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Edited Transcript of PRESTIGE.NSE earnings conference call or presentation 2-Aug-19 9:30am GMT

Q1 2020 Prestige Estates Projects Ltd Earnings Call

Bangalore Aug 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Prestige Estates Projects Ltd earnings conference call or presentation Friday, August 2, 2019 at 9:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Irfan Razack

Prestige Estates Projects Limited - Chairman & MD

* Konanki Venkata Narayana

Prestige Estates Projects Limited - CEO

* V. V. B. S. Sarma

Prestige Estates Projects Limited - CFO

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Conference Call Participants

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* Abhinav Sinha

CLSA Limited, Research Division - Research Analyst

* Adhidev Chattopadhyay

ICICI Securities Limited, Research Division - Assistant VP

* Atul Tiwari

Citigroup Inc, Research Division - VP and Analyst

* Himanshu Upadhyay;DHFL Pramerica Mutual Fund;Analyst

* Neeraj Sahjwani;ASK Property Investment Advisors;Research Manager

* Niraj Mansingka;Goldman Sachs;Executive Director

* Prem Khurana

Anand Rathi Financial Services Limited, Research Division - Research Analyst

* Rajesh Disale;SBI Mutual Fund;Analyst

* Sameer Baisiwala

Morgan Stanley, Research Division - Executive Director

* Saurabh S. Kumar

JP Morgan Chase & Co, Research Division - Senior Analyst

* Swagato Sourya Ghosh

Jefferies LLC, Research Division - Former Equity Associate

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Presentation

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Unidentified Company Representative, [1]

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Good morning, everyone. Thanks for removing the time this afternoon to attend this concall. We have from the management, Mr. Irfan Razack, Chairman and Managing Director; Mr. Venkat K Narayana, Chief Executive Officer; and Mr. V. V. B. Sarma, Chief Financial Officer.

Without any further delay, I would like to invite the management for their opening remarks. Over to you, gentlemen.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [2]

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Hi, good afternoon to all of you. This is Venkat. Thank you for taking time out to be on this post results conference call of Prestige Estates.

Let me begin with brief recap of our performance for the Q1. In terms of operational as well as the financial parameters that what are that have gone by in line with what expectations that we had set for ourselves at the beginning of the quarter, has been quite good operationally. If you look at the fresh sales, they are up 4% year-on-year to INR 1.4 million, will this said the total sales of INR 1,016 crores for the quarter that has gone by, and the collections are also up 16%. Our total collections are INR 1,125 crores. These collections are excluding the rental income and the hospitality income. And the total rental income for the quarter, up by 12% at INR 206 crores. And we completed and delivered 10.33 million square foot of area, 3,892 homes during the quarter, and also launched 6.57 million square foot of area. This is 2 commercial projects and one residential project. And during the quarter, we leased 0.32 million square foot of area.

And if you look at the operational highlights, the quarter that has gone by, the total revenue stood at INR 1,567 crores of top line and EBITDA of 35% at INR 556 crores and PAT at 8% at INR 124 crores. So that's been the financial performance.

A few important highlights for the quarter in terms of the accounting is Ind AS 116 has to date -- Ind AS 116 deals with accounting for leases. In the case of Prestige Estates, apart from the rental income, we also have got a lease and sublease income, wherein we are taking properties on lease and then we sublease it and we've got arbitrage. So the 116 deals with how we need to account with respect to subleases. The standard specifies that over the contractual period, whatever the outflow that we have that needs to be arrived at and needs to be -- we need to do NP of the same and book it as an obligation, as a liability in the balance sheet under a corresponding asset as a right to use that asset as an asset and provide a depreciation on that on a straight-line basis for the remaining period of lease and also charge interest in the current liability, to the extent we are showing it as a liability. So therefore, the NPV of the sublease rentals will be recognized as a current liability as well as asset, obligation to be in the right to use the asset. And accordingly, the interest as well as depreciation has been charged on that. So therefore, you see that some numbers are with respect to some headings -- expenditure headings may not be comparable because of 116. That's one important item. And the second that we'd like to bring it to your notice is that as we've been telling, we have given the breakups of segment-wise business, vertical-wise, in terms of the revenue split, the EBITDA and also the capital employed and what returns are we getting out of each of the categories of businesses that we operate in. So if you look at the (inaudible) breakup in terms of contributions under the written-on capital employed, the office gives the ROC of 13.16%, retail gives 12.5% and a hospitality 6.5% and then services of course, the capital that we have deployed in the services very minimal, is a maintenance management of buildings, and then residential. That's how the capital employed and ROC, ROE. The formulas that have been used, however, this numbers also has been given. This is the first time that we are taking towards the -- giving the segment-wise because operationally, all the segments contribute to the revenue. Maybe in the next quarter, we are attempting to give the cash flows with respect to each of the segments to you separately. That will be a lot more informative in terms of how each segment is doing. So this is about the performance operationally and as well as financially. A few other aspects to brief you with respect to the construction spend that we have done during the quarter, which is commonly [out]. We have spent during the quarter, close to INR 891 crores of money on the construction, INR 664 crores on residential projects, and INR 183 crores on commercial CapEx projects, INR 31 crores on the retail projects and INR 13 crores on the hospitality projects, we saw the construction spend again for that quarter.

So with this brief, we'd open the forum for question and answers. Sir, would you...

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [3]

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No. Venkat has pretty much covered everything. So I think we could open the thing for question and answers. We'll be more than happy to answer any questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Saurabh Kumar from JPMorgan.

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Saurabh S. Kumar, JP Morgan Chase & Co, Research Division - Senior Analyst [2]

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Thank you for this, Slide #6. I just had 2 questions. One is on the residential business. So are you happy with the debt-equity of the resi business, which seems to be about -- I mean out of 3x? And just a follow-up on that. Is your guidance of 1.8x going to 1.4x, sir, implies almost INR 1,300 crores to INR 1,500 crores of deleveraging for the year. So is that something realistic in your view? So that's the first part. The second is, again, your yield on cost on both office and retail is quite good actually, I mean it's quite better, frankly. But just the hotel part is about 1.7%. I mean do you think you want to restructure this portfolio or probably sell it at some point or do something about it? These are my 2 questions, sir.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [3]

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Firstly, on residential, thanks, Saurabh, for the question. I think even we need to clarify a few of the things that you have asked. Residential build, unlike office, retail, hospitality, is a total of the borrowing that we have against the residential portfolio. But as against that if we look at -- it will -- compared with only the incomes that came for recognition during the quarter. But if we look at sum of the residential debt, what are the borrowing that we have, also pertains to many projects, which have not come for recognition, which are ongoing.

