Max Ventures and Industries Limited (MAXVIL) Q3 FY23 Earnings Concall Transcript

Max Ventures and Industries Limited (NSE:MAXVIL) Q3 FY23 Earnings Concall dated Feb. 07, 2023.

Corporate Participants:

Sahil Vachani — Managing Director and Chief Executive Officer

Rishi Raj — Chief Operating Officer

Amit Midha — Head

Nitin Kumar Kansal — Chief Financial Officer

Unidentified Speaker —

Analysts:

Rajeev Sehgal — Individual Investor — Analyst

Faisal Hawa — H G Hawa & Company — Analyst

Prachi Sharma — Ace investors — Analyst

Vasanth Shukla — Individual Investor — Analyst

Nehal Jain — SK Securities — Analyst

Sameer Chadha — Chadha Securities — Analyst

Akash Mithal — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Max Ventures and Industries Q3 and FY ’22, ’23 earnings call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Sahil Vachani, Managing Director and CEO, Max Ventures and Industries. Thank you, and over to you sir.

Sahil Vachani — Managing Director and Chief Executive Officer

Good afternoon to all. Thank you for joining us on the Max Ventures and Industries Q3 and Nine Months FY ’23 Earnings Conference Call. Along with me today, we have our CFO, Mr. Nitin Kansal; our Chief Operating Officer, Mr. Rishi Raj; Mr. Amit Midha, Head of Max Asset Services and Archit Goyal, who leads IR for us. We also have SGA our Investor Relation Advisors, on the call.

The presentation and press release has been issued to the stock exchanges and uploaded on our Company’s website. I hope you’ve had the opportunity to go through the same.

This year, the company has embarked upon the next growth of journey, which we call the Max Estates 3.0 journey, wherein we had exited the specialty packaging firms business and redeploy the capital to expand the real estate portfolio. The company also entered into the residential segment, thereby adding a new asset class in the portfolio. With acquisitions this year, completed and those in pipeline, we will be ending financial year ’23 with a real estate portfolio of almost 8 million square feet, diversified across Delhi NCR, across asset classes of commercial and residential, and across the risk spectrum.

With our focus on exceptional design, sustainability and consumer experiences anchored around the WorkWell and the LiveWell philosophy. Our endeavor is to become a preferred choice for all stakeholders including customers, communities, shareholders, and employees.

I would now like to share the strategic overview of the company and where we stand today. The company has built a strong portfolio of projects which will fuel the next level of growth. Max Estates completed office projects, Max Towers and Phase one of Max House remain 100% leased with a 25% to 30% premium to the micro market, collections continue to be on time and in full. Progress on Max Square and Max House Phase two is on track for completion in Q4 FY ’23 for Max Square and in Q2 FY ’24 for Max House Phase two. We are very confident to fully leased the project over the period of 12 to 18 months post the completion in Q4 FY ’23 for Max Square.

Max House Phase two, is being built on similar lines to Phase one with a larger leasable area of 150,000 square feet. New York Life Insurance has been on-boarded as an equity investor and has committed INR290 crores in our SPV in Gurgaon, sector 65 for our office development project. The SPV is called Acreage Builders Private Limited.

Max Estates and New York Life shall be 51% and 49% shareholders respectively in this entity Acreage Builders. New York Life has been a strategic partner in the real estate business since inception in 2017. They hold 23% in the holding and listed company, which is Max Ventures and Industries Limited and have also co-invested in Max Square Phase one and Phase two, for a 49% stake, taking the accumulated commitment of investment in the group to INR800 crores.

They continue to evaluate co-investment as a strategic investor in our commercial real estate business. As I mentioned during the year, we’ve also entered into the residential real estate segment with an acquisition of a 10-acre land parcel in Noida. We plan to launch the project in the middle of commercial year ’23. This will be a boutique development powered by our LiveWell philosophy, promising and elevated quality of life through pioneering design, well being, wellness, and sustainability. It will be a premium project and the gross development value is estimated to be in excess of INR1300 crores.

On our corporate structuring, we have received approval for the composite scheme of amalgamation by NCLT. On the receipt of approval Max Ventures will merge with Max Estates Limited. The date of hearing has been fixed for May 1, 2023 by NCLT Chandigarh and the amalgamation is expected to be completed in the first half of 2023. This will simplify the corporate structure and enable us to rename the entity as Max Estates, a move that will designate with the real estate as our only focus of the company.

