Sujay Kalele, vice president of the business development section of the company told CNBC-TV18 about the company’s future ventures, expectations in 2013 and the challenges ahead.
In all the markets, residential continues to be the prime driver and that’s across the spectrum right from affordable to super luxury segment
Even though real estate did not live up to the expectations of the market in 2012, Kolte-Patil developers outperformed the market with the stock price reaching to Rs 116, an increase of 282 percent in just a year's span.
Sujay Kalele, vice president of the business development section of the company told CNBC-TV18 about the company’s future ventures, expectations in 2013 and the challenges ahead. He expects to maintain a quarterly run rate of Rs 150-200 crore ahead. The company is also looking to preserve and boost margins in FY14.
Below is an edited transcript of Sujay Kalele's interview on CNBC-TV18.
Q: Can you give us some guidance on your numbers because your Q2 FY13 numbers are spectacular. Revenue up 4 times, PAT up 2.3 times to Rs 20 crore. What led to such growth and what is expected in terms of an extrapolation for the second half of the fiscal?
A: 2012 was very good and we hope to carry the momentum into 2013 as well. It was a combination of good project launches that we did over the last 18 months, coupled with excellent execution speed which translated into good numbers on the top-line as well as the profitability. We were able to manage the inflationary pressures very well as a result of which the profit margins were also protected. As we go forward into the next fiscal, we hope to stick to the project launches that we have decided and conserve profit margins in some projects as well as improve margins in some other projects that will come on stream in the next six months or so.
Q: Your revenue in the last quarter was a huge surprise coming in at Rs 190 crore. Can we expect that run rate in the second half as well?
A: We should be able to do somewhere between Rs 150-200 crore of quarterly run rate because that was partly the reason why one of the larger projects also entered the revenue recognition phase, so there was a blip up into the last quarter. But on a stabilised basis we hope to do anywhere between Rs 150-175 crore in the next couple of quarters. It will depend upon the new launches and as they happen, that run rate will change.
A: Last quarter there was only one project called Downtown which did not hit the 25 percent execution levels, that has also crossed that level. So, almost 99 percent projects have now entered the revenue recognition stage and we will see progressively the revenue getting recognized over the next quarters. This will be coupled with almost 800 thousand to million square feet of new launches that we will do this quarter, as in January to March quarter also. There are healthy launches planned and we will see new sales coming in, in addition to the revenue recognisation of the existing sales that we have booked.
Q: Have you become more of a Bangalore builder than a Pune builder? Are more revenues coming out of Bangalore now?
A: We were present in Bangalore since 1994. Now we have become more aggressive there. Hopefully, in the next fiscal year we will see few more launches in Bangalore. We have just started our Mumbai operations. So, we are hopeful that in the next few years Mumbai operations will also pan out well. As of now, Mumbai, Pune and Bangalore remain key focus areas with key drivers being Pune, supported by Bangalore and will see how Mumbai pans out for us.
Q: In terms of the Pune market, what are you seeing that is most lucrative residential, commercial, Bangalore residential or commercial? If in case you had to put in money in further projects which one would be your top bet?
A: Undoubtedly in both the markets, residential continues to be the prime driver and that’s across the spectrum right from affordable to super luxury segment. There is a big overhang of the existing supply as far as commercial projects go. In micro markets we are able to trade our residential supply at a 50 percent premium to the prevailing commercial rentals. That is the kind of depressed rentals that we are seeing in both the markets.
In Pune this year, the market as a whole is expected to do about 40000 units on the residential front which is actually a 10-15 percent increase over last year. So, we are on an inventory side, the entire market as a whole has less than 11 months inventory which is one of the healthiest signs and Bangalore follows with around 12-14 months inventory. Both these markets are amongst the top seven markets that people track, have the healthiest inventory positions.
As far as reallocation of capital, in Pune we have about 11-12 percent market share which we hope to expand next year on the existing land bank basis to about 14-15 percent. In Bangalore, we already have sufficient land bank and we would first focus on execution of those land banks grabbing substantial market share before putting in our capital. Next year we will see substantial capital allocation to Mumbai, as a market where we are bullish and wanting to take on more projects.
Q: With regards to Mumbai, what is latest on ready reckoner (RR)? Ready reckoner rates have been yanked up sharply, will that affect sales?
A: In Mumbai the sales have been slow. Partly due to lack of approvals which have stopped any kind of activity in the market for the last couple of years.
Q: In case of Mumbai market, where do you see the sluggishness in the projects?
A: Wherever they have high ticket sized products or where the prices have run out of tune with the reality, the projects are suffering. Some amount of activity is returning to the market majorly driven by the approvals that were completely stooped for the last couple of years. So, we are very hopeful that the Mumbai market will pick up and as a strategy we are getting de-risked from extensive capital intensive projects to society redevelopment projects.
Depending upon the capital allocation we will take those calls. Coming back to the ready reckoner rate, the ready reckoner rate has gone up from 10 percent to 40 percent depending upon area. This is a new year’s gift that we always get so we were expecting this from the government any ways. So, it is not a surprise to us. Earlier there has not been much impact of the ready reckoner rates, so we hope this year too there will not be any impact. It does have a short-term impact on the consumers psyche but this is what the non direct taxes that we have to pay.
Q: Should we assume Rs 700 crore current year and Rs 800 crore next year in terms of revenues?
A: We have given a guidance of about Rs 600 crore for this year and about Rs 900-1000 crore for the next financial year. As of today we would like to stick to that.
Q: Will margins be 18 percent?
A: Yes between 16-20 percent.
Kolte-Patil stock price
On November 26, 2014, Kolte-Patil Developers closed at Rs 198.15, up Rs 3.15, or 1.62 percent. The 52-week high of the share was Rs 220.95 and the 52-week low was Rs 70.90.
The company's trailing 12-month (TTM) EPS was at Rs 5.18 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 38.25. The latest book value of the company is Rs 99.56 per share. At current value, the price-to-book value of the company is 1.99.
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