Realty player Kolte Patil Developers is betting big on Mumbai market. The VP – Corporate Finance Varun Parwal told CNBC-TV18 that Mumbai will contribute 30 percent to overall business FY18 onwards. Currently, more than 90 percent of company’s revenues are generated from Pune.
Kolte Patil has signed three redevelopment projects in Mumbai and is focusing on private society redevelopment in the first phase of the Mumbai foray. The company has bagged three projects in Andheri, Vile Parle and Khar."In first phase of our foray we are focusing only on the private society redevelopment and our estimate puts at about 16,000-17,000 societies that would come up for redevelopment over the next few years," Parwal added.
The realty firm also obtained locational clearance for first phase of 475 acre Sanjivani Township in Talegaon, Pune and is planning to launch the first phase in Q4FY15, said Parwal on the sidelines of Anand Rathi Emerging India Conference.
The company’s revenues and net profit were down for the quarter ended June but is confident of seeing improvement Q3, Q4 onwards. Kolte Patil also expects its realisations to improve to Rs 5,500-6,000 per square feet over the next three years.
Below is verbatim transcript of the interview:
Q: Can you gives us a timeline for the launch of your Sanjivani Township in Pune?
A: The Sanjivani Township is a 600 acre parcel. We have received location clearance for the first phase which is about 250 acre and we are looking at launching it some time in Q4 or Q1 of next year.
Q: How is your Mumbai foray doing and over the next few years what kind of traction do you expect in Mumbai?
A: Mumbai foray is doing quite well. We have been in Mumbai since February 2013 and have already signed three redevelopment projects in the city. In Mumbai we continue to have a focus strategy focusing on the redevelopment sector and it should become a good contributor to the topline going forward.
Q: How much potential is there in redevelopment space because there are so many costs involved in terms of tenants than getting all the clearances? Is it still a viable option?
A: Yes. Firstly, the way we sign our projects we tend to link our cost outflows to the time when we get the approvals, so our inflows and outflows are matched and therefore, the projects end up being profitable for us. Secondly, in terms of opportunity, if you take a drive on the western express highway or the eastern express highway, you are going to see lot of dilapidated building in and around the city especially moving around the city, there are a lot of tenanted buildings as well.
Therefore, in first phase of our foray we are focusing only on the private society redevelopment and our estimate puts at about 16,000-17,000 societies that would come up for redevelopment over the next few years.
Q: Overall as a pie of your total revenue share, how much will Mumbai comprise of in the next two yeas if not in this fiscal?
A: We would not be seeing any revenues from Mumbai in this fiscal. By FY17 or FY18 we are looking at about 20-30 percent contribution from Mumbai coming in.
Q: Will the remaining be from the Pune market?
A: Yes. Pune right now is about 95 percent of our revenues with 5-10 percent coming from Bangalore. Over the next three years Pune would remain at about 65-70 percent with Mumbai and Bangalore contributing the remaining.
Q: In FY13 you had average realisation of Rs 4,735 per square feet which went up to Rs 5,400 in FY14. What is the outlook for FY15?
A: If the market remains good, we focus on volume and expect prices to go up a bit more. Over the next three years, across our market, we are looking at an average of about Rs 5,500-6,000 a square feet.
We anyway focus more on volumes than on sales price per se. In good markets the sales prices would be higher than our current estimation.
Q: You have also received location clearance for the Life Republic project. Can you take us through that?
A: Life Republic is a 400 acre township, its phase-I was launched in December 2011. We are right now handing over significant portion of phase-I which is about 3 million square feet. We got phase-II approval in this financial year and are looking at launching it in about Q4 of this year.
Q: When do you see recovery in your earnings or your revenue showing some amount of formidable growth for the company because as of Q1 FY15 that was your fourth quarter of weak earnings and in Q1 your revenue fell 27 percent?
A: Significant numbers of our revenue drivers are reaching maturity. You should start seeing a recover in quarterly volumes partly from Q2 but more likely from Q3 and Q4 onwards. As far as annual revenue and annual topline and bottomline are concerned, you should see a significant impact happening in FY16 and FY17.
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