Runwal Enterprises Limited (RUNWALENTR) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Runewell Enterprises Ltd. Q1 NFI 27 on a conference call. As a reminder, all participant line will win the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vikas Verma from EYNLLP. Thank you, and over to you, Vikas.

Before we begin, please note that some statements made during this call may be forward-looking in nature. These statements are subject to risks, uncertainty, and other factors that may cause actual results to differ materially from those expressed or implied. The discussion should be read together with the risks and other disclosures contained in the company's filing with the stock exchanges. The company does not undertake to update any forward-looking and welcome

to the first earnings call of Runwal Enterprise Limited as a listed company. On behalf of the company and the entire Runwal team, I would like to thank our shareholders for the confidence placed in us. Listing is an important milestone, but we see it as As a listed company, our focus will remain on disciplined execution, transparent communication, and long-term value creation. Since this is our first maiden earnings call, I would like to give a brief introduction to our business, followed by an update on the quarter and our priorities for the years ahead. Our Business and Operating Platform The Runwal brand has been present in Mumbai real estate since 1978. Runwal enterprise is focused primarily on residential development across Mumbai and the wider Mumbai metropolitan region. Our portfolio spans affordable, mid-income, and luxury housing, along with select commercial and retail developments. Our development capabilities cover stand-alone projects, gated communities, and large integrated townships. We undertake projects through a mix of own land, redevelopment, joint development arrangements, and joint ventures. This gives us flexibility in capital deployment and allows us to pursue growth opportunities across different micromarkets and customer segments. We have a total portfolio of approximately 88 million square feet, of which around 20 million square feet is ongoing and 56 million square feet is upcoming. This provides us with a substantial development runway for the next decade and gives us the visibility to sustain growth over the long term. The total developable area is approximately 88.4 million square feet, of which about 74.6 million square feet related to residential development and approximately 6.37 million square feet of commercial development. Residential development remains the core of our business with a balanced presence across affordable, mid-income, and luxury segments. Even though we are predominantly a residential developer, we are on the path to build a portfolio of annuity assets as well. These include Runval BKC, a Grade A commercial development with a gross leasable area of approximately 0.31 million square feet, and Nexus Runval Garden City Mall with a gross leasable area of approximately 0.75 million square feet. Our two large integrated township platforms in Dombivli are a key part of these developments combine housing with schools, retail, commercial spaces, open areas, and community infrastructure. The township model provides a long development runway, multiple launches, opportunity, and the ability to serve customers across different price points. We also have built a strong position in the eastern suburbs and Kalyan Dombivli. Based on the industry research, Runwal was ranked third in Mumbai for new residential launches on sales between calendar year 23 and the first quarter of calendar year 27. We were also ranked first in eastern suburbs in terms of sale and first in Kalyan Dhumivli in terms of new launches over the same period. Our brand, local market knowledge, customer reach, and execution capability have been built over several years. We have delivered more than 13,500 units and over 14 million square feet of area. Our ability to sell through the construction period and in several projects, command a premium to the relevant micro-market is an important strength of the business. With that, I will now hand the call over to our Director, Pradyuman Kanodia, to take you through the operating performance for Quarter 1 FY27. Over to you, Pradevna.

Thank you, Subhaji, and good evening, everyone. The growth priorities for Unwal Enterprises is something which I want to summarize. Looking ahead, our strategy is to build around four priorities. First, we will continue to deepen our presence in Mumbai and the MMR area, where we have established operating experience and brand recognition. The Mumbai metropolitan region is a deep and resilient real estate market, supported by strong underlying demand and diverse customer segments. While there may be concerns around rising supply and oversupply in certain micromarkets, we believe that quality inventory from established developers such as us with strong track record of execution will continue to attract demand, particularly as customers increasingly value timely delivery and reliability. We see opportunities in the southern part of Mumbai and the western suburbs. Second, we will continue to improve our presence towards luxury housing. Our entry into South Mumbai through 7 Mahalakshmi has marked our presence in the luxury segment in South Mumbai. Third, we will pursue capital-efficient growth through redevelopment, joint development, and partnership models. We will evaluate each opportunity based on location, customer demand, project economics, approval visibility, and return on capital. Fourth, we will remain focused on execution, collection, and balance sheet discipline. The proceeds from IPO strengthen our ability to reduce debt, support ongoing construction, and selectively invest in growth opportunities. We have an active launch pipeline for the next 12 to 15 months. The timing of individual launches will depend on approvals and market conditions, and we will maintain a disciplined approach rather than pursue growth at the cost of returns or cash flows. As Subodji informed earlier, we are developing annuity assets in partnership with players of international repute. With that, I will now hand over the call to Sashi Bhushan, our CFO, to take you Thank you, Pradhamji.

