BRIGADE — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
a/a Brloode ls recoonlsed as hPinn nmnnn “Brigade Enterprises Limited’s Q1 FY 21 Earnings Conference Call” August 13, 2020
DIRECTOR · MS. PAVITHRA SHANKAR –EXECUTIVE DIRECTOR
MS. PAVITHRA SHANKAR –EXECUTIVE DIRECTOR MS. NIRUPA SHANKAR –EXECUTIVE DIRECTOR MR. AMAR MYSORE –EXECUTIVE DIRECTOR MR. ATUL GOYAL – CHIEF FINANCIAL OFFICER AND BUSINESS HEADS OF VARIOUS SBUS Brigade Enterprises Limited August 13, 2020
Moderator · Conference Operator
Thank you.
The next question is from the line of Parikshit Kandpal from HDFC Securities.
Please go ahead.
Brigade Enterprises Limited August 13, 2020
Parikshit Kandpal
To my earlier question, just continuing on that.
So you said there were some LRDs which were used in the BTG project, right?
M.R. Jaishankar
Yes.
Parikshit Kandpal
So how much will be the further headroom for raising LRDs to understand how much funding can come in from there because I think CAPEX will get converted to LRD, so, what could be the incremental beyond the CAPEX which we can raise from both the projects put together?
Atul Goyal
So, both the projects put together we have LRD potential of around Rs.2,200 crores.
So, CAPEX now left in this both the projects around 393 crores, some, yes, repayment will happen, around Rs.575 crores in WTC Chennai and around Rs.500 crores also in Tech Gardens.
Parikshit Kandpal
On the existing rental, how much can you do which has already been tied up?
Atul Goyal
Yes, so existing rental we have already taken 400 crores right now LRD, rest will depend upon the leasing.
WTC Chennai is already leased.
So once that possession starts happening, then maybe we can raise LRD somewhere in Q4.
Parikshit Kandpal
What can be that amount because you told that January onwards revenue will start coming in?
So WTC as of now you have not raised any LRD?
Atul Goyal
No, because the rentals have not started, so we cannot raise it but yes, we are in the process of getting a loan sanctioned.
Parikshit Kandpal
How much LRD potential can this have with existing leasing?
Atul Goyal
It should be around Rs.1,000 to Rs.
1,100 crores.
I would also like to clarify that out of 400 crores, we have only utilized around Rs.250 crores or so, rest is still there.
Parikshit Kandpal
So large part of your shortfall in the hospitality, retail business can be raised from the fund flow from the LRD right?
Atul Goyal
Yes, it can be met from LRD and we also have internal accruals, both options are there.
We look at the appropriate time as to how we have to fund hospitality.
Parikshit Kandpal
Given the 2.5 million inventory across projects which is yet to be leased and you all are doing, does it include twin towers also or it is separate because I could match the number like 1.55 in the BTG and 0.2 million less than Chennai, so that is around 1.8, the balance is…?
Subrato Sharma
No, it does not include Twin Towers.
Brigade Enterprises Limited August 13, 2020
Parikshit Kandpal
So balance is the existing projects, right, so which are already operational?
Subrato Sharma
WTC Kochi.
Parikshit Kandpal
What is the sense of building this Twin Towers because in this time when people are looking at postponing CAPEX and you started already building out the Twin Towers, so if you can just highlight creating this 1.5-odd million in Bengaluru market?
M.R. Jaishankar
Twin Towers the earliest will be ready by you can say end of 2022 or so.
And we have to be future ready in our business.
And if you do not build in ‘20 now, we will not have anything to live in 2022.
It is not that the market is dead.
The market is hurt currently, but I think with all the medication, vaccine, balm that we will get, the market will recover in the next nine months.
Parikshit Kandpal
One point you did touch earlier that high pricing markets, start consolidation towards low priced market.
What will be the market positioning in terms of pricing for our projects -- will be like mark-to-market or how much down our rentals will be manipulated to the high market if you can give sense on that?
Subrato Sharma
In this case, particularly we have a huge opportunity in terms of rent to tenants.
It is in Whitefield and Whitefield is kind of significantly lower price than outer ring road, the major micro market of Bangalore, okay.
