Godrej Properties Ltd (GODREJPROP) Q4 FY22 Earnings Concall Transcript

Godrej Properties Limited  (NSE:GODREJPROP) Q4 FY22 Earnings Concall dated May. 03, 2022

Corporate Participants:

Pirojsha Godrej — Executive Chairman

Rajendra Khetawat — Chief Financial Officer

Mohit Malhotra — Managing Director and Chief Executive Officer

Analysts:

Puneet — HSBC — Analyst

Abhinav Sinha — Jefferies — Analyst

Kunal Lakhan — CLSA — Analyst

Pritesh Sheth — Motilal Oswal — Analyst

Samar Sarda — Axis Capital — Analyst

Venkat Samala — Tata Asset Management — Analyst

Mohit Agarwal — IIFL — Analyst

Manish Gandhi — KPMK Investments — Analyst

Manish Jain — GormalOne LLP — Analyst

Parikshit Kandpal — HDFC Securities — Analyst

Dhruv Jain — Himanshu Zaveri — Analyst

Aman Vij — Astute Investment Management — Analyst

Harsh Pathak — B&K Securities — Analyst

Neeraj Sahjwani — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Earnings Conference Call of Godrej Properties Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mit Shah of CDR India. Thank you, and over to you, sir.

Mit Shah —

Thank you. Good evening everyone, and thank you for joining us on Godrej Properties Q4 FY ’22 earning conference call. We have with us Mr. Pirojsha Godrej, Executive Chairman; Mr. Mohit Malhotra, Managing Director and CEO and Mr. Rajendra Khetawat, the CFO of the company. We would like to begin the call with the brief opening remarks from the management following which we’ll have the forum open for an interactive Q&A session. Before we begin I’d like to point out that certain statements made in today’s call maybe forward-looking in nature and a disclaimer to this effect has been included in the results presentation shared with you earlier. Thank you, and over to you, sir.

Pirojsha Godrej — Executive Chairman

Good afternoon everyone. Thank you for joining us for Godrej Properties’ fourth quarter financial year 2022 conference call. I’ll begin by discussing the highlights of the quarter, and we then look forward to taking your suggestions and questions. I hope you and your families are all doing well. I’m happy to report that from an operational perspective, the fourth quarter was Godrej Properties’ best ever quarter on multiple parameters. On the sales front, GPL had its best ever quarter in terms of the volume and value of real estate sold. We sold 3,699 homes during the quarter with an area of 4.0 million square feet and the value of INR3,248 crore representing a quarter on quarter value growth of 111% and a year-on-year value growth of 23% over what was our previous best ever quarter. This resulted in our fifth consecutive year of record annual sales of INR7,861 crore despite the tremendous volatility this sector has undergone during this period.

We also recorded our highest ever residential cash collections of INR2,678 crore during the fourth quarter. These collections led to our highest ever net operating cash flow of INR1,045 crore and for the full year, our residential collections grew by 57% to nearly INR7,000 crore. We launched 9 projects or phases during the fourth quarter and received a strong response to all of them. Our project Godrej Woods in Noida delivered sales worth INR1,650 crore within a year of its launch making GPL the most successful residential launch by booking value to date. Whilst sustenance sales of the financial year grew by 6% to INR4,826 crore, we are happy to note that our new launch sales increased by 40% to INR3,000 crore. On the operations front, we successfully delivered approximately 5.84 million square feet across 5 cities in the fourth quarter. With a large number of project completions in the last quarter GPL recorded its highest ever reported numbers on a quarter — quarterly and annual basis. Our total income for the fourth quarter increased by 191% and stood at INR1,476 crore. Our EBITDA increased by 611% to INR403 crores and net profit increased by 236% to INR260 crore, For FY ’22, our total income increased by 97% and stood at INR2,397 crore. EBITDA increased to INR705 crore and net profit increased to INR352 crore.

While the pace of new project additions in the first half of the financial year was a little slow, we added several projects during the second half of the year. In the fourth quarter, we added 3 new residential projects with a total saleable area of 6.1 million square feet and an expected combined revenue potential of over INR4,100 crore. We extended our existing arrangements with Shivam Realty to develop a 0.7 million square feet housing project in Kandivali in Mumbai, which will add further INR1,000 crore booking value. In addition to the new projects we have already announced, we have a robust pipeline of new development opportunities, and we are confident new project additions will pick up substantially in financial year ’23. The real estate sector has recovered strongly during the year. While commodity cost inflation poses a substantial near term risk to operating margins of projects where most of the sales have been completed, the price hikes we have taken will fully mitigate the cost pressure on upcoming projects. We are optimistic that the financial year ahead will be a strong year for Godrej Properties. We hope to grow residential bookings to over INR10,000 crore this year through the launch of a large number of exciting new projects combined with strong sustenance sales. This combined with strong project deliveries should allow us to maintain rapid growth in operating cash flows. One of our biggest priorities for the year will be to add a large number of new projects to our portfolio, which in turn will set us up well to remain on a rapid growth trajectory.

On that note, I conclude my remarks. We’d now be happy to discuss your questions, comments or suggestions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We’ll take our first question from the line of Puneet from HSBC. Please go ahead.

Puneet — HSBC — Analyst

Yeah, thank you so much and congratulations on once again reporting quarters [Phonetic]. My first question is with respect to your FY ’23 launch. Is it possible to give a sense sort of what would be the total revenue potential from these projects that we’re looking at.

Pirojsha Godrej — Executive Chairman

Hi, Puneet, thanks. I think, again we’ve — obviously things like the pricing of the project, etc. will be decided at the time of launch and we have given the details on both the locations and areas. So I think an approximate amount of sort of revenue potential can be garnered from that but we can perhaps help you offline with our more detailed thinking on this.

Puneet — HSBC — Analyst

Okay. And this is also likely to be an important year from delivery. Any sense of what is likely to delivery target for FY ’23.

