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00:00Let us shift our focus to the second management, Prestige Estates. My colleague Samina spoke
00:13to Chairman and MD Irfan Razak and began by asking about the recent 5000 crore QIP and
00:20what it means for the company. Listen in to a chunk of that conversation.
00:25We've raised this capital and I always take it as a huge responsibility because raising
00:33capital is one thing, but that's the, you know, I won't, you call it an easy part or
00:40the tough part, but the most important thing is the aspiration from the investors who have
00:45invested. They are having that confidence into us and seeing that we grow the company
00:51and we also produce the returns so that they also have growth on the investments. Having
00:57said that now, we've already spelled out what we're going to do with this money because
01:01today money comes with responsibility and one third of this money will be utilized for
01:12pairing debt and that we spelled that out in the HRP and the rest of it is one third
01:20of it will be used for acquiring new properties, business development, and the rest of it will
01:26go towards our contribution to various SPVs where we are doing CapEx projects like office
01:34and retail and hospitality. So it will be a well-rounded utilization of funds. It just
01:40gives us more muscle, gives us that much more flexibility to do more business and grow the
01:45company from this level to the next.
01:47Sir Azhar, interesting, you're right. They've put their faith and confidence in you, not
01:55just because it's prestige, but because you've time and again proved, you know, you've not
01:59just beaten industry, but have been a phenomenally well-run company as well. Sir Azhar, you talked
02:05about how some part of it will go into expansion, acquiring land banks, building more, creating
02:10more supply. Any specific geographies in your mind? I know you started with being a localized
02:16Bangalore player who's now spread his wings pretty much all over the country.
02:20Yeah, this money will be utilized in various cities, including Bangalore. It's Bangalore,
02:27Chennai, Mumbai, NCR. These are the geographies that we are in. Also, we are looking at eyeing
02:33Pune seriously to do some residential development. We did do an office development there and
02:40completed it recently, and we've leased that out to the Bank of New York, Mellon, and they
02:46are going to occupy that property very, very soon. They are fitting it out just now.
02:53Talking about Pune, I believe your subsidiary Prestige Xsora has already acquired some more
02:57land to the tune of four and a half acres in Pune for 200 crores. You want to tell me
03:03what are the timelines here? What are the plans here? What is the deal that you have
03:07with the partner there, if there is a partner involved, a local partner?
03:11This one, it is reported, but misunderstood. This is the same property which I talked,
03:18Prestige Alpha Tech, that we had the landowner's share, where the landowner wanted to exit.
03:27What we did is we bought off the balance share of the landowner, and the company now
03:32holds the entire asset, 100% in its own name, and that has been leased out to Bank of New
03:39York, Mellon. The reporting was correct, but the understanding was a little skewed. It's
03:44not a new transaction. It is an old transaction which got fructified by virtue of us taking
03:51over the landowner's share.
03:53How much of this will contribute to your top line, and from when and up until when,
03:58Mr. Izzak?
03:59See, the entire asset is about 900,000 square feet. Since the property is leased, we do
04:08have a rent-free period with the tenants, and the revenue will kick in. Once the revenue
04:15kicks in, it will give us the rental income. There's no sale in this asset. We are holding
04:23that asset and utilizing it for rental income.
04:27And I think that is seeming to become quite a primary objective for the group as well,
04:31right? You've talked about how you want to expand the annuity business. You want to give
04:37me a sense of, while you talked about how some part of the proceeds will be used towards
04:41that, anything that's close to fructification, and I know one thing is putting on an intention,
04:46the second is executing it and getting that cash flow going, but anything else that's
04:51on the radar on the annuity business side?
04:54Yeah, there are several properties that we're developing on the office fronts, and actually
05:00approximately, I think almost more than 20 million square feet of offices getting developed
05:08by us in geographies like Mumbai, Bangalore, also in Chennai. So these are properties which
05:16are not futuristic, but where we've tied up the lands and the approvals have come, and
05:20where we are pouring concrete, and all these should fructify and get completed in the year
05:262028. And that's when the top line revenues will shoot up tremendously. So currently it's
05:34a work in progress. So not only is the intent there, that is also the actual physical work
05:41that is going on. And now the only, for us, the major challenges is to complete these
05:50developments, to bring them to the market and get them leased out. In fact, we are also
05:56pouring concrete, another large development in Delhi, Aero City, which has a component
06:04of 600,000 square feet of office, which has now been released, which is quite fortunate
06:10for us at good numbers. And also the largest hotel in the country with a big convention
06:16centre and exhibition centre, almost 225,000 square feet of convention exhibition space
06:24with two hotels, which is the St. Regis Hotel and the Marriott Marquis. So these assets
06:30will get ready end of 2025, but start trading in the beginning of 2026. So it's a huge work
06:37in progress. There's a big ambition in all these plans, but these plans all should get
06:43fructified on the timelines we have planned for, and they should start yielding the company
06:49results.