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [4]

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Basically, land also.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [5]

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And also, where we had the land that has not come for -- become project yet and the deposits that they have -- we have paid out. So it includes everything. So the return -- with respect to the capital that we are [deferring] is essentially a lot higher because of revenue recognition that we had to follow. So it is only right now compared with the top line for this quarter. That's one.

And the second thing with respect to the debt equity that you have mentioned. During the quarter, a very important aspect that I didn't mention in the opening remarks is that, we had an acquisition of stake acquisition in one of our malls, which is Forum Mall in Hyderabad. We were 49% holders before and we had landowner, JV partner with [some 51%] holding. We have acquired their entire shareholding. We had also informed the stock exchange of what and when we had done. Therefore, we become 100% owners of that. Two things. One is the amount that we have paid to the -- for this purchase. And earlier, it was not coming for consolidation, now the full debt came for consolidation. Therefore, there is increase in debt equity. But as you mentioned, we did give for 1.4x debt equity by end of this fiscal. I think that is possible. We are also looking at, as you said, the capital churning that can be done with respect to few of the CapEx projects, will definitely to be looked at. You said hospitality, that including hospitality. As far as the return with respect of hospitality is concerned, yes, on a comparative basis, with respect to office and retail, it's slightly lower. But 2 of the hospitality assets, where (inaudible)

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [6]

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(inaudible)

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [7]

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Yes. So almost close to 600 keys, still to mature. We just opened them around a year or so ago. Some of the hotels have not been part of great contracts that went out during the year. So therefore, we believe that there is a room for the better performance. That's what has been put in the footnote also in the hospitality segment. Having said that, we also look at the opportunities where we can churn the capital.

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Saurabh S. Kumar, JP Morgan Chase & Co, Research Division - Senior Analyst [8]

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Okay. And sir, your debt increase quarter-on-quarter was INR 530 crores. And because of Sujana, the total debt should have gone up by INR 900 crores.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [9]

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No. No. So the most of the debt increase has been attributable to that acquisition only. The SPV had a debt of around INR 230-odd crores, earlier because it is not a subsidiary, it was not coming below the line item, we only used to take profit in terms of accounting as per the accounting standard. Now entire INR 230 crores came for the consolidation. Also, the consideration that we paid, INR 364 crores.

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Saurabh S. Kumar, JP Morgan Chase & Co, Research Division - Senior Analyst [10]

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Okay. Okay. And sir, just one last thing. So this margin of 20% on the resi side, that's now should be a more stable state margin, right? I mean...

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [11]

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Yes. Around that maybe there is slight room for improvement further...

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [12]

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Making it bigger is actually better.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [13]

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Yes. So that is also dependent, again, on the kind of projects that came for revenue recognition during the quarter. Some quarters could be higher. So -- but in and around this, is a realistic number going forward.

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Saurabh S. Kumar, JP Morgan Chase & Co, Research Division - Senior Analyst [14]

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And basically, your INR 12,000 crores of unrecognized revenue, INR 3,000 crores of completed inventory. So INR 15,000 crores visibility is there. So effectively, for 3, 4 years, I mean you have reasonable amount of visibility at least for this?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [15]

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Absolutely. Yes.

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Operator [16]

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The next question is from the line of Atul Tiwari from Citigroup.

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Atul Tiwari, Citigroup Inc, Research Division - VP and Analyst [17]

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Sir, my question has been answered.

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Operator [18]

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(Operator Instructions) The next question is from the line of Swagato Ghosh from Franklin Templeton.

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Swagato Sourya Ghosh, Jefferies LLC, Research Division - Former Equity Associate [19]

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Sir, on your ongoing projects, I see there is a sharp increase in the mid-income projects versus last quarter. But we have not launched anything. So what explains that?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [20]

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Which slide is that?

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Swagato Sourya Ghosh, Jefferies LLC, Research Division - Former Equity Associate [21]

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So where you give the cash flow breakup. So mid-income projects area currently is at 5.06, which was last quarter -- I'll just pull it up, which was last quarter 3.9.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [22]

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So project completion also. I mean in the sense -- Slide #11...

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Swagato Sourya Ghosh, Jefferies LLC, Research Division - Former Equity Associate [23]

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Slide #11 versus Slide #17 last quarter.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [24]

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17. Okay. One minute, let me take that out. 17 is retail of the last quarter.

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Swagato Sourya Ghosh, Jefferies LLC, Research Division - Former Equity Associate [25]

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Last quarter.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [26]

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Mr. Ghosh, I'm just -- we're just pulling out the last quarter presentation. Let me have a look at it and answer your question.

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [27]

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You're talking about income projects 5.06 million square feet. No?

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Swagato Sourya Ghosh, Jefferies LLC, Research Division - Former Equity Associate [28]

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Yes. It was 3.9 last quarter. It has increased to 5.06, but we have not seen any launches. So what explains this?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [29]

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No. No. There will be a Phase II of Song of The South, which we would have launched, in some case 2 of -- 1 or 2 projects that would have happened. So that was the only explanation. Because see, we had project called, Song of The South, and that we had segregated one phase...

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [30]

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On High Fields.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [31]

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And I think High Field on Phase 2. So these -- same projects, same name. But there will be -- even RERA number is separate for that. So we are just launching -- launched those. So it won't be really seen as a new project. That's why that's 5.06.

And like the common practice in the industry, a particular project normally in our case is not launched phase-wise. We launch a project, but selling happens phase-wise. So the particular...

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [32]

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RERA, this is a new...

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [33]

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RERA recognition, completion and handing over will be sequentially done. So in technically, we don't launch the project as one more event of inauguration -- and sorry, launch of any of those large projects. Therefore, any Phase II that has not come up or will come, I'm pulling out and [conform] to you once again.

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Swagato Sourya Ghosh, Jefferies LLC, Research Division - Former Equity Associate [34]

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Okay. Okay. So -- yes, that's a satisfactory explanation. The next question is, sir, if I add the segment-wise numbers, like you have given the total number on Slide 6, the consol numbers in the P&L don't really match, like the depreciation, the EBITDA -- sorry, the interest expense, the depreciation. Why the difference?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [35]

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So in terms of accounting terminology, if we look at, the lease, sublease income, whatever we look at, just now we explained. On account of subleases, still there is a huge depreciation that we have charged, which is not part of all this.

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Swagato Sourya Ghosh, Jefferies LLC, Research Division - Former Equity Associate [36]

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Okay. Okay. So then sir, what -- like what was...

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [37]

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All net -- this is all net assets. Okay, go ahead. Go ahead.

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Swagato Sourya Ghosh, Jefferies LLC, Research Division - Former Equity Associate [38]

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Yes. No -- yes, I understand that, sir. But since the difference is quite large, so it will be helpful to like know the number that how much of a rental assets are falling under this lease, sublease model?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [39]

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So under lease, sublease model every quarter, we have INR 80 crores of income, around INR 72 crores of expenses. So around INR 8 crores is the net income that we get.

