KOLTE-PATIL DEVELOPERS LTD (KOLTEPATIL) Q1 FY23 Earnings Concall Transcript

KOLTE-PATIL DEVELOPERS LTD  (NSE:KOLTEPATIL) Q1 2023 Earnings Conference Call dated Aug. 12, 2022

Corporate Participants:

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Pawan Lohiya — Kolte-Patil Developers Limited — Analyst

Pritesh Sheth — Motilal Oswal — Analyst

Shreyans Mehta — Equirus Securities — Analyst

Shivam Prasar — — Analyst

Presentation:

Operator

Ladies and gentlemen. Good day and welcome to Kolte Patil Limited Q1 FY ’23 Earnings Conference Call.

[Operator Instructions]

I now hand the conference over to Mr. Shiv Magdum [Phonetic] from Adfactors. Thank you and over to you sir.

Operator

Thank you. Good afternoon everyone and thank you for joining us on the Q1 FY ’23 results conference call of Kolte-Patil Developers Limited. We have with us today, Rahul Talele, Group CEO and Pawan Lohiya, Head of Finance. Before we begin, I would like to state that some of the statements in today’s discussion may be forward looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available in the Q1 FY ’23 results presentation that has been sent out to you earlier.

I would now like to invite Mr. Rahul Talele to begin the proceedings of this call.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Good afternoon, everyone. A very warm welcome to everyone present on this call and thank you for joining us today to discuss the operating and financial performance of Kolte-Patil Developers Limited for the first quarter of FY ’23. I would like to begin by sharing with you our views and takeaways on the prevailing macro and real estate environment followed by a discussion on key initiatives, broad strategies and an overview of the highlights of the first quarter performance.

Pawan will then take you through the key financial highlights. We also look forward to taking your questions and suggestions during today’s call. To start with some thoughts on prevailing macroeconomic scenario that has a bearing on consumer spending behavior and therefore on our business as well. We believe that the recent news flow and data dynamics are indicating that India is once again getting to be well-positioned for expansion in domestic demand. We see government action, the reform agenda, and the policy framework supporting an upswing in private sector investment and productivity improvements across sectors, thereby creating a virtuous cycle in the economy.

After a long period of adjustment, financial sectors’ balance sheets are looking more robust, indicating a turnaround in the fortunes of a wide variety of borrowers. This also means that there is a greater resource availability to spur the next set of economic growth drivers. The recent impact from oil and commodity price escalation had impacted sentiment with prices pulling down, more stability is expected in the economic environment, creating confidence for improved spending and more positive consumer behavior.

From the perspective of the Indian real estate industry, as in the case of several other sectors, recent developments have caused some escalation in raw material prices. However, the key difference here is that unlike many other industries, real estate has the drivers to create a pass on mechanism for cost escalation. This is especially true for strong brands with efficient execution capabilities and solid reputation built over many years of building customer confidence and delivering to expectations.

We believe Kolte-Patil is one such brand and our strong market position is now reflecting in the positive data points that our business is generating. Our business is also displaying several other elements of strength based on three decades of focused efforts, we established a well-respected franchise within our core customer base

From the customers’ perspective, we have built long-term engagement on the foundations of trust. From the business standpoint, we have been an early adopter of the manufacturing model in the real estate sector across the 23 million square feet of area delivered till date. We are now bringing in elements of visibility, predictability and sustainability into our operating model. We are focused on expanding visibility within our target audiences in the focus cities of presence and deep engagements with all other key stakeholders as well, predictability of thinking, planning and process that will further strengthen our corporate framework. Sustainability of practices that create a resilient structure to drive growth. We believe these attributes are essential to our ambitions of graduating from a mid-sized real estate player to creating a large presence in the industry over the next few years.

