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Edited Transcript of PURVA.NSE earnings conference call or presentation 26-Jul-19 11:30am GMT

Q1 2020 Puravankara Ltd Earnings Call

Karnataka Aug 1, 2019 (Thomson StreetEvents) -- Edited Transcript of Puravankara Ltd earnings conference call or presentation Friday, July 26, 2019 at 11:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Kuldip Chawlla

Puravankara Limited - CFO

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Conference Call Participants

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* Biplab Debbarma

Antique Stockbroking Ltd., Research Division - Research Analyst

* Nimit M. Gala

Edelweiss Securities Ltd., Research Division - Research Analyst

* Rohith Potti;Marshmallow Capital; Investor

* Ruchi Parekh

Anand Rathi Financial Services Limited, Research Division - Research Associate

* Vinit Manek;Karma Capital Advisors Pvt Ltd;Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Puravankara Limited conference call to present and discuss the Q1 FY '20 results. (Operator Instructions) Please note that this conference is being recorded. I now hand the conference over to Mr. Kuldip Chawlla, Chief Financial Officer from Puravankara Limited. Thank you, and over to you, sir.

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Kuldip Chawlla, Puravankara Limited - CFO [2]

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Thank you very much. Good evening, everyone, and very warm welcome to all of you. My name is Kuldip Chawlla. I'm the Chief Financial Officer of Puravankara Limited. Thank you so much for joining us on Puravankara's Q1 FY '20 Earnings Call. We have uploaded the financial results and the investor corporate presentation already.

The Modi government 2.0 under its mission of homes for all has raised the budgetary allocation for its flagship welfare scheme and has provided quite a good impetus for the overall real estate sector. More importantly, we believe that under the current regulatory and market scenario, there exists an opportunity for well-established, well-entrenched, regulated real estate players to expand and to gain market share. Puravankara, with its strong execution capabilities and its trusted brand, is geared to capture this opportunity.

We closed the last financial year on a positive note. The momentum continues. Our focused efforts towards reducing ready-to-move inventory is delivering results. On the back of similar performance over the last few quarters, sale of ready-to-move inventory has more than doubled. Sale of ready stock in Q1 FY '20 stood at INR 233 crores as compared to INR 104 crores in Q1 FY '19, an increase of 124%. The resultant collections and operating surplus is also showing an encouraging upward trend. Customer collections for Q1 FY '20 were INR 441 crores as compared to INR 252 crores in Q1 FY '19, an increase of 75%. The resultant increase in operating surplus has resulted in a small reduction in net debt.

Coming to the quarter's sales performance. In Q1 FY '20, backed by the sale of almost 10 units every working day and with half the sale coming from ready-to-move inventory, sales bookings grew 33% over the quarter April-June 2019 to 638 units or 0.79 million square feet, valued at INR 493 crores.

Now the reported revenue numbers for the quarter. The EBITDA for the quarter was INR 160 crores, up 49% year-on-year, with an EBITDA margin of 25%. Profit before tax stood at INR 65 crores, up 85%, while comprehensive profit after tax was INR 43 crores, up 63% year-on-year.

Importantly, inflows from operations for the quarter continued to grow and stood at INR 474 crores, an encouraging 42% growth year-on-year. This growth in inflows has not only helped accelerate the necessary project spending, but also generated monies to fund some of the initial expenditure for the new launches. Consequently, after accounting for operating expenditure of INR 324 crores, the operating surplus for the quarter was INR 151 crores. Even after paying for interest and taxes, the net operating surplus after interest and taxes grew fourfold to INR 59 crores compared to the sequential quarter Q4 FY '19.

The company continues to comfortably meet all its obligations to its various stakeholders. As of June 30, 2019, the balance collections from sold units of all launched projects stands at INR 2,045 crores against the balance cost to go, excluding overheads and interest, of INR 1,897 crores. Combined with the value of unsold inventory open for sale at INR 4,074 crores, this is projected to generate an operating surplus of INR 4,222 crores before overheads and interest cost.

Apart from this, we project a further surplus of INR 2,309 crores from units in approved projects but those which are not yet open for sale. These 2 figures combined give a projected surplus of INR 6,531 crores as a whole, excluding overheads, interest costs and loan repayments.

We are on track to meet our stated business goals, venturing into new micro markets and one new geography as well as expanding our commercial portfolio progressively. The Mumbai launch is on track and will be followed by further expansion of new Provident projects in Pune where Puravankara is already present. Our other Bangalore launches are also on track. We have started inviting expressions of interest on new projects in Bangalore, Provident Equinox and Provident Capella.

