Shriram Properties Ltd (SHRIRAMPPS) Q3 FY23 Earnings Concall Transcript

Shriram Properties Ltd (NSE:SHRIRAMPPS) Q3 FY23 Earnings Concall dated Feb. 15, 2023.

Corporate Participants:

Mr. Gopalakrishnan J — Executive Director and Group Chief Financial Officer

Mr. Murali Malayappan — Chairman and Managing Director

Analysts:

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Kanika Kothari — Kothari Securities. — Analyst

Ashay Jain — Jain Capital. — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Q3 and Nine Months FY23 Shriram Properties Limited Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.

As a reminder, 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. Murali M. – Chairman and Managing Director from Shriram Properties Limited. Thank you, and over to you, sir.

Mr. Gopalakrishnan J — Executive Director and Group Chief Financial Officer

Good afternoon, everybody. This is Gopal. I would kick-off on behalf of the management of Shriram Properties. I would like to extend a very warm welcome to all of you. And thank you for taking the time out to join this call. I’m joined by my colleagues here in this room and they will — I’ll make a short presentation and then we will collectively try and answer the queries that you may have. I assume all of you have received the presentation, which was either mailed to you, or available on the website of the company, as well as the website of stock exchanges.

So I’m going to refer this presentation slide numbers to walk you through our performance for the Q3, nine months, as well as our expectations of the outlook of the company for the next quarter as well as next years.

Let me begin by drawing your attention to the presentation. With all of you have — who are familiar with the realistic picture. And I would very briefly cover the slides four and five, by summarizing the fact that the market, they are doing well. The undercurrent is very strong and positive. Notwithstanding, the rate hike impact, which surely had some concerns in people’s mind about the potential impact on the demand at least so far, the demand has been fairly strong and robust and market forces, as well as the lending partners do tell us that the momentum on home loans are also remaining strong as of now, and therefore, there is no meaningful or there’s no remarkable slowdown in the demand for retail home loans and that does well from a housing demand perspective.

The core markets of Shriram Properties, which is Bangalore, Chennai and Kolkata have seen very strong demand, launches and also the positive inventories. Chennai and Kolkata inventories have also reduced, but more multiple draws in Bangalore, which has the lowest inventory among Tier- I cities and that’s an interesting development for us.

From a price perspective, I think the average price hike across cities have been fairly meaningful. Considering the fact that we’re seeing price hikes from second half of last fiscal that’s from September-October ’22 unless we have seen — ’21 only we have seen price hikes. In the March ’22 we had meaningful price hike by all players and Shriram Properties has an average decrease of about 7% in fiscal year.

On top of that, we have had further increase in current nine month. So that’s an encouraging price strength for us.

Affordable mid-market segment is doing very well. We continue to account for 70%, 80% of overall absorption of demand in the respective market and that others well for us as a focus mid-market affordable housing player. With this remark on the macro, I’d like to focus more on Shriram Properties, overall operating dynamics and operating highlight and then move to financial highlights.

Looking at slide seven, broad overview of how our nine-month operations are shaped up? We are at the highest-ever nine months sales both in terms of volume and value during this nine months FY ’23. For the quarter also we have been able to reduce the one million plus quarterly run rate has been maintained. But more important this has been achieved despite a deferred two launches says that we have had, I’ll explain that in detail as we go through. We believe the fourth quarter therefore in the next stronger with scheduled launches, all of them are now under control with all the regulatory approvals falling in place.

Our DM business has stabilized, the business model is stabilized. It’s continuing to contribute both in terms of operating metrics as well as financial metrics now. From an operating metrics perspective, DM accounted for nine — 22% of nine-month sales, and remains encouraging for us.

Our collection trends are fairly stable, as you look at on our year-on-year basis, because Q3 collections were a little slower, primarily because the new sales activities were muted because of deferred launches. Despite that, we clocked overall collection for nine-month at INR890 Crore compared to about INR900 crores which we had. We believed Q4 will be robust enough to catch up with whatever we have aspired to set for ourselves for a FY ’23.

From an execution perspective, overall trends have been very strong, we handed-over about 1,200 units so far, and under 400 plots development units have been given handed-over, so in all 1,600 units and plots. And again our target of about 2,000 units for the full year, and that’s actually driving strong income recognition for us.

We have completed seven projects move from ongoing to the completed portfolio, out of a three are residential, four plotted development, adding it about 3.8 million square feet having moved from having received OC another completion certificate. We’ve moved them from ongoing portfolio to completed portfolio to the pipeline to the extent what we listed. However, refilling of new projects, our pipeline remains robust 53 million square feet, 23 million square feet out of that is ongoing. Remaining is yet to be launched. Out of the 23 million square feet of ongoing portfolio, 21 belongs to belongs to Shriram and two million belongs to land owner share under the JV agreements. Out of 21 million square feet we have sold so far along today in our community, we have sold about 18 plus million square feet. So it is a percent of our portfolio — ongoing portfolio sold. As we’ve consistently reiterated, completed projects don’t have a meaningful inventory. So we are near zero inventory on completed.

On the proceeds of inventory to be sold on ongoing projects that are different phases have completed. Registrations momentum has remained strong. Recently completed projects like Southern Crest in Bangalore and Grand One in Kolkata have been the key contributors to registrations during the last nine months. They continue to be the driver in the third quarter as well, I’ll explain that in a moment.

