See rental portfolio around Rs 500cr by 2015: Prestige Est

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See rental portfolio around Rs 500cr by 2015: Prestige Est

Prestige Estates Projects has declared its third quarter results. In an interview to CNBC-TV18, Venkat K . Narayana, chief financial officer of Prestige Estates Projects says, this year the company’s rental income should be around Rs 180-185 crore. “By 2014-2015, our overall rental portfolio will be around Rs 500 crore,” he adds.

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Prestige Estates Projects has declared its third quarter results. In an interview to CNBC-TV18, Venkat K . Narayana, chief financial officer of Prestige Estates Projects says, this year the company's rental income, on an annualised basis, should be around Rs 180-185 crore. "By 2014-2015, our overall rental portfolio will be around Rs 500 crore," he adds.

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Gautam Broker. Also watch the accompanying video.

Q: Can you take us through your Q3 numbers? Reasonably good, but your financial expenses are coming down, is that a sustainable trend?

A: I think it is. The interest rates are coming down. Most of our loans are leased rental discounting loans where the borrowing cost is around 12% as against the construction finance which is at around 14%. So, the mix of our debt is more leased rental discounting. If you look at our weighted borrowing cost, it's come down from 13.61% the previous quarter to 13.5%. So, we hope as we move forward financial expenses will come down further. The last quarter has been pretty good.

Q: EBITDA margins are still down, any reason?

A: Last quarter, we had EBITDA margin of 44%. During that time itself, we had clarified saying that 44% of EBITDA margins are not sustainable as we move forward. We always maintain saying that our EBITDA margins will be between 30-35%. Primary reason for the reduction of EBITDA margin is that the kind of projects that came for revenue recognition in the last quarter and this quarter are different. As we move forward, I think our margins will be sustainable between 30-35%.

Q: You seem to be wanting to shift towards rental income more than selling your properties at this stage. What will this shift in strategy mean for margins going forward?

A: There is no shift in strategy per se. Our pre sales for the fiscal have been very good. We have achieved as on date over Rs 1,750 crore as against the guidance of Rs 1,500 crore that we had given. We hope to finish off this year on a high note.

There is no shift. This is a conscious effort to build a huge rental yielding portfolio. We have always stressed upon building this annuity portfolio. We are working towards it. Last year, our rental income was around Rs 150-160 crore. This year our rental income, on an annualised basis, should be around Rs 180-185 crore.

As we move forward, we have maintained that by 2014-2015 our overall rental portfolio will be around Rs 500 crore.

Q: What's the realisations been both in terms of sales per square feet as well as rental income in Q4, you have seen atleast half the quarter? What will be your sense of the next quarter as well? Is there an increase 10% or a decrease?

A: In terms of sales realisation, if you say per square feet, we have launched the new project in Chennai, large residential project called Prestige Bella Vista a month ago. That's been met with tremendous response. We have sold over 800 units as on date. Rs 4,500 per square feet is what we are looking at as an average realisations because most of the launches this fiscal have been in mid income segment projects. As compared to last year our average realisations were over Rs 8,000 because the launches were upper mid income and luxury segments.

Q: Can you just give us an idea of how much might revenue grow this year, we have only a quarter left? More importantly FY13, what could the run rate be?

A: We are focusing more on finishing off FY12 atleast with two million more square feet of launches. We have already launched this fiscal close to 11.5 million square feet. The focus is FY12 as we stand, we have crossed the guidance that we had given. If we can close our new sales at Rs 2,000 crore, I think that will be fantastic.