All these measures towards enhancing sales, improving collections and focusing on operational surplus, coupled with our various steps towards cost optimization, contract management and other measures in improving our operational efficiency are likely to bear fruit in the coming quarters and indeed the years ahead. We are encouraged and excited with the trends that we see emerging from this quarter in this regard.

To summarize, this continues to be a steady quarter compared to the corresponding period last year. Growth in our focused areas is encouraging, and we see -- we continue to see a good growth trajectory in line with our strategy.

We would now be happy to address any questions that you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have the first question from the line of Nimit Gala from Edelweiss.

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Nimit M. Gala, Edelweiss Securities Ltd., Research Division - Research Analyst [2]

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Kuldip, my question for you. I just wanted to understand how is the liquidity scenario panning out now for the company as well as the players in Bangalore? And given that GSEC yields which have come down substantially now, are we seeing a reduction in debt cost for you guys? And second question is about the subvention scheme -- closing of subvention scheme. So what is our exposure to that?

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Kuldip Chawlla, Puravankara Limited - CFO [3]

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Let me answer your last question first. We have less than 1% active subvention in our entire portfolio. It's also important to mention here that we have never taken any advance disbursement facility or ADS, as it is known. Whenever we have taken any subvention in the past, it has only been progress-based, milestone-driven for the project to which it pertains. And therefore, there is no impact on us of what we are seeing in terms of what the authorities have said on subvention loans.

Number two, your question was on the cost of debt and debt coming down. I think part of that we've already seen. We've seen a reduction in average debt from 11.4% to 11.2% in this quarter. And directionally, we see a reduction in interest costs. I think the pace and scale of it, we will know as things progress, but we are hoping that it will accelerate further. That said, I think our dependence on debt overall is going down.

Your third question was related to the liquidity scenario for the company. I'd like to address that in 2 parts. First, I think we have a very comfortable liquidity scenario. We have over INR 600 crores of lines of credit that we can readily draw across our projects, flexible. So that's not a problem at all. The other thing is obviously as you are aware, we follow a very extensive book building, expression of interest process that is reducing the extent of debt that we need for our new residential projects going forward. So I think what we will do is, in a scenario in which there might be in some quarters a lack of trust, organized players such as ourselves are actually taking advantage and getting the benefit of the trust we have enjoyed across business cycles over the last 4 decades.

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Nimit M. Gala, Edelweiss Securities Ltd., Research Division - Research Analyst [4]

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Okay. And one more question, if I can. Did we not have any launches during the current quarter?

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Kuldip Chawlla, Puravankara Limited - CFO [5]

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No, we did not have except that we've started the expression of interest process on 2 projects, like I mentioned, Provident Equinox and Provident Capella, which we should close towards the end of this quarter.

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Nimit M. Gala, Edelweiss Securities Ltd., Research Division - Research Analyst [6]

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Okay. And do we have any launch pipeline? Of course, I have the launch pipeline with me, but any guidance for that for the current year, rest of the 3 quarters, I mean?

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Kuldip Chawlla, Puravankara Limited - CFO [7]

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As per the presentation -- we are on track, as per the presentation, which I think should be Slide 12. So we're on track as per that.

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Nimit M. Gala, Edelweiss Securities Ltd., Research Division - Research Analyst [8]

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Okay. That's a good 11 million square feet of launches which we're looking at.

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Kuldip Chawlla, Puravankara Limited - CFO [9]

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Correct.

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Nimit M. Gala, Edelweiss Securities Ltd., Research Division - Research Analyst [10]

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What was the advancement for the single year?

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Kuldip Chawlla, Puravankara Limited - CFO [11]

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I think if you look at it, some of it is also possible in FY '21, where you see a large Chennai project.

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Nimit M. Gala, Edelweiss Securities Ltd., Research Division - Research Analyst [12]

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Yes, that's 1 million square feet.

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Kuldip Chawlla, Puravankara Limited - CFO [13]

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Yes, yes, yes. Actually, out of your 11 million, that is 3.8 million. So that's -- I think you should look at it from that perspective.

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Operator [14]

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(Operator Instructions) We have the next question from the line of Biplab Debbarma from Antique.

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Biplab Debbarma, Antique Stockbroking Ltd., Research Division - Research Analyst [15]

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Sorry, I'm on leave, so I logged in a little bit late. So I have one small query. What part of your debt is -- I mean city-wise, what portion of your debt is in Mumbai projects, in Bangalore projects, and in Chennai projects? (foreign language) If you can give some idea.