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Swagato Sourya Ghosh, Jefferies LLC, Research Division - Former Equity Associate [40]

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Okay. Okay. Okay. And sir, one more question, if I may. The stake acquisition. If I look at the consideration paid versus the income that has increased. And like you show in your listing, the economic interest of income. There seems to be 14% cap rate on this particular stake valuation, which is very attractive. So I just want to understand that, what made the partner sell out at 14% cap rate?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [41]

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Let's put it this way. One, I think we closed the discussions with respect to the stake acquisition, quite some time ago. There was at least 6, 8 months of gap, when we froze the number. And there is also a rental escalation that have taken place with respect to rentals because there is always the churning of tenants that take place and contracted escalations, both have happened. Yes. Having said that, when we did look at the acquisition of this transaction, we were at around 7.8%, close to 12%. But the extra that you are seeing cap rate is more to do with the increases that have taken place because it did take 7, 8 months to close this transaction from the time we shook hands.

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Swagato Sourya Ghosh, Jefferies LLC, Research Division - Former Equity Associate [42]

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Got it. Got it. Sir, and one last very quick question is, on the launches, the commercial launches, how much is Prestige share?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [43]

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There were 2 launches. One is the Tech Cloud. 87% is our share and the other one is Tech Park IV. 66% is Prestige share.

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Operator [44]

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(Operator Instructions) The next question is from the line of Adhidev Chattopadhyay from ICICI Securities Limited.

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Adhidev Chattopadhyay, ICICI Securities Limited, Research Division - Assistant VP [45]

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I have a few questions. So firstly, the commercial launches which are given in the presentation. So are these going to be on lease or they're going to be on outright sale basis? Or they're going to be a 50-50 mix or something on the [startup], sale and lease?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [46]

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There's going to be -- Tech Park IV is going to be fully owned.

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [47]

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No. Even there could be a mix, both could be mix and it could be 2/3, 1/3, 2/3 we'll keep, 1/3 we'll sell.

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Adhidev Chattopadhyay, ICICI Securities Limited, Research Division - Assistant VP [48]

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Okay. Sir, also, when you launch this project, so this thing now sits where in the capital WIP on balance sheet or partly in inventory? I mean how does this accounting work? Because these are fairly large projects, right? So it is over 6 million square feet across these 2 projects, that's why we just asked the question.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [49]

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We have started work on this project. So it will be a WIP because -- okay, if you're going to own it fully, it's going to be CWIP, if it's going to be meant for sale, it's going to be inventory. Now right now, we are looking at inventory. As we move forward, we'll see whether we have to split and accordingly take a decision. Because as Mr. Razack said, 2/3 of it, we intend to own, 1/3 of it, we intend to sell.

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Adhidev Chattopadhyay, ICICI Securities Limited, Research Division - Assistant VP [50]

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Okay. 1/3 you want to -- okay, 2/3 you want to own. Okay. Sir, next related question, sir, you mentioned in your segmental thing your -- thing is almost INR 1,700 crores, the capital employed in ongoing CapEx projects, right? So with these new launches and whatever is ongoing now, so what is the balance CapEx spend on all your office and retail projects, which are -- which is left?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [51]

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Sure. So I'll get there. Now the amount that has been spent that you'll see is INR 1,684 crores, that is including INR 749 crores, just to clarify.

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Adhidev Chattopadhyay, ICICI Securities Limited, Research Division - Assistant VP [52]

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Including?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [53]

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INR 749 crores, debt.

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Adhidev Chattopadhyay, ICICI Securities Limited, Research Division - Assistant VP [54]

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Yes. Yes. Yes. Okay, got that. Yes.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [55]

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So in terms of CapEx balance to spend with respect to ongoing project. With respect to commercial projects, we have around INR 1,200 crores. With respect to retail projects, we have around INR 250 crores and the hospitality around, again, INR 250 crores.

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Adhidev Chattopadhyay, ICICI Securities Limited, Research Division - Assistant VP [56]

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INR 250 crores. And this includes these new launches, we have done? I'm assuming this figures or that is -- went above this?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [57]

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Portion of it is meant for sale, it goes to development. The remaining what we intend to own, is part of CapEx.

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Adhidev Chattopadhyay, ICICI Securities Limited, Research Division - Assistant VP [58]

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Okay. Okay. Okay. So secondly, sir, we haven't done much launches during the quarter. Now what is the launch pipeline for the resi business for the year? And just -- could if you just clarify on the subvention schemes? How much did we sell last year from these schemes, if any? And going forward, how do you intend to like drive your sales in this market?

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [59]

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I'll answer the launch part, you answer the subvention.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [60]

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As far as the subvention goes, the last quarter, if you look at, there is no subvention scheme sales at all, what we are coming to the books. And year before last in form of keys, we had some scheme that has opened. And one small project in Chennai and one in Hyderabad as well we had. And Chennai got 2 quarters ago, discontinued. Hyderabad got discontinued almost close to 3 quarters ago, that was initially to do -- push some sales. But Hyderabad, if you look at High Fields, we're almost around 76% sold out. Chennai is now doing well. So these 2 projects we had something. Their contributions in terms of -- to overall sales is not significant. And the last quarter per se, if you look at whatever is the -- last 2 quarters, in fact, there are no sales coming from the subvention, per se. So I mean if you look at the rule change, regulatory change in the market that we are presenting, I don't think that will have, especially from Prestige point of view, much of an effect.

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Adhidev Chattopadhyay, ICICI Securities Limited, Research Division - Assistant VP [61]

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Okay. Okay, sir. And just if I could just catch up on what are the launch plans on the resi side?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [62]

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This is actually today evening, after this call, we are launching our new project, called Prestige Elysian, that's in Bannerghatta Road in Bangalore. But we've got a pretty strong launch pipeline on the cards. But it all depends on the function of how soon we get all the approvals. We've got the Prestige Smart City in the pipeline. We've got something called, Highline -- Prestige Highline in Chennai in the pipeline. And then we are working with several others, both in Bangalore, Hyderabad as well as in Chennai. But it -- there is a strategy. I mean, we're pushing hard for the approvals, like we even got Mumbai on the radar now. Mumbai, a project will get approved, hopefully, this month in August. So if that happens, we could do a launch of residential development in Mumbai, in September, so then we'll have to wait and watch how it all pans out and what type of response we get. Like this evening's launch that is scheduled for today, the response seems to be pretty good. I mean there seems to be good traction. So that's good news, actually. So it gives us a little comfort. And I think the largest that we are planning this fiscal, will be the Prestige Smart City, apart from Mumbai and Chennai and Hyderabad.

