Oberoi Realty Limited (OBEROIRLTY) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Oberoi Realty Q1 FY27 Earnings Conference Call. We have Mr. Oberoi, the Chairman and Managing Director of the Company, and Mr. Somil Daru, Director of Finance of the Company with us for the call. Please note that this call will be for 30 minutes. For this duration of the call, all participant lines will be in the listen-only mode and this conference call is being recorded. The transcript for the same may be put up on the website of the company. After the management's discussion, there will be an opportunity for you to ask questions. Should you need anyone's assistance during the conference call, you may signal the operator by pressing star, then zero on your touchstone telephone. Before I hand the conference over to the management, I would like to remind you that certain statements made during the course of this call may not be based on the historical information or facts and may be forward-looking statements, including those relating to general business statements, plans, strategy of the company, the future financial condition, and growth prospect. The forward-looking statements are based on the expectations and projections and may involve a number of risks and uncertainties and other factors that could cause actual results, opportunities, and growth potential to differ materially from those suggested by such statements. I now hand the conference over to Mr. Obray, the Chairman and Managing Director. Thank you, and over to you, sir.

Thank you. Thank you again. Good morning, good afternoon, good evening to all of you as per the time zones from which you have logged in. And welcome to the conference call, Q1 FY2027, results and business updates. Firstly, thank you all for taking time out to attend this call. A few business updates. We continue to invest in all upcoming projects just to ensure that we have smooth execution and we progress on our project pipeline. Our annuity portfolio continues to perform well, with a near 100% occupancy rate together for Commerce 1, 2, and 3, as well as Oberoi Mall. Sky City Mall, which just completed its first year, achieved an occupancy of 82%, and hopefully going forward, within this year, we should also reach near 100%. We started our journey outside MMR with our project in NCR by launching 360 North. This marks an important milestone in our growth journey. We are confident and excited about the opportunity that lies before us. With this, I now open the floor for questions and answers, and both Somal and I will be happy to take your questions. Thank you.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

The first question comes from the line of Praveen with Morgan Stanley.

Please go ahead.

Thank you very much. First of all, big congratulations, Vikas and Somil, on your success with 360 North. My one question is about the sustainability of sales. So the way I think about it, if you do phase two next year, at least in FY27 and FY28, you should be running at $100, $120 billion of sales easily. We had earlier expected probably $60, $70 billion. So the question is mainly the sustainability of this kind of business volume at a very high margin or without sacrificing margin of 50-plus percent that you have been generating for so many years. Can it be achieved, or there are some considerations? And also wanted to check related to that question is, will you sell the Phase 2 of 360 North like Phase 1, Or would you sell it slowly, like Mumbai 360 West, to optimize the pricing? Thank you so much.

Hi, Praveen. Thank you for your kind words. Firstly, you know, for 360 North, our strategy was that we wanted to get into a new market. And obviously, we ourselves were overwhelmed with the kind of response we got. We were frankly not expecting. And we simply decided that we will honor each and every customer that comes into play. So whatever we had in terms of offering, we opened the entire booking and let people have that. The next phase, strategically, will be launched only next year. And there are multiple reasons. If you see, the value that we've sold is good enough to take care of our entire construction. In fact, more than that, much, much more than that. And so this project, as far as financial closure goes, is complete. Next phase, how we launch, when we launch, and at what price we launch, we still want to discuss that internally. And your assumption about NCR added to Mumbai, those numbers obviously will go to whatever you're presuming or maybe even beyond that. And see, margins have got nothing to do with how much you sell. It's how you strategize your product. Firstly, it begins with how you buy your land, how you strategize your product. and how you approach the market. So we are very confident that our margins will continue, you know, going forward. And, yeah, so did I miss out on any of your questions?

No, I broadly got it. I just wanted to understand if a very high level of sales that we are achieving in FY27 will be maintained and can be done in terms of execution, In terms of construction and so on, or there are some constraints?

