Kolte Patil Developers

Kolte management is guiding for a bumper Q4 quarter, with 800-900 cr. reported revenue, 30-40% gross margin, and 20-25% EBITDA margin. Lets see what they end up delivering. Concall notes below

FY23Q3 concall

  • Out of priority launch pipeline of 7’700 cr. (13 projects), have launched 2’000 cr. Remainder landbank has development potential of 15’000 cr. (11’000 is from Life Republic)
  • Planning to launch 4000 cr. of priority launch pipeline in Q4. There maybe some spillover to Q1FY24. Require 8-12% of upfront investment in terms of sales potential. Cashflows from Marubeni will be utilized for this investment
  • Baner project: Have acquired an adjacent land parcel which has improved economic outcome. Planning to launch at 9000 realizations in March 2023 vs 7500-7800 earlier
  • Life Republic: Average realizations have increased from 5200-5400 to 5900
  • Q3 losses were because of delivery of 2 projects in Pune (which were lower gross margin and contributed 31 cr. gross profits and were insufficient to cover overheads; Western Avenue and Green Olive). All costs related to these 2 projects have been booked this quarter
  • Launched premium Row houses in Life Republic and received overwhelming response. Price bracket has widened from 30-80 lacs to 30-250 lacs
  • Q4 revenue recognition will be 800-900 cr. bringing reported revenue in FY23 to 1600-1700 cr. Gross margin: 30-40%, EBITDA margin: 20-25%
  • Deliveries in FY23 + FY24 will be 3000 cr. (so 1300-1400 cr. of revenues in FY24)
  • OCs: Have received for 2.7mn sq. ft in 9M FY23, 60% of these were received in December 2022 and will be recognized in March 2023 quarter. After OC receival, revenues are recognized in 30-45 days depending on agreement with customers
  • Expect higher EBITDA margins in FY23 vs FY22
  • Expect 25-30% pre-sales growth in FY24
  • Referral sales have improved from 3-5% earlier to 7-9% in FY22 and further to 15% in 9MFY23

Disclosure: Invested (position size here, no transactions in last-30 days)

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FY23 ended as a very good year with presales growing by 28%. One place where they lacked was in new launches, which was much lower than earlier guided and reported margins (again much lower than previously guided). However, since FY20 company has scaled up very well, with presales growing at 19% and company consistently generating very high cashflows (500 cr.+ in last 2 years). Realizations have also grown at 9% CAGR over this period.

FY23Q4 concall notes

  • Pre-sales increased by 28% to 2232 cr. (50% came from new launches), volumes increased by 21% to 3.27 mn sq.ft and collections increased by 21% to 1902 cr.
  • Delivered 3.3 mn sq.ft (exceeding guidance of 3mn sq.ft) but EBITDA margins were sharply lower at 13% (vs guidance of 25%). Lower margins are because revenues that are getting recognized are on a 5300-5400 realization (older projects) whereas marketing costs that are reflected in P&L statement are getting incurred on current projects which are being sold at 6800-7000 cr./sq.ft
  • Launched 3.05mn sq.ft of projects (2120 cr.) which was much lower than guidance of 4000 cr. in FY23
  • FY24 guidance: Pre-sales of 2,800 cr. + deliveries of 3mn+ sq.ft (1500-1700 cr.) + launch 7.39 mn sq.ft (5,265 cr.) + acquire projects with topline potential of 8,000 cr. (5000 in Pune + 2000 in Mumbai + 1000 in Bangalore)
  • In May 2023, acquired two projects each in Pune and Mumbai with top-line potential of 2500 cr.
  • Sustenance Inventory: 1700-1800 cr.; 30-40% of FY23 sales will come from sustenance inventory (~1000 cr.) and 60-65% from new launches
  • Received 206.5 cr. from Marubeni Corporation towards investment in the Pimple Nilakh project in April 2023
  • Business development: Net debt is 110 cr., need 500-550 cr. for current business development which they want to fund via internal accruals
  • Life Republic contribution in pre-sales was 1.76 mn. sq. ft (1070 cr. sales). Currently RERA launch inventory is ~1000 cr. in township. Price realization has improved to 5700-5800/sq.ft
  • Strategy in Life Republic during FY23 was to do high volumes, now with that strategy being successful pivoting to selling at higher realizations in Life Republic
  • Have seen 5-10% higher realization across projects
  • Margins & IRR: Outright projects (30-40% gross margins, 20-25% EBITDA margins), JV & Redevelopment (focus on IRR of 30%+)
  • Have been seeing higher demand in higher value housing rather than low and affordable housing
  • Customer profile: IT segment for entry level, beyond 1cr. inventory its spread across industries