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Adhidev Chattopadhyay, ICICI Securities Limited, Research Division - Assistant VP [63]

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Sure. Sure. And just last, sir. What is the land spend we did during the quarter? And any budget for the full year you would like to share?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [64]

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If we view the land spend number first, the land and stake buyback -- stake buy that we expend in terms of particular months, both put together, is around INR 470 crores for the quarter.

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Adhidev Chattopadhyay, ICICI Securities Limited, Research Division - Assistant VP [65]

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INR 470 crores. So just over INR 100 crores would be the only for the land. Okay, okay, okay. Fine. Sir, any guidance for the year or anything like or that it will only come to the end?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [66]

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No, that may be a little difficult right now because we are looking at opportunities aggressively and cautiously to see how it can help us grow. Maybe at this point in time, with respect to the commitment that we have made so far. We may have outflow of INR 250 crores to INR 300 crores. Beyond that, we'll see the way the year goes by we'll take a call.

And before we go onto the next question, Swagato Ghosh had asked with respect to the increase in the mid-income. There are 2, 3 reasons. One is the Palm Residences stock has got added. And as Mr. Razack said, Song of South and High Fields and the Lake Ridge, 3 ongoing projects. Phase 2s also have got added to that. So that's in terms of increase in the mid-income inventory when he has mentioned.

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Operator [67]

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The next question is from the line of

Sameer Baisiwala from Morgan Stanley.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [68]

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Venkat, given the current liquidity squeeze in the market, are you seeing anything for yourself as a developer or/and for your customers?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [69]

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In terms of liquidity issues,

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [70]

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Yes, credit availability, funding from the banks, NBFCs, et cetera.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [71]

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So far, it's been okay, but then what is the overall macro level affecting will have an impact. I wouldn't say we are completely immune, we're not affected at all. Because if there were earlier 15 players or 20 players who are actively doing the business, now that number has shrunk to, say, 50% or less than that probably. Therefore, to that extent, that capital probably end up being less will have, in general, some impact. But specifically from Prestige point of view, given the fact that the diversified business models and the relationships that we have and -- in terms of credit distinct that we enjoy, it's not been so difficult. But turnaround times have got increased a little.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [72]

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Out of the total debt -- gross debt of INR 8,000 crores plus, how much is coming up for repayment redemption over this year, next year?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [73]

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So in terms of total debt, 54% is project debt, which is of developmental project, conceivable financing on all of that. The balance anyway is CapEx-related or LRD-related. That gets paid according to their tenure that we have agreed upon in the sanction documents. So now, therefore, we are talking about only the project-related debt. So this year per se, if you look at -- let me pull out and confirm to you, around INR 750 crores to INR 800 crores of the repayment.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [74]

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This is for the current year?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [75]

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Current year.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [76]

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And for the next year?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [77]

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I don't have it handy, Sameer. Can I give it out to you for -- I can actually give you entire 54% of residential, the repayment we did, residential of the -- the term loans or project bids. Anyway, all of them do not have more than 3 to 4 year tenure.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [78]

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Okay. So it could be north of INR 2,000 crores next year, if I have to break up 54% of your 8,000 plus/minus versus INR 780 crores for this year.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [79]

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Yes. So I'll have to give it to you, which is back-ended, which is coming next year. Some of them are step-up repayment, some of them are with -- against the stock receivable. If you look at last year and this year, both put together, we have completed 24 million plus 10 million, almost 34 million. Predominantly, these are all residential. Now most of the projects here and there, we have some small stock lift with Prestige Tranquility 2,300 apartments, so we've bought some 60,70 units, Prestige Bella, we got from 40, 50 unit. All of them, we have bundled and looked at whether we can do some discounting of this. So therefore, it pays for itself. So let me see exactly what it is and confirm to you.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [80]

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Okay. Great. And second question is, what triggers release of your refundable deposit? And I'm asking in the context of roughly about 10 million square feet has been delivered in Q1, if I'm not wrong.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [81]

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Right.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [82]

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So would that mean a lot of release of your deposits?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [83]

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Two triggers. There is also a course correction that we have done in the middle of -- this is a project that we are -- that has been completed this year. We have signed the agreements 4 years ago and some of them earlier because the planned sanctions have taken some time. Initially, what we used to do is at the time of completion of the projects, the landowner is to refund the deposit. Subsequently, what we did in many of the projects is, we earmarked some units belonging to landowner share in JD, and these units we will sell and we'll record our deposit instead of waiting till the end of the project. So in some cases, we started recovering by way of sales. In some cases, it comes at the end of the period -- end of completion of revenue. In case of revenue-sharing project out of the cash flow that are coming, we identify small portion, in some cases 5%, in some cases 8%, depending upon what quantum of deposits that we have given and start recovering after we are -- (inaudible) interrupted. So there's no one particular model for all the projects. Lakeside Habitat, for example, is revenue sharing. We have almost fully recovered. And whereas (inaudible) it's a very different model. Now we are in the process of recovering. So that's how it is.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [84]

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Okay. Fair enough. But I think this quarter is probably one of the highest completion. So this 10 million square feet, I don't know if that's a good question to ask, how -- what part of this, half of it or that is based on the earlier model of refund -- on completion, and therefore, is there an equivalent good dollar number that you've got?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [85]

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So Gulmohar is a project that is in the SPV that we have completed. There is no deposit per se. Falcon City, though it's a very large project but deposit outflows with respect to that project is very small, that we're in the process of recovery. The highest amount of deposits has been to the extent of 145-odd crores in Prestige Lakeside Habitat, which got completed in earlier quarter, and almost barring small amount, we have recovered that money.

To answer your other question with respect to repayments, Sameer, we do have, with respect to the retail as well as the office rental building projects, the lines of credit of LRDs, which are undrawn to the extent of INR 1,400 crores, just to tell you. Now, we have not drawn that many we have sanctions.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [86]

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Okay. Okay. That's fine. And just one more from my side. To your debt reduction target for the year of 1.4% net debt to equity, Venkat, I'm not so sure, how do you plan to achieve that? And in Q1, for example, are you generating any surplus cash? I guess, not. Over and above the cash flow from operations plus CapEx. And how do you see the next 3 quarters?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [87]

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So if you are asking us with respect to the developmental business plus CapEx, given the fact that we did incur outflow of stake acquisition and all of that, yes, it was not. But if you look at developmental business per se, given the cash flows and what we have spent, 1,150-odd crores of money that we have collected from developmental business and spend around INR 670 crores on the construction, the overhead proportionate attributable to development business of 70 and all others, developmental business, per se throws up positive cash flows. As I said in the opening remarks, given the segment-wise breakup, next quarter, you'll see even the segment-wise cash flow statement also. So that does. But as far as CapEx is concerned, yes, it's -- we've been deploying capital. So -- and also did some acquisitions and paid some money for the land, INR 100-odd crores in addition to the stake acquisition. So therefore, there is a deficit.

