Poddar Developers - An affordable housing story

Stock Opportunities Untested - but worth a good look
21

http://www.poddardevelopers.com/files/Corporate%20Presentation%20-%20January%202015.pdf

The investor presentation has very good information. Using information in slide 24, we can get a good sense of how revenues are going to pan out in the next few years. They plan to sell ~10 m sqft by 2023. This translates into revenue potential of ~3000 Cr (assuming Rs 3000 per sqft rate as mentioned in their website for each ongoing project) and provides great visibility provided the execution is good and timely.

Lets keep tracking this story on yearly basis.

Other points which I liked are:

  • They want to focus around Mumbai only. Mumbai has the best potential for affordable housing. Mumbai’s GDP is higher than that of 25 states in India and has the highest % of slum population. The extension/upgradation of the existing local line connecting downtown Mumbai to sub-urbs will be a kicker
  • They want to do projects JDA also (along with outright land purchase and construct) which would make the business asset light
  • I feel these guys are quite transparent. They have uploaded the payment schedule of each project in their website which means they charge one price to all customers

Would love to hear/brainstorm where this story could go wrong.

Regards,

Vijay

22

Poddar Developers Ltd has informed BSE that in respect of the QIP, the Finance Committee of the Company has, at its meeting held on January 21, 2015, inter alia, passed the following resolutions:

1). Declaring the bid dosing of the QIP on January 21, 2015.

2). Determining and approving the issue price of Rs. 1,125.21 per Equity Share.

3). Approving and adopting the placement document dated January 21, 2015 in connection with the QIP

23

Dear,

I am new to this investing world. Am not able to make any point of view in todays result. Need some expert advise. Kindly help

Thanks

Arham

24

Great set of numbers for Q3 for Poddar. They did 18 Cr for nine months vs 7 Cr last year. They should close the year with 20 Cr.

PAT margins are healthy 20%+

It would be interesting to see how market values this company- either an expensive company at around 40 PE based on Fy15 eps or a deep value company growing at 100+% YoY available at 40 PE.

Vijay

25

Thanks Vijay for your reply.

Regards

Arham

26

Investor presentation link:http://www.poddardevelopers.com/files/Investor%20Presentation%20-%20February%202015.pdf

27

Interesting has been two updates by company

)- Foray in road and infrastructure space

)- Lease hiring and rental business overseas (UAE)

Source - See notes below Q3 results

The folio is increasing and expanding beyond affordable housing. Key item to watch would be debt at consolidated levels and delivery and handover of key projects in Fy16,17

Disc - Invested at lower levels

28

Hi Vivek,

On the con call, Rohit was quite categorical that they have no intention of getting into road/ infra space. The transaction was to keep alive an old PWD license they have

29

Thanks Umang was able to pick that on Concall. Did scible some notes key ones for all boarders

)- Accounting policy change - revenue recognition -Not 100% sure will wait for annual report

)- Strong push for sales through brokers

)- NSE listing next FY

)- Stock spilt next FY

)- Multiple launches this year

)- Cash collections to double from next quarter due to multiple projects running concurrently

30

Adding a couple more points to Vivek’s notes above:

Q&A

1). 125cr raised by QIP - how will you use it?

A - Buying addl land in MIG/value space. EWS/LIG (5mil land), MIG (<2mil land; 3-3.5 addl), Value housing (addl land). Mainly done for buying a distress sale land opportunity (35cr used here). Addl land: 2.5mil + 1 mil (kalyan)+ 1mil (virar)

2). Any bench marks for buying land?

A- Need to be connected with rail. Will be in mumbai for foreseeable future. High train frequency / central line. Well connected road - usually a state highway, need to have water, electricity, schools, hospitals, infra etc. Have 20 point checklist for buying land. 15-20% of SP is what land should cost. MIG - 35% gross Operating Margin on launch.

3). Does govt have an effect on biz?

A- Govt is supportive for affordable housing. Regulatory frameworks are easier and things are moving faster but wouldn’t affect us in a big way

4). Company making investments in Dubai? Any road/infra projects business?

A- Subsidary in dubai airport. Doing property mgmt. Getting our feet wet in middle east. No construction happening. We are keeping our license alive but not interested in infra projects in foreseeable future.

5). Realization trend?

A- Last 9-months, sales are slow. Highest pricing in the micro mkt - good with our current sales process. Having 10 retail offices in sub-urbs to push for sales - building broker network (currently 40 brokers)

6). Approvals in vidyavihar - issues sorted out of court. We will get the slums vacated in April. Cannot have more than 25acres at any one time of agri land.

7). Competition is specific to micro mkt. Tata housing (highest pricing), Mahindra life space (same price as poddar), Value housing budget corp by Jerry Rao (cheaper than poddar).

