Shriram Properties Ltd Q1 FY23 Earnings Conference Call Insights

Key highlights from Shriram Properties Ltd (SHRIRAMPPS) Q1 FY23 Earnings Concall

Management Update:

• SHRIRAMPPS said the company saw some softening compared to 4Q22 due to seasonality. However YonY, the company saw a very strong growth in demand.

Q&A Highlights:

• Chaitanya Shah from Silverlight asked about the timeline of cash flow total of INR1,000 crores. Murali Malayappan MD replied that this is only lifecycle cash flows of the ongoing project and not enterprise, lifecycle cashflow. These projects will be completed in about 24-30 months.

• Chaitanya Shah from Silverlight also asked if the company expects to be net debt free in 1-1.5 years.  Gopalakrishnan J CFO clarified that gross debt will always be there when ongoing projects are there. The company expects to be net debt negative in about 18-24 months.

• Priyanka Gandhi from ACE Capital enquired that on the DM model, what’s the risk if the land owner is not able to fund the project in timely basis. Murali Malayappan MD replied that financial implication is measured at the evaluation stage of the project so that there is no fluctuation in the future.

• Priyanka Gandhi from ACE Capital also asked if the cost of debt at 12.5% can be brought down in FY23. Gopalakrishnan J CFO replied that the company’s intent is to bring the cost of debt down. Fundamentally, the company has no lease portfolio in the books that will get single digit interest rates.

• Priyanka Gandhi from ACE Capital enquired about the total capex expectation and the expected collections in FY23. Gopalakrishnan J CFO answered that from a capex and collection perspective, collection for FY23 will be INR1,600 crores and capex (mainly construction cost) in the INR800 crore range.

• Devendra Pandey with DP Financial Advisors asked about competition, if the company is seeing any risk going forward with new players coming in. Murali Malayappan MD replied that the company is not seeing a bigger threat on the competition as the entry barrier is becoming tougher and tougher.

• Devendra Pandey with DP Financial Advisors enquired about the expected IRR the company work on before starting a project and how it differs across the development model. Murali Malayappan MD replied that the company looks at about 25% IRR across all projects.

• Devendra Pandey with DP Financial Advisors enquired how many projects does the company expects to deliver in the next two years and the revenue recognition from it. Gopalakrishnan J CFO replied that the company expects to deliver about 10 million square feet in three years. And on avg. INR5,000 a sq. ft. is the ballpark realization.

• Faisal Hawa of H.G Hawa and Co. enquired how is the promoter’s involvement in the businesses and promoter holding. Murali Malayappan MD replied that promoter’s commitment continues to be the same. The Group is also firmly committed to this real estate business.

• Pranay from JNJ Holdings asked the reason for the 2.8 million sq. ft. have moved from the pipeline to hold. Gopalakrishnan J CFO answered that it has been temporarily moved from the pipeline given the complexities involved and some delay in achieving milestones.