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Kuldip Chawlla, Puravankara Limited - CFO [16]

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I think of our total debt, less than 5% -- about 5% would be in Mumbai and approximately less -- about 10% -- less than 10% would be in Chennai.

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Biplab Debbarma, Antique Stockbroking Ltd., Research Division - Research Analyst [17]

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Okay. So we can say...

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Kuldip Chawlla, Puravankara Limited - CFO [18]

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About -- was it -- one second, Chennai -- yes, about 12% in Chennai.

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Biplab Debbarma, Antique Stockbroking Ltd., Research Division - Research Analyst [19]

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So more than -- majority, more than 70%, 75% of -- 70% of -- 75% to 80% of your debt is in Bengaluru projects, right?

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Kuldip Chawlla, Puravankara Limited - CFO [20]

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Yes.

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Biplab Debbarma, Antique Stockbroking Ltd., Research Division - Research Analyst [21]

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That is what I understand.

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Kuldip Chawlla, Puravankara Limited - CFO [22]

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And about less than 5% in Cochin. And maybe another 4% or so in Hyderabad, 4%, 5%.

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Biplab Debbarma, Antique Stockbroking Ltd., Research Division - Research Analyst [23]

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Okay, sir. Okay, sir. And I see that your debt has gone down -- absolute number has gone down marginally, right, sir?

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Kuldip Chawlla, Puravankara Limited - CFO [24]

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Yes.

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Biplab Debbarma, Antique Stockbroking Ltd., Research Division - Research Analyst [25]

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Yes, sir. And we expect this debt to go down substantially marginally going forward?

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Kuldip Chawlla, Puravankara Limited - CFO [26]

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I think I'd just like to -- let me put this in perspective. Whatever figures we track is debt-to-sales, okay? Now as the -- and you find some very encouraging trends if you look across companies on the debt-to-sales ratio. Our sales are growing exponentially. Therefore, you should expect that we would need some element of debt, a little bit on the early part of our cycle as we launch projects and a little bit for residential. So therefore, what I'm trying to say is that if you look at my debt that is reducing because of my ready-to-move inventory sales, there would be some increase in the short term because I need to fund construction. What is important is that this debt -- a larger proportion of the debt has -- is in production, which means it is generating cash flows to service that debt. Therefore, we -- what we'd like you to do is to look at the composition of our debt as much as the absolute level of debt.

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Biplab Debbarma, Antique Stockbroking Ltd., Research Division - Research Analyst [27]

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Okay, sir. Sir, one final question, I have been asking on each con call is that you -- about your Mumbai projects. When these are going to be launched? Around Diwali? Because -- I mean what -- any -- you can give us guidance when these Mumbai projects would be launched?

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Unidentified Company Representative, [28]

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I think around the third quarter we should see something. The only impediment would essentially be, I think, Maharashtra is now going into elections. So depending on how fast we can get our clearances, but, for example, Chembur, Thane, Shilphata, all the designing is over. The submissions have already started for those actions. So I'm hopefully maybe in the next 2 -- maybe 2 quarters, we should be able to have a couple of launches there.

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Biplab Debbarma, Antique Stockbroking Ltd., Research Division - Research Analyst [29]

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I'm asking this question because especially for your Chembur, it is owned by you. So there is some carrying cost. So that was the reason I was asking. So...

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Unidentified Company Representative, [30]

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As for Chembur, the design is completed. The submissions have already started.

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Operator [31]

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We have the next question from the line of Vinit Manek from Karma Capital.

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Vinit Manek;Karma Capital Advisors Pvt Ltd;Analyst, [32]

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I just wanted to check on bookkeeping thing. But can you help me out with the absolute value of the completed inventory as on the quarter? And how much does you -- how much does Chennai contribute from it?

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Kuldip Chawlla, Puravankara Limited - CFO [33]

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The absolute value of completed inventory is around INR 950 crores. Chennai would contribute approximately close to INR 300 crores out of that. Let me put it in perspective. In FY '19, Chennai, we sold INR 140 crores to INR 150 crores of inventory. And this was a growth over FY '18, a 50% growth over FY '18.

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Vinit Manek;Karma Capital Advisors Pvt Ltd;Analyst, [34]

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So we are seeing good traction at...