Now talking about operating performance. We have entered FY ’23 carrying the momentum of the previous year that saw Kolte-Patil deliver in line with our stated pre-sales guidance in a weak operating environment. This was largely on the back of a sustenance project-based portfolio. During Q1 FY ’23, on the operational front, the company’s sales bookings stood at 0.61 million square feet with a value of INR445 crores, a growth of 53% in volume and almost 79% in value compared to Q1 of last financial year. Along with sales booking, project execution activity remains strong and collection from customers increased to INR474 crores during the quarter compared to INR279 crore in Q1 of the preceding year, a growth of 70%.

Price realization had has seen a significant jump based on several factors, including higher realization in ongoing sales from project across the board, product mix contribution from our Pune-based inventory and strong sales momentum in Mumbai. This has led to an improvement in the APR from INR6,418 in Q4 FY 2022 to INR7,260 per square feet in Q1 FY ’23. We now expect to deliver 25% to 30% sales growth by value in FY ’23. We have a pipeline of projects lined up for launch in the coming months across Pune, Mumbai and Bengaluru with aggregate saleable area of INR8.95 million square feet and topline potential of around INR6,300 crores. We also remain focused on meeting our business development target of rupees INR7,000 crores of topline potential for the current financial year. As a part of this plan, we continue to evaluate opportunities such as acquisition of Pune-based Sampada Realities announced yesterday. This particular transaction provides a revenue opportunity of INR1,400 crores at Kiwale in Pune. With all regulatory approvals in place and we expect to start launching in phases in the current quarter itself. We will continue to add more such projects to our portfolio by leveraging our market visibility and balance sheet position for growth.

Today, with the residential real estate segment in structural upcycle, we expect the demand momentum to continue for the next three to five years and we are positioning our organizational resources accordingly. Despite the rise in interest rates, affordability is still at its best backed by strong wage growth trends. The underlying structural drivers of demand remains strong and customers continue to favor developers and projects that provide comfort of reliability, credibility, and strong track record.

We see this as an opportunity to take the leap of faith into the future. We are now targeting INR8,000 crores to INR9,000 crores of cumulative presales over FY ’23, FY ’24 and FY ’25 together. This compares with the INR4,300 crore of pre-sales by value over the last three years. We also look to drive forward on our business diversification objective, with our 40% to 45% revenues from Mumbai and Bangalore by FY25. Underlying this transition will remain our structure of business discipline that has remained with us through the years.

We’ll continue to drive returns on capital, driving growth with cash like partnership and engagement model. With that now, I will hand over the proceedings of this call to Pawan to provide financial overview.

Pawan Lohiya — Kolte-Patil Developers Limited — Analyst

Thank you, Rahul. Good afternoon, everyone. I will now briefly take you through our financial performance for the first quarter FY ’23. Based on CCM based accounting, in Q1, we clocked revenues of rupees INR200 crore whereas EBITDA for Q1 stood at INR46.9 crore compared to EBITDA of INR40.5 crore in Q4 FY ’22. Our net profit after tax post minority interest came in at INR21.2 crores compared to INR26.8 crore in Q4 FY ’22. Here, we would like to remind you that recognition of revenue and profits are dependent on the timing of project completion based on statutory accounting guidelines. We see a strong drive on the DIYs front in FY ’23, linked to project completion and deliveries would be higher revenue recognition in the ensuing period. Our net debt to equity stands at 0.15 as on June 30, 2022. Our focus will remain on maintaining sales performance, timely execution and cash flows, which will continue to drive P&L performance over time.

On that note, I conclude my opening remarks and would now like to ask the moderator to open the line for Q&A.

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 Pritesh Sheth from Motilal Oswal. Please go ahead Pritesh.

Pritesh Sheth — Motilal Oswal — Analyst

Can you hear?

Operator

Sir, you may now start with your question.