Disclosure: Invested (position size here, no transactions in last-30 days)

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18.07.2023 CNBC interview

  • 700 cr. quarterly sales maintained in last 3-quarters
  • Expect 25-30% growth in pre-sales in next couple of years
  • Out of 5000 cr. of proposed launches, have launched 1100 cr. in Q1FY24. Very strong launch pipeline for Q2 and Q3
  • 8 out 10 projects have seen significant increase in realizations (5-15%) including in Mumbai
  • Mumbai: In one project, realizations have increased from 16’500-17’000 to 19’500/sq.ft
  • Life Republic: >10% price increase across products

Disclosure: Invested (position size here, no transactions in last-30 days)

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“Kolte-Patil acquires two society redevelopment
projects in Mumbai Metropolitan Region with estimated saleable area of 4.8 lakh sq. ft. and topline
potential of Rs. 950 crore. These projects located in Goregaon will further strengthen the
Company’s presence in MMR.”

In April-May 2023, the Company announced acquisition of four projects, two in Pune and two in
Mumbai, with the total development potential of ~2.6 million sq. ft. and topline potential of Rs.
2,500 crore. With the two new additions in MMR, the new business development deals now aggregate
a topline potential of ~Rs 3,450 crore. The company is continuously assessing multiple business
development and expansion prospects in its targeted markets through innovative, capital-efficient
deals.

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Some Observations :
1.Net D/E is down - 0.11
2.Pre-Sales almost doubled in last two years
3.Realizatoins are improving
4.New and Sizeble projects acquistions in Pune and MMR
5.Guidance of 25-30% presales for next 2 years…
6.Life Republic is at inflexion point interms of pricing…

Disc: Invested

Another very quarter from Kolte, with pre-sales exceeding 700 cr. and their new business development plans going well. Concall notes below

FY24Q1

  • Quarterly pre-sales have been maintained at 700 cr.+ levels
  • Maintain guidance of 2800 cr. pre-sales in FY24 and 3500 cr. in FY25. Expect deliveries of 1700 cr.+ in FY24
  • Business development: acquired projects worth 3450 cr. (out of planned 8000 cr.)
  • New project launches accounted for 43% of pre-sales in Q1FY24
  • New project launches was ~2000 cr. (guidance: 5200 cr. in FY24)
  • 24k Baner project was launched in June (800 cr. potential). Within the launch week, sold 50% of inventory which was available on sale (sold 242 cr. in Q1FY24). There is strong demand in premium and luxury housing
  • Have delivered 5 24k projects so far, will launch 5 more in FY24. EBITDA margins are 4-5% higher vs MIG housing
  • Life Republic will cross 1.5mn+ sq.ft pre-sales in FY24 (vs 1.7 mn sq.ft in FY23) at higher realizations
  • Sold 200 units in R22 on a weekend (launched in July 2023). Demand is very strong in Life Republic
  • Currently evaluating 10 redevelopment projects in Mumbai, a couple of them are in advanced stage
  • Doing 20%+ EBITDA margins on a project level, corporate level will be lower due to investments in new projects
  • Equa / Wagholi project: waiting for some further approvals, sales velocity is not a problem
  • Business development costs will be higher than previously guided 500-550 cr. because they acquired JV stake in Baner project. Confident of funding most of this expansion from internal accruals
  • Life Republic surrounding areas is a no development zone, their FSI gives them advantage to develop a township
  • Ready unsold inventory is very low (20-30 cr.)

Disclosure: Invested (position size here, no transactions in last-30 days)

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https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/Kolte-PatilDevelopersLimited_October%2009,%202023_RR_329575.html

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Kolte-Patil enters into second agreement with Marubeni Corporation (Japan) for Rs. 110.9 crore.

As a part of this agreement, Marubeni Corporation will invest Rs. 110.90 crore in the Alora project, entitling them to a total saleable area of 59,949 square feet in the project. The Alora project was launched in February 2023 and has a total development potential of ~1.3 lakh sq. ft.

