Clear Roadmap For Growth

Prestige Estates Projects Limited (PEPL) which had a record year of pre-sales , is set on the growth path with robust launch pipeline and expanding geographical footprint , aided by capex boost.

PEPL, according to a recent report by Motilal Financials, reported bookings of INR47b in 4QFY24, up 21 percent  YoY (in line) aided by sustained demand across ongoing projects. In FY24, the real estate major achieved record bookings of INR210b, up 63 percent  YoY. Of these, INR155b came from new launches. In FY24, it also achieved the highest ever launches of 31msf in residential business with a GDV of INR210b.    Sales volume was flat at 4msf, and realization improved 18 percent YoY to INR11,400/sft. In FY24, volume grew 34 percent YoY, and realization was up 21 percent YoY to INR10,400/sft. Total collections in 4Q increased 30 percent YoY and 14 percent QoQ  to INR 41 billion and the company generated an OCF of INR 18 billion . It incurred a capex of INR 6 billion in the annuity segment and spent INR 19 billion towards land/ TDR investments. Net debt increased INR 8 billion sequentially to INR 78 billion with debt to equity ratioo of 0.7x.   In FY24, revenue declined 5 percent YoY to INR79 billion while EBITDA rose 20 percent YoY to INR 25 billion . Adj Profit after Tax (PAT) was flat at INR 7.1 billion.

The strong bookings traction is expected to continue in FY25 as PEPL has unveiled a launch pipeline of 60msf with a GDV of INR600b. It is targeting a pre-sales of INR260b, implying an increase of 25% YoY.

Significantly, annuity income continues to go up. PEPL reported rental income of INR1.3b, up 30 percent YoY, and EBITDA stood at INR0.8b with a margin of 58 percent (vs. 82 percent in 3QFY24). In FY24, rental income grew 86 percent YoY to INR5.4b, and EBITDA was up 119 percent YoY to INR3.8b. The company expects to achieve rental income of INR9b by the end of FY25.      With 24msf of ongoing office and retail projects and an additional 14msf of upcoming projects, rental income is expected to rise to INR38b, once these projects are delivered by the end of FY28.

Hospitality segment whose revenue grew  27 percent  YoY to INR2.4b, will be a growth driver .The company has plans to come out with initial public offering (IPO) for its hospitality business and aims to list it by FY 25 end.     PEPL currently has an ongoing and upcoming portfolio of 1,700 keys and the segment can generate steady-state revenue of INR25b.The proposed IPO will unlock the value of hospitality assets and fund expansion plans.

Prestige Estate’s geographical expansion will be a key to its growth. The company is continuously focusing on expanding beyond its core markets of Bengaluru and Hyderabad, into Mumbai Metropolitan Region (MMR) and National Capital Regions(NCR).The first project in the NCR, a residential development, is expected to be launched in H1 FY25.  

The group is confident of achieving 25-30% growth (INR260b) in bookings in FY25, driven by a vast launch pipeline of INR600b. Timely launches can also enable it to comfortably exceed the guidance. The spending towards business development will continue to be at INR35-40b including pending land payments. The company has recently acquired a large project in Pune where it intends to build its flagship Prestige City project. It also has a strong business development pipeline in Hyderabad, Chennai, and NCR

The capital deployment by Abu Dhabi Investment Authority (ADIA) will be used to develop four large projects – one each in Bengaluru, Goa, Mumbai, and NCR. PEPL has so far received INR5b, which will be used to retire the debt in Ocean Towers project in Mumbai. The balance will be spent on acquiring land in Delhi and Goa, since Bengaluru and Mumbai projects are already tied up. PEPL expects to incur a capex of INR25-30b in FY25. However, given the significant scale-up in residential cash flows along with ADIA Fund, management is confident of reducing the debt-equity ratio by the end of FY25.

The launch pipeline of INR600b has significantly improved the growth visibility in the near term, and with higher spending on business development, progress on project acquisitions is expected to continue, which will further strengthen its residential business. Additionally, as the company advances on its key commercial projects, further value creation is imminent.