Prestige Estates eyes rental revenues of Rs 225cr in FY13

Irfan Razack, CFO, Prestige Estates Projects told CNBC-TV18 that the company's sales were robust in 2011-12 and continue to be so even in 2012-13.

"We launched roughly about 9.6 million sq ft in 2011-2012, out of which we sold almost 5 million sq ft with the sales turnover of almost Rs 2,127 crore," he said.

The company has unrecognized revenues of about Rs 3,300 crore. Of that around Rs 1,600-1,700 crore are expected to get recognized in FY13, he informed.

Real estate player has leased out 3 million sq ft in the last fiscal. "Our rental income as of now stands at about Rs 187 crore and that will go upto about Rs 225 crore in the next year, Razack added.

Below is the edited transcript of Razack’s interview with CNBC-TV18. Also watch the accompanying video.

Q: Sales are quite disappointing this quarter but what the market is more focused on is what exactly the plan is for FY13 in terms of revenue recognition and which projects will reach that stage, could you just line out how FY13 looks?

A: FY11-FY12 it is an effect of what we did in 2011-2012, so the sales had been very robust in 2011-2012 and continue to be robust in 2012-2013 also. We launched roughly about 9.6 million sq ft in 2011-2012, out of which we sold almost 5 million sq ft with the sales turnover of almost Rs 2,127 crore. The effect of this will be visible in the following years. We have unrecognized revenue in the books to the extent of about Rs 3,300 crore.

The tone that will be set now for 2012-2013 will be that we intend to have ultimately sales recognition revenue. When all these projects come in for revenue recognition will be in the region of around Rs 1,600-1,700 crore. We also feel that the same momentum of sales will continue.

We will have similar sales that we had in the current year 2011-2012. We will exceed that and we will reach the target of about Rs 2,500-2,600 crore. All this will make us stronger. I believe it has been a good year last year and it is going to be a good year this coming year also.

Q: You gave us a figure of about Rs 1,600 to 1,700 crore which will get recognized. Is this the entire amount which will get recognized which will get spilled over into FY13? Can you give us a breakup of how much will come into the first half?

A: We have unrecognized revenue of about Rs 3,300 crore as on March 31 and the sales are still happening. I believe that in the coming fiscal it should be around Rs 1,600 to 1,700 and in the first half 50% of it will come in.

Q: Your margins have also improved quite substantially in this quarter, could you walk us through are these margins sustainable at current levels and what we can expect in FY13?

A: The EBITDA in this quarter has been around 36% because we had a revenue recognition of our Cochin project, but the realistic margin that can be sustained will be in the 27-28% range.

Q: How much are you penciling in from rental income for FY13?

A: Leasing has also been quite good in 2011-2012. We have leased out something like almost 3 million sq ft in the last fiscal. Our rental income as of now stands at about Rs 187 crore and that will go upto about Rs 225 crore in the next year.

Q: I asked because that will be important in order to scale down your debt as you have indicated. What exactly would the debt paring down plan be for FY13?

A:  Our cash flows have improved tremendously. In fact they have gone up more than 100%. Our total cash flow collection for ’10-11 from sales was around Rs 600 crore and the current year ’11-12 our cash flow inflows have been to the extent of Rs 1,350 crore, which is more than double. So that trend will help us to reduce the debt also of the company.

Having said, that we need to have debt on the books because we are creating shopping malls, hospitality assets, IT parks and SEZs. These will only go towards creating assets for rental income. So ultimately the entire thing will fructify when all these assets will be totally ready and will start yielding. So that’s the long-term plan. For FY12-13 we hope to touch Rs 225 crore mark as far as rental is concerned.

Q: Where do you expect your debt to be after accounting for all these capital expenditure plans for your malls etc?

A: Right now the standalone net debt in the books is about Rs 1,000 crore and we hope to retain it at that level itself. On the consolidated, it is a little higher because it picks up even the debt of my other shareholders because the entire debt of the subsidiary has to be picked up but that is a little aberration.

We would like to keep our debts at this level in spite of having capex expenditure and that is the intent. I expect our debt equity ratio should be around 0.6 for standalone and 0.7 for consolidated going ahead. That is the level that we would like not to exceed.