And Outer Ring Road also does not have huge vacancy and plus the rentals over there have now reached anywhere between 85 to 95 whereas Whitefield is at around 55 to 60.
So we would see a lot of companies which are actually strained during this COVID scenario, they are actually looking forward to and who are out of lock in, in those markets, they are wanting to actually migrate to Whitefield because that will not actually also result in significant displacement of their existing workplace because both micro markets are very near.
And we are actually seeing those kinds of enquiries coming by, now that the lockdown is vacated, site visits have increased, but we see that these numbers will increase significantly for such requirements.
Parikshit Kandpal
So, what could be the size of quantum of like these in average individual enquiry, how big these could be?
Subrato Sharma
As on date, we are saying mostly the small size and midsize companies because they are majorly hurt in this scenario and those who are out of lock in, they will be open to actually migrate to a low priced market because one is they will be getting a new premises and maybe like many of those such transactions will be kind of fitted out premises.
So those things will come into play.
Parikshit Kandpal
Last thing on the NRI sales which we have done this quarter, what will be the proportion?
Subrato Sharma
In this quarter, the NRI contribution was 25% for residential.
Brigade Enterprises Limited August 13, 2020
Parikshit Kandpal
What has been our average usually?
Subrato Sharma
Last year was little over 12%, but usually it was about 15%.
Moderator · Conference Operator
Thank you.
The next question is from the line of Dev Varma from Antique Stock.
Please go ahead.
Dev Varma
Just wanted to understand in your residential collection in the last two, three months including July, how is the collection in the sense those who have bought, what percentage of them are paying, I mean, is there any default significant that we should know, if there is default, in which category like 40, 50 lakhs, 60, 70 lakhs or more than a crore?
Rajendra Joshi
Is there a stress on the customer side?
Yes, definitely there is a stress.
The salary cuts and the job losses have increased the stress on collections essentially the customers ability to pay.
Currently we are not seeing huge amount of defaults.
Yes, there are delays because one of the significant things which has happened in Bangalore is because it is the tech capital, a lot of people who are from outside the state have moved back to their location.
So that is actually putting a lot of pressure in loan processing, leasing payments, etc., So currently, we do not see any huge stress in terms of calculations.
Are there cancellations?
Definitely, yes, but we do not see a huge stress.
Dev Varma
But there are delays?
Rajendra Joshi
There are definitely delays.
A lot of them as I mentioned are logistical delays, which we hope we should be able to overcome.
Dev Varma
So there is no cause for concern in terms of cancellation per se as of now?
Rajendra Joshi
We do not see it in the immediate future.
Dev Varma
You have launched two residential projects, that is what I heard.
When you launch the project, typically, in a ballpark number, pre-COVID what percentage of projects get sold in the first three months vis-à-vis now in this launched project in Q1, is there any impact on because of COVID on sales of new launch project?
Rajendra Joshi
Typically, particularly in the last 12 to 18 months before lockdown, we used to see in the first three to four months, about 15%, 16% getting sold.
That definitely has reduced in the one project that we have launched in this quarter because of the COVID impact.
So we believe that it will improve, but definitely compared to the pre-COVID scenario, it will probably take a little longer for us to reach that 15%, 20% mark.
Brigade Enterprises Limited August 13, 2020
Dev Varma
Obviously, markets are in a very fluid environment.
Obviously based on just one project, we cannot draw the conclusion, but nevertheless it will deter you in launching new projects in the current scenario, right?
Rajendra Joshi
As we said earlier, we will look at market conditions and the markets that we are launching the new project.
So yes, we will assess the estimated demand and then we will go ahead with launches, currently we are planning but we will definitely watch the market.
Dev Varma
In the Brigade Tech Gardens, the rental that you are getting I heard you are saying Rs.8 or 9 crores per quarter.
That rental is out of how much lease area?
Atul Goyal
That is 0.75 million.
Moderator · Conference Operator
Thank you.
Ladies and gentlemen, that was the last question for today.
I now hand the conference over to Mr. Pavitra Shankar, Executive Director for closing comments.
Thank you and over to you.
Pavitra Shankar
Thank you very much.
Despite a tough Q1, our organization has had many bright moments that we celebrated.
