Poddar Housing FY18 Annual Report Notes
Company had a very bad FY18 in terms of sales and profitability. Only positives for the year were company’s investment in land banks and also company moving up the value chain from just affordable housing to middle income class projects in Mumbai city. Most of the companies project are set to be completed by 2022. With most of the land bank already purchased, company still has enough cash and resources to keep the construction going. Company took loan from HDFC at 6% (very favourable terms) and the repayment starts in 2022, completely aligned with company’s completion schedule. With good inventory and fewer completed projects short to medium term sales will be geography specific market dependent, but in long term (4-5 years) company has very good sales and profitability potential.
- Poddar Housing and Development Limited’s growth was muted across the last couple of years. This slowdown was the result of a sluggishness in the country’s real estate sector, delay in getting approvals for new project launches and the company’s conscious decision to delay launches and let the GST and RERA-induced uncertainty to pass. The wait is over.
- The Company launched two projects in 2017-18 and expects to launch a handful of projects in FY2018-19. These projects are expected to create multiyear revenue and profit visibility, strengthening our reinvestment and business sustainability.
- The Company launched its first residential project in Mumbai with a 100,000 sq ft offering in Chembur even as it continued to launch residential offerings in its longstanding Badlapur location.
- The Company’s decision to enter Mumbai needs to be explained. We believe that even as the Mumbai market in general remains weak, there will always be attractive localised opportunities. Over the last few years, Chembur has emerged as one such local opportunity. What was once dismissed as a distant Mumbai suburb is now being perceived as integral to India’s financial capital. This transformation has been the result of a 23.55 km expressway connecting Chembur to South Mumbai, which has shrunk commuting time from an hour to around fifteen minutes. The result is that a number of people are seeking homes in Chembur, making this Mumbai pocket one of the fastest growing in the last few years.
- One of the things that the company has embarked upon is the reinvention of its brand: from a company exclusively focused on the lower middle-income segment to a value-added segment as well (without vacating its longstanding presence). We believe that this transition will enhance our visibility among listed players with a growing presence in Mumbai’s real estate sector.
- The company is graduating from an established competence in building ground plus four-storey structures (G plus 4) to ground plus 20 structures.
- Launching around an aggregate 8 lac sq ft of residential properties.
- I am pleased to report that the launches proved timely: we succeeded in selling 80 per cent of our Badlapur offering, which means that the focus can now shift from marketing to construction. In Chembur, we successfully marketed 25 per cent of our offering, which represents a critical mass of sales and cash flows to expedite construction.
- We intend to more than six-fold the aggregate size of launches to around 5 mn during the current financial year and successive years. While Badlapur will continue to account for the major proportion of the proposed launches, we will continue to raise our Mumbai city exposure with a second project at Kandivali.
- We are seeking to extend our focus from Mumbai/ suburbs to Pune, a city with improving connectivity with Mumbai. The Company acquired a land parcel of 5800 sq mt during the current financial year at Dhayari in Pune.
- The Company possessed a land bank of 83.8 acres which have potential of 7-8 million sq. feet salable area.
- The Company created three brands – Swakam, Ananta and Spraha – to address the needs of customers across different income segments and in the process creating an aspirational journey.
- FY 2022-23 will see major projects completing with total saleable area of 40 lac sq ft.
- The Company is in the process of obtaining relevant approvals for its other upcoming project at Badlapur, Kalyan – Mharal, Kalyan – Tisgaon, Kandivali and hence no additional project is being launched during the financial year ended 31 March 2018. The Company is expecting to launch few of its above mentioned project towards the end of Q2 / mid of Q3 of financial year 2018 - 19.
- Cash and Financial Investments are Rs. 80 cr as on 31.03.2018.
- Terms of repayment and interest of NCD of 6% Rs. 120 cr from HDFC - Repayable in 3 equal half yearly instalments starting from March 2022. Last instalment is due in March 2023. The internal rate of return (IRR) will be 17.5% per annum to the debenture holder. Interest will accrue from the date of issue however payment of same will start from September 2019.
- Company purchased land of Rs. 68.97 cr in FY18.
- The Company has made an understanding with the other company to jointly develop a slum rehabilitation project at Andheri (E) and paid an amount of INR 1700 lakhs (Prev. Yr.INR 500 lakhs) as an refundable earnest money deposit. Due diligence and title search work are in progress.
- The Company has entered into joint development agreement with M/s Navkar Constructions for redevelopment of slum located at Kandivali East. As per terms and conditions of the said joint development agreement. M/s Navkar Construction shall be entitled for 15 % of gross receipts of the said SRA redevelopment project. As on the Balance Sheet date the Company has advanced INR 797.60 lakhs (Prev. Yr. INR 208.09 lakhs) to M/s Navkar Constructions. The said advance will be adjusted against the gross receipts payable to M/s navkar Constructions.
- The Company has entered into an agreement with Bandongri Co-Op. Hsg. Society Ltd.(Proposed), to develop two parcel of land admeasuring 30690.90 sq. mtrs.and 4592 sq. mtrs of the land under SRA Scheme, jointly with M/s.VTO Sweet Homes Pvt. Ltd., as Co-developers. The Company has given an advance of INR 768.20 lakhs (Prev.Yr. INR 28.20 lakhs) to the said co-developer, and amount of INR 181.02 lakhs (Prev. Yr. INR 56 lakhs) towards purchase of land and INR 141.71 lakhs (Prev. Yr. INR 51.20 lakhs) towards rendering various services for the project. The said advance is recoverable / adjustable against the receivable from the share of the said Co-Developers on the said project.