Q4 sales may be up 50% QoQ, to help beat FY16 guidance: Prestige

Unrecognised revenue on company's books is currently around Rs 7500-8000 crore, he said.Below is the transcript of Irfan Razack’s interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18.Reema: Q3 earnings were a bit disappointing. In fact, in the first nine months of the year, your pre-sales have gone down by 51 percent. What the street is extremely hopeful is that Q4 might just be a turnaround quarter and we will see an improvement. If you could help us with the early indications of how Q4 has been in terms if the new launches, what the pre-sales could look like.A: The last quarter has been quite good. We have done three pre launches and all three have met with good response. We have launched the Prestige Kew Gardens which has done extremely well and we have almost sold more than 50 percent of the inventory. Similarly, we did Prestige Fairfield. Even that has sold well and that has sold more than 60-65 percent. Also, Prestige Boulevard in Whitefield.Now, these three are the three launches that we did this month. These are all in Bengaluru and all have done well. Apart from this, we have also launched office building which we have done strata sales on and even that has met with an extremely nice response and sold well. So, all this has totalled up apart from the ongoing projects which we have in different geographies. So, net-net, this quarter has been fairly decent and has been the best quarter of the year as far as Prestige Estates is concerned.Latha: Can you give us a number? Will it be as good as third quarter or second quarter?A: It is the best of the four quarters. We are still totalling up the numbers, so I do not want to give you any number just off the hat, but obviously, it is maybe 50 percent more than what we did last quarter, so that is a good sign.Latha: So, that was almost Rs 5,000 crore that you did last quarter, sorry 5,000 sq ft?A: No, last quarter, we did not do Rs 5,000 crore, last year we did Rs 5,000 crore, last financial year. This financial year of course, we will not be touching that Rs 5,000 crore pre-sales, but I believe that overall whatever we have done this quarter has been really good.Latha: No, I mean in terms of square feet. What would you finishing the year with?A: Square feet, it is difficult for me to tell you the number just now off-hand, but overall, as I said, it could be totally, now if you look at the entire scenario, it is difficult for me to tell you off-hand. But, if you ask me how much I have sold on the office front, we have sold more than three lakh sq ft on the office front.Reema: When we spoke to you last time, in the month of February, post your Q3 earnings, that time you said the company might do sales of close to about Rs 3,500 crore in FY16 which is lower than the earlier guidance that you had given us. Considering that Q4 has started off pretty well, are you optimistic that you will be able to clock in more than Rs 3,500 crore in FY16?A: Having factored that we are going to do those three launches and having factored that these launches should do well, we gave that number and we are going to exceed that number.Reema: So, will it even cross Rs 4,000 crore when you say it will exceed Rs 3,500 crore? Would it be upwards?A: I do not think so. I do not want to give you certain numbers which may go wrong, but it will certainly be above that Rs 3,500 crore mark, which is a good number.Latha: What is your leasing guidance? Was it 1.5-2 million sq ft in FY16?A: Leasing has been – actually we do not have any vacancies left at all now. Whatever guidance was there, we have completed it. It was some 2-2.5 million sq ft. We have leased out as per whatever we have guided or more. Right now, currently, we are in a situation where we do not have any more inventory to lease. We just have of course a lot of stock under production and we are looking at pre-leasing that. Even that is happening now. So in the next year, we are looking at getting our two or three buildings which are under construction, almost ready so that it can be pre-leased and the traction is good, rents have gone up and overall, the leasing scenario, there is a good momentum, there is a good demand and this demand is sustaining.Latha: What is the average realisation for the fourth quarter? Was it a tad lower than third quarter?A: Fourth quarter, even the average realisation has gone up because the three properties that we pre-launched were all above Rs 6,000 per sq ft. And also, the ongoing projects also have added up. So, it will be Rs 6,000 plus per sq ft as average realisation. Another thing that I must tell you is we have concentration a lot on completion and I am happy to say that while we are pre-selling, it is also very important for us to keep delivering and we had the completion inauguration for eight projects totalling to 1,700 units. Plus, we completed our very large development in Chennai called Bella Vista, that is about 2,600 units and Prestige Downtown. So, altogether, there has been a good focus on completion and we will land up completing almost 17 million sq ft of space and that the deliveries have started. The possession for the customers have handovers have started.Reema: Correct me if I am wrong, but your Q3 realisations were Rs 5,889 crore. So, Q4 realisations in excess of Rs 6,000 per sq ft will be a reasonable improvement on a quarter-on-quarter (Q-o-Q) basis, right?A: Yes, of course.Reema: One more thing, if you could tell us what the unrecognised revenues in the books now is considering that you have sold a pretty good portion of new launches. A: Generally, in the books, what we do have is between Rs 7,500 and Rs 8,000 crore of unrecognised revenue and this gets recognised the moment we touch the trigger of 25 percent of completion. And that will continue to happen, because as we keep recognising more and more of the pre-sales that has happened, we are also doing fresh pre-sales. So, that means in case, the company does not do any pre-sales at all, it still has that much of revenue to recognise. That also means that you can tide along another two years which without any sales and still have a top line of Rs 3,000 plus crore which I believe is the method how the real estate business works. And that is the good part of having that much of pre-sales in the book.Latha: Couple of industry questions. A lot of IT companies have already been speaking a great deal about automation and more bang for the buck. So, less hiring perhaps. And the big flood of startup money that came to your part of India has also now started becoming a little wary and they are counting the pounds, as it were, if not the pennies. Are you seeing it reflected in the real estate market? Are you seeing demand becoming resistant to higher prices?A: It has to, it will. And that is the strength that we have here that whatever the IT companies are doing gets reflected in the demand that we have, plus more job creation happens. And then that is how the demand for housing also is sustained. And of course, we also have to content with the new legislations that are coming in and we have to start gearing up and start looking at that and get compliant to what that is.Latha: But they will kick in only when the state governments pass the laws, is it not?A: Agreed. But, it will be sooner than later that that happens. As a company and as an industry, we all have to start looking at it seriously and start gearing up since the framework is ready. First is we need to understand what we are into and then get compliant and that will ease entire process.