As I said, BD pipeline has remained strong. I explained most of it. On the right hand side, the bottom chart of — part of the chart. Our ASK co-investment platform taken-off well. The first project into the platform got launched in February 2023. We launched it in Jan and formally launched in Feb, it’s called Shriram Pristine Estates. And this part of development has received differently an exciting response for us.

In the first weekend of launch, very successful launch in February, we have sold about — we’ve got 81 expression of interest, 51 conversions into the sales, nearly about 21 of them as they reached the requirement of the spending levels, all in the last few weeks. And the pricing has been far superior than what we thought — what we set out for ourselves before the launch. So, overall, it’s been an encouraging launch for us. We have a few other lunches that have a slide on, I’ll explain that.

LOGOS deal is moving meaningfully ahead. Likely closure is either during the remainder of this Q4 or any part of Q1 next year, is the thing we will do is delay it by nearly a quarter. Not more than that, but I think it is on track. We [Indecipherable] that also I’ll explain this as we go through.

Xander Gateway is completed. The settlement agreements have been signed. Cash flows are expected in February 2023. And INR1.3 billion has been issued in cash flow that we need to receive. Income has been recognized in phases over the last couple of years. These cash flows will accrue to us partly this month, more than half. The rest will come through in tranches for the next four quarters. So, fundamentally, the business is doing well, across key metrics, in both operational and financial metrics. And that’s an encouraging progressive part in this fiscal for us.

The next slide talks about the same data in a comparable form between maintenance last year in FY 2022. I have to explain that. I will spend little more time on the three key numbers in slide nine. Our sales volumes are about 1.04 per million square feet, represent year-on-year growth — and — sorry, quarter on quarter growth.

And it’s still an encouraging number for us considering the fact that the two launches that have planned have got deferred to Q4 because of some approval delay. I think they are now back on track. They’ve got all the approvals required. And will actually be launched the two project this year between feb, a plotted development in Bangalore.

And in Jan the pre-launch activity has begun. Pre-launch is started. Formal launch happened on February first weekend. And I believe, as I said two minutes ago, its got a tremendous — very encouraging response to us.

The subsequent launches, you will see in the next slide, are on track. In pre-launch we were at the beginning of another [Indecipherable], whereas we need to do that in March. So I think we have a robust activity lined up with catch up with whatever we missed in the one month, last to — last one month. But I think we’re very confident of realizing the impact of these pre-launches — the next potential launches in the next 45, 50 days.

Sales value grew by about 39% quarter on quarter, primarily because of the change in product mix. Last year, this time we had — last quarter also we had a very high share of plotted development. The build was similar, but this time, more of apartments. And that’s one of the reasons why we will probably move up and so that vertical lift will keep changing depending on — relative to quarter.

From an average realization perspective, I have another slide which I’ll walk you through on has been an encouraging trend for us both in this quarter as well as for the last nine months. I think it is appropriate to discuss that in detail, along with the project details in page 13.

So, overall, the quarter has been reasonably strong from an operational perspective, except we muted sales growth, which we believe will get caught up in Q4 with the launches already on the way. They just moved from mid-December or early to mid-December to mid-January. Because mid-December to mid-January generally has to shift period in [Indecipherable], but we’ve seen this proposal from their — which is interesting.

So, when we click on the approval in some way the appraisal in the first week of December, we decided consciously to postpone them to post — post similar launches. And that’s one of the reason why we have a muted Q3 launch, but rest of the metrics are in this table.

This is exactly what is explained in slide 10. Two projects, 1.2 million square feet, but apart from any part of December to mid-January, to cover the officious period and to make the launch cost effective from now on investment perspective.

Now, we have four projects ready for launch. All the approvals are in place — started in one, pre-launch, a project started on the Shriram estate prestige estate I told you not to Bangalore 0.8 million square feet of water development. So, we alone got us 81 UI, 51 between in 2021 or already in the last 10 days to the reach 9.9% level. So, that’s encouraging to start.

Sure getting rich is the cluster development in [Indecipherable], prelaunch has become very interesting outcome and from a new guy perspective. I will report this for now and maybe we’ll make a media release the formal release. Formal launches are happened next week on the outcome.

Shriram Solitaire and Shriram Swayam, these are two different apartment complexes one in North Bangalore one invest Bangalore. Both are at the prelaunch stage word processor began. Formal launches are happening on 26th of February. So, they’re all — all the four launches are covered in launches. And we have a couple of more launches lined up one in Koramangala, one in Chennai, one in Kolkata. Subject to autism predicting market acceptability. We will move from pre-launch to launch these projects during the month of March.

11 — slide 11 gives you a glimpse of what I spoke just now, so skip to another slide 12. again, reiterating the actual details of the proposed or ongoing launches. And in all the very strong launch volumes, and given our track record of realizing Pincer to will launch in the first 90 days of launch, we believe big addition — a big part of this can get added during Q4, and progress so far visually confident that we’ll end the year with 0.25 million to 4.5 million square feet of retail volume. And there’s a meaningful growth in not just volume, but also in terms.

Apart from product mix, we are also benefiting from the sale price increase. Slide 13 summarizes the price increase, but as you are aware, we started the second half of FY 2022 that is September, October 2022 and onwards is when our focus therefore some price increments is begin after-COVID. And I think we are encouraging outcome in his second half of last fiscal, it puts an average increase at 16% for this project increase range, ranges increases in different projects.

On top of that, from the price level that was in March 2022, we have now crossed another average realization increase of 7% to the basket portfolio as a whole. So combination of these two gives us about 15% rise in the last 18 months.