I’d also like to welcome our new colleagues. Amit Midha, who joined us as Head of Max Asset Services. He has over 26 years of cumulative experience with prior experience in leading operations at DLF, the Oberoi Group, Health and Group, Marriott Group and JP Hotels.

With this, I’d like to hand over the call to Rishi Raj, our Chief Operating Officer for a detailed business update.

Rishi Raj — Chief Operating Officer

Thank you, Sahil, for the strategic overview. Let me first give you the project-wise detailed business update and then move on to the development pipeline. Let us start with Max Towers. Total area owned by Max Estates in Max Towers is now 100% occupied with leased area of 3.02 lakh square feet. Lease rental income from Max Towers, increased by 15% year-on-year to INR84 million in Q3 FY ’23. For nine months FY ’23, lease rental income increased by 12% year on year to INR249 million. Full year rental of Max Towers is expected to be about INR350 million in FY ’23.

Moving on to Max House Phase one. Max House, Phase one is 100% occupied as well. The total leased area of 1.05 lakh square feet. Lease rental income from Max House increased by 48% to INR35 million in quarter three FY ’23. For nine months FY ’23, the income has increased three times from INR35 million in Nine Month FY ’22 to INR108 million PART-2 In nine months FY ’23. Full-year rentals from Max House Phase one is expected to be in the range of INR150 million to INR160 million in FY ’23. Before talking about our commercial office development under construction, let me briefly share market perspective for commercial office leasing. The calendar year 2022 witnessed 46% increase in net leasing to 38 million square feet pan India, only 7% short of 2019 and second highest absorption over the last one decade. The last quarter witnessed some sluggishness in demand and this quarter is expected to remain slightly subdued in light of global macro environment. The near to mid term outlook for India as an economy, as well as office market, particularly for quality development is expected to be very positive. The India’s dominance as global outsourcing, offshoring hub will only further strengthen and this in-turn will create new office demand, supported by growth in sectors like manufacturing and healthcare. Now coming to Max Square, the work is on-track and is expected to be completed in quarter four, FY ’23, the company has received fire NOC, IGBC Platinum certification and is expecting to receive the occupancy certificate for the same end of February 2023. The company has got good pipeline of leasing for Max Square and is confident to fully lease the project within 12 to 18 months of the completion. For Max House Phase two work is on track and is expected to be completed by Q2 FY ’24. This is being built on similar lines to Phase one with a larger leasable area of 150,000 square feet. A very robust leasing pipeline is already in place, including from existing tenants looking to expand within the campus itself. So waited average monthly rental rates continued to be a significant premium to respected micro-market for both the office assets, currently at INR106 per square feet per month for Max Towers and INR125 per square feet per month for Max on Space, one. Now let me give you an update on new acquisitions. Sure, on our entry in Gurgaon through acquisition offer SPV called Acreate Builders Private Limited. Max Estates Limited has completed the acquisition of balance 2.39% equity share capital of Acreage Builders Private Limited on February 2, 2023 at an enterprise value of 100% basis of INR322.5 crores. Consequent to the completion of acquisition, Acreage Builders Private Limited has become a step-down fully owned subsidiary of the company through Max Estates Limited. Also, New York Life Insurance has been on-boarded as an equity investor committing INR290 crores in this project, Max Estates and New York Life shall be 51% 49% shareholder respectively in the SPV and this SPV has a license to develop commercial project over area measuring 7.15 acre located on Trial Golf Course Extension road in Gurgaon. The total development leasable area is 1.6 million square feet with the revenue potential of INR160 crores to INR400 crores per annum. We have already initiated the work on concept design and on-boarded Gensler a globally renounced design and architecture firm, from San Francisco, California. We are targeting to get all approvals to start the construction of phase development in quarter three FY ’24. Now coming to our second project under construction. This is regarding the entry in residential in Delhi NCR, through acquisition of a 10 acre land parcel on Noida expressway. The timing is appropriate with structural turnaround in the performance of residential asset class pan India. The calendar year 2022 is at nine year high to 310,000 units pan India despite inflation the interest rate is still low Board and affordability question higher than previous cycle and is backed by end users, preferring quality communities from credible corporate developers. With 20 to 25 units per acre, this will be one of the least dense residential project in Delhi NCR, bringing Max Estate LiveWell philosophy to life, aided by 7 acres of landscape, farms, gardens and lawns, and state-of-the-art amenities and facilities. Max Estate flagship residential community is on track with respect to design and approval timeline to be ready for launch in by mid of calendar year 2023. With total development potential of 1 million plus square feet of available area. The project aims to deliver gross development value in excess of INR1300 crores. Finally, on acquisitions in pipeline, we are on track to close the documentation of April 4 the commercial land parcels with development potential up 1 million plus square feet of leasable area, contiguous to existing Max Square development, which we had won in e-auction conducted by Axis Bank. In addition, we are in final stages of locking in a residential opportunity in Gurgaon. With series of successful acquisitions this year. We are on track to achieve a well-diversified real estate portfolio of almost 8 million square feet by the end of fiscal year 2023, three to four times of that we had in FY ’22. With this. I hand over the call to Mr. Amit Midha, Head of Max Asset Services for the update on the same.