Pritesh Sheth — Motilal Oswal — Analyst

Okay. Hi, congrats on a great start and deal you announced yesterday. Finally, good to see some progress on business development. So firstly, on business development, one specifically on the deal. Prima facie, it does seem very attractive. Total investment of INR120 crores for that much of size and project is largely plug and play. You are hoping to launch the first phase in next quarter. So if you can just describe a bit in terms of how you managed to get this deal attractively valued and what sort of margin expectations are we targeting?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Thank you, Pritesh. This is — Sampada Realities has started this project in 2007. They have acquired this property from landowners and launched this project in 2011. But in last 8 to 10 years, they have just delivered 8 to 9 lakh square feet and there were multiple parties involved in this transaction and the potential of this transaction is around 2.5 million square feet. We are expecting around topline potential of INR1400 crores over here and EBITDA margin of approximately 24% to 26% of EBITDA margin. So, in terms of the absolute number in the range of INR1300 to INR1500 square feet EBITDA margin we are expecting from this project. So, Pritesh during our earlier calls, I used to always say that we always do a very stringent due diligence and various states and we have the various states or parameters to assess the transaction and considering the leadership position in Pune, landowners even just project owners and the developers, their first choice of opportunity is with Kolte-Patil as a developer and that is now we got this deal. So there were multiple complexities involved in this deal, but somehow, with the help of the policy working internally, with the help of the strong consultant onboarding on this to provide the various technical, legal and as well as the financial due diligence since we were entering into a live company though it is the only asset in that company. So considering the complexity and considering the brand legacy and the brand capabilities in the Pune market, we could close this value deal for us.

Pritesh Sheth — Motilal Oswal — Analyst

Okay, got it. And so, is there any kind of a distress or any liability that we are carrying from the company that will be part of our books?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

No Pritesh. There is no liabilities for us. The only thing is we have to complete the ongoing Phase over there, which is of a couple of lakh square feet. And we are confident that we are going to complete that in eight to nine months.

Pritesh Sheth — Motilal Oswal — Analyst

Right, got it.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

It is already factored in that the cost IN120 crores.

Pritesh Sheth — Motilal Oswal — Analyst

INR120 crores. Okay, got it. And I think for the first time given the clarity on what is the size of business development that you are targeting this year, firstly, how much does, I mean how much is the pipeline that you’re looking at to target that INR7,000 crore of GDP addition this year. And in terms of what areas you’re looking at, which largely again Pune or it’s mix of Pune, Mumbai Bangalore across the three markets.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Pritesh to be very honest to begin with this financial year, we have set the target of INR7,000 crores of business development activity with the split of say maybe 7 to 8 million square feet of BD in Pune, around one million square feet of business development in the city of Mumbai and around one to two million square feet in Bengaluru. So, we are still continuing with our guidance and there is a strong pipeline. I’ve already mentioned in our earlier call as well. At the same time, let me accept that our due diligence and various process is very stringent and because of that, maybe it is taking a little more time, but we are confident that we are going to achieve this target in this financial year itself, considering the fact that there are multiple advanced level of discussions going parallelly in Pune, Mumbai and Bangalore. In Pune, we are, I mean, at this moment around INR4,000 crores of topline worth potentials are in very advanced stage of pipeline. In terms of area, it is close to 6 to 6.5 million square feet and in Mumbai, we are targeting closure of INR2000 crores of topline worth project. These are largely since we have a strong presence in western Mumbai, now, we are targeting the central and Navi Mumbai suburbs so that we will have the good visibility and that is in sync with our Mumbai strategy. We want to restrict our Mumbai project portfolio, project size in the range of say INR300 crores to INR700 crores of topline at one project. And at the same time, INR1.5 crores to INR3.5 crores of individual unit. So, we are confident that we are going to achieve this.

And in terms of pooling, we are targeting new micro markets, wherein we don’t have the presence. All these deals are such like Kiwale is one of the examples. So other deals are also — we are targeting in other micro markets wherein the sales velocity is already there. There is a good amount of demand. Competition is feeling good and we want to enter those sectors.

Pritesh Sheth — Motilal Oswal — Analyst

Got it, thanks for the clarity. I have couple of more questions. I’ll join back the queue. Thanks for the answers, and all the best.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Thank you.

Operator

[Operator Instructions]

The next question is from the line of Shreyans Mehta from Equirus Securities, please go ahead.

