Suraj Estate Developers Ltd (NSE: SURAJEST) Q2 2025 Earnings Call dated Nov. 18, 2024
Corporate Participants:
Rahul Rajan Jesu Thomas — Whole-Time Director
Shreepal Shah — Chief Financial Officer
Analysts:
Sagar Karkhanis — Analyst
Rohit — Analyst
Krishna Shah — Analyst
Rohit Mehra — Analyst
Arjun Mittal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Suraj Estate Developers Limited Q2 and H1 FY ’25 Earnings 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.
[Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Rahul Thomas, Whole Time Director. Thank you, and over to you, sir.
Rahul Rajan Jesu Thomas — Whole-Time Director
Good morning. I welcome everyone to our Q2 and H1 FY ’25 earnings conference call. Along with me, we have our CFO, Mr. Shreepal Shah; Mr. Ashish Samal, our Internal IR; and SGA, our Investor Relations Advisors. I hope all of you have gone through our Investor Presentation uploaded on the Exchange and our company website.
India’s residential real estate sector has demonstrated robust growth in the recent years, and we anticipate that positive market dynamics will persist in the coming years. The substantial business development we have accomplished under favorable terms positions us to expand our bookings and margins, paving the way for strong earnings growth in the years ahead.
The MMR region continues to dominate the residential real estate landscape, accounting for significant 38% market share among India’s top seven cities. Affordable and mid-end segments continue to be the most sought-after segments by developers and builders, contributing to 35% and 29% of the city’s new launches, respectively.
Within the MMR, the distribution of available inventory across the three subregions, Mumbai, Navi Mumbai and Thane, remained relatively steady compared to the previous quarter. Mumbai continued to lead with a 75% share, followed by Navi Mumbai at 14%, and Thane at 11%. Within Mumbai, the peripheral central suburbs emerged as a dominant zone for available inventory, accounting for 30% of the Mumbai’s available units. Nearly 32% of Mumbai’s available inventory fell within the affordable segment. Compared to the previous quarter, the inventory overhang in the MMR remained steady at 14 months by the end of Q3 2024.
We are extremely pleased with the operational performance this quarter, particularly given that it traditionally represents a seasonally slower period. Despite this, we achieved a commendable 14% growth in sales volume, alongside a 10% improvement in realizations, showcasing a resilience and the growing demand for our offerings. The year-over-year decline in finance costs is another positive development, largely attributable to the utilization of IPO proceeds for debt repayment, which enabled us to reduce debt significantly.
On a quarterly basis, the decrease in interest expense is further supported by the absence of the redemption premium during this period and in the subsequent quarters henceforth. These favorable financial conditions have contributed to strengthening our bottom line and overall financial stability. We have raised INR343 crores via preferential allotment of equity shares amounting to INR243 crores and an additional INR100 crores via issue of convertible share warrants.
In October ’24, we received a total of INR269 crores, which includes fund raised through preferential allotment and subscription money of approximately INR25 crores in October ’24. The balance amount is expected within 18 months from the date of allotment of warrants. These funds will be utilized for land acquisitions, working capital, general corporate purposes, and issuance-related expenses. A group of high net worth individuals, asset management funds and family offices participated in the successful fundraising round.
We are delighted by the robust investor support for the substantial capital raise. This timely infusion will provide the growth capital needed to expand our operations and diversify our product portfolio. We plan to strategically deploy these funds to reinforce our position in the residential and the commercial real estate sectors, seize new opportunities, and deliver lasting value to our stakeholders.
Looking ahead, we aim for pre-sales of INR850 crores for the current financial year with plans to launch seven new projects totaling to a GDV of INR1,150 crores. Our strategic entry into the Bandra submarket backed by the initial phase of approvals and focused approach on redevelopment under DCR 33(7) and society redevelopment under 33(7)B position us strongly for the future growth.
We are particularly optimistic about Mumbai’s redevelopment potential where over 19,000 properties are more than 50 years old, with 16,000 urgently requiring redevelopment. Our expertise in tenant settlement remains a key driver of value in these projects. In our ongoing projects, we have 5.39 lakh square feet — we have sold 5.39 lakh square feet out of a total of 6.09 lakh square feet, generating approximately INR1,370 crores with a receivable of approximately INR767 crores. The unsold inventory totaling 2.71 lakh square feet has an estimated GDV of INR395 crores. The combined receivables of INR1,162 crores from sold and unsold portion of our current ongoing portfolio are expected to materialize between FY ’25 and FY ’29.