Amit Midha — Head

Thank you, Rishi. Good morning to everybody. At Max Asset Services, we provide end-to-end managed office services including but not limited to the fit out leases. Fit out design and build and full service office operations are managed flexible office offerings, WorkWell Suite center at Max House drop continues to be 100% leased. In addition to all aspects of facility management like upkeep, pantry operations, and IT services, we are now looking at adding concierge services, for ease of our tenants to run some errands while they are busy at work. This would be a great value add and further improves stickiness.

As a part of our WorkWell philosophy we continue to differentiate our tenants experienced by continuously curating ecosystems of amenities like fitness centers, saloons and early learning center, shuttle service, meditation space, multipurpose halls, cafeterias, sports facilities, multitude of F&B options to truly enable our clients to work well. In addition, we collaborate with our tenants, continuously and add any bespoke service solutions to our services as and when desired by our tenants. With an aim to uplift our asset with the best-in-class facilities and becoming more operationally action we are deploying various digital tools across all verticals, such as parking management, lift management, MLPs booking, visitor management, air quality monitoring and we are now working on creating our community platform, which is an app, which will augment our engagement and networking with our clients, further helping us serve them better.

We expect the facility as well as design and build service business of Max Asset Services, to witness growth in FY ’23 and ’24 as a high percentage of offices are now open and expected to avail our services.

Thank you very much. I now hand over to our CFO, Mr. Nitin Kansal for the financial updates.

Nitin Kumar Kansal — Chief Financial Officer

Thank you Amit. Good afternoon, everyone. Now let me give you the financial highlights for nine months FY ’23. The consolidated revenues for Nine Month FY ’23 increased by 17% year on year to INR840 million. Consolidated EBITDA increased by 40% year-on-year to INR240 million. Consolidated profit after tax stood at INR139 million in Nine Month FY ’23 as compared to INR2 billion in Nine Month FY ’22. Speaking PART-3 Speaking about our liquidity position. Gross debt stood at INR7.3 billion as on September ’22 as of this 50% of debt is on the lease rental discounting model. Cash and equivalents stood at INR723 million as of December ’22, we are maintaining a debt-equity ratio of less than 0.6. I would now like to hand over the call to the coordinator for the question-and-answer session.

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 Rajeev Sehgal as an Individual Investor. Please go ahead.

Rajeev Sehgal — Individual Investor — Analyst

Am I audible?

Operator

Yes, please go ahead.

Rajeev Sehgal — Individual Investor — Analyst

The management has indicated that Max Square is likely to be ready by March 2023 and Max House Phase two would be ready by September ’23 and thereafter the company needs 12 to 18 months, to lease out the two properties in full. So that leads us to believe that FY ’26 will be the first year when the company will get the full benefit of whole year rental income from Max Square and Max House Phase two in addition to the existing properties of Max Star and Max House Phase one. So against this background, is it reasonable to assume that in FY ’26, we can expect a minimum PAT of about INR300 crores?

Nitin Kumar Kansal — Chief Financial Officer

So Rajeev, good afternoon. This is Nitin Kansal. So the first thing we can expect the full year lease rentals of Max Square and Max Square Phase one and Max House Phase two to hit the balance sheet in FY ’25. As far as the PAT of INR300 crores, so we would start getting lease rental income, full-year rental income coming to us in FY ’25 and from FY ’26, ’27, we would start analyzing our residential income. So that would be a function — PAT will be a function of those numbers.

Rajeev Sehgal — Individual Investor — Analyst

Okay, so as I said, that it’s an FY ’26 you would get the benefit of Max House Phase two as well as Max Square am I right?