But in terms -- to answer your question of whether we can go to 1.4x. Is apart from what we are doing here in terms of the collections and surplus and all of that, there is a plan which we are evaluating, we're at this point in time not able to confirm concretely. To look at capital churning in our yielding portfolios, that is the CapEx portfolio, like we put that whether it is with respect to yielding assets or whether it's with respect to under-construction assets, we'll talk later. With respect to the segments -- CapEx segments, namely office, retail or hospitality. So I think that should help. See like the way our debt-equity is -- has been impacted, whenever we did stake acquisition on 2 counts. One is the outflow that we had to buy the stake and also the consolidation impact. Any of the -- the capital doesn't get expended by doing these portfolios, if we were to churn or dilute -- the impact will also be the accounting point of view as well as inflow point of view. So we don't see there's a bigger challenge. We are working towards it. I think by end of next quarter, we should be able to give you concretely some information.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [88]

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Venkat, sorry to -- just one final from my side. So you have been trying to monetize these 3 yielding verticals for last 12, 18 months. And then sometime in the last 3, 6 months, you said that it's not happening.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [89]

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Sorry, it's changing.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [90]

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Sorry?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [91]

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Sorry. Sorry. The line was not clear. Sameer, go ahead.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [92]

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Okay. No. What I am saying is, you have been trying to monetize the yielding assets for last 10 or 12, 18 months. And then somewhere, things didn't work out 3, 6 months back, and you said that we are moving on, and we'll take a look. So what's changing now? And what's giving you confidence that, especially in this current environment, you'll be able to monetize anything over the next 3, 6 months?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [93]

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Two things. Number one is, we are happy to note that the listed REIT, office REIT, that's been done by the Bangalore-based developer is doing well. Now, given the fact that even yields are getting compressed there, there is an opportunity from the yielding asset point of view, number one. Number two, consciously, if you look at what Mr. Razack was explaining, other office ongoing projects, if you look at, we are resorting the model of owning 2/3, selling 1/3. And therefore, there won't be much of debt pressure to increase our rental income from office portfolio. Now coming to your part of what is that we are trying to do differently, is now last year -- last till -- up till last 12 months, most of our hospitality projects, big ones are under construction. Now they are operating. There is a room to do something there, number one. Number two, now if you are looking at doing any capital raising, as I said in the last quarter, we are not looking at the yielding portfolio because yielding portfolio, we can take it even for the public market. We're only looking at large chunk of under-development or under-construction office portfolio only. So developmental portfolio only is what we are looking at. Yielding portfolio, we can do even -- we can even go to the public markets. So that's the difference.

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Operator [94]

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The next question is from the line of Abhinav Sinha from CLSA.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [95]

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Just on the quarter sales that we have seen, so how much of this was commercial?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [96]

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Close to 30% was from the just launched Tech Cloud, commercial.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [97]

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And what is the rate that you're getting here, rupees per square foot?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [98]

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Around INR 6,500 plus-plus.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [99]

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Okay. And see, on the growth target that you've given for the year of about 50 billion, 60 billion. I mean, looking at the sort of other category economic data that we have seen recently, are you still confident of achieving this high level of growth?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [100]

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So you're talking about presales?

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [101]

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Yes.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [102]

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Presales, we should be able to do, Abhinav, because there are other large residential projects that have been lined up, namely, Smart City, today evening Mr. Razack said Prestige Elysian, we have Finsburry Park affordable housing project. There's something coming up in Mumbai as well, South Mumbai, Prestige Jasdan Classic. We have something coming up in Hyderabad. We have something coming up in Chennai. Given all this and, of course, some of the commercial properties that we are selling. And just -- I mean, the 6,500, what we're getting is all-inclusive for just launched Tech Cloud. I think the guidance that we have given in terms of presales, we are confident that we should be able to meet that.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [103]

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Okay. And on the leasing business itself, I mean how you are looking at volumes this year?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [104]

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Leasing, we should be able to lease -- I mean, there is one project that we are completing, called Prestige Star Tech, which is already leased. We will complete and hand it over in February, that's almost 1 million square foot, but not yet come in the books. Next quarter, it will come. This is a subsequent event. And we should be able to lease, in addition to the 1 million. So therefore, around 2 million square foot of leasing for the year.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [105]

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Okay. So actually -- I mean I saw that the exit rental has been reduced a bit versus what we've saw last presentation. So what sort of explains that? I mean is there a slipup in delivery of a couple of projects? Or...

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [106]

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No. I don't think any exit. Some other projects may be pushed to this, see, I don't...

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [107]

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(inaudible) have retail with office.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [108]

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No. No. No. Unless you looked at the retail plus office if you're looking at,

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [109]

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Because what is...

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [110]

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Overall, retail plus office put together, we have are not reduced the rental guidance, maybe you're seeing a split. Office separated you're seeing.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [111]

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Okay. Okay. I will connect with you separately on that, actually.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [112]

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I have -- sorry, Abhinav, just to confirm, the last quarter presentation I had pulled out for something, we had guided for INR 959 crores, that is INR 960 crores of exit rental income. In fact, we have almost surpassed that as we speak now itself. So there's no reduction on the exit rental income guidance

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [113]

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[It's a mix because you split up] office and retail maybe.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [114]

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No. See, actually, office plus retail, the total volumes that we are looking at is 10.64 plus 4.3, right? So this is about 14.7. I think last time, which you had given, was actually 15 plus, and that was my doubt, it was 15.74, if I'm not mistaken.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [115]

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Let me see that. There is no reduction whatsoever.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [116]

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Slide # 39 and 40.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [117]

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Okay. So I understand, because some of the projects are earlier, what we intend to fully own, now 1/3 we intend to sell as well. If that is what has caused that reco difference. I'll explain it to you. It's (inaudible) and Tech Cloud earlier months have been taken as the projects that will contribute to the rental income, now 1/3 of it is meant for sale.

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Operator [118]

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The next question is from the line of Niraj Mansingka from Goldman Sachs.

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Niraj Mansingka;Goldman Sachs;Executive Director, [119]

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Can you help me reconcile the debt increase? I know there was around INR 500 crores because of the payments. And debt has also increased by similar, but you also had receivables of bookings. So can you just give a cash flow of the receivables in the development side?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [120]

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Sir, development side, as we explained to you -- so INR 1,185 crores of sales -- collections, sorry -- collection against which we had the construction spend of INR 664 crores. So then...

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Niraj Mansingka;Goldman Sachs;Executive Director, [121]

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So it was INR 1,016 crores, right?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [122]

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INR 1,185 crores of collections.