That’s a meaningful up-tick for us and encouraging not only improves the margin profile for these projects — ongoing projects, but also helps in terms of offsetting the impact of a short-term spike in cost that we witness in Q1 and some part of Q2. They’re all behind us. All these will go a long way in protecting and upgrading our margin profile for ongoing projects.

With this I actually shift to Financial Performance Highlights on slide 16. It has been a slightly strong earnings growth story for us sequential quarterly improvement in the nine months of the FY 2023.

We believe the impact of improving operating leverage, project execution and the rising share of DM is supporting our financial performance. We believe the momentum will continue in the coming quarters as well, because we on ground construction activities and sales activities are remaining encouraging.

And therefore, we should have meaningful momentum continue in the coming quarters consistent with what we had expected in the past. We are on track in terms of delivery performance, as I said 16 more units and plots have been delivered. 2000 units is what we have set for ourselves, nearly its own track and we are kind of a confident that the remaining there will be 400 units will get underway in this quarter.

This reduction has been a big positive for us. We’ve managed to move down the cost curve as well as we managed to bring down the overall debt, that’s helping us in any financial performance.

I’ll try to explain the financial performance those are detailed in slide 17 and 18. Let me try and give you some snapshot of the financials which stood out in Q3 as well as in nine months. Starting with Q3, our revenue from operations are gone up 60%, primarily on a year-on-year growth is driven primarily by the ongoing registration completion of registration activities.

And we have the large project, Southern Crest in Bangalore and Grand-1 in Kolkata where we got the OC and complete Completion Certificate called OC here. And those are helped us to move ahead well in the registration front. Simultaneous to that we also had the continuing momentum in Bangalore project called Summit and semi-project called Temple Bells. All these are the handover, the outcomes are continuing.

In fact, top four projects accounted for 76% of project revenues in Q3 and on top of that, they also had two large transactions during this quarter, which one is the ASK platform took-off the [Indecipherable] project from a SPL to the platform, which is a plotted development Shriram Pristine Estates is got launched in January which we spoke few minutes ago. This transfer of development rights has resulted in fair value gain of about INR13 crore or INR15 crores plus to be precise.

And there is also a landowner settlement in one of our project, which is nearing completion which is Shriram One City in Chennai, and combination of these two have added about INR29.7 crores of income to us, these are operational income, but these are current standard requirements, we have to classify them as other income. So, technically, I would urge people to look at the details of it and I will appreciate that the primary core of our business in terms of acquiring and monetizing the transfer of these development rights. And so that’s actually a point that I want to draw your attention to One City.

Other than that, if you look down the P&L, EBITDA margins are fairly strong at 22% compared to 18% in Q2. Absolutely EBITDA growth is muted, because last year, we had a very high EBITDA base as you may recall, we had a plotted development called Shriram Santorini which was wide stream plotted development project in our book for few years as a land and we monetize that land, and therefore they had a very high EBITDA margin INR10,000 per plot — it was a plot for INR9,500 to INR10,000 where we have range of price that we realized in the plotted development.

And given the fact that the plotted development, the costs are very land cost [Indecipherable] and there were books for few years. And therefore, we had a high EBITDA margin there 40% EBITDA margin. So a bit of a non-comparable EBITDA margins versus last year. But overall, I wish to point out that margin profile is probably strong and encouraging both for the Q3 and nine months. I will explain the nine months in a minute, before that, I just want to highlight the finance costs.

Overall, finance cost is low as about 25% year-on-year. As you know, our finance costs comprise of actual interest expense is one, we also have the non-cash charge, which is basically what we call the unwinding impact as we brief on this. We provide focusing non-compete fee in our balance sheet for the Bengal land, where we are supposed to take government of West Bengal a particular liability, that liability is captured in our balance sheet on a discounted basis as a liability. Every quarter as we move, we have to unwind this NCD impact charges to the P&L.

So that by the time when we come to making the payment P&L to government of West Bengal, the liability will be in absolute rupee terms will be same as what the potential outflow is, and therefore the NCD is unwinding gets charged to interest costs on a quarterly basis. That number is almost INR five crore out of my overall finance costs. That number doesn’t change much from quarter to quarter basis, it will continue for another two years. And unless we win the litigation court case that we have filed against the government of West Bengal for the non-compete, until we will keep providing for it.

So focusing on the actual interest expense 42% year-on-year decline to 14.5% reflects the impact of all the refinancing work that we’re doing. And as you begin to show up, we are almost done with the refinancing of the portfolio expect the one project which is also likely to be completed in February, March. And that’s the refinancing impact is what shows is another finance costs, which means the all the unabsorbed or unamortized processing fee of the previous loan, get charged off the moment you shift from one loan to refinance to other loan. And that’s the one off cost that we absorb.

And so, overall, encouraging for us is the interest declined and interest cost is about 12.5% — which is our cost of debt for us, which is despite a 2% increase in RBI’s led lending rate. And that basically reach on a comparable basis from April to now, or March year end last year to now. We are down from 13% to about 10.5% without taking into account the RBI rate hike impact. Even if you take the RBI rate hike impact the decline is more than 200 basis points, which is an encouraging sign for us.

EBITDA is higher by 20% year-on-year to INR26 crore in Q3 and share of JV is negative, positive contribution from income recognition — ongoing income recognition in Park 63, which is a JV between Shriram Properties and Mitsubishi Corporation is continuing, but the impact is masked by renewed campaign that we had for the next phase launch in one or two join ventures called Shriram WYT — Shriram WYTfield and Shriram W 107 SouthEast. These are the new launches during this quarter and therefore the — our share of cost we are picking up as a share of JV record negative.