Rishi Raj — Chief Operating Officer

So Rajeev, this is Rishi. Just to clarify once again. For Max Square Phase one, we said 12 to 18 months from completion, which is February, March this year. For Max House Phase two, which is getting completed in September of ’23 given the size of the development, our endeavor would be to lease that within 12 months. So both the projects taking together, a substantial portion of full year’s needs potential will kick-in in FY ’25. As far as other sources of income are concerned for example, as Nitin said as far as residential is concerned, the recognition of income from residential, of course [Indecipherable] we’ll go to FY ’26, ’27 following the accounting principles when the possession will be delivered. And as far as new commercial projects are concerned. For example, Max Square phase two we are expecting Max Square phase two to get completed in the half years from now. Followed by lease in Max Square Phase two.

Rajeev Sehgal — Individual Investor — Analyst

So then, can you give us an estimate of your rental income for FY ’25 and FY ’26?

Amit Midha — Head

Again for FY ’25, we would have Max Towers and Max House Phase one fully leased. And in addition to that we expect certain portions of Max Square Phase one and Phase two of Max House is also getting leased. These will be income, it can be expected be in the range of INR100 crores to INR120 crores for FY ’24.

Rajeev Sehgal — Individual Investor — Analyst

FY ’24?

Amit Midha — Head

Yes and with the full potential…

Rajeev Sehgal — Individual Investor — Analyst

[Speech Overlap] FY ’25 and ’26?

Amit Midha — Head

So, so what is happening is going once the projects are fully leased, the way we look at is in terms of Max Square Phase one, we expect total even potential of close to INR60 crores, Max House space phase two expecting a leasing potential in the range of INR25 crores to INR30 crores. As we have mentioned in the case of the sector 65, the total using potential is in the range of INR160 crores to INR200 crores and in the case of Max phase two, the total leasing revenue potential INR110 crores to INR110 crores.

Rajeev Sehgal — Individual Investor — Analyst

Okay fine. My next question is by when do you expect to receive the NCLT approvals for development of 2.5 million to 3 million square feet of Delhi One?

Amit Midha — Head

So Rajeev the good news on that is that is the order is reserved. And our resolution plan has been heard by NCLT. The order is reserved. In terms of when the orders will be released to us, difficult to give a definite timeline but we are hoping that in this financial year itself we are able to get to see what the final order is.

Rajeev Sehgal — Individual Investor — Analyst

Thank you very much. Thank you.

Amit Midha — Head

Thank you.

Operator

Thank you. The next question is from the line of Faisal Hawa from HG Hawa and Company. Please go ahead.

Faisal Hawa — H G Hawa & Company — Analyst

So when do we expect our ROCE and ROE to be north of 18% to 19%, once you know, most of these projects are underway, and is that the focus here for us within our KRAS also?

Nitin Kumar Kansal — Chief Financial Officer

Yes. Good afternoon Mr. Faisal Hawa. This is Nitin Kansal, we will be expecting our ROC and ROE to be in this range by FY ’25, ’26 when we would be recognizing the revenues coming from to the residential projects, residential project in Sector 128 and the accounting principles.

And this as a concept, is also closed in the key areas of the senior management team, which clearly defines the unit-level IRR expectations of 20% and overall ROE, ROC of the Company in the range of excess of 20%.

Faisal Hawa — H G Hawa & Company — Analyst

So, when will it happen that do not for the entire revenue of the company and entire balance sheet we’ll will be having this ROE, ROC because you know what may happen is that some projects are giving that ROE and the others are underway. As a ballpark it will never show.

Nitin Kumar Kansal — Chief Financial Officer

So, what happens Mr. Hawa from FY ’26, ’27, it becomes a continuous process, whereby the first project residential project of sector 128 will get delivered, which will be delivered in ROE, ROC, and as we have also stated in our objectives that we will be Launching one, we will be taking on board 1 million square feet of residential and 1 million square feet of commercial project every year. So as a process every year starting from FY ’26, ’27, we would be having that stabilized revenues coming from a 1 million square feet of residential and 1 million square feet of commercial incrementally, year-on-year. In addition to the projects which you already have.

So starting from financial year FY ’26, ’27, the ROE and ROCE will start getting reflected on the balance sheet numbers. But having said that, starting from FY ’24 itself when we would have launched our sector 128 project, you would have started to visualize the cash collections and the total sales potential we getting very amplified to the shareholders.