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Kuldip Chawlla, Puravankara Limited - CFO [35]

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Exactly, exactly. And 90 -- not 90, about 80 -- a little over 80% of the Chennai inventory is Puravankara inventory. So that's really -- this is what we're excited about. We changed our entire approach to selling ready-to-move inventory, and we're very excited and encouraged by the results we see there.

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Vinit Manek;Karma Capital Advisors Pvt Ltd;Analyst, [36]

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And just to check one thing. So the value of this inventory INR 950 crores haven't changed quarter-on-quarter. So last quarter also it was close to that only.

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Kuldip Chawlla, Puravankara Limited - CFO [37]

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Okay. You are factually correct. The reason is that the absolute volume of inventory has gone up. It was about 1.85 million. It has now become 1.97 million. So whilst the old inventory has sold, a small amount of new inventory has been added. But the encouraging thing is that the new inventory, which has been added, is very small, and B, it is fast-moving.

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Vinit Manek;Karma Capital Advisors Pvt Ltd;Analyst, [38]

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Right, right, right. So maybe the whole -- the historical inventory that we had is liquidating and...

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Kuldip Chawlla, Puravankara Limited - CFO [39]

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Historical inventory is liquidating, and new inventory that's been added, specifically, Palm Beach and Green Park have both sold very well, very recently as well.

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Operator [40]

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(Operator Instructions) We have the next question from the line of Karan Singh, an investor.

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Unidentified Participant, [41]

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We see good growth in our units sold this quarter of around 638 units despite no new launches. Now considering new launches in the coming quarters, where do you see this number going to?

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Kuldip Chawlla, Puravankara Limited - CFO [42]

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Where do you see the sales number going to from 638 with new launches coming up? We really don't give guidance, Karan. But I think what you should look at is our track record over the last couple of years where we sell anywhere between 60% to 80% of what we launch within the first year from the quarter in which we launch. So whether you look at Park Square, you look at Goa, Kenworth, Silversands over the last 3, 4 years, in the first year or so that's the trajectory of sales.

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Unidentified Participant, [43]

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Okay. Sir, second question is regarding the commercial space. How much additional debt would you be looking at in projects coming (inaudible)?

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Unidentified Company Representative, [44]

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So there are 2 things. So for the commercial, like we said, we have a strategy of building a portfolio, which is 8 million to 9 million square feet over the next 5 to 6 years, out of which about close to -- or a little under 5 million square foot land is already available with the company. So there is no payment that needs to be made for the land. As far as the construction goes, I mean you can look at an average cost of INR 3,000 to INR 3,500 a square foot, and you can look at -- even if you're looking at a 4.5 million or 5 million square foot to be built over the next 3.5, 4 years, that would be the value. In addition to that, we are also exploring with private equity players a platform deal so that we have a good balance between debt and equity.

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Unidentified Participant, [45]

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My last question is on the macro. How do you see the demand picking up?

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Kuldip Chawlla, Puravankara Limited - CFO [46]

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So I think if you see our sales, I think it's been stable. So I think RERA in that sense has been a blessing in disguise. The number of launches from the unknown players has almost gone out of the market, whereas -- so therefore, I think, all the buying you're seeing is more concentrated amongst the larger brands and, therefore, the success that we've seen in the first 2, 3 quarters of most of the launches that we've done.

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Operator [47]

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(Operator Instructions) We have the next question from the line of Rohith Potti from Marshmallow Capital.

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Rohith Potti;Marshmallow Capital; Investor, [48]

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I -- my first question is on the ready-to-move-in inventory debt. Is it possible for you guys to share that number? How has it moved over the last year to this quarter?

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Kuldip Chawlla, Puravankara Limited - CFO [49]

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Rohit, can we take this offline, but directionally, our ready-to-move inventory debt is around INR 900 crores in total.

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Rohith Potti;Marshmallow Capital; Investor, [50]

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Okay. So I'm assuming with the strong sales that we are seeing, this would come down quite substantially going forward, right?

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Kuldip Chawlla, Puravankara Limited - CFO [51]

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Yes.

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Rohith Potti;Marshmallow Capital; Investor, [52]

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Okay. And could you give me a rough ballpark on the cash inflow from the completed projects that have been sold, but the money has not been received yet?

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Kuldip Chawlla, Puravankara Limited - CFO [53]

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We have approximately right now around

(technical difficulty)

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Operator [54]

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Mr. [Nagamalai], I'm sorry to interrupt but we have lost the audio from your line. Ladies and gentlemen, kindly stay connected. We have lost the management's line. We'll reconnect them shortly.