No, in fact, Praveen, we believe that we have cracked the code as far as volume and quality is concerned. So, you know, as a company, we feel we can build more and we can build better than what we did. And so the way we build our entire team of contractors who we outsource is really solid. And, you know, so we are very ready to be doing volume and at a very good quality.

Thank you. That's all for me. Thank you.

The next question comes from the line of Puneet Gulati with HSBC Bank. Please go ahead.

Thank you so much, and congrats on a fantastic launch in Gurugram. My first question is with respect to the litigation which has now emerged, what is the progress there, and are you seeing any signs of customers asking for their money back as yet?

So, again, you know, I don't want to talk about the litigation because it's prejudice, but there is absolutely no, you know, we have customers who refuse to take, you know, refund of the deposit that they've given, EOI deposit that they've given us. They want to wait. If there's any cancellation, please give us an all. So, you know, here we are pushing them to take their monies back because we have no flats to offer. But people, on the contrary, are waiting. So, very humbling, very, you know, I would say very thankful to God with the way all this has panned out.

That's very nice to hear. Secondly, if you can talk a bit about where are you in terms of approvals for Adarsh Nagar and what should one presume as a potential timeline of launch?

So, Adarsh Nagar continues to be, you know, we are hoping a Q3 launch. You know, we had last time said it will be anywhere between Q2 and Q3. We are hoping for a Q3 launch. We so wanted even 360 North to be the Q1 launch, but we missed them by a few days. So, you know, given how our industry works, I always keep a cushion of a quarter here and there. But it looks like Q3 is when we will launch our Jashnagar.

So, what approvals still to take from your perspective?

Some, like, you know, like how we want to build as build approvals, you know, typical IOD and all of that.

Okay. And lastly, on Rich Carlton, what's the timeline for that?

So, I think we said that either within the end of this financial year, we should be ready. I would say 80-90% of interior work is done, and it's just the last mile that we are finishing.

Great. That's great. Thank you so much, and all the best.

Thank you, Puneet.

The next question comes from the line of Gaurav Khandilwan with J.P. Morgan. Please go ahead.

Hi, Radeem Nindansh. Thanks for taking my questions. Most of my questions are answered. I just wanted to check one thing on the cash flow statement. So the new disclosure is really helpful. But for the 786 crores, which we state towards upcoming development properties, are these mostly for 360 North? And also for context, can you tell us what was the QOQ and YOY number?

Hi, Gaurav. I think I'll let Somil answer this. Hi, Gaurav.

So, as far as NCR is concerned, out of the 786, it was only about close to 200 that related to NCR, the balance didn't. The QOQ and the YOY number, we can, you know, work on that and we can discuss that with people separately. But as far as NCR is concerned, that's only 200 out of the 800.

Got it. Thanks for that. And then just another question. When I look at the residential operating margins for this quarter, that's closer to 51%, 52% compared to 55% in the last three quarters. So what is driving this lower margin? Is this cost impact due to higher commodity prices? Or what is it that is driving a lower margin?

So, typically what happens, Gaurav, is my overall margin will always depend on, you know, what the overall mix of the projects that are coming in through REVREC. So, and not all projects, as you would appreciate, work at the same margin, you know. So, they are all high margins, but not everybody works at the same margin. So, for example, if I have anything from 360 West coming in, then that comes in with a really good number, you know, with a really good margin. So, it all depends on which projects are there within that. Some will be, you know, lesser, some will be higher. So, we have project margins ranging from about 43-44% to, you know, 65 odd percent. So, depending on the mix which comes in, that's where that number goes, you know, up or down. Nothing extra in terms of cost or on account of cost impact or anything, you know, because those budgets are always there, you know. So, if you will see, we use estimates for the purposes of our percentage accounting method. So, those costs are always kind of, you know, you have contingencies which are built in into the budget. So, those don't really impact as much.

Got it. So, it's purely a function of sales mix, Dan, in that case.

Correct. Correct.

Cool. Thank you so much. Appreciate this. Thank you so much, Karan.