Company maintains their presales runrate, however they weren’t able to launch any new project in Q2 as a result of which most sales came from Life Republic. On reported numbers, they are guiding for 1500 cr. revenues in FY24 and 2000 cr. in FY25. Concall notes below

FY24Q2

  • No new launches in Q2, as a result sales only came from sustenance inventory (462 cr. from Life Republic out of 632 cr. in Q2)
  • Few projects saw realization drop (24K Altura – 8965 vs 9105 in Q1, Little Earth – Kiwale – 4843 vs 4979 in Q1). Is this a cause for worry?
  • Ownership in Life Republic reached 100% from 95% post acquisition of 5% stake from minority holders in October 2023, will also need to make some payment to ICICI (125 cr. total payment and then Life Republic township will be 100% owned by them)
  • 24k projects: have launched 3 (out of 5 planned in FY24). Have sold out 60%, 20% (in pre-launch stage), and 25% (row house) in these
  • Confident of delivering 3mn+ sq.ft in FY24 and book revenues of 1500 cr. (& 2000 cr. in FY25)
  • Doing 25-30% EBITDA margin at project level in currently sold projects. This will likely reflect in numbers from FY26. In low rise projects, margins are 40%+
  • Construction costs have been locked for next 4-8 quarters for multiple raw materials due to long term construction agreements with vendors
  • Exceptional item: Impairment of goodwill (12.4 cr.) on account of merger a subsidiary earlier + reversal of land transaction in Life Republic (6.78 cr.)

Disclosure: Invested (position size here, sold few shares in last-30 days)

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Since they have guided for pre sales number 2800cr in fy24 and 3500cr in fy25 will the revenue gets recognized by fy27-28?

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This does make things more interesting… :thinking:
Also, Ashish kacholia’s presence adds to it.

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Q3 FY24 Concall note:

New area sale 2.89msf for 2079 crore in 9 month FY24 , and collection is 1478 crores

Acquired two new projects with 545 cr potential revenue in Mumbai

Additional 4000 cr project acquired

2800 cr pre-sales guidance for FY24

Launched project worth 3200 crores in 9 months FY24, 1800 will be in last quarter

7000 crore of new project launch targeted in FY25

Gross profit is 25% on low-margin projects

25-27% EBITDA blended for last two years projects

Revenue Guidance:

1700 fy25

1700 fy26

Not included low rise development projects, which may come in FY26 revenues

Affordability is good, around 35 to 40 per cent of household earnings are going into paying EMIs

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Would be near to that may be one more year, a lot depends on completion of project, velocity is nearly 4 years

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Company sold a lot of premium projects (24k) which has caused a huge jump in realizations. Reported nos will be subdued until FY26, and management expects current projects to start getting recognized in FY27/28 when the real economics should be reflected on P&L statement. Concall notes below

FY24Q3

  • Volume declined by (-13%) in Q3, realization increased by 20% due to higher sales of 24k projects. Price realization has increased by 5-15% across projects

  • In next 2 project launches in Life Republic, realizations will be 6,500/sq.ft (vs 4,800/sq.ft 2 years back)

  • Will reach 20-25% EBITDA margins by Q4FY26

  • Construction scaleup will not be a problem, they were earlier doing 2.5-3mn sq.ft which has now increased to 4mn sq.ft. Can handle 1.5-2x of earlier volumes (material procurement is centralized, labor for construction is outsourced)

  • Life Republic minority stake buyout (stake increase from 95% to 100%) - paid 60 cr.

  • In low margin projects, gross margin is 25%. For projects sold in last 2-years, are making 25-27% EBITDA margin

  • Make 18-20% EBITDA margins in redevelopment projects but much higher IRRs

  • 9MFY24

    • Business development of 4,000 cr. (guidance of 8,000 cr.)

    • Launched 3,200 cr. projects (guidance of 5,200 cr.)

    • Presales of 2,080 cr. (guidance of 2,800 cr.)

  • Will launch 1,800 cr. (2 mn sq.ft) of projects in Q4FY24 of which Life Republic will be 1,000 cr.

  • Will launch 7,000 cr. projects in FY25 (8mn sq.ft)

  • Business development of 3,000-4,000 cr. over next 3-4 months and 8,000-10,000 cr. in FY25

  • Reported revenues guidance: 1,500 crore in FY24, 1,600-1,700 cr. in FY25 & FY26

  • FY25 guidance: Presales of 3,500 cr. & launches of 7,000 cr.

Disclosure: Invested (position size here, no transactions in last-30 days)

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