Shreyans Mehta — Equirus Securities — Analyst

Yeah, thank you for the opportunity. Sir, just wanted to understand this quarter we’ve launched only one project, right, Giga?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Yes.

Shreyans Mehta — Equirus Securities — Analyst

So if I exclude that roughly, ballpark number in terms of resales is at 0.52, so I mean, I understand we are actively looking at the BD pipeline aggressively, but unless and until you know we do not see scale up in the existing especially on the LR, how can you, I mean — I am trying to understand how do we — I mean we are talking about INR8000 crores, INR9000 odd crores and unless and until we see some aggressiveness as far as LR project is concerned — so just wanted to understand the thought process out there.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Okay, thanks, Shreyans. See, we have given details on the priority launches. So that is to the tune of INR6,300 crores across geographies and we have only classified all those projects wherein we are actually in a very advanced stage of approvals. So, let it be — Kiwale is completely approved or buyer project is in very advanced stage of approval. All — we have received all sets of approval for our Life Republic project. We have received the key approval of environment clearance for around 4 million square feet and the same is the case in fact for the Sukhniwas project we have received, which is in Mumbai. We have received the CC today. So we are going to apply for the RERA. In the Golden Pebbles, which is again in Mumbai, we have received the IOD and the society has vacated. Now, the demolition work has begun.

So in couple of — I mean in the next 30 to 45 days, we will be receiving a CC for that as well. And Bengaluru RERA, we have already applied to the various authorities for the approval. So, all — we have classified all these priority launches, whereas the possibility of a definitive launch right from next 15 days to next three to four months. So all this potential will get sanction and out of this, depending on the project size, we are going to launch partially. So, we are targeting launches of close to INR2,500 to INR3,000 crores in the next three to four months.

Shreyans Mehta — Equirus Securities — Analyst

Sure. So just to put it other way, I mean, in terms of, if I look at the LR run rate, we are still not even at the pre-COVID levels — the peak, which we’ve done. So how do you think that probably in by FY ’23 and we should see that scaling up?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Shreyans, I believe we have achieved the highest sale in terms of value at Life Republic last year. So as compared to the pre-COVID numbers and not only in terms of value, but as well as in terms of the per square foot price realization. Though it was sustenance phase, I mean the leftover inventory or the partial left over inventory, we could achieve — we could improve our price realization in the range of 3% to 7%, 8% in the Life Republic project. So there is a good possibility of additional value addition, as well as now since we are running a township model with a supermarket of product. So, there is a price range of INR35 lakhs to INR80 lakhs as on date. And with this new launches, which are mentioned in that slide, our price range is right from say INR30 lakh to INR1.4 crores. So, that will give us additional volumes at LR and considering the demand for the premium houses or the spacious houses, we are confident that this year itself, we are going to surpass significantly as compared to the delivered number of last financial year.

Shreyans Mehta — Equirus Securities — Analyst

Got it, sir. Got it.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

At time since there is a mega — I mean this is a big township, we are parallelly looking for the strategic monetization at LR. All those potential, which is going to be live after seven, eight years ensure that we are trying to monetize that. And if there is a possibility to acquire projects at other level, we are evaluating that as well. And also at the same time, we are in next three to four months — we are planning to launch a 24K vertical at township that will again add volume and value at township. And we are also targeting a walking segment at townships. So all put together, we are confident that we are going to achieve significant growth at township level.

Shreyans Mehta — Equirus Securities — Analyst

Got it, sir. Got it, got it. Sir, my second question pertains to realization. So if you could quantify how much is it because of the price hike and how much is it because of the product mix.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Out of this, our last year — last quarter realization was INR6420 and this is in the range of INR7260. So there is a delta of around INR800 rupees. So out of this INR800, around — so this is 13% to 14% of improvement in price realization. Out of that, say, 3% to 4% is just because of the improvement in the prices at the project level itself. The rest is a combination of contribution from a premium project and change in the product mix.

