Godrej further says: “We expect to see very sharp growth in cash collections and hence operating cash flow over next couple of years. That will help us grow rapidly while maintaining our gearing level but we have no aspirations of reducing debt beyond this 0.5 to 1 band.”
A great set of numbers are coming in this time, both on a quarterly as well as full year basis. Best ever quarterly and annual sales, net profit, collections, all of that. Can we expect this momentum to continue and sustain going forward as well, is the question.
Pirojsha Godrej: The team has done a fantastic job ending FY24 on an extremely strong note across all operating parameters, as you mentioned. We do expect the financial year ahead to be another very good one. We had done a lot of work to build our portfolio through very active business development over the last few years when we felt that land prices were suppressed and we did expect to see an upturn in the cycle which is being seen very strongly across markets. The portfolio for new launches that Godrej Properties is actually quite a bit stronger in FY25 than it was in FY24. We hope to be able to build on the strong operating momentum we saw last year.You have given some very solid guidance for FY25 in terms of your booking value in pre-sales, you have guided for Rs 27,000 crore. Can you just throw more light on that because what we want to understand is what is driving this confidence because Rs 27,000 crore is almost $2.5-3 billion.
Pirojsha Godrej: A few things are helping drive the confidence. One is, of course, in FY24 itself, we did about 22,500 odd crore of sales. So, this is about 20% growth on that, which is a long-term aspirational growth rate that we would like to maintain. I think we have demonstrated success at a very rapid scale up in sales over this past year.
If you look at our numbers last year, a lot of the growth came out of the NCR market, where we grew by 180% to cross 10,000 crore in sales last year and the Mumbai market, where we grew again well above 100% to achieve about 6500 crore of sales and we had more moderate growth in some of our other major markets like Bangalore and Pune. This year, we feel as we look at our project pipeline, that all four of these major markets should be firing on full cylinders and therefore not just two big contributors to growth, but all four markets we expect will do well.Additionally, in Q4, we added two new projects in the Hyderabad market, which is another very large residential real estate market in the country and we are looking forward to marking our first launch in Hyderabad later this financial year. So, those additional geographic levers, we think, again give us a lot of confidence that we can see this kind of growth. Lastly, the market conditions that we are seeing remain very strong and we are quite optimistic that we are kind of mid-cycle now so that we will have another good year of real estate demand ahead.Can you also take us through what the outlook is when it comes to your commercial portfolio? By when do you see 100% leasing for all your commercial projects?
Pirojsha Godrej: Typically the way leasing for commercial office works is that most of it happens in the year or two after the project is delivered. You do typically have a little bit of pre-leasing and then a lot of leasing activity once the project is ready and tenants can come straight into the development. What is exciting for us this year from a commercial point of view is that most of our commercial buildings will be receiving their occupation certificate over the next few months. So, these projects have been under construction for the last three or four years and are now reaching completion.
We have two projects completing this year in Bangalore, a project completing in Pune, a project completing in Golf Coast Road in Gurgaon. So, all of those will add very substantially to the stock of ready inventory we have on the commercial side and I expect it to be a very strong year from a leasing perspective. FY22 and FY23 had seen a big dip in leasing activity as the effects of the pandemic, work from home, concern about how ready people would be to come back to offices was still playing out. We have already seen a sharp improvement in FY24 where leasing activity has been quite strong and we have seen, for example, in our building here in Vikhroli, Godrej Two, getting very close to 100% leasing this year.
Let us also talk about the debt that you have on your books. After 11 straight quarters of rising debt, it has finally come down. Are you more comfortable with the current debt levels and would they go down further from here?
Pirojsha Godrej: We had guided publicly on a long-term basis that we would like to operate the business with a gearing anywhere between 0.5 is to 1 to 1 is to 1. Anything under 0.5 is to 1 would not be adequately taking advantage of the kind of growth opportunities present in the Indian real estate sector today and if we were getting over 1 is to 1 that might be a sign that we are perhaps putting a little bit too much risk onto the balance sheet.
So, we think anywhere in that range is where we are comfortable operating. As you would recognise, 0.62 is towards the lower end of that range. We have significant headroom for investment this year. And I also think we expect a very strong growth in cash collections from customers and operating cash flow. We have always tried to explain to the market that our view is that in this business, the first thing that has to come is the capital which we raised four or five years ago just before and during the pandemic. The next thing that has to come is business development and we have been very successful in adding a strong set of new projects to our portfolio over the last three or four years. Once you have those projects, you of course bring them to market through launches and you see booking value growth, which again as I mentioned has been 55% and 84% for the last two years.
After that kind of booking value growth, the next thing is the customer cash collections because you will start constructing these projects at various construction milestones, the cash that customers who have booked, the cash that they owe you will start coming in. So, we expect to see very sharp growth in cash collections and therefore operating cash flow over these next couple of years, and that will help us continue to grow rapidly while maintaining our gearing level in this band but we have no aspirations I should clarify of reducing debt beyond this 0.5 to 1 band because again we think that is not fully capturing them then the opportunities that the sector is providing us today.