Pirojsha Godrej — Executive Chairman

Yes, I think it will be a big year for deliveries as you’ve said. I think we did about 6.5 million square feet in the last financial year. I think that number should at least cross 10 million square feet in the current year, if not more than that.

Puneet — HSBC — Analyst

Thank you. And my last question is, if I look at your cash flow statement, you have broadly being spending close to INR2000 crore a year on development costs and you alluded to business development being the biggest priority for the current year. So what kind of number should we pencil in for that.

Pirojsha Godrej — Executive Chairman

Rajendra, you want to take that.

Rajendra Khetawat — Chief Financial Officer

Yeah, so Puneet, basically the construction as the progress of the projects across the sites are going up, so construction costs will also proportionately increase and like if you see the operating cash flow we have been able to do INR1754 for the year, so hopefully this operating cash flow would be positive and will be stronger as more and more projects keep getting into the launch and and to the cash flow cycle. As you rightly said about the cash flow would be for the new BD purpose. That obviously would continue for at least a year or 2 where we are investing into the new BD opportunities. Otherwise operating wise, I think the cash flow would be healthy and we expect this should grow further.

Puneet — HSBC — Analyst

But the BD cash flow which is land approval and the JV partners what can that number becomes from current–

Rajendra Khetawat — Chief Financial Officer

That also, Puneet, is again like the deals, which have been tied up, so there would be some outflow on account, which is a milestone laying. That will be in the range of INR1,000 to INR1500 crores. Rest will depend on the new BD opportunities which we will tie up in the coming quarters. That will also be directly proportional to the BD, new BD opportunities which we will be able to tie up, like we are sitting on a INR4,000 crores of cash flow. The idea is to deploy that into the coming quarters.

Puneet — HSBC — Analyst

Understood. My last question is just on the sales strategy side. Historically you focused on selling as much as you can when you launched the project. Do you intend to continue that strategy given how the cost pressures are there in various phases of projects.

Pirojsha Godrej — Executive Chairman

Mohit, you want to comment.

Mohit Malhotra — Managing Director and Chief Executive Officer

Sure. Thanks, Puneet. I think overall, the strategy is to sell as much as possible, Puneet, as launches. Of course, we are adjusting prices significantly, given the way inflation is moving and also budgeting a slightly more future inflation in our budget. Having said that, there is obviously a project has large phases, so on a continuous basis. It’s kind of catches up on a portfolio basis.

Puneet — HSBC — Analyst

Okay. Understood. That’s all from my side. Thank you so much and the best.

Pirojsha Godrej — Executive Chairman

Thanks, Puneet.

Operator

Thank you. Next question is from the line of Abhinav Sinha from Jefferies. Please go ahead.

Abhinav Sinha — Jefferies — Analyst

Hi, congratulations on a strong set of numbers this quarter. Just wanted to, couple of things on the sales front, when you’re talking about INR100 billion plus in FY ’23. Is it going to be a similar sort of back-ended mixture on both launches in sales or do we have higher visibility in the first half of the year.

Pirojsha Godrej — Executive Chairman

I think we do have have visibility on the first half. I’d also just reminded that the last year, the start was, the first quarter was of course marred by the delta wave. So we had only INR500 crores of sales in the first quarter. We actually even in the second quarter, we did quite well and had about INR2500, INR2600 crores of sales in the second quarter. So it’s that the first half was really cyclically weak but rather that this pandemic impact was quite strong. I do think that this year we will have a reasonable percentage of the sales in the first half of the year itself. Already we have a couple of Mumbai projects that will be launched this quarter and so I think we’ll have a better balance in the first half of the year this time.

Abhinav Sinha — Jefferies — Analyst

Right. And you also alluded to higher pricing now. So can you quantify that, I mean, what does that number look like on a pan India Y-o-Y some such number.

Pirojsha Godrej — Executive Chairman

Mohit, you want to take that.

Mohit Malhotra — Managing Director and Chief Executive Officer

Sure. What we have done is in the start of the quarter 4, we did an exercise to look at what is the inflation impact. The prices are also significantly rising up then. And we took almost 5% to 7% hike across project at the start of quarter and just to let you know even at the start of April, these structured project would take the price hike for the inflation which is set up now in the last quarter. In Q4, we took almost 5% to 7% price hike whenever it was possible.

Abhinav Sinha — Jefferies — Analyst

Also cumulatively, you would have raised prices by maybe 7%, 8%.

Mohit Malhotra — Managing Director and Chief Executive Officer

I would say if you have to ask me a blended average, I would say it will be closer to 5%.

Abhinav Sinha — Jefferies — Analyst

Okay.

Mohit Malhotra — Managing Director and Chief Executive Officer

Minus 1% on a blended portfolio basis.

Abhinav Sinha — Jefferies — Analyst

And how much have cost of that broadly.

Mohit Malhotra — Managing Director and Chief Executive Officer

Almost similar in terms of percentage of booking value, around 5%.

Abhinav Sinha — Jefferies — Analyst

Okay. So margins should be under control incrementally you are saying.

Mohit Malhotra — Managing Director and Chief Executive Officer

At a portfolio level, yes, because we are taking that price hike but projects which have already been sold a lot there would be some kind of margin pressure and the new launches, we are kind of increasing strategies to mitigate both the cost inflation for that project and also some hit for the portfolio.

Abhinav Sinha — Jefferies — Analyst

Finally, my question on balance sheet side is on the gearing front. You are seeing strong cash flows already. I mean is the 0.5 target on gearing, is that likely to be hit in FY ’23 or do you think we are slightly behind or how are you seeing that now.

