Land parcels available through institutional channels like National Company Law Tribunals (NCLTs) and Asset Reconstruction Companies (ARCs) are making land buying and expansions for real estate companies easier.
Venkat K Narayana, chief executive officer, Prestige Group told FE that the company has acquired at least four land parcels in the recent past through these institutional channels, and few more are in the pipeline.
The company has already launched eight million square feet project in Mulund, a suburb in Mumbai Metropolitan Region (MMR), picked up under the NCLT process. The company is in the process of launching a project in upmarket south Mumbai at Marine Lines, which was also picked up from Edelweiss ARC, while another upcoming project in Worli was a stuck redevelopment project for 10 years and the company is looking to launch a residential project there.
Prestige has also acquired a land in Noida -another stressed acquisition. It is awaiting final leg of approvals for the project there. Two such acquisitions are also underway in Gurugram and Pune.
While the process has become simpler and more streamlined, these acquisitions come with their own sets of problems, and need to be addressed, Narayana said. “Most of the land transactions are happening through banks and ARCs and under NCLT process, so the acquisition has become easier. However, while we are dealing with institutions, these acquisitions are not free from problems which need to be addressed, as they are not clean,” he said.
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According to Narayana, the way Prestige mitigates the risk involved is that the company is cognisant of the price that it will pay for any land parcel. “We always follow scientific measure of pricing our products. We know how much we would like to sell it for, how much the construction would cost and balance is only the land cost that we pay. So, if it falls in the range then we do the transaction, else we do not.”
Prestige is looking to end the financial year 2022-2023 with over Rs 12,000 crore of pre-sales. The company clocked around Rs 10,000 crore of pre-sales in FY22. It has plans to launch 15-20 million square feet of residential projects over the next six months in the mid-income and premium category with two, three and four BHK configurations, Narayana said.
Prestige Estates reported 55% year-on-year increase in the consolidated net profit to Rs 149 crore for the quarter ended September 30, 2022. The company’s revenue from operations came in at nearly Rs 1,475 crore, up nearly 10% on a y-o-y basis.
The Ebitda (earnings before interest, tax, depreciation and amortisation) for the quarter remained flat y-o-y at Rs 415.6 crore. Company’s Ebitda and net profit margins were at 28.18% and 10.12%, respectively. Ebitda margins declined 226 basis points on a y-o-y basis during the September quarter.
For first half of the year H1 FY23, the company registered sales of Rs 6,523 crore up by 129% y-o-y, while collections increased 85% y-o-y to Rs 4,749 crore. The sales during this period is attributed to 8.18 million square feet volume with an average realisation of Rs 7,976 per square feet. The company sold a total of 5,774 units in the first half of the year.
In the past, messy land acquisitions due to unclear titles, prolonged and delayed approvals led several of them into accumulating huge debt piles and come under severe financial stress. Most big and branded players had refrained from expanding into other geographies. However, that seems to be changing now.