Shreyans Mehta — Equirus Securities — Analyst

Got it, got. And sir, this 3% to 4% price hike, is it, you know, that you’ve taken at one go or probably we might see in coming quarters as well?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

There is a certainty of price improvement in the coming quarters as well. So, there is a price mechanism we follow. On a quarterly basis, we try to freeze the price for the entire company level and we review that on a monthly basis and we are now targeting all those new projects that we are planning to launch, mentioned in that priority list over there as compared to our business plan assumptions, we are targeting almost 5% to 7% extra at the time of launch itself.

Shreyans Mehta — Equirus Securities — Analyst

Got it, got it. Sure. Sir, last question from my side. In the slide, which is given on priority launches, can you just give us some tentative numbers or in terms of then for example, Baner revenue expected to launch, same for Pimple Nilakh and Tathawade.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Baner, we will get launched in next two months. In terms of Pimple Nilakh, it will get launched around in the Q3 or early Q4. And Tathawade, we have received the onset of approvals. And it will get launched in another 30 to 45 days.

Shreyans Mehta — Equirus Securities — Analyst

30 to 45 days and same for the Mumbai projects?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

For Mumbai projects, in fact we have received all sets of approvals. Now the vacation and the demolition process is going on. Sukh Niwas will get launched in next 20 to 30 days and Golden Pebbles in another 30 to 45 days or max two months. And for Life Republic, certainly, we are confident that all these projects can get launched in next 60 days.

Shreyans Mehta — Equirus Securities — Analyst

Next 60 days.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Yes.

Shreyans Mehta — Equirus Securities — Analyst

Okay. Sure, sir. Thank you very much, and all the best.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Thank you, Shreyans.

Operator

Thank you. The next question is from the line of Shivam Prashar, individual Investor. Please go ahead.

Shivam Prasar — — Analyst

I would like to — thanks for the opportunity first and congrats on a good set of numbers. My question would be, sir, how much time will it take for the execution part for us to happen for the ongoing construction that’s happening and what are the margins that you expect?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

See, every quarter or every — we are launching a project. So, and there is a difference in the height of the building. So every project has a different set of RERA timelines, so in the range of, say, two years to four years from a RERA perspective. At the same time, all these ongoing inventory, we are confident that we’ll be finishing the deliveries in next 18 to say three years — 18 months to three years. In fact, this [Speech Overlap], again, we are confident that this year, it will be very strong in terms of deliveries. We are targeting a deliveries of close to 3.5 million square feet in this year itself.

Shivam Prasar — — Analyst

Can you quantify that in rupee terms, sir, the deliveries which you are targeting this year in 3.5 million square feet?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Sorry.

Shivam Prasar — — Analyst

Sir, can you just tell me the rupee value of this 3.5 million square feet, which you are targeting to deliver this year?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Okay. So, it will be in the range of INR1600 crores to INR1800 crores, INR1900 crores.

Shivam Prasar — — Analyst

This will be executed this year only?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Yes, yes.

Shivam Prasar — — Analyst

And what do you — and how much do you see in the next 24 months like.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Next year, since we have sold the very — out the very our sales for next years, again, our deliveries will be more than 3 million square feet and since the price realization if you see the trend in the last few quarters, there is a big jump in the price realization. Considering that fact, there will be — maybe, we’ll be targeting more than INR2000 crores of revenue recognition in the next financial year.

Shivam Prasar — — Analyst

Okay. This will be execution part. And sir, the margins on that. In the next three years, we are going to deliver around close to say 8 million to 10 million square feet of deliveries. Okay, okay, right, right. And sir, what would be the margins for the first 3.5 million square feet deliveries you will be looking and for the next year in the same? Can you say that the margins and any fluctuation in margins you are seeing due to this commodity pricing, revision in margins or so?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Let me answer the second part. So there is hardly a fluctuation in terms of the cost of construction since all these projects, which are going to deliver in this year is already in the finishing stage and the commodity price uptick is for all those items which is required at the beginning half of the project. So there is a very limited impact in terms of the — from the perspective of commodity price hike. We are targeting a EBITDA of around say 24% to 25% with a PAT expectation of around 12% to 14%.