Faisal Hawa — H G Hawa & Company — Analyst

And sir, apart from the brand which is like a clear, clear USP for the Max Group can you name three things which would be a clear differential in selling our properties. Because real estate is not, it’s almost like a commodity. So once we sort of, what are the…

Sahil Vachani — Managing Director and Chief Executive Officer

Absolutely. Hi, this is Sahil I’ll take that. Our focus is on a very differentiated consumer experience articulated through what we call the LiveWell philosophy. So like in the office space segment. We have captured the WorkWell philosophy and there are 14 elements that are part of that. So it is also it’s a scientific approach to ensuring that there is that the LiveWell philosophy is in bumpers in each of our residential developments. Our brand will stand for a sense of, obviously a huge sense of generosity, luxury, esthetics sense of design and if I may say Indian luxury brand, so to speak, rather than PART-4

Unidentified Speaker —

[Indecipherable] what has happened in the West, it is going to stand on the factor of local materials, but very high-end and luxurious in terms of experiences, in terms of design, in terms of hospitality, in terms of overall the LiveWell philosophy. So we have already piloted this in the office space segment. And we’ve got tremendous success, not only in terms of traffic, in terms of clients, but also a premium of the pricing and we are confident to be able to replicate this in the residential space as well. Thank you.

Faisal Hawa — H G Hawa & Company — Analyst

So we are clear that in most cases, we will have a partner who will take on the financing responsibilities and we should be focusing only on building the brand and executing. So is that going to be a clear cut roadmap forward?

Rishi Raj — Chief Operating Officer

Yes, this is Rishi, and I’ll respond to that. There are two verticals, Commercial and Residential. On commercial, as we have already stated, we have New York Life as our strategic and financial partner. And they are continuing to invest 49%, as we expand in our commercial office space. As far as residential is concerned, in residential, we at this point in time are following model which is a mix of outright purchase from a balance sheet which is how we did Sector 128, our flagship residential community in Noida.

The second one that I talked about, which we are exploring Gurgaon, is going to be on joint development model wherein the land will be brought by land owner and we will be doing the construction. In future, we may explore a joint venture partner in residential as well, but not quantitate yet.

Faisal Hawa — H G Hawa & Company — Analyst

Thanks a lot for answering my questions, so well.

Operator

Thank you. The next question is from the line of Prachi Sharma from Ace investors. Please go ahead.

Prachi Sharma — Ace investors — Analyst

Hi, sir. I just have two questions. Firstly, are we seeing any slowdown in the commercial real estate in the past few months?

And secondly, by when do we plan to launch the residential real estate in Noida? And what is the interest we are seeing for this project?

Sahil Vachani — Managing Director and Chief Executive Officer

Okay, so I’ll answer all the three. As far as slowdown in commercial office is concerned, as I stated in my narrative while calendar year 2022 has been exceptionally good only second to 2019 peak that we have seen in last one decade, yes, there has been some sluggishness and slowdown in decision making in last quarter and expecting it to be in this quarter.

Having said that, our view as far as India as an economy as far as office market in India particularly in NCR is concerned for quality developer, which is far and few is very, very positive. And whatever is happening globally ultimately we’ll have the positive rub-off effect as I’ve said, one of my illustration. The trend towards global outsourcing and offshoring because of cost and talent arbitrage will only improve. In addition, we have already seen increase in demand from other sectors beyond tech which is manufacturing, healthcare, financial services and if you look at the numbers the share of these sectors have relatively increased compared to the tech sector. So in short, the near to mid-term outlook for office, particularly in NCR is positive. So that’s on number one.

Number two, in terms of the launch of residential in Noida. As we have stated, we are targeting mid of this calendar year. As far as interest are concerned, as we have yet not got RERA approval we are not out there in the market, seeking interest, but we are very, very confident of the product and the experience that the first residential community will deliver, we are very, very confident of its pickup post-launch.

Prachi Sharma — Ace investors — Analyst

All right sir. This is very helpful, I’ll get back in the queue in case of any other questions.

Sahil Vachani — Managing Director and Chief Executive Officer

Please, thank you.

Operator

Thank you. The next question is from the line of Vasanth Shukla as an Individual Investor. Please go ahead.

Vasanth Shukla — Individual Investor — Analyst

Yeah, hi, sir. Hi everybody. I have a few very basic questions. I would start with basically, I have been a long-term investor since 2017. So and what I am realizing now we have got the focus right, we are working towards it, but just, I would like to understand, because we have raised a lot of money from the market. So as a shareholder we like our shares to do well. That is what we anticipate of the company to do well and subsequently the share to do well.