Pirojsha Godrej — Executive Chairman

Abhinav, I think — we think it can be done during the year. I mean, look, ultimately, there are some deals that are quite large Also in a single shot can can help us achieve some of these targets. At the same time, we don’t want to let this cash burn a hole in our pocket. We want to wait for the right deals and do the right quality of deals but we’ve seen, as I said a pickup in momentum in business development over these last 3, 4 months. In addition to the deals we’ve already announced, we actually have a few deals, which are already fully concluded but will be announced post the completion of certain condition precedents that the partners have to complete. So we feel pretty good about the momentum on the business development side and would certainly not want to be at kind of zero net debt levels that we currently are. I don’t think it’s out of reach to get to that 0.5 kind of number this year but again, it depends on us getting the right quality and quantity of deals.

Abhinav Sinha — Jefferies — Analyst

Sure. Thank you and all the best.

Pirojsha Godrej — Executive Chairman

Thanks so much.

Operator

Thank you. Our next question is from the line of Kunal Lakhan from CLSA. Please go ahead.

Kunal Lakhan — CLSA — Analyst

Yeah, hi, good evening. Thanks for taking my questions. My first question was on the new launches. A couple of key launches, if you can give us some indication on when those are expected to launch like say Ashok Vihar and Wadala, I believe we have already launched or pre-launched. So if you can give some indication on these 2 launches.

Pirojsha Godrej — Executive Chairman

Mohit, you want to get in.

Mohit Malhotra — Managing Director and Chief Executive Officer

Yeah, you’re right. Wadala, we have already pre-launched. We have all the approvals. So that will be our big launch in quarter 1. On Ashok Vihar, the approvals are at final stages but given the way approvals have been moving, we are quite hopeful that either in Q1 or Q2 we should be having a positive outcome on that launch.

Kunal Lakhan — CLSA — Analyst

And any indication on like how the response has been for Wadala so far.

Mohit Malhotra — Managing Director and Chief Executive Officer

Very early to comment on that.

Kunal Lakhan — CLSA — Analyst

Sure, sure. Just a related question on your launch tracker. I mean when I look at last year’s launch tracker couple of Mumbai projects, Sanpada, Bayview and Riviera which we couldn’t launch last year, I find those names missing in the launch tracker for this year. So any particular reason.

Mohit Malhotra — Managing Director and Chief Executive Officer

Bayview, we did launch last year. Sanpada was the project which we have signed in Navi Mumbai and unfortunately there is a litigation going on between the 2 government agencies there because of which this project and not just our project, but the whole set of project there has got stock. So we have kind of taken it out from this year unless we get visibility on the litigation front between the government agencies.

Kunal Lakhan — CLSA — Analyst

Okay. And my second question is on the the bookings side, rather the revenue recognition side to be delivered 6.5 million square feet this year and against which we booked INR1800 crores of top line and INR350 crores of bottom line and now with the 10 million square feet plus kind of a guidance for FY ’23, we are actually reaching close to what we are selling in terms of deliveries, right? So my question is on when we can see the revenue and PAT coming closer to the sales in terms of value that we’ve clocked on an annual basis because clearly INR1800 crores and INR350 crores PAT is not nearly close to what we sell on an annual basis.

Pirojsha Godrej — Executive Chairman

Mohit?

Mohit Malhotra — Managing Director and Chief Executive Officer

Yeah, I’ll answer on PAT because revenue is a combination of how the deals that are getting recognized especially in JV projects, it comes as a line item as PAT. So clearly, revenue is not something I would like to comment on. On PAT actually we feel very confident that the trajectory of PAT for the company is now absolutely on the track of the guidance we have been giving in past. So I think next year is going to be a spectacular year for us on and FY ’24 is where we should be able to get our original guidance which we had given to the investors.

Kunal Lakhan — CLSA — Analyst

Yeah, so what could–

Pirojsha Godrej — Executive Chairman

And Kunal, just to add. The revenue, the way the accounting works because of a JV, the JV revenue doesn’t get reflected into our topline. So to that extent you will always find that gap because booking value reflects the entire booking value of the JVs whereas the revenue only reflect the one line item as Mohit said. So to that extent, there would be a gap.

Kunal Lakhan — CLSA — Analyst

So yeah, I get that. So in terms of like, say for example we do, let’s say INR7000 crores or INR8,000 crores of presales, on a PAT level even at the JV level or even after accounting for the JV, we should be at least making 1000 per square feet kind of PAT on a 10 million square feet kind of delivery or sales velocity. So my question is that if you are delivering like 10 million square feet could we see profit or PAT levels of say INR1,000 odd crores.

Rajendra Khetawat — Chief Financial Officer

Yes, we should be able to see that in 3 years timeframe. I think FY ’24 onwards, we will see a number closer to what was intended.

Kunal Lakhan — CLSA — Analyst

Sure sir. Thanks. That’s very helpful, thank you so much.

Operator

Thank you. Our next question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.

Pritesh Sheth — Motilal Oswal — Analyst

Hi, thanks for the opportunity and congrats on both operationally and financially. Very strong performance. My first question is on again on P&L. So I was trying to reconcile your fourth quarter’s revenue declaration. Since we have only completed one outright project that is Godrej Aqua and rest all were JV and that Godrej Aqua if I understand it correctly it won’t be more than INR400, INR450 crores kind of a revenue top line. So where this INR1300 crores is exactly coming from. I mean, just any clarification on that.

Rajendra Khetawat — Chief Financial Officer

Yeah, okay. Thanks, Pritesh and so we have not only completed one JV project. Godrej Aqua is our outright project. Apart from that Godrej Aqua, we have completed two of our plotted development. One is Godrej Retreat, which is at Faridabad. Second is Godrej Woodland. So, both have contributed, Retreat has contributed around INR350 crores of top line, Woodland has contributed around another INR250 crores of top line and then we have Godrej Avenues, which is again our own project, that has contributed another INR178 crores. So all 4 projects together contributed around INR1150 crores of top line.

Pritesh Sheth — Motilal Oswal — Analyst

Okay, great, thanks. That clarifies. And secondly on business development, so we have already last quarter with the deal with DB that obviously got sold off but we have cleared out our intentions on large size SRA project. So how the pipeline is looking right now. Are we still thinking of a couple of opportunities from those DB lands or how is it going to be done.