(technical difficulty)

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Kuldip Chawlla, Puravankara Limited - CFO [55]

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I think Rohith was asking the question. Is Rohith back online?

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Operator [56]

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Sir, we don't have the participant, but I'll call for more questions. One moment...

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Kuldip Chawlla, Puravankara Limited - CFO [57]

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No, I think I was answering a question from Rohith from Marshmallow.

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Operator [58]

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Sure. In case he comes back in, I will put him through.

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Kuldip Chawlla, Puravankara Limited - CFO [59]

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Please, please, please.

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Operator [60]

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(Operator Instructions)

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Kuldip Chawlla, Puravankara Limited - CFO [61]

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I was answering a question that was asked by, I think, Rohith from Marshmallow Capital. He asked what is the receivable from sold but not received ready-to-move inventory. It's about INR 450 crores.

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Operator [62]

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(Operator Instructions) We have Mr. Rohith Potti back into the queue. I'm just going to put him through.

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Rohith Potti;Marshmallow Capital; Investor, [63]

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I apologize, the call got disconnected.

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Kuldip Chawlla, Puravankara Limited - CFO [64]

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No, no, we apologize. I think we all got disconnected.

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Rohith Potti;Marshmallow Capital; Investor, [65]

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Okay. Okay. So I think Kuldip, you -- what I heard last was you were talking about the amount of cash inflow that is to be coming out of the sold completed inventory.

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Kuldip Chawlla, Puravankara Limited - CFO [66]

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INR 450 crores, Rohith, is the receivable from sold, built and yet-to-receive, ready inventory.

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Rohith Potti;Marshmallow Capital; Investor, [67]

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And this is to be received over the course of this financial year?

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Kuldip Chawlla, Puravankara Limited - CFO [68]

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Over the course of this financial year.

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Rohith Potti;Marshmallow Capital; Investor, [69]

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Okay. Great. That's nice. And with the new...

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Kuldip Chawlla, Puravankara Limited - CFO [70]

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I just would like to add a little clarification. While this includes this financial year, some of this may not have been billed because some of these projects such as Palm Beach, which includes a meaningful part of that INR 450 crores, is yet to be billed because that project is not yet ready to be fully handed over.

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Rohith Potti;Marshmallow Capital; Investor, [71]

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Could you explain it a little more?

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Kuldip Chawlla, Puravankara Limited - CFO [72]

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What I'm trying to say is, when a project -- as we hand over a project, we also bill. So if I'm going to hand over this to a customer and the customer comes after 3 months because he is on vacation or he is overseas or after 4 months, then billing will happen at that point in time.

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Rohith Potti;Marshmallow Capital; Investor, [73]

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Okay. I understand. I understand. Okay. Fine. Got it.

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Kuldip Chawlla, Puravankara Limited - CFO [74]

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But it's going to be in this financial year.

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Rohith Potti;Marshmallow Capital; Investor, [75]

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Okay. Got it. So yes, I got what you said. And with the -- the next question is on the budget announcement where they have capped the price of the affordable housing property at INR 45 lakhs. So does it change your strategy in any of the locations, perhaps in Mumbai?

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Unidentified Company Representative, [76]

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No, I think as far as the Provident model is concerned, I think we've hit a sweet spot in terms of the design and the ticket size. So what would end up happening is within projects, we'll see about 45%, 50% of our inventory, which will probably conform to that INR 45 lakh budget. So therefore, the customers will enjoy that benefit of that additional INR 1.5 lakh this thing. But going forward, I think post September 1st projects -- before September 1, even projects where we have INR 45 lakhs and larger units, we will still -- as a developer, we still get the ATIB benefit. But post September 1, you may not get that tax benefit if you have larger apartments in that. I think we would rather focus on building something that is marketable than to meet something that at INR 45 lakhs and we're not able to sell, depending on the locations of where our land assets are.

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Rohith Potti;Marshmallow Capital; Investor, [77]

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Got it. Got it. That makes sense. Next question is more strategic that I want to understand. I mean I just observed that over the last 10 years, the company's addition to the retained earnings and the dividends paid to the shareholders is, I think, less than the interest rate of the banks. So -- and over the last 10 years, while the debt has ballooned to more than -- to around 4x the level we saw in 2008, the construction area that we have right now has remained at around the same level of 20 million, 23 million square feet. So from this point on, how do you see that changing? The reason I'm asking is even over the last 4, 5 years after we began the expression of interest model, where we have self-funded most of projects, the debt has still increased. So what -- how do we see this particularly on debt reset terms?

