Existing loan rates can attract people to buy residential properties: Atul Goyal, Brigade Enterprises

Atul Goyal, Chief Financial Officer (CFO), Brigade Enterprises Limited, talks about March quarter results, the impact of corona and learning from the crisis, outlook on demand and projects among others during an interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: The numbers have been weak in Q4FY20. Do you think that it was impacted due to Corona or the overall demand has been low?

A: The demand was very good in the fourth quarter. We have sold more than a million in the tune of about Rs 600-650 crore. So, demand was not a reason behind the decline. But it has happened due to the adoption of Ind-AS 115 under which profit is recognized. Secondly, there is an accounting of the landowner which is a gross accounting where a 5% margin is taken and this led to a fall in the profit. There was also a CSR expenditure in March which is debited under P&L. Besides, COVID has an impact on the hospitality industry in March as there was a decline in occupancy level via cancellations, which led to a loss of Rs 20-25 crore. This also led to the fall in Q4. Otherwise, our sales were good and our last year’s sale was the best in the history of the company at 4.3 million which is equivalent to Rs 2,300 crore. Overall, the company has performed well and has shown an occupancy of 67% last year in the hospitality segment and leased around 2.5 million. Thus, the operational parameters were good and the cash flow has increased by Rs 300 crore. So, the accounting is based on IND-AS 115 and that’s why such a variation will be visible in the future as well. 

Q: You were saying that demand was good in Q4. Do you expect that there will be a pent-up demand as prices are quite attractive, which will lead to an improvement in the numbers in coming quarters?

A: Definitely, we will not be able to maintain the run-rate at which we were working earlier but we have sold our projects online in April and May. The lockdown was opened in May in Bangalore, which allowed people to visit the sites. It seems that there will be an improvement in the market because the salaries have been good in IT and ITES and the job losses have been low in the sector. I think prices are rational in Bangalore and the existing rate of the loan is very attractive at present, which will attract people. We are seeing a recovery in the residential segment. Normal recovery can be seen in the next 3-4 months and we have great hopes in the residential segment. As far as leasing is concerned, the malls have opened now. So, let’s wait and see how retails are functioning and footfalls and the way the business goes ahead. We hadn’t faced problems in the office segment and 95% collections have been made and we haven’t opted for loan moratorium in office and completing our commitments. However, the hospitality segment will take some time in recovering. 

Q: What is the status of the ongoing projects? Considering the situation construction work has been started with certain conditions in different states. So what is the status across the country on ongoing projects and will you put the lined-up projects on hold for some time and revisit it after some time or you will go as per your plans?

A: Construction work is open on all 24 sites that we have except Chennai, which was opened but a fresh lockdown has been implemented in the city, where the camp was a bit far. We are trying to shift the labours to the location to keep the work going. Most of our sites are based in Bangalore where there is no issue and every site is functional. Yes, we are facing problems related to labours and I think that the strength of the labours which stood at 80-90% during the lockdown has reduced to 45-47%. This is one challenge that we are facing but I don’t think labours will return slowly and the construction work will resume its pace. If you talk about the launches then yes reduced it but have planned launches of 2.5 million and we will stick with it because each one of our launches is doing good. We have plans to launch a project in Hyderabad as people are quite interested in it. So, I expect that we will be able to maintain 2.5 million launches. 

Q: What is the inventory level at which you are sitting at present? You have also launched lucrative schemes for people, especially in the residential housing segment. Can you provide details about it?

 A: We have a total inventory in ongoing projects stands at 6.9 million and these projects are running at present and we have an inventory of 1 million. We have an objective of selling completed projects as much as we can because it will help in recovering the money at the earliest. As far as payment plans are concerned then we are not working a lot on a flexible payment plan or 10:90 or 20:80 because chances of cancellation are slightly more on that front. Yes, we have offered 3-4 flexible plans to the customers and have guaranteed that if they book the property today than the rates of the property will not fall and the developers will not sell the property at a rate that is low then the rate at which the property was booked. We have given this assurance to every customer. 

Q: Is there any change in the strategy for FY21, if yes, then what it will be? Also, tell about the learning as COVID has an impact even on the hospitality industry?

A: The first impact of COVID is that we have started monitoring cash flow closely and we maintain a cash flow of around Rs 200-250 crore as bank balance to make sure that there is cash preservation. We are studying the fixed cost and analyzing each one of them especially in the hospitality industry, where we have monitored the manpower and admin cost closely and went for several cuts in it. I think each of the branded hotels that we have been bringing their global expertise and we have worked a lot on it. We are reviewing almost everything in the residential as well as retail segments. We have got our portals online in the residential business where you can sell, see the site of the property and make online payments. So, things have made online and these are the new learning. Yes, you don’t have enough focus on cost when you are doing good but now things are more focused on cost as well as an escrow.