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Niraj Mansingka;Goldman Sachs;Executive Director, [123]

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Okay. So I thought your presentation had 1,016 crores.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [124]

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[186?]. INR 1,125 crores.

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Niraj Mansingka;Goldman Sachs;Executive Director, [125]

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Sorry. Sorry. INR 1,125 crores. Yes.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [126]

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So then INR 664 crores of the spend, and we had [audit] of INR 70 crores attributable to developmental business. And then interest of close to INR 100 crores.

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Niraj Mansingka;Goldman Sachs;Executive Director, [127]

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Okay. So how do you see this cash flows in the residential side over the next 2, 3 quarters?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [128]

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See, the residential, there are 2 aspects. One is the cash flows that we have been getting so far, were meant for the construction because many projects were ongoing. The difference between the earlier quarters -- the cash flows and now is even if 30%, 40%, 50% of the cash flows are out of that, the stock fees. The entire cash flows are not going towards construction, they are free cash flows, that's number one. Number two is, as we look at the presales for the year, we have guided for INR 5,000 crores to INR 6,000 crores of presales, that is significant increase over last year. We are on course to achieve that. So therefore, there would be -- in addition to that the cash flows from the presales. So there are three: one is the cash flows from the new sales; the second is stock sales; third is the cash flows from the ongoing projects. So these are the 3 things that will contribute to the collection. We see that we've been doing around INR 1,000 crores of cash collections for a year for almost 6 to 8 quarters now. Now the time has come for taking the step-up, next level or to go to the next level. I think we should move towards slowly to the next mark of INR 1,400 to INR 1,500 crores of collections every quarter.

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Niraj Mansingka;Goldman Sachs;Executive Director, [129]

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Okay. And when do you see reaching that number?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [130]

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I think linked to presales. So give us a quarter or 2, we should get there as the retail momentum moves from INR 1,000 crores a quarter that we've been doing. Now we've got many more launches. We are launching new geographies also. If you look at last 3 years, entire 3 years put together, our launches have been very, very low, around 6 million or so. Whereas, earlier, we used to launch 10 million, 12 million a year. So that has a little bit of an impact. Now we have added new geographies to the business, and we have a lot of launch pipeline in the existing markets. So therefore, that's linked to launches. Give us a quarter or 2, I think we should be there.

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Niraj Mansingka;Goldman Sachs;Executive Director, [131]

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Okay. Okay. The other thing is, you had a lot of slightly high-value residential apartment stock, whereas the slow-moving rather than stock out, what -- can you tell me about how you're looking at the sales on those side? And if -- yes.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [132]

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See, there are only 2 projects, which are high-value...

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Niraj Mansingka;Goldman Sachs;Executive Director, [133]

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Hello?

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Operator [134]

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(technical difficulty)

Ladies and gentlemen, the management line has connected.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [135]

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Sorry, we got disconnected. On this high-value inventory, observation was absolutely correct that there is a certain component of high value. And these are only 2 projects, one in Whitefield and other is the Prestige Golfshire. But I'm happy to say, even that has now picked up some momentum and there are sales. There's a focused activity to see that this inventory gets cleared up. And the good part is, there's no new inventory of this category coming in from our side. So it's all mostly mid-income inventories. With that, I believe, the existing inventory will get cleaned up. And obviously, if you look at the rest of the inventory that we have, there's nothing that we have of any concern. And once this gets cleaned up that will add additional cash flows into the system, will also help us to reduce the debt and do all of it. See, the only way that we can do is sell, collect our money, and that's the only part about it. Because the money that's needed to be spent is already spent, there's no further money needs to be spent for this.

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Niraj Mansingka;Goldman Sachs;Executive Director, [136]

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How many are -- what made the traction seems to actually improve on those projects?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [137]

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Now the project is completed, it's there to see, the community is developing. See, this is a good question. See, its experience. Over a period of time, what really happens is, once you complete the project, once the community develops and people start living there, so one brings the other. So it's a little bit of a slow motion. But then, that's what brings the overall picture. And then slowly people start appreciating what has been created and the business happens. And since these are very different, very high-value properties. People are able to look, feel and experience it. And once they're happy, budget and the requirements, the business does happen.

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Niraj Mansingka;Goldman Sachs;Executive Director, [138]

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And so what is the value ...

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Operator [139]

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Sorry to interrupt you, sir. I'll request to come back in the question queue.

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Niraj Mansingka;Goldman Sachs;Executive Director, [140]

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I'm just part -- it's the part of the same question, I'll just complete that. So what is the value of the project stuck in Whitefield and Golfshire which is anyway moving right now?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [141]

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Yes. These are the 2, I think both took together is about INR 1,500 crores.

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Niraj Mansingka;Goldman Sachs;Executive Director, [142]

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Okay. And how much would we have sold in last quarter, approximately?

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [143]

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That number, I don't have off hand. But we can tell it with you later.

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Niraj Mansingka;Goldman Sachs;Executive Director, [144]

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Okay.

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [145]

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It's [INR 1,030] crores, premium and Luxury, we've got that here in our completed projects. Yes, about [INR 1,500] crores. Yes.

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Operator [146]

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The next question is from the line of Himanshu Upadhyay from DHFL Pramerica Mutual Fund.

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Himanshu Upadhyay;DHFL Pramerica Mutual Fund;Analyst, [147]

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My question was on -- we are thinking of launching in Bombay, okay? Can you give some idea of what would be your strategy? Because what we have seen many premium players have also sufficient inventory of incomplete project, even it -- means incompleted projects inventory, which is getting stuck at the premium end. So how are you thinking about this market? And with a 3- to 4-year timeframe, what would be your strategy and differentiating factor for you in this market? I mean some ideas can you throw on the geography where you are trying to enter?

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [148]

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That's a very relevant question. We've also studied the market. We are also starting slow and starting for sure. We studied the market in Mumbai. What we have seen is, most of the inventory that's available are pretty large phases, where the ticket size is pretty high, it becomes unaffordable. So what we have done is, we've reduced the size of our inventory. We've made sure that the ticket size won't be so high that it becomes unaffordable. And overall, look feel is good. Location is good, and it comes without any problems. And hopefully, with our past track record and the brand that we have, if people have a need for a house and I'm sure Bombay people will have a need for a house, it's only that how much they can afford, I believe we should be able to make a differentiator. But we are starting small, starting sure because out of the 4 projects that we are in Mumbai, 2 are office, which is a different thing, and 2 will be residential and out of which, one is now getting approved this month. And once we do it, maybe when next quarter, when we have this chat, be able to tell you how we performed.

