of [Indecipherable] Advisory. Please go ahead. [Operator Instructions]

Unidentified Participant — — Analyst

Hello.

Operator

Go ahead, hi.

Unidentified Speaker —

Not very clearly. Can you please be at least [Speech Overlap]

Unidentified Participant — — Analyst

No, I don’t any questions right now, all have been answered.

Operator

Thank you. We think that was the last question. I now hand the conference over to the management for closing comments.

Rajendra Shah — Chief Financial Officer

Thank you, ladies and gentlemen for showing interest and joining us — joining with us on this quarter three and nine months for financial year ’22-’23 operational and financial performance call. See you again. Thank you so much.

Operator

[Operator Closing Remarks]