06:50Right, sir. Just to quantify all of this, how much does commercial or office hotel contribute
06:56to your top line today? And where would you like to see it by 2028? I know I understand
07:01it's all work in progress. And hence, I want to ask you your current revenues coming in
07:07from office and what is the goalpost in three years?
07:12With what we are just doing currently in the office, I believe we should end up by 2028
07:19with the top, if everything gets leased out, with a top line revenue of about 3,800 crores
07:26on the office side. And similarly, we are doing retail. Retail is also about 11 million
07:33square feet of retail space is getting built over various assets. Even that should contribute
07:38around 1,100 crores. And the hospitality business today, we are looking at an NOI in 2028 with
07:48all the assets that are getting built at about 1,000 crores. So that is the overall game
07:53plan that we are on at the moment.
07:56And the journey of that has already been undertaken. Just to talk more about the building side
08:02of things, right? There has been, of course, a little bit of blip in pre-sales due to maybe
08:08delays in projects. Now, with the money that you are looking to raise, that you have raised
08:13and some of it, of course, going towards projects, is it a fair assumption for me that you will
08:18use some of these QIP proceeds to speeden up upcoming developments? Any key projects
08:25in the pipeline for F525 that you can share details about where this money could be spent
08:29only to bring it to the market, to deliver quicker than expected? Because we'd like to
08:34see those numbers reflecting on your top line.
08:37Yeah. And you see what the thing is, the lands are already there. We've got in the pipeline
08:44where lands are tied up, plans have been done, plans have been logged in for approvals to
08:50the extent of almost 60 million square feet, which will eventually land us up with 60,000
08:58crores of top line. Now, this is not something future. This is already what we have in our
09:03pocket and what we can bring to the market. Now, where is the gap? The gap is that there
09:10is a huge approval process and this process has its own timelines. And if I acquire any
09:16land today to bring it to the market takes between 12 to 18 months. So, we've been working
09:22relentlessly to see that all these projects come to the market and get launched. And once
09:28they get launched, then the entire churn keeps happening. Now, this QIP money which we have
09:33raised is for future to buy, to invest into more properties so that the pipeline increases
09:41because we just can't sit back and say, okay, I've got this pipeline and I have to keep
09:46fueling that pipeline to see that newer projects come in. So, we have already listed out in
09:53our, again, our regulatory filing, the list of properties that we are intending to invest
09:59in. And if those get invested, this money will get utilized properly.
10:03Sir, currently, how many projects do you have on ongoing basis and how many under the planning
10:08stage?
10:09See, at the moment, we are pouring concrete for 60 million square feet of space. That
10:18is all asset classes put together. And this is only growing. At some point of time, we
10:23may even grow to 70, 80 million. So, that's a lot of work that is happening across the
10:28country. And there's a lot of responsibility also because if I've done pre-sales of homes,
10:34I should make sure that they should be delivered within the timelines, within the specifications
10:40that we have promised, and then keep the aspirations of our customers intact. And that, again,
10:46what it does is it gives the confidence for new buyers. So, that is where we've probably
10:52won the game in some way because the type of revenues that we've got currently and which
10:57are growing, it's only because of the current confidence the buyers have in us because of
11:04whatever deliveries we've done in the past. And then we can't let up. We have to keep
11:10at it and we have to make sure that we keep delivering so that it should be business.
11:17It's not an easy business that we are in. It is the most difficult business, but we
11:21are glad that while we are doing what we are doing, we are building homes for our customers
11:26and at the same time, we're creating wealth for them.
11:29Interesting. It is a tough, tough business to be working in. And of course, now that
11:34you're also, oh yeah, you've been in equity, a listed company makes it doubly harder.
11:38Mr. Rizag, what are average realisations across the board for prestigious estate and where
11:44do you see that over the next one to two years?
