Key takeaways of the call

Revenue from operations for Q1FY18 registered a growth of 37% to Rs 246.6 crore. The EBITDA margin for the quarter was 24% compared to 32.9% in corresponding previous period. And the net profit after tax grew by 27% to Rs 23.2 crore. Strong topline growth was led by the Ivy Estate (Corolla), Western Avenue, Three Jewels projects in Pune and first time recognition at Jay-Vijay society in Mumbai. EBITDA margins impacted on account of contribution from lower margin projects like Western Avenue and JDA projects - Mirabilis & Stargaze.

On new sale booking front, this quarter was a bit subdued on account of the uncertainty leading upto GST and the implementation of RERA, as customers adopted a wait and watch approach. In Q1FY18 the company recorded a sales volume of 0.41 million square feet (total sales value of Rs 257 crore) compared to 0.66 msf (sale value of Rs 370 crore) in Q1FY17 and 0.55 msf (sales value of Rs 327 crore) in Q4FY17. Q1FY18 has seen an uptick in the sales contribution from Bengaluru, buoyed by the launch of new project i.e. Exente project on Hosur Road. Bengaluru accounted for 18% of sales in Q1FY18. There were few cancellations in Q1FY18 due to GST & RERA rollout.

The company is confident of achieving a new sales booking of 2.2 msft in FY18 despite weak Q1FY18. In July 2017, it has already seen an uptick in sales velocity and expect normalcy to return in the second half of the year. New booking in July 2017 was about 2 lakh sft which is a normal run-rate for the company.

Price realization in Q1FY18 stood at Rs 6288/sft, an increase of 12% from Rs 5612/sft in Q1FY17. Higher price realization in Q1FY18 was led by a few commercial sales in Pune.

KPDL's share of total saleable area was 15.5 msf. Expect to see increased contribution from Mumbai and Bengaluru in current fiscal, adding two further dimensions to the growth and part of the company's strategy to diversify the revenue base.

Despite the uncertainty, collections of the company have been healthy at over Rs 253 crore an increase of 10% over Rs 229 crore of collection in Q1FY17. Even as the industry goes through this phase of transformation, it has seen consistency in its quarter-on-quarter collections of about Rs 240-250 crore over the last ten quarters. This was used to aggressively focus on construction.

Net debt as end of June 2017 was Rs 452 crore compared to Rs 455 crore as end of March 2017.

For next one and half year the company want to focus only on 3 cities of Pune, Mumbai and Bengaluru and after wards only other prospective cities will be explored. In Pune market while the company is looking to consolidate its dominant presence by leveraging its strong brand name, through the execution of ongoing projects and launch of subsequent phases of existing projects. In addition to Pune, the company has a strong pipeline of projects in Mumbai over 1.2 msf, which will facilitate PAT and ROCE expansion, and reduce working capital cycle for the Company going forward, while providing synergies to the existing Pune operations. Bengaluru is expected to be an additional growth engine going forward with the launch of the Koramangala project in H2 FY18, in addition to the launch of Exente, Hosur Road in Q1FY18.

To play on the Government's affordable stimulus theme, the company is also evaluating potential expansion into Affordable Housing in subsequent phases of existing projects which could help drive pre-sales growth. From existing land portfolio the affordable housing segment projects will be about 2 msft. This number can go up higher with new land deals.

The company continues to monitor the situation and expect the sentiment to improve over the next few quarters. With several government initiatives and the recent fall in home loan interest rates coupled with RERA introduction will lead to improved consumer confidence and demand.

The company will continue to focus on execution, collections and given the company's asset light approach is expected to generate strong free cash flows over the next few years which will be utilized to strengthen its balance sheet further.

The company welcomes both GST and RERA with all its rules and regulations. It believes both GST and RERA will bring in transparency, accountability, boost customer confidence and create a level playing field.

Whatever the GST benefit the company is getting from contractors etc are passed on to the customer from August. The level of impact of GST vary from project to project 0.5-2.5%.

About 75% is going to escrow account under RERA. Given difference in historical cost of land and current market price, the company is allowed to revalue the land to market rate and through this the company is able to take up 18% more. About 50% of topline is enough to complete the project.

About 30% of supply is going to be out of the market as they are not registered with RERA or approval not given yet. There are about 480 un-registered projects in Pune and the authority have levied penalty of Rs 50000 per project already. Going forward, the company is expected to improve its market share with significant supply out of the market.

Of Q1FY18 collection of Rs 253 crore the company has spend about Rs 125 crore on construction, Rs 9.5 crore on selling and advertisement expenses, Rs 26 crore towards land owners share, Rs 12 crore in Admin Expenses, Rs 24 crore on interest, Rs 19 crore on Tax, Rs 3 crore on debt repayment and Rs 10 crore redemption premium.

Land owner are now more willing for JD/JV deals at better terms than earlier.

Of the KDL's share of 13.4 msf in Pune market the unsold inventory is about 7 msf. Completed and ready inventory in Pune market is about 1.5-1.75 lakh sft.

The company has made application with RERA website within deadline and waiting for approval in Bengaluru market.