The next question comes from the line of Pritesh Seth with Access Capital. Please go ahead.

Yeah, hi. Thanks for taking my question. Largely on NCR, firstly, in terms of the size of the project, I think when we announced, we announced that the potential to be 2.6 million square feet on carpet area. Right now, we have sold 1.4, approximately. Does the size remain the same, 2.6, or has there been any change since this was acquired two years back? And is all these areas RERA approved or some of this area will also come from the higher floors which we are planning to build there?

You have also answered that in your own question. If you even prior to this, somebody asked about a phase 2. So, you know, there is obviously going to be a phase 2 for this and that is the balance area. So, that will, you know, come in later. In the current phase, as much as we had gotten RERA approval for, we launched. And when we get the RERA approval for the balance phase, we will bring that also.

Okay, okay. And the size remains changed, 2.6 million square feet on cars. Yeah. Okay, okay. Fair enough. And some of the sales were also for older IEO customers. How would be the, I mean, what would be the cash flows that we would be getting from them?

No, no, no. So, Pritish, the 2.6 million basically is the net effective area available to us. This does not cover the IRIO customers. So, even the number which we announced of 1.4 million, that does not cover the IRIO customers.

Okay, okay, fair enough, fair enough, fair enough. And in terms of the pipeline now, you know, sustaining this 8,000 crore, you know, you know, obviously we have a balance phase here, but otherwise, how should we think about the future pipeline? Have you already started evaluating proposals now that we have almost sold half of the project and probably we would need, you know, a pipeline for sustaining the sales in future? So how should we think about, you know, business development in NCR, you know, from here on? Would it be this year or probably next year we'll probably close something in NCR?

So British business development, hi, this is Vikas, business development for us is an everyday job. And we are, you know, what we really did back then, of course, again, like I say that, you know, it was not expected. But all we want to tell is that we also know how to play this volume game, and we know how to build in quantity and build quality as well. So, obviously, we've enjoyed this ride, and we will continue to do that. For us, like I said, business development is an everyday job, and you'll see similar action in many other projects of ours.

Sure. That's helpful. That's it from my side. All the best. Thank you.

Thanks. Thank you, Pritesh Bhai.

The next question comes from the line of Akash Gupta with Nomura Holdings. Please go ahead.

Hi.

Am I on the...

Yes, Akash. Hi.

Hi, sir. Congratulations on a great performance for 350 North. My question was on the launch pipeline that we have for the balance part of the year. In addition to Adarash Nagar, how are we thinking about the other projects in terms of launches and approvals for the balance part of the year?

So, again, you know, we spoke about all our projects. Today, we have Aurelius, which is on Pedder Road. We'll be launching that. We have two towers, one each in Okhran Road and Kolshed, which we will launch within this year itself. Then we have a project in Alibag that we will launch. So, a lot in the pipeline, Amin. Again, yeah.

Understood. My second question is on the 360 West. The off-take has been slowing down since the past three quarters. I mean, we sold four units in the second quarter of F-26. Now we're down to one unit. And we are also bringing new Adarsh Nagar inventory this year. So how should we think about the off-take in 360 West? And by when are we planning to consummate the entire inventory?

So, you know, again, a lot of resale has happened. And rather, I wouldn't call it resale, sales by our, you know, erstwhile landowner slash partner in 360 West. So the flats are selling. It's just that, you know, like now we are the only ones left with inventory. So you will see some momentum there also.

Understood. Thanks for that. And then just the final question on the revenue recognition on the residential fund. It's slightly lower than the past three quarters, roughly 8.8 billion versus the last three-quarter rate of 14 to 13 billion. Can I know, like, what's the reason behind the drop in 1KF by 20 cents?