Looking at our future pipeline, we are awaiting upcoming projects with an estimated carpet area of over 9 lakh square feet for sale, approximately 67% of this is in the value luxury projects, 14% is in the luxury, and 7% is the mix of value-luxury and luxury. And the balance 12% is in commercial properties for sale. So, 18 projects are projected to generate a GDV exceeding INR5,000 crores.
The Mumbai Metropolitan Region, the MMR region’s residential real estate market [Technical Issues]
Hi. We just reconnected. To continue, the MMR region’s residential real estate market is poised for a robust performance for FY ’24. The sustained momentum witnessed in previous quarters fueled by favorable economic conditions and a growing preference for home ownership is expected to continue. With several infrastructure projects nearing completion, and the continued focus on urban renewal, the MMR residential market is well positioned to conclude 2024 on a high note, potentially setting a new benchmark in both sales volume and value. Our optimism regarding the potential with MMR region remains steadfast. We look forward to capitalizing on its growth prospects in alignment with our vision for a robust and diverse wide portfolio.
With this, I would like to hand over the call to our CFO, Mr. Shreepal, who will run you through the financial highlights. Over to Shreepal.
Shreepal Shah — Chief Financial Officer
Thank you, Rahul. A very good morning to everybody. I will now run you through the financial highlights for the quarter and half year ended September 2024.
Starting with the performance for H1 FY ’25, the total income grew 18.3% year-on-year to INR244 crores versus INR207 crores in H1 FY ’24. EBITDA grew 16% year-on-year to INR128 crores in H1 FY ’25 versus INR111 crores in H1 FY ’24. PAT grew 97% to INR62 crores from INR32 crores in H1 FY ’24. On a quarterly basis, the total income grew 6% to INR110 crores in Q2 FY ’25 from INR104 crores in quarter two FY ’24. EBITDA grew by just as a percentage to INR64 crores in Q2 FY ’25 versus INR63 crores in Q2 FY ’24. PAT grew 88% to INR32 crores versus INR17 crores.
Coming to the operational performance. Pre-sales grew — growth rate of 26% year-on-year in Q2 FY ’25 and 13% in H1 FY ’25 despite a seasonally weak quarter and the occurrence of some inauspicious period during the quarter. Realizations grew 10% year-on-year in Q2 FY ’25 and 12% year-on-year in H1 FY ’25 on account of price hikes and increased sales of luxury portfolio of projects. Collections grew 90% year-on-year in quarter two FY ’25 and 46% year-on-year in H1 FY ’25 on account of new project launches and higher sales volume. 40.9% of revenue came from sales of luxury units and 59% of revenue from sales of value luxury units.
With this, I would like to open the floor for questions. Thank you.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Sagar from Nirmal Bang Institutional Equities. Please go ahead.
Sagar Karkhanis
Yeah. Thank you to the management for taking this time up. My first question is on our upcoming 18 projects which have 9 lakh square feet of development area, if I remove the 1 lakh square feet of commercial projects, we have around 8 lakh square feet of residential. And out of that, almost 50%, which is 4 lakh square feet, is coming from two projects, which is Marinagar and Girgaonkarwadi. So, if you can throw some light on these two projects, what are the timelines and what will be — what we can expect from these?
Rahul Rajan Jesu Thomas
Hi. Thanks, Sagar. So, in terms of, like you correctly said that most of the upcoming projects carpet area is coming from these two projects. In terms of Marinagar, we have already got the first phase of approvals where we already have live IOD in two upcoming buildings there. There would be slight minor amendments in the plan in terms of adding five more buildings in the redevelopment phase. We have already done the necessary paperwork as part of our announcements that the five buildings in the same project also will be added, so there will be an added potential coming up from what we have already discussed. And design is underway as we speak, and we are targeting mostly a big launch by next year.
Sagar Karkhanis
And the Girgaonkarwadi project?
Rahul Rajan Jesu Thomas
Girgaonkarwadi will not commence by next year, it will commence in the following year.
Sagar Karkhanis
Sure, thanks. And one more question is, our average realization, and I have seen the presentation on the ongoing projects is shown as some INR39,000 per square feet, and our estimated average realization on the unsold inventory we have taken at around INR55,500 per square feet. So, if you can just throw some light on what are the last deals that are happening and how confident are we of achieving this number of INR55,000?