The overall net profit is up INR22.4 crores, 69% year-on-year growth and more importantly, 14% higher on a sequential basis compared to Q2 level, which is fairly satisfactory and its encouraging for us.

And on nine month basis spending few more minutes, the table — last three columns of a table will tell you that our overall revenues have grown up 129%, revenue from operations has grown 144%. So we stand at the total revenue of INR643 crores compared to INR281 crores last year nine months.

Our EBITDA is up 59% year-on-year, INR137 crores compared to INR86 crores last year. Finance costs for the nine months is also lower, its down 20% year-on-year. Interest expense as explained earlier, interest expense is a more relevant metric in our context [Indecipherable]. So net interest cost is down 32% to INR52.3 crores or 523 million compared to INR77.3 million or INR77.3 million last.

Non-cash charge I explained at Government of West Bengal royalty related non-tax [Indecipherable] advisory payment related charge and that will continue for few more years unless we get the integration — ongoing integration close in our favor until December as a matter of prudence we will continue to provide service.

On a nine basis share of income — JV income is positive because Park 63, JV is between Shriram and Mitsubishi is registration activity simply require [Phonetic] momentum. And that’s actually showing up there. Of course partly offset by marketing expense and JV refinancing costs that we had in the first part where we refinanced from LIC or the NDFP scheme banks like SBI and investment bank at [Indecipherable] some costs. And therefore, we decide to refinance them for the long-term agreement project.

Net profit for the nine month period is at INR52.4 million square feet — sorry, INR52.4 crores or INR524 million, my apologies — compared to a negative earnings in nine months last year. More importantly, it is meaningfully higher compared to INR18 crores reported net losses for fiscal 2022.

Looking at a quick — look at our balance sheet in the rate ROCE. Our return on capital employed stands at about 10.5% on a nine months not annual — nine month annualized and expected Q4 should put us slightly ahead of peculiar FY ’22. So we are in the 10% on 5% 11% band on our ROCE basis, which puts us meaningfully in the first quartile of listed player group. And on the debt side I will cover that little more in detail in the next slide.

But before that, I want to talk about cash flow we did in detail. Slide 20 gives you the overview of our cash flows. If we look at the cash flow chart on the right hand side, it is a company wide collections. The selections are here talking — the blue bar the bottom is the Sriram CFF consolidated cash flow.

The next bar is three — above nine months its 3853 which matches with the column three of your table on the left. 31118 is the require — INR311 crore is the JV share of collections. And the DM collection is about INR189 crores. That’s how consolidated collection for the nine month period is INR187 crores that we have seen in previous slides.

Focusing on the CFF cashflows of Shriram, which is 100% belonging to us and not bringing JV all sort of JV cash flows in this context. I’m just focusing on CFF cash flows. If I look at the overall operating cash flows — cash flow from operations has been positive approx. INR77 crores and for the Q3 it INR18.8 crores. And we do about INR17 crores from the financing activities in a nine month period, and therefore — so we invested despite INR20.5 crores from the operating cash flow towards loan repayment as well as interest costs.

So free cash flow before any credit investments have been in the range INR59 crores INR60 crores. And as I look at the business projects, primarily comprises of JV advances given some of the projects. So we typically give somewhere around INR eight crores to INR15 crores and INR five crores is typical outgrow for a JVA project every month as JV advance from 0.5 million square foot projects. So we signed up for two new projects. Those are JV advances we also spend money — our share of investment in the platform in core investment platform in the ASK where we launched this project for Shriram Property Limited. And also we have made some further investments, requiring 100% economic interests — in a project called Suvilas Palms and Suvilas Gardenia. These are now — as you recall from the press release we made, we acquired this deal of bigger DM project requirements listed in project to meet advantage of the subsidiary of Shriram.

Now, we are only complete the project and they’re getting launched. You heard the main called Shriram Poem the Poem by Shriram, but nothing but the renamed version of Palms, which is relaunched as our end project which are the DM project. So, all these activities took us about INR120 odd crores of investment in new project. Some part of this capital will come back in the next 45 days to 90 days, because we are putting back into the position more in the NBFC platforms or is — capital to unlock or release some part of our investment already. But we during the nine months we invest around INR23 crores, that’s how we use INR64 crores of cash flow from cash and cash equivalent in hand. We believe the closing balance of INR77 crores will rise sharply in Q4, because as I said in the beginning, concluded the BM arrangement and settlements with Xander Gateway office complex about building a BM project that’s supposed to be the GMP from Xander funds — GMP about IN 150 crores, of that INR65 crores will come through FY — in Q4. In terms of other recognize has been phases in the past couple of — in the past year or two, the cash flow will approve now, I think we are getting about INR60 or INR65 crores now on their balance will come in branches over the next one year per quarterly installments.

So that will boost our cash and cash equivalent at the quarter end. And we’re also expecting to as I said monetize or unlock release capital from some of the new investments that we made last quarter in acquiring projects since the last — come out with and we have done completely due to the funding of this project acquisition now. We will monetize that so that cash will come back. So we think we’ll end this year with much stronger cash and cash equivalents should be in the range of about INR150 crores, cash and cash equivalent.

Moving to slide 21, I’m doing best, and so as I said our gross debt is about INR504 crores top left chart. Our net debt is about INR427 crores, gone up slightly compared to previous quarter about INR20 crores higher, but gone up about INR60 crores compared to year end or the year beginning — beginning of the fiscal year will go down over the next quarter. The B2B is about 0.35 and 0.36 [Phonetic] still remains one of the lowest in sector.