This is Sashi Bhushan. I am the CFO with the group. I will be very happy to take you all through a brief commentary covering our operating performance and the financial performance. But before we get into the numbers, before we start looking at the trend, it becomes imperative for me to make you all familiar with the accounting policies and the revenue recognition policy of the company, so that we are able to figure out the variability and trends. So, at the company, we currently follow revenue recognition on the basis of project completion. In fact, it's a bit more stringent than that. We recognize revenue only when the project If it receives occupation certificate, customers come ahead and take possession of their units because that's when the control of the unit actually gets transferred in favor of the customer. Having said that, our revenue, EBITDA, profit margins, all of them should be seen in light of this recognition policy. It may happen that on quarter-on-quarter basis or on an annual basis, we saw significant variability, but all of them will be primarily on account of the revenue recognition policy, which I just explained. For this reason, we, therefore, encourage our investors to look at our operating metrics as well. Say, for example, pre-sales, collections, average selling price, how many million square feet we are launching or delivering in a particular quarter or in any particular time period. We believe that this, along with the financial performance, they all give a complete and healthy picture of the overall organization. With that background, let me take you through a quick commentary on the numbers. So if I look at the operating performance in quarter one of fiscal year 2027, during quarter one, we recorded pre-sales of close to 4,835 million square feet, rupees 4,835 million, which is close to 5% jump in comparison to 4,600 million that we reported in the corresponding quarter last year. Collections were also up from We have sold close to 0.35 million square feet in this quarter. This translates into an average selling price of close to 14,200 per square feet, which is again a significant jump in comparison to the quarterly selling price that we have achieved in the same quarter last year. This is happening primarily because we are now diversifying more into the luxury segment and the average selling price will continue to remain on uptick from here onwards. We also ended up delivering close to 1 million square feet. When we talk about the area that we are delivering, we are essentially reporting the figures against the developable area of those towers or phases where we have got the occupation certificate. So, on a total basis, all the running projects that we have currently, they have cumulatively achieved a sale of close to 150,542 million, and against that, we have a collection done already so far, which is roughly 114,280 million. So, this lists us with close to rupees 36,000 Looking at the financial performance, so revenue from operations stood close to INR 3,400 million, lower in comparison to the figure of 4,462 million. The total income for the quarter was close to 3,760 million. EBITDA stood at roughly slightly ahead of rupees 1,000 million. The profit after tax was close to 497 million. So financing cost for the quarter was INR $257 million, as the benefit of debt reduction will progress, especially in quarter three, because our IPO proceeds were realized in the first week of October, the benefits of the interest rate reduction and the benefits of the interest reduction and the benefits of debt reduction will be visible more from quarter three results. As of now, we have used the proceeds of roughly 325 crores from the IPO to repay the debt. Apart from that, we have also converted the CCDs that were outstanding from HDFC Capital along with the accrued interest by then. So, already around 500 to 600 crores of debt reduction has already happened. Those numbers will become visible, especially at the end of quarter three, and the reduction in debt will translate into close to 50 to 60 crores of annual saving in terms of interest. Our debt-to-equity ratio, which was close to or slightly ahead of 3 at the end of fiscal year 26, has already come down to close to 1.5 after accounting for all the debt repayment that we have done using the proceeds of the IPO. With this, I just want to conclude saying that our focus, the focus of the group and the team here remains on five areas, that is to maintain the sales momentum, improve the collections, deliver projects on schedule, execute the launch pipeline and calibrate it to reflect what market is looking for, and of course, deleverage the balance sheet further and strengthen it. Since this is our first quarter as a listed company, we are putting in place a consistent disclosure framework. We intend to communicate our operating and financial performance in a very clear and transparent manner to build a long-term relationship with all our stakeholders, shareholders, analysts, and the wider investment community. So with this, I will conclude my speech, and thank you very much for joining us today. We will now be very happy to take your questions one by one.