Rahul Rajan Jesu Thomas
Sure. So, if you see our average realization quarter-on-quarter, Q4 average realization was about INR53,650, Q1 was INR51,116 to be precise, and this quarter was about INR48,366. So, we are seeing the average realization has gone up in the last three quarters, so we have taken a base of the same of the last three quarters.
Sagar Karkhanis
All right. And my last question is, all our — largely our upcoming projects are in the Mahim site and not many on the Prabhadevi Worli site, and we are seeing a lot of traction in the market in the Prabhadevi Worli site. So, is it that we have consciously tried to be away from the Prabhadevi Worli site because land cost is high and more towards the Mahim site? What is your strategy, if you can share your thoughts on that?
Rahul Rajan Jesu Thomas
Actually, lands have already been acquired. And since these are already lands which have been acquired and these are larger in size, we need to give returns to the shareholders. So, we are planning to launch the larger developments first and they happen to be in Mahim. And we are seeing good traction even in Mahim in terms of — we have a couple of projects in the Mahim belt as of now, and we are seeing good realizations coming from them. So, I think we are very confident in that market as well.
Sagar Karkhanis
All right. Thanks. I’ll come back in the queue. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Rohit [Phonetic] from RM Securities Limited. Please go ahead.
Rohit
Thank you for providing me the opportunity. I have one question, which segment do we see traction in the industry? Are we seeing oversupply or is it easy for us to sell? Hell?
Rahul Rajan Jesu Thomas
Yes, Rohit, we could hear you. So the traction we are seeing right now, which has always been steady, has been the value luxury concept where it is between INR1 crores and INR3 cores. So, that is a constant segment in which there has been steady growth, and — in terms of not only realization but also in velocity. Even the larger ticket is doing well, but of course we see that prices won’t go higher than this. This is our estimate that, we see that the prices will be kind of steady at the current market price. And we are seeing, again, a big demand for commercials. So, just to give you an industry overview, we see commercials, which has good potential. The luxury segment will be obviously doing well, people have a demand for it, but we see the price is not going up from now onwards. And of course what is really doing well is the value luxury concept.
Rohit
That answers my question. Thank you so much.
Rahul Rajan Jesu Thomas
Thank you.
Operator
Thank you. The next question is from the line of Krishna Shah from Ashika Stock Broking. Please go ahead.
Krishna Shah
So, I have a question on the cost of construction. So, quickly wanted to understand, what is the margin that we are expecting? Are you expecting any increase in the cost of construction going forward?
Rahul Rajan Jesu Thomas
In terms of construction cost, we are seeing that the construction — the labor prices have been going up steadily, which obviously will impact our construction cost. But we don’t see a very substantial hike in the construction cost, it’s normally steady. But of course, there is a labor shortfall we see overall in the entire construction industry. And I think that may impact the construction cost, though very marginally.
Krishna Shah
Okay. Got it. Secondly, on the approval side, are we getting any delay on the front of approvals from RERA or any other government body which is impacting the project launches that are planned in the second half of FY ’25?
Rahul Rajan Jesu Thomas
Normally RERA approvals take some time. The number of compliances from RERA standpoint also has increased in the recent circular. So, normally it does take time to get RERA approval compared to earlier. But I think compliances have just gone up so I think that’s why the timeline has been extended.
Krishna Shah
Okay. Got it. And my third question is on the revenue target for FY ’25. So, what is the revenue number that we are expecting to close this year? And at what margin, like the EBITDA margin?
Rahul Rajan Jesu Thomas
I can’t give you an exact estimate on the future revenue, but I can just tell you that our target of pre-sales would be INR850 crores, and we are quite confident on achieving those numbers. The pro rata, of course, depending on the project and the regular recognition method, it will definitely be higher than last year, but I can’t give you an exact estimate right now.
Krishna Shah
Okay. Sure. And one last question for me was, what is your target spend on business development that we have planned for FY ’25? And how much of it has been done in the first half of FY ’25?
Rahul Rajan Jesu Thomas
We have raised some money under preferential, so I think the end-use was for business development. So that will be kind of extended before March.
Krishna Shah
Okay. Got it. Thank you so much. Thank you.
Operator
Thank you. The next question is from the line of Rohit Mehra from SK Securities Limited. Please go ahead.
Rohit Mehra
Yeah. Good morning, sir, and thank you for the opportunity. My question is related to the same fund raise. Where do you plan to use the funds we recently raised? And how much GDV would it translate to?