Shivam Prasar — — Analyst

Okay, sir. And you won’t revise these — these would be revised upwards only, not downwards I guess.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Yes, certainly.

Shivam Prasar — — Analyst

Okay. And sir, can you just, if you just a general question — if you can highlight the market share percentage, if you’ve gained any market share or lose any market share in certain markets?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

So, Pune market, various reports — from various reports, Pune market is in the range of say INR40,000 odd crores to INR60,000 odd crores and we are achieving around say INR1100 to INR1200 crores in Pune. So we are consistently in a top five position in Pune since last 20 to 25 years. And maybe, we are the only developer who is there since beginning. Okay. And the other markets. Any market share numbers — any market share percentage if and — in the other markets. So you are losing market share in Pune or you are gaining market share or you are just maintain the market share market share. I wanted to listen to that? See, let me classify this. See, Pune, now Pune has grown so big. So, we have classified Pune into various micro markets, wherein we have the projects, we are consistently achieving our market share. In fact, there is a better maintain our market share even if there is a competition and hence what I discussed earlier, we are targeting all those new micro markets wherein we don’t have a presence, and that will give us a very good amount of delta in terms of volume. So, there are multiple micro markets we are targeting to enter. And with that possibility, I mean there is a good amount of room left to double our volumes in Pune itself in the next, maybe next financial year.

Shivam Prasar — — Analyst

And sir, any percentage numbers.

Operator

Sir, you may come back in the queue if you have further questions.

Shivam Prasar — — Analyst

Okay, okay, thank you so much.

Operator

[Operator Instructions] The next question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.

Pritesh Sheth — Motilal Oswal — Analyst

Hi, sir. Thanks for the follow-up. So again on Life Republic and good to see launches ramping up and we are now bringing in a variety of products with plotting and the 24k project as well, right, within the next 24 months. So and previous participant rightly highlighted as well that we have been in 8 lakh square feet to one million square feet range since quite some time now. So with this ramp up in launches and bringing in a variety of products, do we expect a scale to improving Life Republic 1 million square feet to maybe 1.5 million square feet on an annual basis?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Pritesh, certainly, we are confident that about the more volumes coming from Life Republic. So in next 12 months from now, we are planning for 1.5 million square feet of pre-sales number at township.

Pritesh Sheth — Motilal Oswal — Analyst

And this plotting is just one opportunistic thing you’re doing or we have a larger line size that we have dedicated for this plotted development in this township?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

No, since it is a township, as I mentioned earlier, we want to go with the supermarket concept. We want to give various varieties to the customers and nowadays plotting is in demand and considering that we are getting — we have already delivered one sector in township, we started with the sales rate of INR3800. Last units we sold at more than INR5,000 rupees a square feet. So, considering that positive momentum, we want to encash that opportunity at a limited level in township.

Pritesh Sheth — Motilal Oswal — Analyst

Okay, got it. And in terms of realization, we have already reached around INR5,500 rupees per square feet on an average. Considering how strong the demand is right now across cities and for our products as well, do we envisage to scale up this further to around INR6,000, INR6,500 where utilizing the additional township FSI that we have of 1.7 also starts to make economically viable sense for that matter? Is that the plan now?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Yes, certainly Pritesh. So there needs to be a right balance between volume and value and considering that we are gunning for the step-by-step approach. Now, we are planning to launch new sectors, with the starting rate at INR5,400 to INR5,000 rate. And after the various categorization of the inventory, it’s easy to sale, moderate to sale, and difficult to sale. Our average realization will be in the range of INR5,700 to INR5,800, that is our projections for this set of next launches. At the same time, there is a good amount of possibility of consumption of that additional FSI as well considering the fact that I have mentioned during our earlier interactions that there is I mean if you touch that INR6000 level, then we can certainly go beyond 70-meter of development and we are certainly planning to come up with that kind of development through 24K product.