Thank you so much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone 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 question comes from the line of Bhaskar Chaudhary, an individual investor. Please go ahead. Hi, thank you.

Thank you so much, and many congrats to the man. I just had a couple of real listeners.

Mr. Chaudhary, sorry to interrupt you, but if you can just speak a little louder. Thank you. Sure.

Is it better now?

Yes.

Yes. So, first question I wanted to ask was that now that we have listed, what would be our strategic priorities going forward for the next two, three years?

So, this is Subodh Runwal here. So, our strategic priority for the next two to three years would be to pursue growth within Mumbai City and to grow at a CAGR of close to 20% and also So, to look at asset light opportunities and also focus on the margins and to also ensure that we have a debt reduction in place as such.

So, the growth of 20-30% that we are talking about is in terms of pre-sales, right? So, regarding that, 20%. So, this year, as well, on FI27, can we assume a growth of 20% baseline, at least?

That would be our endeavor.

Okay, okay. And for the next two, three years, we should assume like a baseline of 20% to 25% growth in the...

So, again, our endeavor would be in the range of 20% year on year.

Got it, got it. So, this will be supported by our new launches and also the sustainable sales. Also, I would want to ask that on a gross level, what would be the sustainable per project margin that we look for?

Pat of close to at least 15%? No, I'm talking about... EBITDA margins close to 28%?

On a project level, gross margins I was asking about.

Bhaskar Pradehman here. So, from a project level, since we are present across different price points, affordable, mid-income, and luxury, each one of them offers a different percentage of profit. But on a blended average, the project level, our EBITDA margins should be upwards of 25%. And as the luxury segment or the mid-income segment continues to give us greater sales and greater velocities in the years to come, the product mix, we should be able to sustain our project margins at greater than 25% over the next few years.

About 25%?

Yes.

All right. And I also wanted to check that going forward, will you guys be having a stated guidance policy like the other real estate players?

We have already disclosed that this is our first call post-listing. We will be as transparent and as much forthcoming in our disclosures as required. And at the right time, we'll give a direction, but without giving specific guidance, We will definitely try and give some sort of a general sense in which the company is growing. And as Subodhji mentioned, our endeavor would be to grow at 20-25% from a pre-sales point of view while maintaining our balance sheet and the health around profitability and margins. So I think the focus will be all around rather than just focusing on one number.

All right. All right. Helpful.

Thank you so much and best of luck. Thank you, Mr. Bhattar. Thank you. Our next question comes from the line of Rohan Singh with Pinpoint Capital. Please go ahead. Hello, any audible?

Yes, Rohan.

Hello, thank you for your opportunity. My question is on the debt part, so could we just throw some light on the debt repayment plan and how should we look at the debt going forward?

Yeah. As Sashi had mentioned, the IPO proceeds were utilized to bring our debt significantly down, and as of now, our debt to equity, which used to be 3.1 times, has already come down to 1.5 times. The desire is to maintain a healthy balance sheet and see that the debt is always in a number which can be managed very, very effortlessly. Our being a residential development, a lot of our existing cash flows allow us to repay our debt in a natural manner. Our thoughts around asset light model in terms of new acquisitions through JVJD models would mean that we will be allocating limited capital for new growth and new opportunities. So with that, and also our partnerships on the annuity side with renowned names like Nexus and the Japanese Investor would mean that there will be an overall growth focus on equity wherever required and a very limited amount of debt to be taken at the right time, that too on a self-liquidating basis. So you will find that our debt will continue to come down. Already it has come down to 1,900 crores as we speak. So that's the journey that we would endeavor to continue. And the objective is to reduce and get the debt as low as possible.

