Kolte-Patil Developers Ltd Q4 FY23 Earnings Conference Call Insights

Key highlights from Kolte-Patil Developers Ltd (KOLTEPATIL) Q4 FY23 Earnings Concall

Management Update:

• [00:03:58] KOLTEPATIL said the company achieved its highest ever pre-sales number of INR2,232 crores in FY23 and looks forward to maintaining the momentum going ahead. Sales also has nearly doubled from INR1,200 crores in FY21 to INR2,232 crores in FY23.

• [00:06:11] KOLTEPATIL added two new residential projects in Pune with an estimated saleable area of 1.9 million sq. ft. and topline potential of around INR1,300 crores.

• [00:07:18] The goal for FY24 is to achieve robust sales value of INR2,800 crores and secure deals with a cumulative topline of INR8,000 crores.

Q&A Highlights:

• [00:10:59] Pritesh Sheth of Motilal Oswal asked if there is any uncertainty on the launch of 3 million sq. ft. in 1H24, and will the Baner project launch in 1H or 2H24. Rahul Talele Group CEO replied that the Baner project will be launched in 1Q23, and KOLTEPATIL is confident of launching at least 3 million sq. ft. in 1H24, subject to regulatory approvals.

• [00:12:24] Pritesh Sheth of Motilal Oswal also asked if the remaining 4.5 million sq. ft. will confidently sail through or if there might be some spillover. Rahul Talele Group CEO said most of the projects have already received environmental clearances and the company is confident of launching them in FY24. There may be a spillover of a couple of projects to 1Q25.

• [00:13:52] Pritesh Sheth at Motilal Oswal enquired which projects contributed to the 20% EBITDA margin in 4Q23, and if it can be expected to continue going forward. Rahul Talele Group CEO answered that the Pune Life Republic sectors and Ivy projects contributed the most to revenue recognition. Going forward, KOLTEPATIL is confident of maintaining good margins at the project level.

• [00:17:04] Pritesh Sheth at Motilal Oswal queried about the visibility and confidence in adding many projects to the pipeline. Rahul Talele Group CEO replied that the company has a strong pipeline of advancement of BD proposals and is currently conducting due diligence on multiple projects. KOLTEPATIL is diligent in its due diligence process and will continue to announce BD deals once satisfied with the due diligence requirements and closure for the respective projects.

• [00:18:15] Prithvi Raj from Unifi Capital asked what the company is doing differently in the Life Republic project to achieve significant sales traction. Rahul Talele Group CEO said Life Republic project has seen significant sales traction due to a number of factors, including customer-centricity, strong market intelligence, and comprehensive amenities. The company is confident of delivering 1.5 million sq. ft. of sales in the project in the future.

• [00:22:28] Prithvi Raj from Unifi Capital queried if the 20% EBITDA margin will continue despite being on the lower side this year. Rahul Talele Group CEO replied that KOLTEPATIL is confident of maintaining its margins at the project level, but there may be some short-term deviations in the group level margin due to increased marketing spend and revenue recognition.

• [00:24:13]  Biplab Debbarma from Antique Broking asked for more information on the redevelopment projects in Mumbai, Mulund, and Vashi, including the compensation for existing tenants, the deposit required, and the expected timeline for launch. Rahul Talele Group CEO replied that KOLTEPATIL has entered into two redevelopment projects in central Mumbai and Navi Mumbai. These projects are expected to be launched in the next 6-12 months. The company is confident of completing these projects on time and within budget.

• [00:27:55] Biplab Debbarma with Antique Broking queried about the contribution of the Life Republic project in terms of value and the expected per sq. ft. price escalation in FY24. Rahul Talele Group CEO answered that KOLTEPATIL has seen a 4-5% price uptick in its recent launches, and is confident of crossing 1.5 million sq. ft. of sales in FY24. This would translate to pre-sales of INR700-800 crores.

• [00:29:28] Biplab Debbarma from Antique Broking asked how has the ticket size of the Life Republic township changed over the years, from affordable to premium. Rahul Talele Group CEO clarified that the township currently has 13,000-15,000 residents, and KOLTEPATIL expects to add 2,000 more families each year. KOLTEPATIL has two business strategies: affordable housing and luxury housing.

• [00:35:09]  Rohit Balakrishnan from ithought PMS enquired about the run rate for sustenance sales, assuming that new launches will no longer contribute to sales. Rahul Talele Group CEO replied that KOLTEPATIL is confident of achieving 50-60% sales from sustenance projects and will explore maximum opportunity to launch projects in the first half of the year.

• [00:41:02] Dhwanil Desai from Turtle Capital asked if the company prefer to develop its own projects or JV with other developers, and how will the rising land prices impact project IRRs and margins. Rahul Talele Group CEO said land prices have increased in the last couple of years due to high demand and additional FSI potential. The company is exploring multiple structured outright transactions due to its good amount of internal accrual but may also consider JV/JD as an entry strategy in some micro markets. The company is working on structured outright, pure upfront outrights, and JV/JDA.

• [00:43:01] Dhwanil Desai at Turtle Capital asked if the incremental projects be limited to the existing three suburbs of Mumbai, or will we explore newer micro markets in the city. Rahul Talele Group CEO answered that Mumbai will remain KOLTEPATIL’s priority area for the next 2-3 years, with a focus on Western Suburbs, Central and Navi Mumbai. KOLTEPATIL will acquire projects in the range of INR300-1000 crores and sell units at INR1.5-3.5 crores.

• [00:45:11] Himanshu Upadhyay of o3 PMS asked that with 7.39 million square feet of launches, how much will be 24K and how will business development focus on this premium brand. Rahul Talele Group CEO said the company is planning to launch multiple 24K projects in Baner, Pimple Nilakh, NIBM and LR. These projects will have high margins, as KOLTEPATIL has seen good response for its spacious MIG and HIG projects in the past.

• [00:49:34] Ankit Gupta from Bamboo Capital queried how will the realization in Pune change with the increasing contribution of Mumbai and Bangalore to pre-sales by FY25. Rahul Talele Group CEO replied that realization increased from INR6,400 to INR6,800 in FY23. KOLTEPATIL project realization will be close to INR6,800 to INR7,000 in FY24.

• [00:53:34] Amit Mehendale of RoboCapital enquired if KOLTEPATIL is still on track to achieve PAT margins of 12-14% in FY24, considering the booking of accounting costs for new launches. Rahul Talele Group CEO answered KOLTEPATIL is confident of achieving its operating margins and there can be deviation in accounting margins due to the disconnect between revenue recognition and cost recognition. However, KOLTEPATIL is confident of its EBITDA margins at a project level.