Pritesh Sheth — Motilal Oswal — Analyst

Okay, got it. And roughly how much that increases the potential of LR if we go for that higher FSI and right now we are at 11 million square feet of additional development that we have, which is still not launched. What would be the additional potential that we might look at?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

So, see LR total potential, I mean see, we have given that note in our presentation as well. So, there is a potential of more than 20 million square feet at this moment at township.

Pritesh Sheth — Motilal Oswal — Analyst

Okay, 20 million. So, right now at one FSI, we are still at 11 million square feet additional and it can go up to 20 million.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Yes. So this new launches of around 4 million square feet — 3 million square feet is a part of this 20 million.

Pritesh Sheth — Motilal Oswal — Analyst

Okay, okay.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

It is a combination of residential and economic activity. So largely residential of around INR1400 — sorry 13 million square feet or 14 million square feet and 5 million square feet, 6 million square feet of economic activities, which is largely a commercial development.

Pritesh Sheth — Motilal Oswal — Analyst

Got it. Fair enough. Thank you very much. That’s it from my side. All the best.

Operator

Thank you. [Operator Instructions]

The next question is from the line of Shreyans Mehta from Equirus Securities, please go ahead.

Shreyans Mehta — Equirus Securities — Analyst

Yeah, thanks for the opportunity. Sir, just a follow-up in terms of cash outflow, just wanted to understand what is the pending construction cost to be incurred for this year and next year?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

So from the ongoing projects, the pending cost which is to be incurred is around INR1500 crores. Out of that, we are planning to spend around INR600 crores to INR650 crores this year and balance in the next 18 odd months.

Shreyans Mehta — Equirus Securities — Analyst

INR900 odd crores in the next year 18 months?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Yeah, that’s right, for the existing large projects.

Shreyans Mehta — Equirus Securities — Analyst

Got it. And for the recently acquired projects and to be launched, what would be the rough indicative number in terms of investments?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

So see for Kiwale project, the investment amount is INR120 crores and all those projects that I have mentioned earlier, we have to invest obviously in tranches of around six to nine months. So our investment requirement will be in the range of INR400 to INR500 crores?

Shreyans Mehta — Equirus Securities — Analyst

INR400 crores to INR500 crores. Sir, given that probably this year we have an aggressive bid pipeline as well as you know we have certain portion of construction also moving in, how do you see the balance sheet moving from here on, especially in terms of leverage?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

So see at this moment, our net debt to equity is 0.15 and there is internal accrual, 0.5. So there is a good amount of debt left off around INR300 crores to INR400 crores to further leverage. So that is our plan B. Our plan A through internal accruals and through what I mentioned earlier through strategic monetization at Life Republic and then backed by this leveraging, we are confident that we will achieve our targets.

Shreyans Mehta — Equirus Securities — Analyst

Got it, got it. Sure. And sir, lastly, again dwelling more on LR, just wanted to understand, are you in talks with any players like we had the earlier where we have monetized the Planet. Are we in talks with any other players or with the same players?

Rahul Talele — Kolte-Patil Developers Limited — Analyst

See, we are in discussion with a couple of players. Some are pure, pure equity infusion like what was the structure at Planet.

Shreyans Mehta — Equirus Securities — Analyst

Right, okay. And it’s still at the initial stage or…

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Very initial stage. See, Shreyans, as a group, we have, I mean, see if you see the history of growth, we have realized on the various private equity partners. Though we are in discussion because since we are launching multiple projects, private equity players.

Shreyans Mehta — Equirus Securities — Analyst

Got it, got it. That’s it from my side. Thank you.

Operator

Thank you. [Operator Instructions]. As there are no further questions, I would now hand the conference over to management for closing comments.

Rahul Talele — Kolte-Patil Developers Limited — Analyst

Thank you once again for your interest and support. We will continue to stay engaged. Please be in touch with our Investor Relations team for any further details or discussions. Look forward to interacting with you next quarter and wish you all Happy Independence Day in advance.

Operator

[Operator Closing Remarks]