Pirojsha Godrej — Executive Chairman

Yes, I think we have said that we’re open to looking at project level partnerships. I think basis the feedback we received from our various stakeholders, we decided to call off the strategic investment but we are open to project level partnerships and of course, there are lot of other potential new project additions in Mumbai. We are very happy actually that the project we added last year which is quite a sizable redevelopment project, not a slum redevelopment of course, is actually already getting launched this quarter. So we certainly one of the key priorities for the year will be to strengthen the Mumbai portfolio and we are quite, we think we have quite a good pipeline in place to be able to do that.

Pritesh Sheth — Motilal Oswal — Analyst

Great. And lastly, I mean so saying that Wadala project we turned it around within 9 months timeframe. Would that be the similar timeline that we should look forward to from the projects that you guys are signing from here on because previous projects we have seen some delays. So what should be the turnaround timeline from here on.

Pirojsha Godrej — Executive Chairman

I think projects of course are at different stages when we enter them sometimes and I think this one was at a more advanced stage. It did allow us to turn around very quickly. Of course the goal will be to always turn it around quickly. None of the projects we’re adding, do we think of as like a futon [Phonetic] bank that we’re expecting to wait many years but you do sometimes have situations particularly in some of the larger projects that they end up taking a little bit longer than one hopes to launch. But certainly, the goal is always to do it as fast as possible. And we’re very happy with the timelines in this one but I wouldn’t necessarily say that for all redevelopment projects we can expect this quicker turnaround.

Pritesh Sheth — Motilal Oswal — Analyst

Sure. Thanks, that’s helpful, and all the best.

Pirojsha Godrej — Executive Chairman

Thank you.

Operator

Thank you. Our next question is from the line of Samar Sarda from Axis Capital. Please go ahead.

Samar Sarda — Axis Capital — Analyst

Thanks. Good evening, and congratulations on a good FY ’22. I had a couple of questions on collections and cash flow and one on Vikhroli. So just to take a quick question on Vikhroli first. FY ’23 launch pipeline also does not include any residential launch in Vikhroli. We have some like trade is more or less completed and sold out. Any reason why we not releasing more area in that micro market.

Pirojsha Godrej — Executive Chairman

Yeah, I think it’s again regulatory approval linked, Samar. So certainly I think both Vikhroli and Worli, we would hope to launch something during the financial year, if possible, but I think the level of conviction was not high enough to be included in the guidance. So hopefully, we can have a positive surprise on those.

Samar Sarda — Axis Capital — Analyst

Great, and on collections, probably Rajendra or Mohit could take it, collections were really good in FY ’22 like INR7700 odd crores. Increase in construction as a percentage is not that much. So, which is why like we see a phase good. So will our construction expense increase a little more in FY ’23, ’24 on a percentage basis versus like how collections has gone up. A related question here is we did a lot of subvention sales during COVID. So most of those collections has chipped in for this year or might come in FY ’23 and ’24 as well.

Rajendra Khetawat — Chief Financial Officer

So Samar, just to take your question. It will be, it is coming over because know when we did subvention, those projects were at different stages. So as and when those projects reach that milestone of OC where the 90% guys do, so those will fall, must have fallen due in ’22, some will come in ’23 and some will come in ’24. So those collection will chip in in the next 2 years also. That was your question. What was your second — other question on collection.

Samar Sarda — Axis Capital — Analyst

Construction expenditure increase.

Rajendra Khetawat — Chief Financial Officer

Yeah, so if you see there is a steady increase in the construction expenditure because as and when your milestone construction, milestone increases your billing milestone also increases. So, definitely with more projects under construction those expenditure if you see compared to last year construction expenditure has substantially gone up as compared to last financial year. And that is going to keep happening and similarly our collection also will keep pace with that milestone. Obviously, you know, we have sold it. So as and when you build your milestone gets triggered and that’s where the collection will keep coming in.

Samar Sarda — Axis Capital — Analyst

One last question on OCF like if I go by your numbers of INR7,700 crores, then INR750 crores of OCF for this year. So we have given a guidance of 10,000 the collections might reach there probably in a year or 18 months but if we really collect INR10,000 crores, will our collection margin or OCF margin also likely improve and go up where we are doing some outright project acquisitions. How do we see this moving over the next 2 years.

Rajendra Khetawat — Chief Financial Officer

It should improve, definitely it should improve because the margins are like we have been doing a mix of outright, plotted and other and even the JV projects are our high margin project. So as and when they start contributing, definitely we should also see an improvement in the OCF.

Samar Sarda — Axis Capital — Analyst

Great. And great going on the guidance and operations. All the best for the forthcoming quarters.

Pirojsha Godrej — Executive Chairman

Thanks so much, Samar.

Rajendra Khetawat — Chief Financial Officer

Thank you.

Operator

Our next question is from the line of Venkat Samala from Tata Asset Management. Please go ahead.

Venkat Samala — Tata Asset Management — Analyst

Hi, am I audible.

Pirojsha Godrej — Executive Chairman

Yes.

Venkat Samala — Tata Asset Management — Analyst

Thanks for the opportunity. Sir, just wanted to understand when I look at the interest expenses they look so low. I mean at 5.95%. If you could give some color as to how we are able to borrow at such low cost assuming it’s construction finance.

Rajendra Khetawat — Chief Financial Officer

So thanks for your question. What we do, we do 2 types of borrowing. Even the construction finance, we are able to catch a very low rate. So our construction finance are in the range of 7% to 8%. So apart from that we do a lot of corporate financing where we are able to negotiate a very fine rate and we have some mix of product. We have done some long-term tying up debt. We have placed NCDs in the past for long tenor which were at a very fine rate. So blended we are able to keep our average borrowing cost down.

Venkat Samala — Tata Asset Management — Analyst

And what would that mix be. I mean between construction finance and NCDs or other type of finance.