Cost of debt reminds me of 12%, 12.5% range, directly towards a very stabilizing around 12% at least before year end. Majority of you will practice of course, reduced by cost base as well, but more importantly, the cost of debt that come down because we shifted from mostly NBFC focused loan portfolio to bank focused loan portfolio to the refinancing that we have completed over the last nine months, 55% volume which is now in banks. Incremental debt we are able to raise now in the 9% to 10.5% range coming from banks like SBI, IndusInd Bank and RBI we are going to be conservative in the last nine months to add this loan portfolio, increase the share of banks in the loan portfolio.

Our focus remains on reducing overall debt, as well as winning on the cost of debt, relatively speaking with all the RBI rate hikes impact. So this 12.5% include RBI rate targets means effectively down to about 10.5% to 11% in the sense that I’m not trying to complicate it right now. So on 12.5% I think we are still aspiring to go little around 12% before year end and understand unless there are very large rate hikes that is coming through from RBI for the next three to six months

Some of the awards and recognition that we receive for our projects are in slide 22. I will quickly summarize what we see as an outlook for 2023 and beyond the next two to three slides, and then I’ll pause for — a stop for Q&A within 40 minutes.

From an outlook perspective, we see a very strong — for Q4. As you know, five credits accounted for 76 — projected revenues in 2023. All of these projects have come under control in terms of external factors like the [Indecipherable] all of these projects. So as we complete customer registrations and handovers, we start recognizing income in these projects. BM reminds on track and will continue to be a key contributor to the effects industry revenues as well as EBITDA.

And moving beyond the ’23 Q4, which is a — 35 days left looking at a three year earnings record, ’23, ’24, ’25. We believe the visibility is very high, 75% of our aggregate revenues during this period, ’23, ’24, ’25 will come from projects. So volume sold up to September ’22 already, and 60% of BM revenue will come from projects launched already. And therefore we see a meaningful visibility on what we can deliver.

And we have been consistently emphasizing since requirement is called cross listing that we do see our data visible to anomalies. And we are confident of delivering what we promised. And we see nine — last three quarters supporting our efforts, and we believe will continue to demonstrate that we are on the right track in delivering long term value for our shareholders. And we will wait for — and we believe as you continue to deliver capital markets will be able to get through this and valuations will move. And as someone pointed out today, our current EPS amendment is about a shared liquidity subject and therefore an annualized facility. And that shared impact will be in the stock price.

So, on a historical earnings basis, it is trading legally at a low number. But given the fact that we are currently focused on delivery demonstrating to the market that we are on rght track to deliver early returns, and we believe at some stage markets will recognize this consistent delivery.

On slide 25, talked about the same metrics that I talked about on the three year earnings. We will deliver 10,000 units. We are targeting to deliver 10,000 units over the three year period. [Indecipherable], we sold about 11 million, 12 million in the last three and a half years. They are coming for completion and handover and therefore at least 10 plus million that it will be handed over to customers involving 10,000 units. That should give us the revenue recognition potential.

This year, I think we believe we will complete the handover about 2.5 million, 2.6 million square feet, which basically means, given at least three million square feet at least annually over the next two years. Even on a high current business perspective selling price, it means 1,500 square feet [Indecipherable] growth of revenue recognition. And with an EBITDA margin that we believe is sustainable at Summit 20. I need the audience to decide what should be a sustainable level of EBITDA in this company.

And therefore, what we want to emphasize the fact that, we believe we are on the right path. We believe the current performance is supporting our belief that we are on the right path. And we’ll continue to move forward with both our own growth in terms of volumes, as well as financial earnings and returns.

Slide 26 summarizes what we expect to do over the next couple of years. We will continue to focus on delivering growth momentum. We will continue to leverage our operating benefits and the benefits are on the backup scale and efficiency improvement and over the next couple of years, we remain committed to delivering 20% CAGR in sales volume. Margin stabilized around the mid-20s EBITDA and RoCE stabilized in the mid-teens. And we’ll continue to focus on DM, simultaneously our emphasis is on JVs and JDA.

So while being all of this will continue to unlock potential from Kolkata. These are explained more in detail in the slides later. But I’ll end with slide 27 saying, despite moving seven projects 2.8 million square feet from ongoing portfolio to completed portfolio, which is a positive development, and also differing couple of projects because they are taking more time than what we envisaged. 2.8 million square feet moved out of the pipeline. Though there are shelved the project, I think they are not coming through over the next couple of years. Therefore we said, when it comes we will add them come back.

Despite all this, we have still managed to have a pipeline which is robust enough with 51 projects to 50 million square feet, out of which 23 million square feet is ongoing, and therefore 30 square feet upcoming projects set to pipeline potential spread well across JVs, JDAs and DMs. Out of 23, as I said at the beginning of the call, I’ll end with saying you have no completed inventory, out of the 23 million ongoing nearly 80% is sold. And that’s an entirely encouraging spot to be in as a with market real estate developer.

With this, I pass or stop here. Me and my colleagues will be more than happy to address all the queries that you have. Thank you, and over to the host.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator instructions] We have a first question from the line of Dhananjay Kumar Mishra from Sunidhi Securities. Please go ahead.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Yeah. Hello Sir. Congratulation on very strong case booking despite the fail of launches. So, what is the likelihood of launches, I mean how many projects we can launch out of the seven you have listed in the presentation? So, can we launch at least four or five or it will not be spillover in next quarters out of that you mentioned?