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Unidentified Company Representative, [78]

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So in terms of trends, 2 things. One is that you see over the last 2, 3 years, I would say, 8 out of 10 projects where we have done the EOI model. If you see the amount of construction finance is almost insignificant. For example, if you look at Silversands in Pune, the total borrowed CF is not more than, correct me if I'm wrong, 25 crores?

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Kuldip Chawlla, Puravankara Limited - CFO [79]

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Correct, correct.

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Unidentified Company Representative, [80]

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It's under INR 25 crores of the CF borrowed, typically, which would have been at least 3, 4x that. If you look at Kenworth in Hyderabad, again, where we have 1,600 apartments, what is the total CF there?

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Kuldip Chawlla, Puravankara Limited - CFO [81]

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INR 100 crores.

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Unidentified Company Representative, [82]

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That's about INR 100 crores for a project, which is 1.6 million or 1.8 million square feet. Goa, again, which is about 1,600 apartments, do we have CF?

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Kuldip Chawlla, Puravankara Limited - CFO [83]

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We have some INR 50 crores of CF.

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Unidentified Company Representative, [84]

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There's just INR 50 crores of CF. So incrementally, the CF is not increasing, though the project sizes are large. You are comparing our numbers to 2008 to now. The change in strategy really, now if you look at our West acquisitions, which is Pune and Bombay, I think 8 out of 10 projects -- 9 out of 10, rather, have been on joint development basis and not outright. So while the number of projects and the volumes are increasing, we're not seeing the debt increase in that same fashion. So that's the change in strategy as well.

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Rohith Potti;Marshmallow Capital; Investor, [85]

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Understood. I was asking because I think we see around INR 250 crores to INR 300 crores interest payment, and that has been a big drag on the amount you have been able to retain shareholders into the company. And this -- with the commercial property strategy that you're having, I think that's on...

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Unidentified Company Representative, [86]

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So on the commercial bit, so while the strategy is to build a portfolio of close to 8 million to 9 million square feet over 5, 6, 7 years, almost -- a little under 5 million square foot land is already available to the company, so there is no monies due against land, A. B, as a strategy, you're right, so we are also now talking to private equity players to form a platform that will be because we understand that then we do strategy required for the construction of these commercial assets so that we have the right balance between debt and equity in our commercial portfolio.

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Rohith Potti;Marshmallow Capital; Investor, [87]

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Got it. Understood. And I noticed the land - so is it true that we did that land deal with Unitech. I saw it in the news, so I don't -- you don't know what to entirely believe and what not to. So just wanted to hear it -- hear a confirmation from you if that is true.

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Unidentified Company Representative, [88]

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No. So this was a 2-year -- 2.5-year-old transaction, where we had gotten into an MoU. There were certain conversions of land that were pending. There were certain titles that were pending. Finally, I think, in November -- sorry, July last year, the title came through, the conversions were completed. And then also I think, Unitech, Supreme Court had asked for a list of their assets. And that's where our MoU also got reflected and gave a direction that within 30 days, these transactions should be completed, which is where we completed. So I think it was a 2.5-year-old transaction, which was completed in June last year. So this is a 12.5-acre parcel on Bellary Road right -- on that new airport road in Bangalore. So a prime location for commercial.

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Rohith Potti;Marshmallow Capital; Investor, [89]

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Okay. Okay. So extension of that is -- do you see the company doing more land deals opportunistic of...

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Unidentified Company Representative, [90]

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Going forward, I can comfortably say, I think, 90% of them will be more capital-light joint development models, and that's the focus given to the land acquisition department as well. But for a few very stray cases, which are older transactions that have taken time to materialize on account of the landowners having completed certain deliverables on this site. And the price that was agreed was a 2.5-year-ago price. So it is not at today's current market value. So there is a price advantage as well.

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Rohith Potti;Marshmallow Capital; Investor, [91]

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So you mean to say that the prices have increased over the last 2 to 2.5 years. I would have thought they would have been stagnant or reduced...

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Unidentified Company Representative, [92]

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There is no -- no, no, not at all. In fact, if you go to Bellary Road, this is where the new airport is and the new metro is coming. If you look at the last 2 years, I would say prices have gone up at least 40%, 50% land value because that's the new growth area, right? Everyone is looking for land there. All the micro markets have not increased in the same fashion, but certain micro markets, yes, have gone up 50% in the last 2 years.

