Will exceed presales guidance; see no slowdown: Prestige

Prestige reported a drop of 12 percent in revenues at Rs 430 crore compared to Rs 492 crore in the previous quarter last year. The bottomline was also down 12 percent to Rs 80.5 crore against Rs 92.05 crore in the same period. The numbers were slightly better than estimates. Margins of the company improved sequentially due to better product mix. Below is the verbatim transcript of Razack’s interview to CNBC-TV18. Sonia: This time your revenues are lower than expected and that raises the fear that perhaps you may not be able to meet your pre-sales guidance that you had setout of around Rs 3,700 crore. You have already done about 82 percent of it. Tell us why the revenues have been slightly lower this time and whether you will still manage to meet your FY14 guidance?

A: This quarter is about revenue recognition, so in this quarter we have recognised revenue of about Rs 460 crore, but the good news is we have got Rs 7,000 crore more of revenue that has to get recognised quarter on quarter. So, there are a lot of sales that we have done in the bag, in fact this quarter we have done the highest sales contrary to what can be seen from the numbers.

We have done sales to the extent of Rs 1,200 crore plus and it is just a question of production and these numbers getting recognised because I need to touch the trigger of 30 percent to recognise these numbers. During the year, we have made Rs 3,700 crore and my guidance was Rs 4,300 crore.

We will not only achieve it, we will exceed that guidance and I am very sure about that. If one looks at the nine month figure – compare it to the previous nine months then there is a 50 percent increase in the recognised revenue in the turnover as well as in the profit.

Latha: When you see revenue down, earnings before interest, taxes, depreciation and amortisation (EBITDA) down, profit after tax (PAT) down on a year-on-year (YoY) basis, the doubt is, is this only a question of revenue recognition and hitting the 30 percent mark or is that slowdown in real estate sales, which is almost country wide also impacting the Bangalore market. To what extent is this market lethargy and to what extent is this just a technical factor of recognising more?A: The sales are happening and we have done good sales.Latha: You are not smelling market slowdown in any fashion – demand slowdown. Your demand was as robust as it was in the previous two-three quarters?

A: Absolutely no slowdown as far as we are concerned. As I said this is a technical thing of recognising the revenue so we have this lumpiness, certain quarters you go up, certain quarters the revenues get recognised less. I have always been saying that real estate revenue recognition is a very different thing from manufacturing but the good part is that sales are on ground, people are buying, people are committing themselves and the numbers are very healthy.

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Sonia: You said that you will exceed your pre sales guidance. What are the launches that one can expect in the next few quarters that will actually help you meet your guidance going ahead?

A: As far as this financial year is concerned we have almost met our launch guideline. We have done 92 percent and that is after only partially launching our largest project that is Prestige Lakeside Habitat. So, there is a phase two and phase three and phase four to be launched there. So, we will be concentrating only on this project in this quarter and we will exceed our launch guidance that we have given and with that we will also exceed our sales target that we had given for the financial year. So, there is a lot more launches that are planned. That is for the next financial year. I would rather talk about it then.

Latha: If you can give us a ballpark figure as to what kind of sales targets you can manage in FY15 after all these are long gestation projects. Can you give some visibility? What will the growth rate in terms of revenues be – 20 percent-15 percent-10 percent?

A: In our internal meetings we are looking at least minimum 20 percent plus than what we have done in the current year so it is only going to be positive. There is no negativity.

Sonia: Lakeside Habitat is in the mid income segment and there is a view that now Prestige is moving towards the mid income segment to insulate themselves from the slowdown that the premium segment is seeing in the Bangalore market. Are you facing any slowdown in the premium segment and will you increase your exposure in the mid income segment?

A: I would not like to generalise even Lakeside Habitat contrary to the perception, it is a mid to premium because we have got high-rise apartments as well as we have got villas and we have got 271 villas and those villas also have sold well and these villas are all upwards of Rs 3 crore. So, there is a market; it’s only a question of location, the type of product, the type of packaging that we do in terms of look and feel as well as design and the parameters that we adopt. However, I have always been saying that the market - if one want to have volumes, will be in the mid to upper mid segment and the premium and the luxury has to supplement and add up to the overall product mix that we are doing. So, one cannot ignore one with the other; one has to look at the entire spectrum of products that are to be offered to the customers and that is how one will get well-rounded product offering.