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Himanshu Upadhyay;DHFL Pramerica Mutual Fund;Analyst, [149]

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And one more question. In Bombay, when we see players coming up, they have entries through 3 ways. One is SRA, one is through JDs and third is outright purchase. What would be your preference? And would you -- and how would you think about the entry in this market? Means would you be only taking JDs, outright purchase or you have 1 or 2 path not -- or you are not interested? Any more light on the land augmentation in this market, when we -- over next 2 to 3 years?

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [150]

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Yes. See, we haven't touched any SRA project. SRA have taken a clean land. And it's a wavy, wavy model that has happened. So hopefully, like as we go along, more details will relay much.

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Himanshu Upadhyay;DHFL Pramerica Mutual Fund;Analyst, [151]

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And we had this [JDFC] transaction or what we -- so are we fully capital deployed in that JD? Means...

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [152]

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So we have so far deployed only close to 35-odd-percent. We are evaluating the 3, 4 more projects. I think by end of this fiscal, we will reach that level of redeployment.

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Himanshu Upadhyay;DHFL Pramerica Mutual Fund;Analyst, [153]

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And which are the 2 projects, where we have deployed, 35% to 40%.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [154]

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I mean the Smart City and Finsburry Park and both are getting ready for launch, hopefully, in the next 3, 4 months both should get launched.

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Himanshu Upadhyay;DHFL Pramerica Mutual Fund;Analyst, [155]

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Okay. And is it going on our expected lines, means, what high IRR we were expecting this projects could lead to in 1.5 years bank. So are we in those -- are we reaching those targets? Or you think it is slow? Or what is your sense on that?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [156]

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So, yes, we are reaching because the acquisition also have become very attractive. So the sale prices are not moving upward there more -- the entry-level acquisition price for the lands have become little more attractive.

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Himanshu Upadhyay;DHFL Pramerica Mutual Fund;Analyst, [157]

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Okay. Okay. And the new launches, what you are thinking about in southern markets, where you are already present? Do you think -- are you finding differentiation between mid-income? And are they faster moving? Or do you think premium and luxury is still moving or new launches? What would be your thought process? Where do you want to place?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [158]

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The market is only in the mid-income segment, that's where the maximum volumes are coming. And so -- and that's where a demand is also there and the need is also there. So our concentration is very much there, though we will not take nor the premium or other luxury. But then, what we also need to do is clear up the luxury that we have in our stocks. Then try and sort of, once again conceptualize new stocks. So at the moment, our concentration is on the mid-income and that is moving well and churning well.

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Operator [159]

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The next question is from the line of Rajesh Disale from SBI Mutual Fund.

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Rajesh Disale;SBI Mutual Fund;Analyst, [160]

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So 2 quick questions. Earlier, you said that you'll be launching in new geographies. So can you tell us which geographies are those? And the second question is, you also referred to the REIT doing well, (inaudible) REIT doing well. Do you have any timeline on when do you are planning to launch your REIT, if you are planning to?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [161]

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See, there was 2, 3 separate things. Of course, now the first news talked about new geographies. The one new geography for us is Mumbai, which we are seriously and very -- we are working quite diligently on that line. There are several things that are happening. We've also got Pune as office we are doing, and there is something that will happen in NCR and Noida. So all these are work in progress, and there's one single project we even picked up in Goa, which is a nice, neat project in a good location, came at decent terms. These are there, residential. As far as -- see, I have a different thought on this REIT way. We've already got yielding assets where the -- they've been created. It's -- we are trying to see that how we can make it a little more attractive in terms of size. So what is -- what we are planning to do is, try and see how we make a bigger portfolio before we even attempt the REIT. And there is also the retail part of it, and there is an opportunity where we can also package all our retail assets under one package and then also partner with someone else. So some discussions are also happening in that line. So possibly -- see, nothing is stagnant, everything is dynamic at some point of time or the other, something will emerge. But at the same time, at the moment, nothing is concrete in the sense -- staying -- going in this direction. And we're going to achieve it within this timeline. But we are working towards that direction. Hopefully, I think we should be able to do one or the other. But now the concentration as far as offices are concerned is to see whatever is on the plate, completed, lease it out, add it to the portfolio and look at it in a larger picture at some point of time. Retail, 10 operating months, the 4, 5 under -- 2 under construction, 3 under planning. So even that is something that is already happening. And there is some opportunity there. I can't spell the whole thing out immediately. But we are looking at something, and hopefully, if that materializes, it will be another opportunity.

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Operator [162]

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The next question is from the line of Prem Khurana from Anand Rathi Shares and Stock Brokers Limited.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [163]

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So 2 questions. One was on the sheet that we've given this quarter and business vertical review. So hospitality seems to be pretty low in terms of ROC that maybe Narayana you explained a large part of it is essentially because of the fact that your 600-odd rooms are yet to kind of stabilize. But I mean, just to get a sense, I mean, if you adjust for the capital that you would have employed in the 600-odd rooms, what could be the number, essentially? I mean, is it comparable to the number that we have for either retail or office? Or how the number compare to these 2 segments.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [164]

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Eventually, it will happen because these 2 assets have just been launched, see because any asset whether it's even retail is the same thing, about a year, 1.5 years, it takes to stabilize. And I must tell you that these assets are actually performing very well considering they have just been launched. And it's a matter of time, but there's another big difference. If you look at the depreciation figure and hospitality is much larger as compared to others. So it will have a -- an impact. But I believe these assets will definitely perform, and they are performing as we are seeing it even in this quarter.

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V. V. B. S. Sarma, Prestige Estates Projects Limited - CFO [165]

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Net of these 2, closer to the retail lease.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [166]

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Okay. And sir, given the fact that [I mean in see the --] between the retail and hospitality, I mean, if I were to adjust for this asset size to stabilize, your ROC is somewhat similar. So how do we decide on capital allocation? I mean it is more to [do with] location that you get to have? Or I mean, how does that work? And how do you decide on the capital allocation, if the ROC is the same or if the yield is the same between the 2 assets?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [167]

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See, one thing is or sometimes everything comes as a package. Now what really happens is there is a location, there's a particular site, it lends itself for partly office, partly hospitality, partly retail so -- and if I just do only retail, it may not work well. If I do only office, it may not work well. It's an opportunity lost. So what we need to evaluate is, how we develop these -- all this entire piece of plan. And then allocate a certain portion to retail, allocate a certain portion to office and a certain portion to hospitality. It's not that we have got some big ambition to become the biggest hotelier in the country. That's not the ambition. Well, every development comes with a certain opportunity. It comes with a certain bandwidth to do a certain development. So we have to look at and conceptualize all of it as a whole. And according to us, all of these assets at some point of time definitely will perform. And if you look at it together, maybe if having a hospitality component with the office and retail, the office and retail performed better than the hospitality. That supports -- the hospitality supports those 2 to become -- perform better. And at some point of time, hospitality itself starts yielding. Like today, I have got now a hospitality asset in our mall in Whitefield. I've got another hospitality asset along with our mixed-use integrated development. So it's a mix and match of everything.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [168]

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Sure. And sir, the second question was on the CapEx properties, which are under construction, I mean, between office and retail almost 7.3%. What is the total CapEx that we need to incur? And how much is already incurred? And what is the timeline in terms of completion for the -- this 7.3 million square feet of area?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [169]

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Early -- while answering earlier question, the commercial CapEx is the balance of INR 20,240 crores. On the retail, under construction is around INR 250 crores. Hospitality is also around INR 250 crores. So this is what that needs to be -- hospitality is one more hotel that is JW Marriott in north Bangalore. The retail are 2 properties, and the commercial are various properties INR 1,240 crores.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [170]

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Sure. And given the fact that our current rate seems to be almost around INR 200-odd-crore in terms of CapEx spend, is it fair to assume (inaudible) we would be able to finish this entire thing over the next 2 years?