What I have realized is over a period of last by five years, Max Ventures has raised close to INR1500 crores to INR1700 crores through various loans, [Indecipherable] issue, then they showed the specialty business then. So from this aspect, so this INR1600 crores, INR1700 crores that we have raised over a five year period, what has been the utilization of that INR1700 crores, because, I would like to know in slightly more detail because that is not very clear to me, if we have raised that kind of money we should be generating more revenue per se from that kind of money. I understand that there is a long gestation period is there. But beyond a point even long term investor also need some [Indecipherable].

And apart from that. I also have another question regarding your investment in Azure Hospitality, had you written it off, what exactly is the status of the same or whether it is part of Max Estate or not, that also I would like to know. If somebody can help with that. So these are basically two questions I have right now.

Rishi Raj — Chief Operating Officer

Hi Vasanth. Thank you so much for your very, very pertinent question and being a long-term supporter and investor in the company. I will take up, this is Rishi. I will take-up the first part of your question and I’ll ask Nitin to take up the question on Azure.

As far as, if you look at all the capital that we have raised, which is true combination of rights issues followed by exit of our packaging film business, which generated around INR650 odd crores, we have redeployed the entire capital in real estate, starting with commercial office which is Max Towers and Max House development, which was totally done out of our balance sheet using these capital. And more recent raises that we have done we have redeployed that in the acquisition of our residential entry in Noida and our Gurgaon entry in commercial office space.

Our endeavor, as we also stated earlier, our endeavor is to remain very much focused as far as real estate business is concerned, particularly in Delhi NCR and really focus on two verticals, commercial and residential. And continue to follow a very capital-disciplined approach in terms of where we deploy as the light through equity partnership as you have seen we bringing on board, New York Life, who have already committed around INR800 crores to help us on the growth journey or through a model which is beyond outright through a combination of joint development which you will see in residential or joint ventures in future.

So in short, the capital that you are talking about has been redeployed across these commercial and now residential asset classes.

As far as… Yeah, go ahead.

Vasanth Shukla — Individual Investor — Analyst

Sorry. So what return you are expecting from those deployment like so INR1500 crores should be generating to at least 10% annually right. This is not happening or it will happen going forward, then maybe if you can elaborate on that.

Rishi Raj — Chief Operating Officer

Absolutely. I think yes. As you rightly articulated the underlying fundamental performance should and will and is already getting translated into what we see as far as performances as stock market is concerned and we do keep a close tab on it. The way we look at our investment following a very disciplined capital deployment approach is to evaluate every project on PART-5 On its merit and we have a very rigorous approach of evaluation and underwriting and we only deploy where we are confident of getting a pretax IRR or internal rate of return of 20% or more. That’s how we deploy and this, as we will execute and as the cash will start coming in following those business cases, this will all start getting translated further in our stock price movement. So that’s the response to your first question. Coming to Azure and what’s happening with Azure I’ll request my colleague, Nitin to respond.

Nitin Kumar Kansal — Chief Financial Officer

Yeah, good afternoon. [Technical Issues] had investment in Azure in two tranches, a cumulative amount of close to INR72 crore rupees, in 2017 and ’18. Since then during COVID, the business went through a lot of pressure and we had taken an impairment of INR27 crores in September of ’21 and currently we carry the investments in the books at INR45 crores. However, post the COVID era, now, the business has really, really improved significantly in the case of Azure Hospitality and they have significantly exceeded the revenues, which they were hitting pre-COVID times also. Currently, they are doing a revenues in excess of INR200 crore per annum and with an EBITDA margin of more than 30%. As we speak today the business is on the recovery path and we are hopeful to recover our full investment on Azure Hospitality.

Vasanth Shukla — Individual Investor — Analyst

So just we recovering the investment or like if we see the other sectors, some companies have started doing pretty well. So we just anticipate that we will recover back that INR27 crores, that is what you are saying?

Nitin Kumar Kansal — Chief Financial Officer

So what we are anticipating to recover the full amount of investments, which we had made in Azure hospitality INR72 crores.

Vasanth Shukla — Individual Investor — Analyst

But you don’t anticipate that will be a good investment for you in the long run, like. It’s not going to give you many returns so just you will be recovering the money, that’s it.

Nitin Kumar Kansal — Chief Financial Officer

So what is happening, conservatively, we are taking a number to the current investments because the business has gone through a lot of pain through the COVID times although our aspiration would be to make returns on that. But as of now, the guidance would to recover our capital on the investment.