Thank you.

Ladies and gentlemen, yes, please go ahead.

Yes, so also just to add there, I mean, there is one more activity that the company is considering. We are also thinking of monetizing a part of our land parcel by selling it to data operators. And that will also give us some proceeds that will be used directly for the repayment of debt. We have given the mandate to JLL, and we have also got some interest from 10 to 12 interested parties. Now, the further details about this will be disclosed as and when we are going ahead and we are concluding the transaction. But that's another activity that we are thinking of to repay the debt and deleverage the balance sheet immediately in addition to everything that Pradhamji has told about.

Thank you, sir. Ladies and gentlemen, anyone who wishes to ask a question may press star and one. Our next question comes from the line of Abhinav Sinha with Jeffries. Please go ahead.

Hi, sir. Congratulations on the listing. Congrats to the whole team. I just, you know, had a few questions. So, firstly, on the last part that you mentioned on the data center build, which location are we considering for this land?

So, we are looking at land parcel that we have in Dombi Vili, while we are open to look at some other projects as well, but as of now, we are considering land parcel located at our project in Dombi Vili, which is Gardens in My City. Okay, and how much land is available for this with you? A significant portion of the project is across 250 acres of land parcel. We have a significant We have the second portion of that available for sale over there, but we are currently looking for monetizing close to 18 acres.

Okay. Okay. That's it, sir. Secondly, the commercial bit that you talked about earlier with a couple of projects at BKC and Nexus, what is the lease income profile, you know, that we can think about when they are completed, say, three, four years from now, and are there any other I think

these are the two large developments that we currently are doing on the annuity side, apart from small schools that are operational. So these two projects, both the mall as well as the BKC project, should be completed over the next two and a half years' time. And with the completion of these two projects, our annuity business income would start reflecting in our P&L, which currently would be absolutely minuscule. The rental income from the mall could be on stabilization upwards of 100 crores in the first year. And also on the BKC projects, we are expecting very good rentals to get generated. And we are still looking at the right kind of end-use customer for those projects. But having said that, these are quality land parcels at very, very quality locations. And with the investments by such big names and the work We should be able to generate rentals which are above market. So while the journey may take little time, apart from that, we have opportunities on commercial development both at Kanjur Marg as well as at Bandra where we have existing opportunities which could be either in form of strata sale or on leasing model as well. We are evaluating, and in the long run, Dombi Vili offers a lot of opportunity on offices because it's a township development where we will be also doing more commercial apart from the retail that we are doing. So over a period of time, the idea is to grow the annuity business with as much focus on these three, four existing opportunities that we have, and along with the partners that we have been able to develop over a period of Hopefully, as these things stabilize, our rental income could be starting to reflect in P&L, but very difficult to give a number at this stage. It could be a function of timing, it could be a function of area, but these two projects definitely in two and a half years should start reflecting in our P&L.

Okay. On the residential side, can you help us with the GDV number for the land bank or, you know, if you can, some good estimate there, one? And secondly, what is the launch pipeline for the current fiscal?

See, two things. One, that we spoke about 88 million square feet of development potential that is housed in our land bank across different micro markets, It's currently selling at around 13,000, and this 13,000 is going to continue to increase as the mix improves, as the price points goes up. So one can take a blended average and arrive at a number, but these are, again, projects which will have seven years of journey, eight, six years of journey. So one needs to calibrate that. So we have a growth pipeline from our existing portfolio, which will be sufficient to continue to give us growth of 20-25% year-on-year for at least the next decade or so. So, a very healthy pipeline backed by strong land parcels at very important micromarkets. So, that's a very important thing. And as far as the other question that you had in terms of launches, I think we are geared up for launches on a continuous basis, both from our existing land parcels, which are seeing new phases to be launched, whether it be Kanjur Mark, Dombi Vili, or new launches across Bandra, or maybe the new opportunities around marine lines and marine drive. So these are things which will depend on the timeline that we are looking at approval, but to match our aspiration to grow 25% on a year-on-year, we will have a corresponding launched number as well. So, you will see that from land acquisition to launch, we will try and crunch the time as much as possible so that we are able to launch projects in a very short possible time, allowing us to grow from multiple locations and achieve our objective of at least 25% growth coming in from a pre-sales point of view.