Rahul Rajan Jesu Thomas
So, mainly the objects of the fundraise is also for business development, so a good portion of that would be — roughly around 40% would be for new BD and land acquisition. So, that will be expended before March. And I can’t give you the exact dynamics of the plot because it’s a bit too early, but definitely we will inform the exchange and everyone on the GDV once we acquire that land.
Rohit Mehra
Okay. Got it, sir. Thank you. And also, can you highlight the breakup of finance cost?
Shreepal Shah
Shreepal here. So what breakup you require?
Rohit Mehra
Overall finance cost, what it comprises of?
Shreepal Shah
Majorly it’s from ongoing portfolio of projects, 19 [Phonetic] is there — which is there. We can take that question offline.
Rohit Mehra
Sure, sure. No problem. I will join the queue. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Sagar from Nirmal Bang Institutional Equities. Please go ahead.
Sagar Karkhanis
Thanks again for the opportunity. Sir, on the Suraj Vibe, our commercial project, if you can throw some light, how has been the response and what we plan to build there? Some details if you can share whatever.
Rahul Rajan Jesu Thomas
Yeah, sir. So, on Tulsi Pipe Road, which is — we have approximately 1 lakh of square feet. The RERA is underway, which is also part of our launch pipeline for this year. So, we are seeing good interest coming up from clients who are looking for commercial space, and I think we are quite confident on closing some deals over there.
Sagar Karkhanis
And lastly, on the Bandra project, anything that you can share with us right now?
Rahul Rajan Jesu Thomas
So, things are moving positively in the Bandra planning. I think like we informed earlier, we already have the first phase of approvals. We are looking at the larger piece, so design and a lot of technical details are getting worked out as we speak. So we are preparing for the next year lunch.
Sagar Karkhanis
In which quarter we plan to launch the Phase 1, Bandra project?
Rahul Rajan Jesu Thomas
We are still — it again depends on certain approvals, but I think between Q2 and Q3 is something which we are targeting.
Sagar Karkhanis
All right. Thanks a lot, and best wishes. Thank you.
Rahul Rajan Jesu Thomas
Thank you.
Operator
Operator: Thank you. [Operator Instructions] The next question is from the line of Arjun Mittal [Phonetic] from Mittal Securities. Please go ahead.
Arjun Mittal
Yeah. Hi, sir. Good morning.
Rahul Rajan Jesu Thomas
Good morning.
Arjun Mittal
I have a couple of questions. My first question is, what gives us the confidence of achieving our guidance considering we did not launch any new project this quarter?
Rahul Rajan Jesu Thomas
Thanks. So, basically we have already got approvals in our commercial project, which I think Mr. Sagar from Nirmal asked the same question. We have the approvals IOD and the CC for that particular project. It’s just that the RERA approvals are pending, which is taking some time. So, as soon as that RERA approval comes in, we are seeing a GDV of approximately INR450 crores of launch only in that one project. So, since these all approval projects which we already got all the approvals, it’s just RERA is pending, we are quite confident that these launches will come across very soon.
Arjun Mittal
And my second question is that what would be the GDV we would expect from these new launched products?
Rahul Rajan Jesu Thomas
Like we said earlier, INR1,150 crores worth of projects will be launched before March.
Arjun Mittal
Okay, sir.
Operator
Arjun, I hope this answers your question?
Arjun Mittal
Yeah, yeah. Sure.
Operator
Thank you. [Operator Instructions] The next follow-up question is from the line of Rohit Mehra from SK Securities Limited. Please go ahead.
Rohit Mehra
Thank you, sir. So, just one question. As our debt has gone up despite raising funds, can you give some clarity for the same? And also, can you help us with what is the cost of debt now?
Rahul Rajan Jesu Thomas
To answer your question, we have — the cost of debt remains at the same level, 13% weighted average cost of capital. And regarding the debt, I did not get regarding the fund raise, your question.
Rohit Mehra
So, my question is, as we have raised the funds, but at the same time our debts have gone up.
Rahul Rajan Jesu Thomas
Fundraise has happened after September. The debt position which we are talking of is in September. The increase in debt is on account of the upcoming launches where we have spent approval-related cost. So, two of our projects, one at Tulsi Pipe Road and residential project known as Parkview 1.
Rohit Mehra
Okay. Got it, sir. Got it. Got it. That’s it from my side. Thank you.
Operator
Thank you. [Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Rahul Rajan Jesu Thomas
I take this opportunity to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with us or SGA, Strategic Global Advisors, our Investor Relations advisors. Thank you very much.
Operator
[Operator Closing Remarks]