Vasanth Shukla — Individual Investor — Analyst

Understood. Sorry to continue the first question again. I’m sorry, I’m taking a big time. Just wanted to understand like suppose we in investing, close to INR2000 crores. So IRR of 20% then you will anticipate close to INR400 crores of profit right technically, every year, so do we really see that kind of profitability even in ’26, ’27 or beyond? Do we really anticipate that? I’m just question based on just the numbers. That’s it.

Rishi Raj — Chief Operating Officer

Sure. So, yeah. So Vasanth, now IRR as the metric we use to evaluate project level cash flow, but coming back to return on investment question that you asked we expect as Nitin was explaining earlier, once the residual income gets recognized in our book following the accounting methodology, which is FY ’26, ’27, we are impacting to hit or we are aiming to hit a return on equity in the range of 15% to 20% and we expect to maintain that level of return with a continuous churn in our portfolio by adding projects, both commercial and residential. So that our endeavor and the long-term guidance and plan is.

Vasanth Shukla — Individual Investor — Analyst

Understood. So if had to — let’s assume that in 2023 as stated, you will be 1 million commercial and 1 million residential will be available, or it will take over to ’24.

Rishi Raj — Chief Operating Officer

So what I, meant was, this return on equity of 15% to 20% is on underlined investment. That’s clear. As far as, just to answer on the size question that you have, we will be having 8 million square feet in our portfolio by end of this financial year, delivered under construction, and planning. And every year our endeavor will be to at least add 2 million across commercial and residential. So that by the time we reach FY ’26, ’27 every year couple of million square feet comes online on stream from a income perspective.

Vasanth Shukla — Individual Investor — Analyst

Understood. Hopefully, we achieved that. Because now I think it’s getting now close to 5 and 5.5 years, and I think we are more on the talking side than executing side that is what is happening, from what I understand. But yeah, like, I understand that. Anyways, thank you. Thanks for answering the questions.

Sahil Vachani — Managing Director and Chief Executive Officer

This is Sahil, I disagree with you. Sorry, this is Sahil. I just want to clarify. I don’t think so. I think if you were to look at the journey of five years. Here is what has happened. We did not start with the land bank. Today, the company has a development potential of 8 million square feet already signed. It has already two develop fully leased assets, it has a pipeline of two office developments, one in Noida, one in Gurgaon. It has a residential development. We have established ourselves as a brand in the national capital region and we are at least our first development that we have is on track for a GDV of more than INR1300 crores. So I think we should not confuse the accounting methodology of real estate, which fortunately or unfortunately happens through the POCA methodology.

So therefore, the numbers will get reflected when we are able to book the revenue which is as per the POCA methodology in real estate, which happens in three years from now, but if you look at the pipeline of what we have the asset base of what we have, the deployment of capital that has happened and the assets that have been generated particularly and so far the office space is concerned that we have already executed over the last 2.5 or 3 years, the valuation of those assets in market today are significantly higher than what they reside in our book, so I just wanted to clarify that, as an overall picture and not to mention the fact that we have New York Life as an investor and continuing to grow our office space journey as well. Thank you.

Operator

Thank you. The next question is from the line of Nehal Jain from SK Securities. Please go ahead. [Operator Instructions] Nehal over to you.

Nehal Jain — SK Securities — Analyst

Thank you for the opportunity. Sir, I just wanted to know that if you could give your views on the company’s capex plan for FY ’24 and FY ’25?

Nitin Kumar Kansal — Chief Financial Officer

Hi, good afternoon Nehal, this is Nitin Kansal. As we mentioned in FY ’24 and FY ’25, in FY ’24, we would have our Max Square Phase two and sector 65 project in full flow and in FY ’24 and FY ’25 both on the residential side, we would have our residential sector 128 project in full flow, what we are expecting to have our total deployment of close to INR800 crores in total in next couple of years across this project and the way to be funded is that we are expecting to raise the debt of close to INR600 crores on those two construction finance, on the commercial real estate, and equity of close to INR200 crores, which would be bought in by New York Life in the ratio of 49% and 51% by Max Estates.

Just to give an overall perspective to complete these projects which we have announced we would be having a total capex outlay in next three to four years in the range of INR1400 crores to INR1500 crores, which will have incremental INR1400 crores to INR1,500 crores. And we would have this will entail a total debt in the range if INR1000 crores to INR1100 crores and equity contribution of close to INR300 crores, of which 49% will be bought in New York Life and the remaining 51% will be bought in by Max Estates.

Nehal Jain — SK Securities — Analyst

Understood, okay. Thank you.