Rajendra Khetawat — Chief Financial Officer

So mix would be in the range of 70 or 75,25 kind of a thing.

Venkat Samala — Tata Asset Management — Analyst

Seventy five in favor of, sorry.

Rajendra Khetawat — Chief Financial Officer

Seventy five towards the corporate finance, 25 towards the construction finance.

Venkat Samala — Tata Asset Management — Analyst

Okay. And what would be the costs, sir, of this corporate finance.

Rajendra Khetawat — Chief Financial Officer

Our average borrowing cost is 5.9 from pipeline of YTD that we have reported.

Venkat Samala — Tata Asset Management — Analyst

Right. So assuming that is 7% to 8%, then this should be around 5%, right?

Rajendra Khetawat — Chief Financial Officer

Yeah, it’s blended. For the JV, it’s not getting reported in this and so it should be around 5.5% is what we are at the corporate level we are able to borrow. So blended is — will come at around 5.95% kind of a thing.

Venkat Samala — Tata Asset Management — Analyst

Understood, understood. Right. And one last question is, sir, I mean the bookings number that we report, does it include any taxes or any other elements. What I want to understand is assuming it’s an outright sale that you’re doing whatever–

Rajendra Khetawat — Chief Financial Officer

No, it’s a pure booking value, it doesn’t include any GST or other taxes.

Venkat Samala — Tata Asset Management — Analyst

Okay. So assuming it’s an outright sale whatever amount we are booking we expect to — that to be recognized in P&L as revenue whenever it does.

Rajendra Khetawat — Chief Financial Officer

Yes.

Pirojsha Godrej — Executive Chairman

With the example of joint venture project where the single line consolidation.

Venkat Samala — Tata Asset Management — Analyst

Yeah, sure. And sir, I mean even now we are seeing some losses on the JV side despite such good completion of projects. Any reason.

Rajendra Khetawat — Chief Financial Officer

Sorry, come again.

Venkat Samala — Tata Asset Management — Analyst

Even in this quarter we are seeing some losses being reported, right, on the JV side.

Rajendra Khetawat — Chief Financial Officer

Let me explain for better understanding. The JV losses, actually those are not losses. It comprises of 2 parts. One is is because of the Godrej commercial project G2 which is completed and it is not yet fully leased out, so the interest get expensed out. So bulk of that INR80 odd crores is coming out of that as an expense item. Secondly, a lot of projects, which have not contributed to the revenue recognition, the marketing and other period costs get expensed out. So that is another. And the third important part is most of our JV are structured in a manner where we do most efficient tax planning. So lot of income from the JV is being taken as interest income or a DM income or in the other form. So it is gross up. So what, till the time the JV comes to OC completion stage, you will not see that and period costs will keep expanding out. Otherwise the JVs are always in profit, maybe JV to JV it may depend at the time — the margins may differ, but none of the JVs are like in red. It is only the reporting because of which it is coming as a one line negative item.

Venkat Samala — Tata Asset Management — Analyst

Right. And sir, just as a follow-up. This Godrej2 what will be the hit if you could quantify, annual or quarterly.

Rajendra Khetawat — Chief Financial Officer

Like we said, around INR80 odd crores.

Venkat Samala — Tata Asset Management — Analyst

INR80 crores in a year.

Rajendra Khetawat — Chief Financial Officer

Yes, this will come down as and when the premises get leased out.

Venkat Samala — Tata Asset Management — Analyst

Okay, sir. Thank you. Thanks a lot.

Operator

Thank you. Our next question is from the line of Mohit Agarwal from IIFL. Please go ahead.

Mohit Agarwal — IIFL — Analyst

Yeah, thanks for the opportunity and congratulations on great set of numbers. I have just one question, trying to understand your business development strategy. In the last quarter, we have added projects in Nagpur, in Sonipat. You have earlier expressed our interest that we want to focus on 4 markets. Has that changed. And is there something that you’re doing different this time around.

Pirojsha Godrej — Executive Chairman

Yes, it’s — we are focused on the 4 market still. I think what we have also said if it’s a plotted development, we are willing to look at a broader range of cities. So, these would both be plotted development projects that you’ve mentioned.

Mohit Agarwal — IIFL — Analyst

So outside the 4 markets, it would be only plotted development.

Pirojsha Godrej — Executive Chairman

That’s right. And for that, I mean we may still of course occasionally add projects like Calcutta and Ahmedabad etc. But yes, for — almost all the projects are outside these 4 markets will be plotted. Okay. And apart from faster turnaround also is the margin profile or the IRR profile different for plotted projects in these markets versus our core portfolio. Yes. They are much faster to complete. So both the margins and IRRs tend to be higher.

Mohit Agarwal — IIFL — Analyst

Okay, that’s all from my side. Thank you.

Pirojsha Godrej — Executive Chairman

Thank you.

Operator

Thank you. Before we take our next question, we would like to remind participants to please limit their questions to 2 a participant. Time permitting, you may come back in the queue for a follow-up question. We’ll take our next question from the line of Manish Gandhi from KPMK Investments. Please go ahead.

Manish Gandhi — KPMK Investments — Analyst

Yeah, hi. Congratulations on a very good strong quarter on all the front. My first question is with regards to construction timelines and our aspiration to reduce it by 50% and going by few projects of say Pune and Bangalore, I have observed that despite COVID-related disturbance we are delivering in 2 to 2.5 years. So do you think we can make it 2 years or below for say 20 to 25 floor developments in the near future and which could lead to strong competitive advantage as well as satisfying great customer needs. That is my question.

Mohit Malhotra — Managing Director and Chief Executive Officer

Hi, Manish. Thanks for your observation. We have significantly brought down the OC timeline for the type of buildings you mentioned where we actually recorded the best ever OC timeline by a project in Pune at 22.5 months, so which is the fastest ever. Last fastest was 24 months, we have got it down. Also the flat cycles we have been consistently bringing it down. So this year, the average life cycle for the company has been brought down to 12 days. So, a lot of work has been happening on this front and we remain confident that with our focus on construction, we should be able to continuously bring the timeline down but I think 24 months is something we are now kind of working towards as almost consistent average for all projects.