Hi, Akar Sommel. So, you know, depends on two things. So, for example, where we are selling finished units, like in the case of 360 or in the case of Mulun, there the revenue recognition will happen once the final payments from the customers are received and the possession is handed over. As far as the other projects are concerned, there the revenue recognition happens on the basis of percentage of work done. So, that's the only dichotomy which is there. So, at times, you know, for example, in Mollund, if somebody pays you on, you know, 5th of July instead of 30th of June, then that recognition gets deferred, you know, to the next quarter. So, it's only a question of how that, you know, basically the order book is there. The only thing is how it flows through the P&L. That's all, you know.

Understood. That's all the question I have. Thank you so much.

The next question comes from the line of Rahul Jain with El Ara Capital. Please go ahead.

Hi, sir. Just a quick clarification on 360 North. The gross bookings of 80 billion plus, I mean,

all the allotments related to these bookings are done, or are there any pending allotments that are there?

In the sense of allotments, I mean, allocations and all that are done.

Yeah, all done.

Okay, so it's completely intense from the code rolling. Okay, thank you.

A reminder to all participants, you may press star and want to ask a question. The next question comes from the line of Karan Khanna with Ambit Capital. Please go ahead.

Yeah, hi. Thanks, Vikas. Hi, Vikas. Congrats on the... From my side, firstly, given the success that you've seen in Gurugram, and in a recent interview, you also mentioned you would like Gurugram to become a bigger market than Mumbai. Given that context, what kind of discussions are you having with landowners in the market in terms of BD, and perhaps what kind of partnerships are you evaluating in the market? And if you can talk a bit about how are you looking at the opportunities in Delhi and Noida as well, and price points or segments that you'd like to operate into in the entire NCR market over the long term.

So Karan, like I said earlier, that business development is literally an everyday job for us. Now, our focus has increased, and we have now started including NCR, both NOIDA and Gurgaon, for that. We continue to get offers, but we are mindful on what we want to do, how we want to do for us, land, location, everything is really important. And, you know, I can only answer it in this many words. Can't tell you specifically what BD project we are pursuing. We do it all the time. And you will hear, you know, over time, in terms of markets, you know, we work in a market like Thane where sale prices are anywhere between $20,000 and $25,000 on carpet. So, we are happy to work within those markets. If you have a market like that, we want to ensure that these are growing markets, and there's a large enough land parcel for us to monetize over time. And that's exactly what we will do when we go to either Noida or Gurgaon. And what I like about that market and what prompted me to say that was that I feel that that market is both width and depth, and we really want to play that market. That's about it.

Sure. And then secondly, on the price hikes, can you talk about the quantum of price hikes that you have taken in the past few months to absorb any inflationary impact owing to the cost inflation and how is the absorption of the price hikes in the market? And a follow-up, if you look at Eternia, where your realizations have actually crossed enigma during the quarter, so given that you have more launches planned in Moulin, what kind of price points are you looking at in terms of future launches in this market?

So, Karan, our strategy is always to be proactive when it comes to pricing. If you see what we've done in both Gorigaon and Burigli, we increased our price, you know, and in fact, I must say that the markets have helped us. Because all the apartments that are being resold in Buribli and Gorigaon continue to sell at higher prices. Buildings that have been complete are actually setting new benchmarks. So I must say that, you know, my customers know how to sell my apartment better than I do because they literally lead the price increase. And so for us, it's not like we wait for any external factor. We ensure that there's a constant price hike and that's why there's no knee-jerk reaction on increasing a price just because external factors are not favorable or anything like that. So, it's very, it's all planned. We always have contingency also planned. We have price increase planned. And we exactly know when to increase the price. You know, all of that. So, we do that.

Great. Thank you, Vikas. That's it from my side. Thank you.

The next question comes from the line of Harish Patak with Motilan Oswal Financial Services. Please go ahead.

Yes, hi, good afternoon, Vikas and Sommel. Hi, good afternoon. So, first of all, many congratulations on the NCR performance. So, my first question is on the launch pipeline. Vikas, you just mentioned that we have the Federal Road project, the new phases at both the Thane projects, the Alibag, and I think Tardew is also in the pipeline.

