Embassy Group to launch 4 million sq ft of residential portfolio, eyes Rs 3,300 cr revenue

Aditya Virwani, chief operating officer, Embassy Group

Real estate developer Embassy Group plans to launch 4 million square feet (msf) of residential portfolio with a potential revenue of Rs 3,300 crore within FY2023-24.

Additionally, the company is looking forward to launching 1 msf in Chennai, Aditya Virwani, chief operating officer, Embassy Group, told Moneycontrol on June 30.

"We have over Rs 2,000 crore of OC (occupation certificate)-compliant inventories ready for possession this year and our target collection will be Rs 3,000 crore," he added.

Currently, the company is reinventing its residential portfolio by migrating more towards the mid-segment, with a ticket size of less than Rs 2 crore and apartment cost between Rs 9,000 and 10,000 per square feet (sq ft).

"Last year, we clocked a revenue of Rs 1,100 crore from the luxury segment. However, this year we are looking for smaller developments that allow a quicker exit. Previously, it took us about 8 years to complete a luxury project. Today, we are trying to bring it down to 3-4 years," Virwani added.

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Among the launches in the luxury segment, the Embassy Group is looking at a 30-acre villa project in Bengaluru with a development potential of 0.5 msf.

For the upcoming launches, the company has 0.5 msf in Whitefield. It will be launched in two months. The launch of another 1 msf will be taking place at Embassy Springs by the end of this year.

Diversifying assets to ease debt

Virwani said, currently, the Embassy Group's debt stands at Rs 8,800 crore, and the company is looking to bringing it down by Rs 1,900 crore by September end.

"Out of our total debt, 38 percent is backed by OC-received residential projects, at about Rs 2,000 crore. We have REIT (real-estate investment trust) units worth Rs 23 crore, 10 percent in the non-REIT commercial projects, and 11.2 percent in construction finance towards commercial projects, converted as Lease Rental Discounting (LRD) or sold to REITs," Virwani said.

LRD loans work on the premise of properties receiving fixed rent.

Currently, Virwani added, the company is looking forward to selling the Chennai office park, an asset in Manyata Tech Park in Bengaluru and 1 msf in Thiruvananthapuram to help the group to ease its debt.

In March this year, Embassy Property Developments Pvt Ltd sold shares worth Rs 4.2 crore in Embassy Office Parks REIT to Bain Capital for Rs 1,250-1,300 crore to pare debt.

Expanding office parks, new launches

Currently, the group has over 10 msf of saleable office portfolio between REIT and non-REIT units at various stages of development across southern India.

"By the next financial year, we are launching another 4.6 msf of office space in Bengaluru. The new launches will be between the REIT and non-REIT segments with a potential capex of Rs 2,200 crore," Virwani said.

More than 50 percent of the company's office portfolio is pre-leased and among the upcoming launches, about 1.6 msf is already committed. The company did not share further details about the development.

Currently, the company is expanding the Manyata Tech Park in Bengaluru, which will contribute about 1.6 msf of new launches. Among the other launches, about 1.6 msf is on the Outer Ring Road and 2 lakh sq ft in northern Bengaluru.

In Chennai, the company has an ongoing development of 1.6 msf of office park. Another 2 lakh sq ft is in the pipeline.

"Another acquisition of a 60-acre land close to the airport in northern Bengaluru is ongoing. Phase 1 of the development has already been committed to REIT," Virwani said.

Last financial year, the company leased about 5.1 msf of office space with a revenue of Rs 3,400 crore. This year, Virwani said the company is confident about a strong pipeline in the office space portfolio, with the banking sector currently dominating the non-SEZ office spaces in Bengaluru.

However, till March, according to the regulatory filing, the company has about 4.9 msf of office space vacancy and about 3.3 msf lies in the SEZ segment.

"With several regulatory challenges in the SEZ segment, we see decreased demand for this space. A lack of floor-wise denotification amendment does not allow us to convert those assets thus making the entire building unleasable. This has also delayed the closure of office deals in the market," Virwani added.

For flex office space, where Embassy Group owns 73 percent of the stake in WeWork India, Virwani said the company is looking forward to raising additional funds. "Last year, we achieved Rs 240 crore of EBIDTA at WeWork. This year, we are planning to double it to Rs 400-500 crore," he added.