Manish Gandhi — KPMK Investments — Analyst

Actually, that’s a great achievement for the Godrej team, especially our records in India to give possession. And my second question is on the launches this year, very exciting lineup. I was just wondering, would like to understand your thought process behind launching Wadala 1.6 million in one go which could be INR3,500 crore plus sales. So what gives you this confidence to launch the whole project in one go.

Mohit Malhotra — Managing Director and Chief Executive Officer

No, I think we are not launching the whole project at one go. This is the overall potential of the project. We will be launching it in phases but depending on how each phases perform, we can significantly bring more phases into the — If you see what happened in Noida last year, we actually sold close to INR1800 crores of sales in 12 months periods. I think this is the overall project size. The exact area would depend on how the launch is performing for each phase.

Pirojsha Godrej — Executive Chairman

Manish, thanks for pointing this out. I was just looking at the presentation. You’re right, I think this has been incorrectly put. So let’s — Rajendra, let’s correct this.

Manish Gandhi — KPMK Investments — Analyst

I was hoping that you must be thinking of selling INR2000, INR2,500–

Pirojsha Godrej — Executive Chairman

We’ll do our best.

Manish Gandhi — KPMK Investments — Analyst

Thanks, and all the best for FY ’23 and I’m sure, Piroj, you will meet your guidance on the upside of INR10,000 crores.

Pirojsha Godrej — Executive Chairman

Thanks so much, Manish.

Manish Gandhi — KPMK Investments — Analyst

Thank you. That’s all from my side.

Operator

Thank you. Our next question is from the line of Manish Jain from GormalOne. Please go ahead.

Manish Jain — GormalOne LLP — Analyst

Yeah, hi. First of all congratulations on raising the bar for you all because you all are setting up new trends in the industry and what was really heartening to see is that now first glimpse of scale is visible and really as the previous speaker asked on launches, I had 2 questions. First is on the business development side. On the business development side, we have been doing an excellent job on NCR and Pune. In what timeframe do we plan to excel in Mumbai and Bangalore. I’m leaving out the plotted project for now.

Pirojsha Godrej — Executive Chairman

Mohit.

Manish Jain — GormalOne LLP — Analyst

Plotted project, which land to do across outside the 4 geographies, I’m leaving that but in what timeframe do you plan to come back to excellence in NCR and Mumbai. Sorry, Bangalore and Mumbai.

Mohit Malhotra — Managing Director and Chief Executive Officer

Thanks, Manish. This year actually we were very happy with what we did in Mumbai. We have committed more than INR1,000 crores of capital in Mumbai in business development in FY ’22 and have a very strong pipeline of projects in Mumbai for the next year, which is already in term sheets and at fairly advanced stages of closure. So I think from a overall perspective, very, very strongly focused on turning around Mumbai business development and we feel it could give us a big scale in Mumbai. On Bangalore, again, there has been, we have been adding 2, 3 projects every year but I think we really need to get our strategy right in Bangalore and I’m hoping that next 6 to 9 months, we should see a turnaround in Bangalore as well. Mumbai, I see a very strong visibility upfront, Manish.

Manish Jain — GormalOne LLP — Analyst

Excellent. Congratulations once again. It’s really a delight to see the kind of performance like launch tracker to see 26 projects planned and of that 11 new launches. Phenomenal.

Mohit Malhotra — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.

Parikshit Kandpal — HDFC Securities — Analyst

Congratulations for year end quarter. My first question is on–

Operator

Sorry to interrupt. Mr. Kandpal, your audio is very muffled, sir. We can’t hear you clearly. If you are on a speaker–

Parikshit Kandpal — HDFC Securities — Analyst

Is it better now, hello.

Operator

Yes, thank you.

Parikshit Kandpal — HDFC Securities — Analyst

Is it better now?

Pirojsha Godrej — Executive Chairman

Yes, thanks.

Parikshit Kandpal — HDFC Securities — Analyst

Congratulations on a great quarter and the year. So my first question is on business development. So we have seen a big spike in input costs. So what’s happening on the land side. Do you intend to do a lot of land acquisitions this year. So can you give us any overview on how the land cost is going up or how is the inflation there, some sense on that.

Pirojsha Godrej — Executive Chairman

I think it’s varying a little bit by geography but certainly we expect both in property prices and land prices to continue to move upwards over this next couple of years. So I think we are quite keen to do business development this financial year but we are already seeing some increase in pricing on the land side over say, a year or 2 ago.

Parikshit Kandpal — HDFC Securities — Analyst

My second question is on Mumbai. So I think Mohit did mention that you’re looking to add a large pipeline in Mumbai. We have to pay an outlay of 100 rupees next year. Is it right there has been a large part of that will go into MMR now in this year.

Pirojsha Godrej — Executive Chairman

I think we’re open to doing projects in all of these geographies and would like to expand in all of them. Yes, I think it’s fair to say that Mumbai amongst these 4 cities is the number one priority for new project addition. So we’re quite hopeful that a big chunk of new investment will go there.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. Just last question on what I’ve been hearing from the market is that you are not buying like you’re buying land but you’re not buying land say where the development potential is for 10 years. So you are looking to do like more 3 to 4 year one single phase kind of new land acquisition. So, but if the opportunity comes in where you have to write a big check of say INR2000 crores or INR3,000 crores, which in India hardly like two, three developers can do, are you open to that kind of opportunity because government has recently formed that land monetization authority wherein you can see those kind of opportunities opening up from the government side on government land. So are you open to exploring those kind of opportunities, that could be big outlays maybe 8, 9, 10 years kind of project.