So, which of the projects will come up in FY27

You know, the projects that I named, all of them are in FY27. There is a good possibility that we might bring in Mulud also and, you know, within the 27, because now we don't have any project in Mulud. Other than these two that are continuing to sell and they are ready. So we are ready as far as designs are concerned. We are already on an approval stage. So even if, let's say, we get our approvals within the next three or four months, we can still look at a launch in the last quarter. So we play that out. But we have enough and more happening in 27, not thought of 28 as yet. Or at least don't want to announce 28 is too far-fetched.

Understood. And regarding the NCR balance inventory, I think in one of the media interviews you mentioned that 16,000 crores is, you know, the total GDP of the project. So, are we thinking to launch the entire inventory in one go next year or maybe we might launch in a staggered manner?

Harsh, I really hope you are right in 16,000, but I mentioned 14. I'll still try to get 16 now that you've told me. Set a new target for us. Now, on a serious note, sorry, what exactly was your question? I got a little fluxed in your 16,000 versus my 14.

Yeah, so my question was, are we thinking to launch the entire balance inventory in one go next year, or we will be doing it in a more staggered manner over the next two, three years?

You know, honestly, we have not thought. We will think through, and we'll see how we play that out. We've really not thought through. It will depend on multiple factors. Where are we in terms of our construction? What phase are we? Now, our first objective is to get the show apartment ready. We know we are doing something really special. Once that apartment is ready, I'm sure people will appreciate what we've done. And we'll look at that reaction and then decide. But it's really, it's there in the offering for the next year for sure. How much, what price, I can't say that today.

Sure, Vikas. Thanks a lot for taking my questions.

Thank you. We believe that we now have cracked the code as far as execution is concerned. We can build volume with quality, and that's exactly what we intend to do. We have our systems in place. We've been in the business for too long now, and we know how to build quality. And at a decent speed. And this is what we've been working on. If you really see, we are probably amongst the few developers who are, as we speak, constructing almost 18 towers, which are anywhere between 60 and 65 floors. So, you know, at various levels of construction. So, again, you know, we already are doing volume. And now it's just a case of replicating. We have an excellent team in place. We have our external partners. And that's it, you know. So we are at that stage today, I would say, we've hit some sort of a tipping point where we can now really go into our next phase of expansion. And again, our brand name is helping us. We are able to, you know, easily, you know, the way we were received in NCR. I feel confident now that, you know, yeah.

Just one question, Swamil, on our Sky City Mall, right? The occupancy has increased, right? And I think the revenue has not been in sync with that. So anything to read on that?

No, so what had happened was in Q4 of last year, there was a lot of true-up which we did for all the retailers who had come in since launch. So that is why there was a little bit of a bump up in that quarter because of that. And that is why that number, despite a lower occupancy, might look to be higher than what the revenue for this quarter was. But I don't want to read anything more than that. You know, so that would have been a one-time thing which has played out. From here onwards, I think you can consider this as a base. Even this I will not consider it as a base because what happens is, you know, when we say this is the occupancy for the quarter, this is typically the occupancy at the end. There are many retailers who, you know, some for all the new things which have started during the quarter, some will be for three months, some will be for two months, some will be for one month. So, if you look at our numbers for Commerce 1 or you look at our numbers for Oberoi Mall, which is a more comparable asset, there they don't move around as much. So, that's where once you hit steady state, then it works slightly differently. So, maybe give it a few more quarters for the mall to reach steady state. Then, you know, I think then you will get a fair estimate of how much that mall will make every quarter.

Thank you. All the best for the coming quarters. Thank you. Thank you, Vijay.

Ladies and gentlemen, we would take that as the last question for today. I would now like to hand the conference over to Mr. O'Brien for the closing remarks.

Thank you all for taking time to take this call. We look forward to hearing from you on an ongoing basis. Please feel free to reach out to us or our investor relation team as and when you have any questions. Thank you again. Thank you all for your continuous support.

Thank you, sir. Ladies and gentlemen, on behalf of Oberoi Realty, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.