Mr. Gopalakrishnan J — Executive Director and Group Chief Financial Officer

Yes. I think we’re very confident, because while it looks like moved from one quarter to other quarter, the launches were planned for early part of December, so it’s just delay by three weeks for us. Of course, quarter sale we move from — it shift from — it looks like a one quarter delay. So out of these six projects that are listed on slide 12, Shriram Pristine Estates is launched already on February 3rd or 4th or rather first weekend. And that’s for the story — I would encourage you story by 12.

Chirping Ridge joined forum EOIs that started last weekend, and they’ve actually got a very good response. In fact, Chirping Ridge has more than 100 EOIs in the first weekend. So I think we launch — our pre-launches we already started in DC projects.

Solitaire and Life Space will be the pre-launch during the second half of February and formal launch by — I think ’26 it’s getting launched Solitaire and Life Space. Solitaire is in Bangalore and Prime Life Space in Chennai. So there are all these formal lunches during the early part of March. Once we gave the interest then we’ll the drive the price — that’s the pre-marketing that we’re doing.

So I think five of them are already taken off in the sense, four or — in the pre-launch phase, and one is launched. Koramangala we’ve got all the approvals in place. So there are no external dependencies. It’s a very big project, 1,30,000 square feet of projects in Koramangala, and therefore, it’s a high-end by invitation type marketing launch that we’re going to do, and therefore — and I don’t — you don’t see a big challenge in Koramangala project [Indecipherable].

So we are on track for all the projects that are listed here. On top of these, we have some buffering — launches were there is one external approval dependency pending in West Bengal, they said we’re not committed them. So these five new plus one launch, six of them are definitely on track, they will all be formally launched by end of this month, within the next two weeks they will be on the shelves, on the newspapers.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Okay. So in total we have — we will have at least eight, nine project, right?

Mr. Murali Malayappan — Chairman and Managing Director

This year we should end with about nine or 10 lunches.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Okay. Sir, what is the target for next year in terms of launches, we have any target in mind?

Mr. Murali Malayappan — Chairman and Managing Director

Number of launches are mini, based on where they are out of — we believe, we will be somewhere between six and nine launches at least based on where we stand today. And, out of which nearly four of them are very high visibility in terms of the timeline, the remaining to me is contingent on timing of plan approvals in each of these cases. So, there is some visibility or some dependency on few project, but otherwise, six seven launches are visible, but I would imagine between six and nine will be the fair number for FY ’24.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

And in terms of sales booking, we will be doing…

Mr. Murali Malayappan — Chairman and Managing Director

Sorry, just to clarify. The number of — more than the number of launches is of the size of the project, which also matters for us, like, for example Prime Life launch is very different from Chirping for us, because one million square feet apartment complex in Chennai, prime location, and therefore, we see that one launch can feed a very large volume.

So, we are confident of 5.5 million square feet next year, because we see the pipeline already in a mature stage to support that kind of — to be prudent, I will say 20-plus-percent growth is definitely achievable in FY ’24 and ’25 based on signed pipeline documents, the document already signed document for pipeline project.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Okay. So 4.5 million sales booking we are expecting this year for ’23, and about 5.5 million next year, right?

Mr. Murali Malayappan — Chairman and Managing Director

Yeah. Little bit here and there for this year, but the ballpark there, 4.5 million.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Okay. And second question with respect to ASK investment, sir what is arrangement with them? Going forward, how many projects we are going to do with them?

Mr. Murali Malayappan — Chairman and Managing Director

Yeah, so it’s a — ASK platform is a INR500 crore co-investment platform quasi pretty in nature, where ASK took their 80% of the capital, Shriram took 20% of the capital and ASK gets a coupon on their investment for the first page of return will be in the form of a coupon to them. Shriram gets the 20% BM on the project. ASK gets somewhat similar coupon on the — on the investment that they have made and thereafter it is all also proportional sharing of free cash flow available in the project. And ASK exist at 20% GAAP, 20% IRR subject to cash flow is available in the project. There are no guarantees beyond this coupon. But — and their — even if the cash flows are very strong, they get capped out at a particular level. And thereafter all that cash flow belongs to Shriram.

The first project, which we have dropped in this platform is called a Shriram Properties Limited but I said that we launched in January, February, beginning, Jan and pre-launch and February pre-launch. And that launches — that project is eight lakh square feet proper development in North Bangalore and that’s already in the platform.

We think that the platform — it is using INR100 crores platform, INR20 in Shriram, INR80 crores in ASK. Acquisition of a plot development land from someone who acquired from NBFC and we think we have another potential for keep the floor flowing on the size of the project. With already evaluating one project we put in the pipeline — in the platform.

Depending on the size of the investment that could be anywhere between three projects from now, three more project from what we have done already to maximum four projects.

Mr. Gopalakrishnan J — Executive Director and Group Chief Financial Officer

The gross activities like 10 year with the 20% of the capital, we are getting the remaining capital instead of borrowing the remaining money they’re actually getting a 40, 50 in a sector but that’s the way we see it. Because our IRR will go up as long as we project IRR with more than 20% we should get — our investment should get a much higher IRR.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Okay. So can we assume that this INR500 crore platform, we will have three, four projects and potential revenue could be about INR1500 crore, INR1600 crore from the platform itself?

Mr. Murali Malayappan — Chairman and Managing Director

Sorry, how many crores, I need the last part.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

INR1500 crores sales potential.