11:48See, currently now the average realisations have gone up, if you've taken average, because
11:53we're also operating in a geography like Mumbai. So, I think it's around Rs 11,000 today in
12:00the last quarter. That's a number that I remember. And these realisations are, we
12:07don't want pricing to go up too fast, too soon, because then if we breach the affordability
12:14barrier, again, we get set back. We have to do the balancing trick. We have to see that
12:20we get land at the proper pricing. We have to be efficient in our construction pricing
12:26and we have to protect the bottom line of the company. It's a big juggle that we have
12:31to do and offer the product at a sensible price to the consumer, because if the price
12:37goes up too soon, too fast, again, the flavour will be lost and the consumer will have to
12:43start thinking whether they should commit to buy. So, it's a tough one, but we have
12:48to balance it that way. I don't know, this is only India peculiar, where the land property
12:55prices have always been going up and up. There's no relenting on it, but we are very
13:01sensitive to this and we definitely don't want to see that the prices run up too fast.
13:08How is sales doing right now? Because there are mixed signals coming, especially from
13:12states like Maharashtra, right? So, while there are some properties that are selling
13:16out on opening, there are others that have been lagging behind significantly. Could you
13:21give me a sense of what the on ground picture is? Is it looking much better today than it
13:25looked maybe at the start of this year, when there was so much of euphoria around real
13:29estate?
13:30The sales are doing very well. Now, it all depends on what type of product you launch
13:36and where your location is. If you're targeting the mid-income, whichever city you're in,
13:43the mid-income definition changes from city to city, but then if you're targeting the
13:49mid-income group, I believe that you are launching today and the product gets lapped up almost
13:55immediately. But if you're targeting the luxury market, luxury I always say it's a
14:02niche market and that is a very high-ticket item, things will sell, of course they will,
14:09and today the market is even good for that, but then it just doesn't get sold overnight.
14:15People have to think, rethink and take a decision. But the good news is today all segments are
14:21selling, but I don't get too overexcited in the luxury segment because there is no
14:28need over there. Basically, it's somebody who has a requirement and then will have to
14:33take their time in deciding and then a commitment. But the mid-segment is where it's evergreen
14:39and if we get the pricing and the location right, we can have sellouts as we launch.
14:45You know, Mr. Rizak, most people, I mean some of your peers, right, and of course individuals
14:50as well, after the Golden Visa, we've seen a lot of Indian real estate players foraying
14:56into markets like Dubai. Now that you're sitting on a little bit of pile of cash, opportunities
15:01are there, but they come at a price tag in India. Is that a plan? Is that something you've
15:05thought about? Because I'm pretty certain you would have pen to paper on going global
15:10or going to Dubai if nowhere else.
15:12No, no, we have no such thoughts or plans. We are very much an Indian company, we'd like
15:17to remain that way and we have a job in our country to do and we'd like to be here and
15:24do our job here. We'll leave it to the rest of the, whoever wants to do it, whichever
15:30part of the world, but we are pretty happy doing work in our country.
15:34Very lastly, and I know we've talked about this in the past, but just a quick shot in
15:38time so I'll quickly take this with you. I know there was some margin pressure because
15:41of your legacy projects that you started to furnish and of course deliver because cost
15:45of raw materials have gone up. Is that now behind prestigious states?
15:49No, the accounting system itself is a little lopsided, it is a little flawed because we
15:56have to account based on the completed method. The revenue gets recognised only when the
16:05project gets not only completed, but handed over to the customer while we have to keep
16:11meeting the expenses. Now, if I'm doing large projects, my overheads are going to increase
16:15exponentially, but these overheads, not the construction costs, but the overheads, these
16:23will be debited to my P&L account quarter on quarter, year on year, but we will see
16:30the benefits of this debit only three years, four years later when the project gets completed
16:37and handed over. So this is called the Indias accounting system. Just about five years ago,
16:45it was on the percentage completion method. Now it's switched on to these 100% completed
16:51method where not only the project has to get completed, but also get delivered to the customer.
16:56So it's a little back-ended, though the expense is front-ended. So you'll find that thing,
17:02so it's very difficult for even an analyst to really find out exactly what the company
17:07is doing in terms of profits. On the face of it, you'll say one quarter, the profits
17:12are low and other face of it, you'll say profits are high, but that's not the reality. I think
17:17the real way to look at profits for real estate companies, if you are doing the completed
17:22method is to look at the top line revenue that has happened and the budget for construction,
17:27you will get the numbers, but those are all hypothetical numbers that somebody can get,
17:32but the reported numbers are the facts that are there and that's the way it will be as
17:38we go along, unless the system changes again.
17:40Right. So that was Mr. Irfan Razak, Management of Prestige Estates, who's told us in detail
17:46as to what the fundraise means for the company. But with that, it's a wrap on The Small and
17:50Mid-Cap Show. Keep watching NDTV Profit for more news and updates.