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [171]

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Yes.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [172]

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Okay, sure. And just one last, if you -- if I may. I mean, we've delivered good in terms of completions this quarter almost [100-odd million] square feet of area. But then when will you get to have this kind of lumpy deliveries, you get to see -- I mean, do payments tend to a milestone -- last milestone payments then to come at a later date, right? So what would that number be varying? We would not have been able to realize that money because the position -- and we've also had the position, but the buyer is yet to kind of take the position later.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [173]

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We have just not worked those numbers out. But then your observation is correct.

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Operator [174]

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The next question is from the line of Saurabh Kumar from JP Morgan.

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Saurabh S. Kumar, JP Morgan Chase & Co, Research Division - Senior Analyst [175]

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Sir, just following up on this capital allocation. So I'm just wondering how you allocate capital because your annuity EBITDA currently is more than your residential EBITDA? And in residential, you are launching 6 million square feet, delivering 10 million square feet. Whereas in office, you just have to do 1.5 million, 2 million square feet. And your capital costs are quite decent. And in your resi, your net margin, at least, is sub single digit. So I'm just wondering, I mean, just in terms of bandwidth capital as in the annuity business is better placed to be in for you, and that's where you should be directing most of our capital to.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [176]

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Mix of all. In fact, if you look at -- Saurabh, I'm glad you made this observation. Residential, again, if you split into -- ideally you should split those 3 [NRK], JD projects, residential sub, the returns are very, very high because construction costs have not moved up between the last 3, 4 years. They're holding up at particular levels. It's more of a planning and budgeting that we needed to do to get the right numbers. So the JD projects are quite high. The bought out products -- projects also we made a lot of money. It's a -- the premium or luxury development, where the staff churn has been little slower there. That's where the -- a lot of capital has gone. So but for that even those will be higher. That's different segment altogether, that's why it's on plus and minus, we can do higher volumes with a lesser amount of money. The idea behind -- I mean broadly, the idea behind giving out this sheet, we've been talking about it is that to tell all of you that start looking at us as a company with 5 different segments. Five segments, which has got independent opportunities, markets and the growth potential with the different yields well-diversified. In fact, I would like to draw your attention to Slide #20, where we have given the office breakup of operating under construction upcoming retail, likewise -- likewise hospitality. And to that, if you add in services as well as residential, as a sum of parts, if you look us and apply cap rates for office and retail, some EBITDA multiples for hospitality, and services a similar way and residential and reduce the whatever the debt that we have got, we should be valued very, very differently. So the idea behind this is, start looking at us as a company with 5 different business verticals. As we move forward, maybe in a year or 2, you will see us being run off in that manner because the retail as such is a very specialized field, now the time are running at very different, we've got 10 months runnings, 5 more in making, 15 more -- some more acquisitions. Our constructions will happen. In terms of number of mall owners, who are doing only -- predominantly mall business. We have the right there in terms of number of malls. In terms of office, if you look at also rental income, we're getting around INR 600 crores, we can go INR 1,600 crores, just considering what is under construction and under planning. So that is comparable with the any developer who is doing office only, more or less. So therefore, sum of parts is the best way of looking at everything. Yes, as you said, there our capital deployment opportunities, some segments will do higher yields as compared to others. As Mr. Razack was explaining to us -- while answering earlier questions, sometimes, it's the way it comes, it's the mix that we need to do. So far, we've been making good money in the residential. If you look at ROE in residential, it's very high. So you're looking at a PAT margin. It also depends upon what we are investing to get that return. If you see the highest yield after services is the residential business.

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Saurabh S. Kumar, JP Morgan Chase & Co, Research Division - Senior Analyst [177]

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In my limited point was you have a crosstown rival, we has lifted the REIT, right? And if your NOIs are not very far off -- but the EV differential or market cap differential is very wide in that some sense, and -- that the differential seems to be the residential business and the debt on the resi and the discussion on the resi. And -- so I'm not so sure whether it is adding any positive value, is my limited point.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [178]

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So no, taken your point, Sourabh. So the moment we look at having off office, retail, hospitality and start making them a business vertical run separately, then we will have only residential year. So they will automatically get their due share in terms of the visibility and the value.

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Operator [179]

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The next question is from the line of Neeraj Sahjwani from ASK Property Investment Advisors.

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Neeraj Sahjwani;ASK Property Investment Advisors;Research Manager, [180]

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I wanted to ask about your South Mumbai project. You said, you were reducing sizes and looking at smaller ticket size. So what configuration and ticket size are you looking at?

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [181]

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I think cap rate between 700 to 800, 2 bedroom and on those lines. And I think more than that, the ticket size, we're looking at around INR 3 crores. So we'll have to work towards those lines.

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Operator [182]

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Ladies and gentlemen, as there are no further questions, I will now hand the conference to the management for closing comments.

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [183]

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Thank you. I think it's been quite an enthusiastic discussion this time. A lot of questions and a lot of -- sort of interaction. It's been quite good as usual. And thank you for your participation.

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Konanki Venkata Narayana, Prestige Estates Projects Limited - CEO [184]

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Thank you all for your participation. I mean if you see -- now we've started giving business verticals, the capital employed and the results per se segment-wise. And next quarter, we'll try and add cash flow statements to each of the segments. The idea is to now drive the businesses across these segments, across the geographies and see how we can capitalize on the current market opportunities that exist. And we are on course to meet the guidances that we have given at the beginning of the fiscal. There is a huge launch pipeline that we do have. So therefore, we are comfortable at this juncture to meet and surpass the guidance that we have given. Thank you, once again, for your support and time for -- taking out time to be on this call. Thank you.

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Irfan Razack, Prestige Estates Projects Limited - Chairman & MD [185]

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Thank you.

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Operator [186]

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Thank you very much.