Mr. Murali Malayappan — Chairman and Managing Director

Sales potential. Yeah, it can be because we will definitely do a three to four projects, at least. We are already evaluating one, which involves 1.8 million square feet. And that alone should give you about INR750 crore actual value. So I think that — you are there –I don’t agree with your number. There’s a meaningful potential there to unlock. Its not — it’s a way of financial structuring because these credit pipelines are already either been sourced back or already the pipeline with us. So it’s kind of capital source for us.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

And lastly, sir on interest funds. So for nine months, we have done 12.5% interest. So in this quarter what is the interest for us. It should be lower than that, I think.

Mr. Murali Malayappan — Chairman and Managing Director

No, the initial quarters will be higher. I mean, I can share the details offline or I can remember how, because we started at 14.4%, 14.3% in March or April 2022. And obviously, as we go down, there is adhering factor that gets pulling back. So the combination of both these I right now don’t have a policy, so they’ll have quarter-to-quarter track number. But I think it could have descended from 14 point something to 12 points or gradually do not have gone down a big number in Q1 and Q2.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Okay. Okay, sir. That’s all from my side. All the best.

Operator

[Operator Instructions] We have a question from the line of Kanika Kothari from Kothari Securities. Please go ahead.

Kanika Kothari — Kothari Securities. — Analyst

Hi, sir. Good afternoon.

Mr. Gopalakrishnan J — Executive Director and Group Chief Financial Officer

Yes.

Kanika Kothari — Kothari Securities. — Analyst

Firstly, I wanted to ask, can you please elaborate on the trends and patterns and performance of real estate sales in metro cities versus in Tier II city.

Mr. Gopalakrishnan J — Executive Director and Group Chief Financial Officer

Yes. So as you — most of you aware that’s going to be the account for about 80 odd percent for real estate listed demand, organized real estate demand in the country. And MCR [Phonetic] has won the other one if I count [Indecipherable].

You may have seen this from nine plus four and five our core market. The numbers are very encouraging from sales volume or adoption number they quote. The law of IPC reports currently, I picked up a couple of them and they’re off and picked up as more frequently visited members. Visibility new launches in these core top Tier I markets have gone up by about 15% of the options are being 20%, 25% growth. And therefore naturally [Indecipherable] those in our core markets of band in Kolkata as well as other core market.

So overall market is going very strong, lack of supplies or the number of suppliers as you know has come down because of the ongoing consolidation. Therefore, the supply growth is more controlled in my view. And therefore the trend of declining inventory could continue for some time, and it’s very encouraging inventory levels, if you look at Bangalore has less than 12 months of inventory which probably one of the lowest that we’ve seen in recent years. Chennai has 13 months of inventory, Kolkata has about 15 months of inventory and the markets like Bombay has 14 months, Kolkata has 16 months, so it’s like ranges from 10 months to 16 months compared 58 months we use to have. So that clearly shows the market is getting balanced. One another interesting factor I must point related with markets, I call the Tier II cities later.

One of the interesting factor is that big markets have always been a stable in terms participant. This market demand is [Indecipherable] induced driven, there is no unlisted gain there, because the ticket size is low. The induced on demand is [Indecipherable] the end user demand. And therefore, mid market tends to perform much stronger and inventory levels are very, very low in mid market across Tier I markets.

The premiums and higher end of the segment is there even in the pre-COVID period which have very high inventory problem. I think that the inventory problems are gone down now, post COVID, even though the luxury and premium products are actually new down very well in the market. So overall the markets are doing well. That’s the point number one.

Point number two, the interest rate hike impact all of us, especially the capital market factors will have more concerns than the real estate player. But there are concerns and appearances about the impact of rising interest rate on the housing. Unlike the western world where we have a much stronger direct correlation. In our market, if you look at the last 50 cycles of real estate and interest rates, we just match them, you will realize what I’m talking about. In the previous cycle, also relative resolution just got into a new cycle, maybe one, one and a half, two years is gone, so there is still a relatively — cycle to go. And in the past cycle, interest rates have been even higher than what it is today. So, you don’t see that as a big dampener. And we believe we also endorsement, the fact that all the home loan companies listed and unlisted, they all are reporting very strong — continued strong demand from customers for a home loan. That clearly shows that the customer perception and decision-making procedure have changed. So, will it continue forever? No, at some stage, if you break off, where was the point, we don’t know. But I get — I’ll probably hazard a guess saying the double-digit interest rate for customers maybe there will be a slowdown in their appetite. But as of now, there is no big negative impact that we have seen in our announcement — fair market.

The other second part of the question, did I forget? Tier II cities, yes. Tier II cities, I have a limited knowledge of what — some of the Tier II cities are emerging slowly trying to become Tier 1, they are also — they are doing very well, especially whereas several of the listed players have not really focused on these Tier II cities, because the Tier I has still human potential as of now, and I think it will be two years before we all start exploring markets, but Tier II also be well, especially markets like Ahmedabad, Bhopal, Indore, these cities are doing extremely well. As an outsider, we’re just listening to the feedback from people, this not get better, but there is or what we hear second information, I think the markets have been filled with all the ongoing infrastructure spending by government of India and continued trust from the [Indecipherable] the budget allocations have gone up, all these are going to be good news for residential because eventually the money will flow into the government and power and therefore, it will come back into the real assets and real estate be one of them should be a beneficiary across Tier I and Tier II. But for now to clarify Shriram Properties will remain focused on our core markets, which are Tier I markets at [Indecipherable] and Kolkata. We will explore cautiously the early markets, but fundamentally — we are currently focused on Kolkata.

