Puravankara Ltd Q4 FY23 Earnings Conference Call Insights

Key highlights from Puravankara Ltd (PURVA) Q4 FY23 Earnings Concall

Q&A Highlights:

• [00:10:46] Srishti Tandon of NVS Brokerage asked how PURVA sees margins picking up since PAT has been negative. Neeraj Gautam EVP said the company had a loss in the same quarter of the previous financial year due to less revenue recognition. However, for the last financial year and this financial year, both as a whole and for 4Q, the company recorded a profit.

• [00:12:16] Srishti Tandon of NVS Brokerage enquired about the commercial plans and timelines for FY24 and FY25, including the total square feet planned for launch. Abhishek Kapoor ED said revenue recognition and PAT depend on the possessions handed over in a quarter and expenses booked in the quarter. PURVA currently has 3 million sq. ft. under construction, with completion expected in 2025, but no new commercial launches are planned for FY24.

• [00:15:21]  Harish Shah at HS Investments asked if the recent increases in home interest rates led to a decline in footfalls or conversion rates and how has it impacted end demand in the income and luxury segments. Abhishek Kapoor ED replied that PURVA has seen no impact of increased interest rates on demand and had its highest quarter last year with over 4 million sq. ft. of sales. Demand is expected to increase due to appraisal cycles, work-from-home, and high rental prices.

• [00:18:00] Harish Shah at HS Investments enquired if PURVA expects pricing to increase due to higher demand for both existing and upcoming projects. Abhishek Kapoor ED clarified that realization is influenced by multiple factors such as inventory mix, product type, market demand-supply dynamics, and brand value. PURVA is confident that it will see a positive uptick in pricing due to these factors.

• [00:20:01] Harish Shah at HS Investments enquired how does PURVA expect its plotted development projects in Chennai with over 3.7 million sq. ft. saleable area to pan out and the expected cash flow from the project in FY24. Abhishek Kapoor ED said PURVA is excited about Chennai due to the successful launch of projects such as South Bay and Raagam and the quality of its plotted developments. Collections typically range from 50-60% of sold realization within the first year of launch and expects to collect 40-50% from Raagam in FY24.

• [00:22:57] Yashvi Jain at ICICI Direct asked about PURVA’s plans to launch the Chennai project and the expected revenue from it. Abhishek Kapoor ED replied that the company has launched a 700,000 sq. ft project in Chennai with expected revenues in excess of INR200 crores and plans to launch another 1 million sq. ft. project within the next two quarters with a total revenue potential of INR250-275 crores. Subsequent phases will add value to the 3 million sq. ft. development.

• [00:24:13] Yashvi Jain at ICICI Direct queried about the plans for debt reduction and controlling the debt-equity ratio. Neeraj Gautam EVP said that debt for the residential business and land purchases has decreased while debt for commercial projects has increased. The company has also taken on debt to buy out a JV partner’s cash flow. Debt per sq. ft. of development has decreased from INR2,077 to INR1,106.

• [00:27:34] Yashvi Jain with ICICI Direct asked if the company is planning any new projects for pipeline sector. Abhishek Kapoor ED replied that the company plans to launch 16 million sq. ft. of developable area and 13.7 million sq. ft. of sellable area spread across the south and west of India, with 3.74 million sq. ft. in Puravankara, 6.22 million square feet in Provident, and 3.73 million square feet in Purva Land.

• [00:28:24] Tirath Muchhala from Elusividya Advisory asked about the reason for the significant increase in operating outflows for the year. Neeraj Gautam EVP said that operating outflows have increased due to accelerated construction, initial working capital for launching nine new projects, and spending on two commercial projects. These outflows are backed by increased operating inflows and a CF line for commercial development.

• [00:33:17] Tirath Muchhala at Elusividya Capital enquired about delivery number for FY24. Abhishek Kapoor ED said the company delivered over 1,600 units and 1.73 million sq. ft. in the last financial year and aims to double that to over 3,000 units in the next financial year.

• [00:34:20] Sukhum Mafti from Amin Securities asked if PURVA is looking to do any acquisition on the land bank front. Abhishek Kapoor ED said that the company is actively pursuing new acquisitions for Puravankara, Provident, and Purva Land across the south and west with a robust pipeline and special focus on the western region, especially Mumbai and Pune.

• [00:43:29] Samar Sarda of Axis Capital asked about the capital outflows and establishment expenses in cash flows. Abhishek Kapoor ED said the capital investment was INR124 crores and establishment cost was about INR90 crores.

• [00:47:13] Samar Sarda of Axis Capital enquired about the company’s comfortable inventory month level compared to its peers. Abhishek Kapoor ED replied that the company manages its inventory by opening it for sale based on the quantum of volumes sold at launch and in a particular year. A new inventory phase is added when 70% of sales have been done in the previous phase. This ensures that the inventory available in the market is comfortable for the financial closure of the project and that construction costs are never overcommitted.