Extremely strong at 42% net margins: Puravankara

Speaking to CNBC-TV18, Ravi Ramu, Director-Finance at Puravankara Projects said that on a QoQ, the margins have been pretty flat and high at 42% net margins, it is only the gross margin which has come down a tad by 2% but still extremely high at 45%, he said.

Excerpts from the exclusive interview with Ravi Ramu:

Q: The margin seems to be gone up on a YoY basis from 30% to 38%, but on a QoQ basis, they seem to have come off from about 45% to 38%, Is there any specific reason for that?

A: In fact on a QoQ, we have been pretty flat and high at 42% net margins, it is only the gross margin which has come down a tad by 2% but still extremely high at 45%. Last quarter, we had some exceptional sales of some high-earning villas and these will continue in the next few quarters as well but on a margin story, we are extremely strong at 42% net margins and operating margins are also very high.

The other important feature of the margin story is our general and admin expenses have done extremely well, it is not just a trading story but it’s the way we have controlled our costs and we expect those benefits to come through in the coming quarters as well.

Q: So you expect margins at the operating level to stay around that 38% to 40% for FY09 or do you think it could inch at about 43% or 44%?

A: There is an inching up story there, partly buoyed by the fact that our JV with Kepel, our developers will contribute quite handsomely to the bottom line as well, so the margins will get a boost. We have had our second project of the JV launched, in Kolkata and that has had an excellent response. It has sold very well in fact and increased prices out there. so we expect the JV to contribute much more handsomely in the coming quarters.

Q: Two numbers from you, how many million sq. ft of land did you spend acquiring in the third quarter and how many million sq. ft of land did you actually develop in the third quarter?

A: We had two major acquisitions, one in Chennai and other in Hyderabad, both totaling at 10.4 million sq. ft, about 6 sq ft in Hyderabad and 4.4 sq. ft. in Chennai. So that’s been significant. We have got them at a much lower than market rates and therefore there is already a locked in profit out there. We have big plans for those bits of land. In terms of what we have developed, the actually production is well over 7,50,000 sq ft in terms of constructed space in the quarter which has gone up quite considerably over the previous sequential quarter at about 1,00,000 sq ft up. So we are on a good growth trajectory, it is not just a margin story but the volume pickup is looking great and so is the sales pickup.

Q: The general concensus is that the interest rates are pretty much plateau at this time, we have spoken to Unitech and DLF over the past couple of days and they have given the indication of a fairly stable pricing. You are fairly dominant in the southern part of the country, what’s your sense on how pricing will pan out in the next say 12-18 months?

A: We have been in the last few months and we expect the next 12-18 months to have an upward trajectory in prices. Some of our key projects, we have increased the prices since the last few days or weeks and we don’t see any end to that kind of scenario. We can’t paint the whole industry with the same brush. Our projects are well priced and are well located with high value with additions coming in on the other facilities we provide on our projects and that could be one significant reason why we are seeing such an upside and uptake in prices.