Kanika Kothari — Kothari Securities. — Analyst

Okay. Understood. Thank you. And sir also can you please throw some light on the Kolkata land parcels, I mean how much we will recognize and buy when?

Mr. Murali Malayappan — Chairman and Managing Director

Kolkata as I’ve said in the past couple of calls, our strategies are very simple and continues to be unchanged. We will develop 10 million square feet by ourselves, we will sell FSI is willing to do so roughly about INR175 crore, INR200 crores acres of land is available and Rustomjee developed that. Our own development has moved ahead well. So, the monetization is already progressing. Grand One handovers are — we see good progress, and I think we will complete the Grand One, which is the first project we launched [Indecipherable] 3.2 million square feet. And we’ll complete the handover in about 18 months.

In Grand Two, I think we sold 98% of phase [Indecipherable] sorry, [Indecipherable] of phase one and about 60% of phase two. So in all about 1.1 million square feet has been sold out of 3.2 million square feet.

So as a launched project, 4.4 million square feet launched and about three — something you can see — as you can see, [Indecipherable] we have to be comfortable on this launch activity. As I said in between the launch topic, we are also waiting for one approval there.

We might launch [Indecipherable] in the site, sometime in the next 45 days, subject to approval coming through, being over and above the launches that are listed in the PowerPoint presentation. Currently the launch has been mid part or late part of March, so typically not part of the Aril launch.

That will be a third project that will start monetizing, and then some commercial activity that we have — commercial development we’re doing. So that’s the — our side of 10 million square feet story.

And the monetization, I think, as you’re aware, we’re signed up with LOGOS. Usually, really, almost complete. Documentation is progressing well with them. And we think we should be able to close in the next month or two.

So really I would probably bet on rearranging, retargeting, second half FY 2023, might get pushed first part of FY 2024 I think, because the buying party needs to get some landholding approvals. [Indecipherable] so that might — it has been out of our hands, governmental dependency by a foreign company. So, I would kind of go cautiously on the timeline. Somewhere around the end of this year, early next year is when — typically, is when we think the LOGOS will submit.

We also have got, as you have seen through slide 29, we also got interest for additional land beyond LOGOS for another large credible global player. I would stay away from quoting the name right now. But it’s a very large — one of the largest players in the global space, have also shown interest in the same land — in the land parcel of the [Indecipherable] in Kolkata.

So between LOGOS and the second large global player — second player, I think we need to monetize a large part of saleable area. But we will keep our fingers crossed in the final term sheet with the second player. So one is that, this is progressing well. This is a limited point I’m making.

We believe from a timeline perspective, our own development will be completed in about three to four years, maybe out of the site 10 million square feet. From a monetization depending on the models of monetization can be anywhere between 24 to 36 months before we completely — complete with Shriram Grand City as a project. So four years from today is when I think we see entire three million acres of land getting completely monetized. So [Indecipherable]

Kanika Kothari — Kothari Securities. — Analyst

Okay, sir. Thank you.

Operator

Thank you. [Operator Instructions] We have a next question from the line of Ashay Jain from Jain Capital. Please, go ahead.

Ashay Jain — Jain Capital. — Analyst

Oh, yeah. Hi, good question. So I have two questions. So what is the impact for repo rate hike on sales considering that we cater mostly to the affordable segment?

Mr. Gopalakrishnan J — Executive Director and Group Chief Financial Officer

Yeah. Good afternoon, Akshay. So just one correction will be available, affordable and mid market they together add about 80% of fiscal year. Affordable alone evolves 35% of our volume demand is coming from mid markets.

Ashay Jain — Jain Capital. — Analyst

So that’s the kind of break?

Mr. Gopalakrishnan J — Executive Director and Group Chief Financial Officer

You’re writing an expectation that both because of 85%, 90% customers are valuing it, 85% of our customers take home loans and they are all end use customers. Therefore, it does have some impact. As of now it has not dented in demand, as we see, it may have been leading up, it may have an impact, the 850 [Phonetic] home loan, it has not really had a meaningful impact, not just for us, what I hear from the large home loan companies HDFC, ICCI, and all of them we all cover them mostly when I do. What we hear from them is that, they have not seen a slowdown in Home loan momentum. It clearly says that customers are fairly comfortable with the current layer of rates. It’s made up about — SBI — limiting rate used to about 6.7, 6.8. Now it’s like a 8.25, 8.2.

So there’s meaningful corresponding increase with repo rate. But fortunately, it does not had a meaningful dent on it. From our own sales perspective, they haven’t really seen either in impact in some form, or in the conversion, conversions are receiving faster than pre-COVID living consistently [Indecipherable] market participants over last three, four quarter. Surprisingly big conversion are happening, faster conversion are happening unlike pre-COVID level. That does not slowdown. We achieved our growth, the impact is very marginal.

Ashay Jain — Jain Capital. — Analyst

Understood. That’s helpful. That’s all from my side. Thank you.

Operator

Thank you. I would now like to hand over the call to management for closing comments. Over to you sir.

Mr. Murali Malayappan — Chairman and Managing Director

On behalf of all us who have been with me Ramesh, Gopal, I would like to thank everyone of you for your time and energy to listen to our story. I hope we’ve been able to answer your queries, and we are always available phone call away or email away for any queries that you have. I’d also like to thank SGA, thank you Rahul and thanks for coordinating this call. Thank you.

Operator

Thank you. On behalf of Shriram Properties Limited that concludes this conference. Thank you for joining us and you may now disconnect your lines.