Jun 02, 2016 02:32 PM IST | Source: CNBC-TV18

Joint venture with Adani to open more doors: Marathon Nextgen

The high-end residential JV, Monte South, is worth Rs 500 crore, where Marathon and Adani have stake share in 40:60 ratio, says Mayur Shah, vice-chairman of Marathon Nextgen Realty.

Mumbai-based Marathon Nextgen Realty saw a spurt in its income in FY16.

The major reason of this increase in the income was through investments, and its joint venture Marathon Futurex, an IT and financial business centre situated at Lower Parel, said Mayur Shah, vice-chairman of the company.

It also plans to launch its most awaited JV with Adani Group: Monte South, a high-end residential tower at Byculla, in the next few years.

The project is worth Rs 500 crore and has a completion target of 4.5 years, he added.
Marathon has 40 percent stake in Monte South JV, while Adani has 60 percent.

Shah maintained that Marathon is a debt-free company which relies mainly on internal accruals.

It has also tied up with several SRA (slum rehabilitation authority) projects, that would see the light soon.

Below is the verbatim transcript of Mayur Shah’s interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.

Nigel: Could you fill us in with some details? I was just looking at your financials, your other incomes has bounced up. Could you tell us the total area that you have leased out and also are we likely to see this kind of lease-rent coming in for the coming financial years as well?

A: Our major income is coming from the investments which have been done by the company into a certain joint ventures. The major part is actually coming from the completion of the Marathon Futurex, a Lower Parel property. It is a gold rated IT-BFSI project and there we are seeing a very good traction coming in the commercial market lately and that is where we have close to Rs 60 crore of income coming from that investment. The other Rs 50 crore is coming from our investments in the other projects.

Reema: Where is this getting reflected because when we see your FY16 revenues they are only at about Rs 6 crore? I understand your profits are higher at Rs 75 crore but if you are getting Rs 60 crore from this Marathon IT-BFSI and another Rs 50 crore. Where does it get reflected?

A: Rs 60 crore is an investment that Nextgen company has done in a 100 percent subsidiary Parmeka Limited, which has a share in this Marathon Futurex project. Now that Marathon Futurex project is completed and we had very good clientele coming in. However, in a bad market we have been able to realise good prices in the last year. We had the companies like Thomas Cook, State Bank of India, ICICI are occupying that building.

Reema: What does this mean in terms of your next year’s numbers?

A: We have recently launched another joint venture project called Monte South. It's a high-end residential 60-story tower at Byculla, South Mumbai and that is going to be our focus for the next year.

We have tied up with slum rehabilitation authority (SRA) projects. The company is going into SRA and between Mulund and Bhandup we have tied up 6.5 acres which can expand to 28 acres and out of which Marathon Embrace has already started in that affordable housing segment between the Rs 60 lakh to Rs 1 crore type of product. And of course, our commercial focus will remain for the next year.

Nigel: Could you give us some numbers? What kind of saleable area will you be looking at with that joint venture (JV) that you are doing with Adani? What exactly is the amount? What is the value that we could see coming in from there and also, could you tell us what is the total value of all your land parcels that you are currently sitting on? Could you give us some value numbers?

A: That project is a little long-term project and I do not think the revenue will be realised very soon in the next year or so, but the revenues of the 60-storey tower, the completion target is around four-and-a-half years. Right now, it is an eight lakh sq ft 60-storey tower and approximately Rs 500 crore will be invested. However, we got good response in our launch and we got substantial booking coming in. As we go further at the end of the completion of the project the revenues will be realised by the company.

Reema: What will be the total revenues that you will realise four-and-a-half years later from Monte South?

A: I do not have the exact numbers with me but it is 8 lakh square feet and close to minimum Rs 20,000-22,000 a square feet is the price going on there.

Reema: Will you have to take on any kind of debt because right now you are a debt free company but you spoke about investments that you will have to make of nearly Rs 500 crore in Monte South. What is the trajectory on debt?

A: Marathon Nextgen is debt free company and we strongly believe that we would like to rely mainly through internal accruals but the projects specific funding is available from HDFC which has already offered up to Rs 500 crore of a construction funding. So, as and when we require we can definitely tap that construction funding.

Nigel: I was asking about your land parcels, if you could put number to that. What is your total holding that you have and also you were talking about 8 lakh square feet being sold at around Rs 20,000 per square foot or thereabouts. It should be around that Rs 1,600 to 1,700 crore as well. Could you give us both these two details?

A: I am not having the exact numbers right now and will not be able to give you the number. It is a macro level picture which I can through to you - the company is very well positioned, in a very tough situation also we are into affordable housing segment we are into high-end segment, we have marquee properties, very great locations and definitely we will be able to achieve much better than what has been estimated.

Reema: What can be your exact annuity rental income every year?

A: Right now we do not have a very large rental portfolio in this particular company because in the commercial market, in the last few years the prices were very attractive and most of the companies are coming forward for buying rather than renting it.

However, we have seen, in the last two years other than the multinational companies (MC) all are interested in buying property because the prices are very attractive and we have a world-class commercial building.

Nigel: These floor space index (FSI) have been tweaked from an industry perspective. Have you heard anything of that? Does it make any difference to any of your projects and going ahead as well could it make any kind of difference?

A: Definitely, overall for the new development plan (DP) which has been very recently published with Development Control Regulations (DCR), they have increased the FSI from 1 to 2 across the cities and they are also going to come up with some other incentives; FSI and premium FSI. So, definitely, that will help to create more affordable housing stocks also.

It is a good move because whatever land parcel, very few in my estimate -- in Mumbai only 5 percent of the land parcel, which are available, which are not under urban renewal. Rest all is a redevelopment and urban renewable project. So, increase in FSI is a win-win situation for both.

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