Demand is looking good in Rs 50 lakh to 3.5 crore segments: Mohit Malhotra, MD & CEO, Godrej Properties

Mohit Malhotra, MD & CEO, Godrej Properties, talks about the sales booking in FY21, expected response in FY22, Q2 launch pipeline, capital raising exercise, demand situation among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: The company has topped in sales booking for FY21 beating all your competition. How did you manage it in tough times and is it sustainable?

A: We topped the real estate market last year and were the number one player. It is very sustainable and we feel that it is the tip of the iceberg. From here, the company will grow at a very rapid pace. If you will have a look at the last 10 years when we did our IPO in FY10, our sales were around Rs 400 crore and today we have grown almost 15x in the last 11 years and still, we have less than two and a half per cent of the Indian market share. So, from here I feel, we will have a very high level of growth in the next decade and the next few years. There are many reasons for why we were able to do this growth on a very sustained basis and if you have a look than in the last four years, the company has been consistently delivering growth on sales and that was at a very high level. One reason is that we are among the dominant player in each of the major metro city in the country. In Delhi-NCR, the company is doing extremely well. In Pune, we are the number one player in the market. In Bangalore, we are amongst the top three-four players. Mumbai is our hometown and we have a very large presence. So, we are not a city dependant player and are present in six cities and dominating each of these six cities and that gives us sustainable growth because if there is an issue in one city, we have a widespread portfolio, which is growing at a sustained basis. So from here, we are quite optimistic. I think that in the next one to two quarters or maybe in the next few months, there will be ups and downs depending upon how COVID is going. But hopefully, once everybody gets vaccinated things will only look positive from there on, so, extremely bullish on the future outlook.

Q: Can you please give a sense of the kind of response we are getting in FY22 and what target you are having in terms of sales and will you be able to break the record you have created? Also, what is your view on margins and profitability?

A: Profitability is definitely improving. The challenge in the real estate sector is that when we do a sale like last year we had a record sale by the time it delivers in the PAT there is a three-four year lag because profit can be recognized only when the project completes. So, there is a lag going on in the company in the reported profit numbers. But as we have been highlighting for quite some time, FY22 onwards, the company’s P&L will show a significant shift upward trajectory because all the past sales will start reflecting in P&L and you will see very sustained high margins, reported PAT trajectory for FY23 onwards. But internally, we are able to track this and can see a significant shift already in the margins. In terms of FY22 outlook, as I said in the long term, the medium term we extremely bullish quarter one has been a slow start because of the first two and a half months, practically, the wave 2 has had a huge impact. This time, the impact of the COVID wave was much harsher than the first time because a lot of people, their families, the customers and their families were impacted so I think quarter one is something, which is practically was under the influence of COVID. Things have now started to improve as the numbers have started to drop at a pan-India level in all of our important cities. We are seeing customers are now willing to come back, visit the sites. Lockdowns have been relaxed in most of the cities, so people can come and visit the sites. From here onwards, we have a strong launches plan for Q2. So, we are quite optimistic the only thing, which is somebody can not control is, when the wave-III comes, how big the impact is. But overall, internally, we are looking at much higher sales compared to the last year and a significant growth compared to the last year.

Q: You have talked about the Q2 launch pipeline. Can you please elaborate a bit on it in terms of the kind of launches we will see, what are the upcoming projects and geographies you are tapping?

A: Every Geography has a launch plan between Q2 and Q3. What happens at the launches is approvals are required from the government side and at times, it gets delayed for a month or two. But If I look at the full-year view on launches, the launch pipeline is very strong across cities. We have already launched one project in Bangalore, in North Bangalore just this week we will be launching, which will have a significant impact on Q2. In Pune, we are launching one project and we already have approvals. In NCR, there will be launches in the Delhi portfolio. There are big projects, we have taken in Delhi, which we expect to launch either in Q2 or Q3. In Mumbai again, we have signed a couple of projects last year of which one was signed in Navi Mumbai, one was in the Kalyan belt and then there is Panvel belt. So, I think all of these launches are expected to come in Q2 and Q3. So, across cities, the launch pipeline is very strong and that is what is giving confidence to us to deliver again an excellent FY22. The only caveat is we don’t know how the environment will play out but if everything remains the way it is, we should expect a very very strong year again.

Q: A good amount of capital raising exercise has been done by the company. How do you plan to utilize the capital raised or will you need to raise more capital?

A: There is no need to raise capital further because we are sitting on a very large cash pool. The idea was to raise this capital to invest in new projects. There are many interesting opportunities, we are seeing across cities. Land values have come down because of the distress in the market. Given our high sales which we are witnessing due to the kind of confidence the consumers are placing on us, it is giving us the confidence to pick up more projects and deploy more capital. If you have a look at the last 3-4 years, we have deployed close to Rs 800 million of money in the market and we expect to continue that kind of deployment over the next couple of years.

Q: The kind of response and demand from the people and post corona we are getting a sense while talking with financing companies that there is an increase for bigger houses, which includes mid-income and luxury houses. Since Godrej is a premium property player, how are you seeing the response and demand and at what ticket size are you focusing more?

A: Demand has always been very strong in the mid-income segment. And, post-COVID, you are right that people prefer slightly bigger houses and they want to upgrade from two-bedroom to three-bedroom and three-bedroom to four-bedroom but budget is always a constraint. Big cities are quite expensive, so, people have to balance between the need for space and the budget. There is also a trend that we are witnessing of flexible homes, which we are also working on. So, demand remains very strong in the segments, we are operating between Rs 35 lakhs to a Rs 1 crore segment in all geographies excluding Mumbai. In Mumbai in the range of Rs 50 lakhs to Rs 3.50 crore segment, which is going very strong. I think the kind of segment in which we are dominant we are seeing very strong traction. The luxury segment saw a very strong demand trend due to the stamp duty cuts, which the government has announced. I think, going forward, it will remain in a positive direction but that significant jump is now going to be stabilized.