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Rohith Potti;Marshmallow Capital; Investor, [93]

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Okay. So other than any legacy MoUs that you have signed, where you might have to honor the commitment, you're not looking at anything new with what you're doing?

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Unidentified Company Representative, [94]

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That would be quite clear to -- like I said, with the land acquisition is to focus more on (inaudible). And the proof of that is also if you look at the West, right? Like I said, 9 out of 10 -- so we've gotten off 5 -- almost 5 projects that we signed up in Pune, we've got almost now 5 projects in Mumbai, 9 out of 10 have been ready.

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Rohith Potti;Marshmallow Capital; Investor, [95]

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Yes. So over the last few years, I did observe and that was very nice to see. But my question was more because I think over (inaudible).

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Unidentified Company Representative, [96]

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You are right, these were the legacy ones, which the prices are quite attractive if you look at it today. So these were transactions closed 2, 2.5 years ago.

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Rohith Potti;Marshmallow Capital; Investor, [97]

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Would it be -- I mean I understand it just cannot, but would it be possible to understand how many more of these are probably in the horizon for the company over the next whatever future period?

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Unidentified Company Representative, [98]

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I'll be honest with you, it's so difficult to track and predict. I tell you why. Even with Unitech, we almost gave up hopes that they would come -- I mean from a company point of view, we had no cash-out. We had a very small advance and an MoU signed, right? This thing is going on for 2 years. If there was no Supreme Court pressure, I don't think this would have happened for the next 2 years, to be very honest. So being in this business and land being our raw material, we have MoUs, which are 5 years old, 6 years old. I don't know will it come in the next year, will it come 3 years later. But there are not too many of those.

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Rohith Potti;Marshmallow Capital; Investor, [99]

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Understood. Okay. So in addition to what Mr. Chawlla has mentioned that we might need some very tiny construction finance due to the very strong launch pipeline that we have this year, would I be right in thinking that so for example, the Unitech land deal, which has gotten consummated right now, so you would see that increase because of this as well? So you would see additional INR 200-odd crore of debt coming into the book?

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Kuldip Chawlla, Puravankara Limited - CFO [100]

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No further debt increase because of this deal.

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Operator [101]

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We have the next question from the line of Ruchi Parekh from Anand Rathi.

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Ruchi Parekh, Anand Rathi Financial Services Limited, Research Division - Research Associate [102]

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(inaudible)

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Kuldip Chawlla, Puravankara Limited - CFO [103]

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You are not audible. Are you speaking on the speakerphone or the handset? Can you repeat your question, please?

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Operator [104]

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Ms. Parekh, I'm sorry, the audio is sounding a little muffled from your line. Could you adjust your audio piece a little bit? We cannot hear you clearly, ma'am. Could you disconnect and call back from a different instrument?

(Operator Instructions) We have the next question from the line of Rohith Potti from Marshmallow Capital.

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Rohith Potti;Marshmallow Capital; Investor, [105]

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I just wanted to get this particular perspective, the last perspective from you on debt. So is there a number in your mind that you're comfortable with? Or is it sort of linked to the amount of construction and sales that you do going forward? So it's not an absolute number, but it's a relative number in relation to sales or equity as Mr. Chawlla mentioned previously?

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Unidentified Company Representative, [106]

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Yes. I think it's a relative number to the amount of launches. So for example, this year, 9 million square foot of launches. Now how much of that we get the clearance and how much we launch. So you have that much of land in production or project in production or square footage in production. It will be a result of that, A. B, one comfort that comes out of it is, if you look at the last 3, 4 years of launches, I think 8 out of 10 projects, the amount of CF that we have taken has been relatively lesser, right, because of several EOI processes. So it's definitely relative.

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Rohith Potti;Marshmallow Capital; Investor, [107]

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Understood. So what I was trying to understand is, given the whole change in process where you are -- I mean like you mentioned in almost all the new projects, which is Goa, Pune, Hyderabad, Park Square, where -- I think you have enough bookings where the cash flows have probably covered majority of the construction cost. Do you see this number trending downwards at least on the residential bit and you would be taking incremental debt probably only for the commercial bit?

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Unidentified Company Representative, [108]

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Yes, absolutely.

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Kuldip Chawlla, Puravankara Limited - CFO [109]

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I think that assumption is right.