Great. Thanks and all the best. Thanks, Abhinav. Thank you.

Thank you. Next question comes from the line of Siddhant Ludhaya with Sanchi Fund. Please go ahead.

Yes, just a clarifying question. We mentioned that the net debt is now 1,900 crores. So, I'm assuming that is as of September end

because the debt sells around 2,800.

Yes, yes. So, I'll just clarify. So, 1,900 crores. So, there are two parts to our debt. I mean, if I look at my current net debt as of now, then it's close to 2,700 crores as reported. Now, out of 2,700 crores that you get to see there, around 365 crores is on account of loans from the related parties. They are from various group companies, which are not getting knocked off due to consolidation, and we have an external debt of close to 2,400 crores. So, this 2,400 crores have fallen down to 1,900 crores at the end of post-IPO. So, that's not also exactly as on 30th September. The repayment happened in the first week of October when we realized the proceeds from IPO. So as of now, the external debt is 1,900 crores, and the loan from the related parties or the group companies will still be around 365. So if I look at the exact number, the 2,700 crores have now fallen down to 2,200 crores, and that will not be visible in the results coming out corresponding to 30th September. That will be visible in the results coming out corresponding to the 31st December quarter because the IPO.

So, thank you.

Thank you. Thank you so much.

Our next question comes from the line of Jia, an individual investor. Please go ahead.

Jia, we are...

Yeah. Congratulations on being listed to the whole team. So, sir, I ask you a question. One of them, which is, which budgets are awaiting approvals, And could you just provide us if there are any approval delays that might push the launches?

Okay. Right. So there are two, three projects that we are in the process of seeking approval. And that will also augment our launch pipeline, may not necessarily in this year, but sometime even next year as well. So the first one is there is a society redevelopment project that we are doing in Bandra. So that's a project that is waiting approval, and there will be, we are almost ready to launch there, but just waiting for the approval to come. Then there is another project that we have acquired in Marine Drive, so that project is also where we are scheduling our launch activities, and approval is also pending there. So we are not expecting any delay over there, depending upon how our launch activities pan out in the subsequent months, and depending upon how our market intelligence suggests to us, they will be queued up for launches subsequently, either in this year or probably sometime early next year. I mean, we are not giving the guidance as of 9 terms of the launches because we know that approval is a third-party activity, and probably the dependence on that cannot be calibrated by the management. So, but yeah, these are definitely the projects which are awaiting approval. Apart from that, there are many more towers and the phases that we continue to do, continue to launch in Dumbivilly. I mean, these are the large projects. So there will be some phases, some towers that will also get, where also we have applied for approval, so they will also get queued up, especially towards the launches.

Okay, understood. So the next question is, how is the absorption of the price in the market and how much headroom remains for price increases in subsequent phases?

So, in all the micro markets where we are present, for example, Dombivli and even Kanjur Marg, Moolund Belt, so at all these places historically, and we have disclosed that in prospectus as well, we have enjoyed a differential price of close to 3% to 5% in comparison to our competitors. So, we have enjoyed a premium of close to 3% to 5% in these micro markets. We are very well established in these micro markets, and we continue to expect to have this incremental price or a premium nearly in the same range in the quarters to come, in the years to come as well. In the third micro market, our prices, say, Seven Malakshmi, that is in the southern part of Mumbai, our prices are at par with whatever is happening with the competition around that as well. And we expect that the prices will continue to remain almost at par with the competition there. As the project progresses, and as we launch the upper and higher flows in the towers over there, we will see some increases there. Historically, whenever we have done a price rise, they have generally been absorbed quite well, primarily because we are market leaders in the geographies where we are operating, and we hope that things will continue to remain in our favor as of now.

Okay. So, any plans to expand beyond the MMR market as other players are doing it?

