Key takeaways of the conference call

Sales trajectory improved 9% in volume terms and 10% in value terms in Q1 FY20 driven by Life Republic, Opula, Ivy Estate, Tuscan, Western Avenue and DMA projects.

Saleable area in ongoing project (including unsold inventory in completed projects) of the company as end of Jun 30, 2019 stood at 6.46 million square feet (msf). In addition the company has about 2.05 msf under approval stage and a land bank of 18.90 msf as end of June 2019.

Furthering the business development initiatives of the company, the company added three projects in Pune under the development management (DM) model, leveraging its strong brand name and execution capabilities.

Under DM model the company has 0.29 msf under ongoing/unsold and 0.88 msf under approval stage as end of June 2019.

The company expects completion of about 1400 units (about 1.4 msf) ready for deliveries over the next two quarters, which includes completion of another about 1 msf in Bengaluru, driving the collections and setting the stage for the next phase of growth.

Continued focus on execution led to robust collection to the tune of Rs 343 crore in Q1FY20, higher by 11% YoY & QoQ, despite sluggishness seen in the market. The company have used the strong cash flows to further strengthen its balance sheet and accelerated execution across projects, especially those nearing completion with deferred payment schedules, where significant portion of collections are linked to possessions.

The DM model will help diversify its revenue stream with the inclusion of fee-based income and enable it to increase its customer reach across product categories and geographical micro-markets. This is in line with its ongoing strategy of looking for capital-light growth opportunities, and will continue to evaluate further such opportunities in the future. The investment is negligible in DM model but gets attractive project management fees. About 11-12% of project cost will be accounted in topline and of which after 1/3^rd of expenses the balance 2/3^rd will hit bottom-line.

Believe the recent advisory on subvention plans will accelerate consolidation in the sector towards organized players with financial discipline and a proven execution track record, like Kolte-Patil.

Ongoing project the company expect a cash flow of Rs 3800-3900 crore and outstanding cost of construction of Rs 1850 crore with profit of Rs 1400-1500 crore in next 3 years.

Average cost of debt for the company is about 10.4 to 10.5%.

Launch pipeline for balance period of current fiscal are 3 launches from existing phases of Life Republic [R5 about 0.45 msf of development, R17A sector plotted development of 0.165 msf, R17 B about 0.75 msft] with about two towers we will be taking to sales. In Downtown project about 0.7-0.8 msf and in Residency about 0.6-0.8 msf is expected to get launched by end of this fiscal. In addition under DMA two projects with an aggregate saleable area of 0.9 msf will be launched with in current fiscal.

Visibility of 3 msft (compared to 2.7 msft sales booking in FY2019) of pre sales for the year the company sticks to it by Q3 will be in better position to review it. About 0.08-1 msf of pre sales is expected from Life republic every year for next 3 years.

The company will be launching a plotting project with a saleable space of about 1.65 lakh sft in next quarter that will bring in cash flow.

To launch upscale Koramangala project in Bengaluru and a few Mumbai projects in FY20

Mumbai and Bengaluru expected to grow to about 25% of sales by 2020

Expect development to start in 3 Mumbai project within FY20 with a total development and construction space of 1.2-1.5 msf and its share will be 0.67msf

Over the last one year, it have created a strong framework for sustainable long term growth on the back of successful project launches, improved collections from customers, focused on timely deliveries and committed investment to the tune of about Rs 270 crore in buying out its partners' stakes in its key projects, Life Republic and Downtown. In the ensuing quarters, it will continue its focus on collections, execution and approvals and expect acceleration in sales volume based on growing visibility from Pune and increasing contribution from Mumbai and Bengaluru.

The company is also in the advanced stages of closure of acquisition of a few projects through structured deals with land owners, which will provide further impetus to its sales trajectory.

After implementing path-breaking reforms like GST and RERA, the government presented its Union Budget 2019-20 with a clear intent to further improve the regulatory environment for the housing sector. The focus on ‘Housing for All' and ‘Affordable Housing' has been reinstated by creating additional incentives.

The company sees its focus on 360 degree operational excellence driving sales, revenue and profitability on a diversified operating base to create long term growth opportunities.