Pirojsha Godrej — Executive Chairman

Yeah, look, I think we’re open to any opportunity within residential development in these few cities. I think for the kind of investments you are talking about, we of course, have a great deal of confidence in the micro markets, scalability of them and our ability to deliver strong annual sales on an ongoing basis but certainly, I think the appetite to do big projects is very much in place. I think if you look at a project like our Ashok Vihar project in NCR that’s probably INR6000 to INR8,000 crore topline project. We bought the land for INR1300 crore. We have a project we’re launching now in Bombay would be INR3000, INR3500 crore topline project that we added. So certainly as the company scales, I think we do want to focus on good returns on capital in doing projects that we can turn around quickly. I think that there’s a lot of merit in those projects but we’re certainly also happy to cut large checks for strategic opportunities of a larger nature.

Parikshit Kandpal — HDFC Securities — Analyst

Because my concern is only coming that this year if you touch INR10,000 crores plus purely on basis of volume growing beyond that it will be difficult. So you will have to take the average utilization much higher. So for that you will have to add more of premium projects. That will get the growth kick off, so that we need to see a lot of BD opportunities being worked out there in that front. That was the only concern which I had.

Pirojsha Godrej — Executive Chairman

I mean yes and no. I think the growth opportunity in India, us and any other developers is just scratching the surface of the opportunity. I always like to say the whole top management team, just before the pandemic had spent a little bit of time in China meeting with the top developers there and if I recall correctly, I think we have done about 6 million square feet of sales that year and the big Chinese developers were doing 600 million square feet. So with a 2% or so share of the market currently, we don’t see any sort of market imposed constraint on our growth. But you’re certainly right that as the company continues to scale, to obtain a meaningful size projects that we should have in our portfolio should also scale concurrently and that will be the endeavor.

Parikshit Kandpal — HDFC Securities — Analyst

Okay, thank you. That’s all from my side and all the best.

Pirojsha Godrej — Executive Chairman

Thank you.

Operator

Thank you. Our next question is from the line of Dhruv Jain from Himanshu Zaveri. Please go ahead.

Dhruv Jain — Himanshu Zaveri — Analyst

Hi, congrats on a great set of numbers. Pirojsha, as a shareholder, when can we expect dividend as it’s been like long time now, 7 years already.

Pirojsha Godrej — Executive Chairman

Yeah, I think our thinking has been that the company has a fairly unique opportunity to reinvest and grow for a sustained period. So I don’t think that from our perspective, we’re thinking of dividends as a key means of shareholder value creation. We do think that reinvestment into this space, given the kind of opportunities makes more sense. To be perfectly honest unless something changes in that outlook, I wouldn’t expect any dividends over the next few years.

Dhruv Jain — Himanshu Zaveri — Analyst

Okay. And any idea on Mumbai, as I have marked, the sale is always little slow compared to NCR, Pune or Bangalore because any particular reason because I have marked like in NCR like Godrej Golf Links, Woods Faridabad one or in Pune, the Mahalunge, etc., all have been selling like very, very fast as compared to Mumbai where the projects are little slow in selling, that’s — what’s wrong.

Pirojsha Godrej — Executive Chairman

I think the issue has been our projects in Mumbai, has been a little bit on the smaller side in terms of the recent launches, we’ve been able to do. We’ve certainly seen very strong launches in Mumbai in the past including at The Trees in Vikhroli, our redevelopment project in Chembur. We are quite hopeful that this quarter, we will have a have a good response to that question in terms of a couple of launches in Mumbai.

Operator

Mr. Jain, maybe–

Dhruv Jain — Himanshu Zaveri — Analyst

Wadala one and the Thane one which you are launching.

Pirojsha Godrej — Executive Chairman

That’s right.

Operator

Mr. Jain, may we request you to return to the queue. There are several participants waiting for their turn.

Dhruv Jain — Himanshu Zaveri — Analyst

Okay.

Operator

Thank you. We’ll take our next question. That’s from the line of Aman Vij from Astute Investment Management. Please go ahead.

Aman Vij — Astute Investment Management — Analyst

Good afternoon, sir. My questions are on the margin front. So if you can talk about region wise margins that which we are achieving as of now, say NCR, Mumbai, Pune and Bangalore. What kind of EBITDA margins, do you think are we achieving as of now.

Pirojsha Godrej — Executive Chairman

Mohit or Rajendra, you want to take this.

Rajendra Khetawat — Chief Financial Officer

I don’t have a region-wise breakup right now but on the sales, what we are doing our blended average margin for company is right now upwards of 20% plus.

Pirojsha Godrej — Executive Chairman

So the company EBITDA margin is 30% kind of a thing. So region wise obviously depending on the project configuration, it will change like our plotted would be in the range of 40% kind of a thing, group housing depending on the type of project whether it’s a JV, whether it’s an outright or whether it is, you know, that will depend on a project to project basis. So like I said Faridabad, NCR had a 40% margin like similar Bangalore plotted has a 40% margin, group housing would be in the range of like Mohit said 20% to 25%. So again, it will be overall different for different projects but blended it will be like our EBITDA is 30%.

Aman Vij — Astute Investment Management — Analyst

So just a clarification on this part. When you talk about blended is 30% versus reported numbers. I understand the JV numbers are coming directly but the costs are also I think coming, we are not including in the topline. So that 16 — 15%, 16% margin, which we achieved in Q4. Is it because of the older projects or this kind of margin only we should assume.

Pirojsha Godrej — Executive Chairman

The blended, it’s a mix. It’s a mix of old plus new.

Aman Vij — Astute Investment Management — Analyst

Sure sir. So that was my point. So going forward when the newer portion increasing, say for example in next couple of quarters should there be uptrend on this margin and can it cross this 20%, 25% number also.