8). 50 offices in next 6months which are broker houses. 2-3% of sale as brokerage

9). NSE listing will be done and stock will be split from FV of 10 to 1.

10). The company has established property mgmt to manage properties for rental and ensure higher amount of occupancy which allows for poddar schools etc. to operate well

11). Accounting policy will change from realiization on handover of project to 25% method of sales completion and collection

Vijay

31

thnks vijay…

32

Does anyone have investor relations contact at Poddar Developers? Thanks

33

According to the co’s presentation of 14-02-2015 - http://www.bseindia.com/xml-data/corpfiling/AttachHis/Poddar_Developers_Ltd_140215.pdf

Net worth on 31-12-2015 - Rs.85.26 cr

Turnover for 9 months ended 31-12-2015 - Rs.107.47 cr

PBTfor 9 months ended 31-12-2015 - Rs.27.29 cr

PAT for 9 months ended 31-12-2015 -Rs.18.31 cr

At the time of writing this mail the company trading at a market cap > Rs.900 cr

Valuations look really stretched.

34

http://www.bseindia.com/xml-data/corpfiling/AttachLive/1C5FE5AC_5113_4479_BFE0_C90BEE3AAA97_182453.pdf

35

It is a delight to hear Mr.Poddar he goes out at length to explain dynamics of business he is running
Few things that I picked up from conference call

Delays due to new FSI norms in existing projects mainly in MIG space in Goregaon and Vidyanagar could be impacted, Management is still awaiting clarity on regulations to make a move

New bill for affordable housing is likely to be brought in month of July – key features would be - Single window clearance, possible tax exemption for companies operating in space , additional interest relief for customers , environment clearance could be faster

Hired some good talent on marketing - Started new 10 marketing offices in Mumbai to boost retail sales, 7 out 10 dealers were flop in first three weeks, they learned revamped the process and now seeing better traction

In FY16, there would be 7 projects launched Affordable housing – there will be launch of 5 projects Value Housing projects – 2 Projects – in later part of the year
Investor presentation on website has all details

The broker/ dealers opened in this year involve no capital outlay from company apart from INR 2.4 lakhs spent on branding , On sale they get 2% commission . Once they do ~10 to 15 conversions a month the model becomes viable for dealers

Company likely to be pay off debt in next quarter to become debt free

Currently leads come from advertisement in railway bogie (1st class / 2nd class) they call centres for eventual conversion

Long term plan for dealers to have a model 1bhk flat in their apartments , however this will not happen anytime soon
Vision to sell 10,000 flats – 5 million square feet every year from FY20 (I think that’s quite steep target) with about 15% PAT levels

Mr Poddar felt that they have significant Entry barriers -Local know how buying skills, project management, finance skills

Company focuses more on cash flows and not on IRR, they want to make affordable housing as FMCG product , acquire land, build and sell at fast pace

Post launch they turn cash flow positive

Company philosophy to be conservative on capital allocation

Key risk in execution risk as the company becomes big, management says they are confident that they are on right track
Typical land cost to company is about 12.5% of the total outlay for project

No plans for equity dilution, however company can dilute at project for better cash flow management

In next 18 months may do test projects in Bangalore & Chennai

Every time I listen to Mr Poddar he sound sensible and reasonable

Disc – 2% of my portfolio

1 Like
36

Investors presentation:
http://www.bseindia.com/corporates/ann.aspx?scrip=523628&dur=A&expandable=0

37

thanks for details vivek. can u please share the link of conference call. i have not been able to locate it.

38

Rohit Poddar interview(courtesy Rohit Chauhan)… Most of it related to his personal journey…

Disc: No investments

1 Like
39

You have to go research bytes create a free account and listen to concall - Thanks

40

Vivek - Good notes. Few other points which I gathered and would like to discuss are:

  • One another important USP of the company that was pointed was its land aggregation and execution capability. Rohit said his land is 50% cheaper and project speed 2 times faster than Tata value homes and VHBC
  • He said that projects in Vasai, Vidyavihar and Mohili are delayed owing to new real estate norms in Maharashtra. This is a key monitorable as he said Vasai and Mohili’s will be launched post monsoon. Is it truly because of this new norm or he is delaying because of some softness in overall demand. I understand he said that demand has never been an issue for them, but I just want to be sure that it is not an undue optimism. However, when we triangulate the general demand scenario with housing loan disbursements of NBFCs, it seems to be on an upswing. So, this is positive.

Although there is huge demand for affordble space, for me sales and execution are the key monitorables for a company which has sold around 3-4k units till date and wish to sell 10k units/year 4-5 years from now.

Vijay