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Rohith Potti;Marshmallow Capital; Investor, [110]

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Understood. Okay. And commercially, do you see over the next 3 years the demand to be strong? Is it because -- I mean I was reading that because of the strong rental yield the commercial properties are giving right now, probably this year or next year, the supply is going to almost increase by INR 50 crores to INR 75 crores across markets. So would you see -- I mean would you see a pressure on the yields probably 2 years out when our projects are ready?

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Unidentified Company Representative, [111]

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There are 2 things here. One is the existing 4.5 million square foot. I would say, 85% of that land is a historic land cost sitting on our books, A. So this is not fresh value land bought at today's market value. Secondly, these are very carefully selected micro markets, right? So for example, if you look at -- just to give you a little bit of a flavor, so in Bangalore, we have one commercial that is coming up 3 kilometers from MG Road. This is a land owned by the company on Old Madras Road, but 3 kilometers from MG Road, which is CBD. We have 2 commercial projects which are coming up on Bellary Road, which is a new growth corridor. So the kind of boom and growth that the Ring Road saw over the last 10 years, most of the development now because it's totally -- Ring Road is now exhausted, we have seen the interest go along the new airport road. So it's coming in that growth area.

If you look at Pune, today, one 10-acre development is coming up on our land which is in Kharadi where you have the EON SEZ. So it's already an established IT micro market and that too is a JDA, right? We have another JDA in Pune, which is opposite the Mercedes-Benz showroom on the Wagholi highway, again, a great micro market, which is essentially 10 minutes before Kharadi. Today, I'm able to -- so we have underwritten that at INR 45 rental, whereas Kharadi today is sitting at INR 80 to INR 85 rental, right? So this was a detailed study through JLL and Knight Frank did a micro markets. So today, I can do 100% residential on the 28-acre Wagholi land, right? But today, we've done our survey where up to 1 million square foot -- the study said if you do 1 million square foot and if you're able to operate at INR 50 a square foot rental, and if it works for you, you can really get advantage from the Kharadi market today, which is trending at INR 85, INR 90. So these are very carefully selected micro markets. It's not a general strategy to say commercial across Bangalore and any micro market will do well. So we've been careful, selected specific land banks from our existing land banks and then chosen to do commercial offices.

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Operator [112]

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(Operator Instructions) We have the next question from the line of Ruchi Parekh from Anand Rathi.

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Ruchi Parekh, Anand Rathi Financial Services Limited, Research Division - Research Associate [113]

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Sir, I just -- hello?

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Unidentified Company Representative, [114]

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Yes, yes, we can hear you, Ruchi. Please go ahead.

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Ruchi Parekh, Anand Rathi Financial Services Limited, Research Division - Research Associate [115]

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Sir, I just wanted to know more about actually the dealing that recently happened with Unitech. So like the half of the area has been acquired and the rest is still pending or in the clearing stages. So when do we expect that to come on? And how do you plan to further, I mean of launch dates, phases or how do we plan this?

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Unidentified Company Representative, [116]

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So the entire MoU signed with Unitech, I think, little -- I think close to 3 years ago, a little over 2.5 years ago was for a 28-acre land parcel. But front 12.5 acres, we have taken 2.5 years to sort of get the conversions done to get the title clearances done. I think it would have taken longer, but due to the Supreme Court pressure, they sorted that out. The money had to be deposited in Supreme Court. It finally came through July of last year. Now to just give you a flavor, the balance land, so 28 minus 12.5, the balance land is in the state -- the front land was in 2.5 years ago. So I really can't put a time line. It may take 2 years, 3 years, 3.5 years for them to do the conversion. Conversion means agricultural to nonagricultural. And there are other title-related issues that we need to clear up. So it will take some time. So we are going ahead. So every time we get into any agreement, we ensure that risk mitigation is that we only register it. The front land is available. So even if the back land does not come to me in time, I can walk away from it. And the first phase is the 12.5 acres is a stand-alone project and can be developed. So as of now, the design for the first 12.5 acres is already ready. We are going ahead with submissions next week. So it does not really -- it's not dependent on the second phase coming.

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Operator [117]

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(Operator Instructions) As there are no further questions from participants, I now hand the conference over to Mr. Kuldip Chawlla, Chief Financial Officer, for closing comments. Please go ahead, sir.

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Kuldip Chawlla, Puravankara Limited - CFO [118]

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Thank you so much. Thank you, ladies and gentlemen, for your time and your attention, especially on a Friday evening. We will be available offline to address any further questions or clarifications that you may have. Have a wonderful evening. Thank you once again.

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Operator [119]

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Thank you, gentlemen. Ladies and gentlemen, on behalf of Puravankara Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.