Pirojsha Godrej — Executive Chairman

So, the endeavor would be to go — take that to the higher but obviously it’s still there would be old projects which are — which will keep coming into the revenue recognition and like I explained our revenue recognition depends on the project completion. Till the time that project completion happens, the period costs will keep expensing out. So, there would be some amount of I would say averaging out across the high margin contributing project with the projects, which have not yet started contributing. So obviously the endeavor would be to improve our margin profile but for some time, there would be averaging out of old, new and the marketing expenses.

Aman Vij — Astute Investment Management — Analyst

Sure sir. My second question is on the Bangalore side. You have talked about we are lacking somewhere. If you can talk more about it because whatever we have aimed in the last 3, 4 years, we have — the gap between what we have targeted and what we have achieved we see maximum in Bangalore region. So if you can talk about where according to is our gap, is it project selection, is it something else and when do — what are we doing to fill that gap.

Pirojsha Godrej — Executive Chairman

Mohit.

Mohit Malhotra — Managing Director and Chief Executive Officer

I think the key issue in Bangalore if you really ask me has been business development. We haven’t been able to add as many projects as we would have liked to. On operations actually, the region has done quite well. The sales performance has been quite good. The delivery performance has been pretty good but it’s been largely a function of the lack of new projects and business development which has pulled it down but as I said earlier that we intend to correct it at next 6 to 9 months timeframe.

Aman Vij — Astute Investment Management — Analyst

Because we are targeting a lot more in Bangalore for FY ’23, it’s like 2 to 3 times our average sale, which we have achieved over the last 3 years.

Mohit Malhotra — Managing Director and Chief Executive Officer

It’s a function of launches. We have couple of launches planned in Bangalore and they are at fairly advanced stages of approvals, so this we are pretty confident on the numbers we had in the recent years for Bangalore.

Aman Vij — Astute Investment Management — Analyst

Sure, sir. That is all from my side. Thank you.

Pirojsha Godrej — Executive Chairman

Thank you.

Operator

Thank you. The next question is from the line of Harsh Pathak from B&K Securities. Please go ahead.

Harsh Pathak — B&K Securities — Analyst

Yeah, hi, good evening, and congratulations for a strong quarter. So this is in continuation to one of the earlier question on land prices. So this is what our check suggest is that land prices in Tier 2 cities have risen sharply in the past year. So if you could please quantify or give a ballpark figure on how much the land prices must have risen and would this likely put pressure or put hindrance to our target of getting better margins and IRR profile or plotted elements on this land parcels, please.

Pirojsha Godrej — Executive Chairman

Mohit.

Mohit Malhotra — Managing Director and Chief Executive Officer

Yeah, if you’re talking about Tier 2 we have just entered 2 cities which is Sonipat and Nagpur and there we are seeing both margins and IRRs actually much upwards of 30% plus, closer to 30%, 35% which is a very good return which we’re very happy to underwrite and we’ll be happy to have that.

Harsh Pathak — B&K Securities — Analyst

Right. But how much have been the land price increases in the past year because is that putting any pressure or getting it difficult for us to procure new land parcels. What trend are you seeing on ground?

Mohit Malhotra — Managing Director and Chief Executive Officer

There has been pressure of land pricing in it which I have observed especially in Gurgaon but if you look at other parts of the cities like Mumbai, Bangalore, Pune, we haven’t seen significant increase in land prices. They are in line with the pricing increase.

Harsh Pathak — B&K Securities — Analyst

Sure. That’s helpful. And my second question is regarding the smaller players are re-entering the market is what we are hearing for the Mumbai region at least. So in your experience, are they launching projects all by themselves and how is the response these players are getting from homebuyers, and does this make negotiating new attractive deals tougher for us. What trend are you seeing on ground?

Mohit Malhotra — Managing Director and Chief Executive Officer

Not really. Actually if you ask me, if you see our Shivam project, it is by — the Kandivali project is by a local developer and they came back and asked us to do the second phase as well. So people see value in cleaning up the land but at the time of sales and launches, they would like to partner with bigger companies like us and some of the other players. So I think that there could be sporadic launches by existing players but new launches definitely they are going and tying up with the larger players. Not seeing much issue with business development in Mumbai as of now.

Harsh Pathak — B&K Securities — Analyst

Sure, that’s helpful, thanks a lot.

Operator

Thank you. Our next question is from the line of Neeraj Sahjwani, an Individual Investor. Please go ahead.

Neeraj Sahjwani — Individual Investor — Analyst

Hi, I have–

Operator

Mr. Sahjwani, if you’re on a speaker mode, could you please switch to handset mode. We can’t hear you clearly, sir.

Neeraj Sahjwani — Individual Investor — Analyst

Am I more audible now?

Operator

A little better.

Neeraj Sahjwani — Individual Investor — Analyst

I have 2 questions, mostly around Bombay. So one is, do you have any clarity on the Bandra project. I think that’s marked even probably beyond FY ’23 and second is there has been redevelopment in the Western suburbs of Mumbai especially in society redevelopment. Have we intentionally kept out of that, considering they’re usually smaller in size.

Pirojsha Godrej — Executive Chairman

Yeah, Mohit.

Mohit Malhotra — Managing Director and Chief Executive Officer

So answering your second question first, we have evaluated society redevelopment projects but we can only do it if there is a certain scale to it. So smaller projects we are kind of avoiding because it doesn’t make sense to spend bandwidth [Phonetic] from it. On Bandra project, there has been an unfortunate situation at the JVP end. And so the project has got delayed, but I believe that once the situation on the joint venture partner side gets resolved, I believe it is getting resolved, then we should see a positive traction on it but unfortunately it’s got stuck because of some of the unfortunate incidents which has happened on there.

Neeraj Sahjwani — Individual Investor — Analyst

Okay. Thank you, Mohit.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Over to you, sir.

Pirojsha Godrej — Executive Chairman

I hope we’ve been able to answer all your questions. If you have any further questions or would like any additional information please reach out and we’ll be happy to be of assistance. On behalf of the management, thank you again for taking the time to join us today. All the best.

Operator

Thank you. members of the management. [Operator Closing Remarks]