Operator

Thank you. The next question is from the line of Sameer Chadha from Chadha Securities, please go ahead.

Sameer Chadha — Chadha Securities — Analyst

Thank you for the opportunities. My question is that we are seeing an increasing debt. So what is the optimal debt plan that we should have going ahead?

Sahil Vachani — Managing Director and Chief Executive Officer

Sorry, your question is about the leasing plan.

Sameer Chadha — Chadha Securities — Analyst

Debt plan.

Sahil Vachani — Managing Director and Chief Executive Officer

The debt. Yeah. So. Mr. Chadha currently as we speak, we have a debt of close to INR700 crore in the balance sheet. This is made up of two components, one is the lease rental discounting debt, another is a construction finance debt. So in terms of lease rental discounting debt percentage is close to 50% and that is basically at this to be taken by the bankers on our tenants and not in the company PART-6

Unidentified Speaker —

The company. On the construction finance debt we have got, New York Life as a partner in the company, in which, New York Life holds 49%, but from an accounting perspective the entire debt is reflected on the balance sheet of Max Estates. The risk of the debt is also shared equally between New York Life and Max Estates as a currently listed debt equity policy or debt equity ratio of 0.6 and our intention is to maintain our debt equity ratio of not more than that.

Sameer Chadha — Chadha Securities — Analyst

Okay sir, thank you so much.

Operator

Thank you. The next question is from the line of Akash Mithal as an Individual Investor. Please go ahead.

Akash Mithal — Individual Investor — Analyst

Yes, thank you. So, sir. I mean a couple of quarters back, I had this question that what’s your plan for execution, because the presentation till then had been continuously speaking about we are planning, we are doing good to know. Congrats for that we at least have the pipeline now to execute. Only couple of questions, like on the residential side, which is where I think you probably might generate a significant alpha. So you have mentioned a Gurgaon project, where you expect the sales to be INR1300 crores, right. So what is the typical price per square foot, you are planning for that. I just want to get a sense of where are you positioning in the market vis a vis the leaders like DLF and those in this area.

Sahil Vachani — Managing Director and Chief Executive Officer

So. Akash. Thank you and thanks for your appreciation and compliment. This INR1300 crores in excess of INR1300 crores that we talked about is for our flagship project in Noida on 10 acres of land parcel which has got 1 million square feet of total sellable area. So here in Noida. We are definitely looking at upwards of INR20,000 per square feet. The second project that we will soon lock in is in Gurgaon. And again, in a very prime location in Gurgaon, we will share more details as been locked that in, but our target price segment is INR10,000 onwards, INR10,000 per square feet plus for this Gurgaon development as well.

Akash Mithal — Individual Investor — Analyst

Okay, Gurgaon, as well. Sir, the second question is on the execution side, I see you have hired a few people recently. So far I mean I don’t know about your team size, that’s not in public information, but I want to understand like you have invested a similar amount of tech like SAP and digital tools. So how do you plan to make money out-of-the significant investments in ERP like SAP. It’s quite a — it would be a significant amount of money you have already committed, right.

Sahil Vachani — Managing Director and Chief Executive Officer

Yes, Akash. Let me step back a little bit. I think this is very important question that you’re asking, right. If we just go back several quarters one of the big question for us was growth pipeline, which we have sold for now, now that our capital is sorted, growth pipeline is sorted, the focus of the company is on execution and for that execution to play well as per our promise, we need to invest in two things, one, getting the right people, the right talent, the right expertise on board. This is where you have been witnessing series of new hires that we have done from different parts of the real estate and non-real estate world.

And second, if you look at the history of any real estate company, one of the reasons real estate companies have not been able to survive long term is that we have not invested in process fee system. So SAP is one of the many things we are planning to do to strengthen the process fees so that we are not a 5-year, 10-year but 100-year plus kind of a company. As far as investment in SAP is concerned, there been investment, but on a lighter note, it’s not as exorbitant as your question sounded to be. But we are very, very confident that all of this will help us achieve for example, delivering more than INR1,300 crore in residential projects and several other projections we have made, for other projects in commercial and residential.

Akash Mithal — Individual Investor — Analyst

Fair enough, and I think the rest of the questions have been already answered. So I’m good with that, thank you.

Sahil Vachani — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Mr. Sahil Vachani for closing comments. Thank you and over to you sir.

Sahil Vachani — Managing Director and Chief Executive Officer

Thank you very much for your time and participation and look forward to chatting with you next quarter as well. Thank you.

Operator

[Operator Closing Remarks]