No. As of now, as Pradhanji also said, one of our key pillars remains to remain focused in MMR itself. We believe that there are ample and enough opportunities in Mumbai itself, so we will remain MMR focused.

Okay, sir. Thank you and all the best.

Thank you. Thank you so much.

Yeah, thank you.

Thank you so much. Our next question comes from the line of Jain Soh with Tata Consultancy Services. Please go ahead.

Yeah, hi. First of all, congrats on the listing. I have a couple of questions. One is that when the IPO came out, some of us would be surprised that the amount was reduced from $1,000 to $500. Given that, we know that you have a lot of debt. I was expecting you to be at least looking at 1,000 crores because you could easily reduce the debt. That's one question. I don't understand why the amount was reduced. Second thing is, you are probably one of the few premium builders operating in all segments. You are there in affordable, you are there in high-end, you are there in commercial. So my question is, over the next two years, will there be a shift in terms of where you will be doing more projects And where you will be doing a little bit less, depending on your gross margins, will you be taking or will you be doing everything in the same way you're doing right now? I mean, in particular, you might.

Yeah, hi, Ramesh. Pradhiman here. And I think your observations and your questions are very valid. So let me attempt to answer that. On the size reduction part, I think we began this journey of going public almost two years back. The team and the entire management had put in a lot of effort. But the markets have seen a lot of challenges over the last 8 to 12 months' time post our initial approval that we got from SEBI, which included the wars in Iran-Iraq, the fact that the war at Ukraine and all continued, our issues around the markets continue to have several challenges. In that difficult micro market and environment, SEBI gave a one-time concession to entities who had got approval to reduce their size and offering by 50%. We believe that at this stage to fight the market from a valuation point of view would not be the right thing because it continues to – and we are not diluting the fact that the promoters had not offered any share for – as an OFS, it was all a primary offering. So we, in the wisdom, we realized that a small dilution at this stage will allow us to move this journey to get ourselves ready for the next leg of growth, whether it be from a readiness of being tested against the best of the best from a listed space, whether it's on compliance, whether it's on growth, whether it's a way of disclosures and transparency. So a lot of effort and thought went into that, and since dilution was limited to 10-11%, we saw the opportunity, and we didn't want the efforts to go waste, and that's the reason why we took this benefit of size reduction, which was given by SEBI for a limited time, and our bankers also advised that that would be in the best interest for us to go forward and take it. So that was the reason, and that's the logic behind the size reduction. As far as your observation that we are a premium builder, absolutely right. We are one of the most trusted real estate developers in Mumbai. We are a household name in Mumbai, having spent more than five decades in developing this brand value and brand image, which has seen us do multiple projects. And now with Subodhji, under his leadership, we are doing at least, we spoke about 88 million square feet of development potential spread across different micro markets, different price points. Yes, as we move forward, the opportunities around South Mumbai and Western parts of Mumbai are much higher, which means that you will be looking at more opportunities on the mid-income and luxury side of offering, not the Uber luxury of 100,000 or 150,000, but the luxury which So you will see that there is a gradual shift because of the nature of the projects that we undertake, that our product mix will continue to evolve and change. Affordable housing, which is more towards the Dombivilli side, will continue to have a robust journey, continue to give good pre-sales number, but from an overall number point of view, the percentage will keep coming down. And we also believe that Dombivilli will soon not be just an affordable It will also move to a mid-income market the way infrastructure and other things are happening in the Dombiwili region. So for us, the focus would be to look at opportunities in mid-income and luxury where the margins are healthier and where the opportunities also lie now. So the mix will continue to evolve and change, and you will see less and less contribution of affordable and of that nature in our future years to come.

Okay. Thank you very much. Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for the closing remarks. Thank you. And over to you, team.

Thank you, everyone. I hope all the questions were answered. In case you have any more queries, you can reach out to our IR team. Thank you so much.

Thank you so much, sir. Ladies and gentlemen, on behalf of Runval Enterprises Limited, that concludes today's call. Thank you for joining us, and you may now disconnect your line.