We are happy to say that Brigade was ranked #43 in India’s top 100 Best Companies to Work for in 2020 by the Great Place to Work Institute and the Economic Times in one of the largest workplace studies conducted in India.
The recognition this year was made even more special as it marks the 10th year in a row that we have received this award.
Our subsidiary, Brigade Hospitality Services Limited ranked #3 among India’s Great Mid-size Workplaces in 2020 also by the Great Place to Work Institute and the Economic Times.
We initiated a number of relief measures for COVID-19 in Q1 which we have continued in Q2. Among these, we count donations of ambulances, ventilators and prefab ICU modules to various hospitals, dry rations and meals to the needy, construction workers support and engagement through meals and allowances and supported the Chief Minister’s Relief Fund.
Another proud moment was the Inauguration of the St.
John’s Health Center in June at Brigade Meadows, a 60-acre integrated enclave on Kanakpura Road, Bangalore.
This not-for-profit initiative is a joint effort of the Brigade Foundation and the highly reputed St.
John’s Medical College & Hospital.
The Health Center commenced services on June 25th and caters to all the primary healthcare needs of families not just in Brigade Meadows but in the entire neighborhood and will eventually become a full-fledged hospital.
Let us not ignore the importance of arts and culture when needed the most during our darkest time.
The Indian Music Experience Museum supported and founded by Brigade, has had a challenging time due to the pandemic, but has adapted to the changing times with a new partnership with Google Arts and Culture.
Brigade Enterprises Limited August 13, 2020 To commemorate Independence Day, over 100 artifacts from the IME, India's first interactive music museum can now be viewed and experienced by people all around the world in a specially curated digital exhibit, titled “Legends of Indian Music and their Memorabilia.” The lockdown and all its challenges have made all of us at Brigade introspect and reevaluate many things.
But we remain committed to our core values: “QC FIRST which stand for Quality and Customer, Fairness, Innovation, Responsible, Socially and Trust.
They continue to be our guiding principles whether times are good or challenging.
We know that better days will come and we plan to be ready for them stronger and more resilient.
Thank you all for taking the time to hear from us today.
Stay healthy and stay safe.
Moderator · Conference Operator
Thank you very much.
Ladies and gentlemen, on behalf of Brigade Enterprises Limited, that concludes this conference.
Thank you for joining us and you may now disconnect your lines. ***************************
Questions and answers
Moderator · Conference Operator
Thank you very much.
Ladies and gentlemen, we will now begin the question-and-answer session.
The first question is from the line of Adhidev Chattopadhyay from ICICI Securities.
Please go ahead.
Adhidev Chattopadhyay
All my questions will be on the rental business.
Sir, first, our rental revenue has declined around 19% quarter-on-quarter to Rs.28 crores.
If you could give us a breakup on how much of that is because of waivers given on mall rental, that is one?
M.R. Jaishankar
On the reduction in rentals, it is entirely due to the waivers given by the malls.
Nothing is connected with office space.
Adhidev Chattopadhyay
And that also includes the reduction in the CAM right, which would have anyway fallen because the malls were shut, is that correct?
M.R. Jaishankar
Maybe you can say a small portion of the CAM is there but it is substantially the reduction in rentals.
Adhidev Chattopadhyay
I did not get that number.
Is it 98% you said collection in offices rental for the quarter?
Brigade Enterprises Limited August 13, 2020
M.R. Jaishankar
Yes, correct, 98%.
It is like this.
If you see only June 30, it could be 95% but when we have said 98% we have also taken the 3% of the collections which has come in July.
Adhidev Chattopadhyay
Second is on the same part of the question, what is the saving from the moratorium we have taken for malls and hotels, the interest cost?
M.R. Jaishankar
From malls it will be around Rs.25 crores and from hotels it will be around Rs.12 crores or so.
Adhidev Chattopadhyay
And this is accrued in P&L, but will be payable by the end of March ’21, is the understanding correct?
Atul Goyal
You are right, it is accrued in P&L and it has been added into the loan balances in our debt portfolio.
Adhidev Chattopadhyay
You are saying the net debt position reflects that?
Atul Goyal
Definitely it reflects that.
We have around Rs.34 crores or so of interest which have been added there, that is 25.
Adhidev Chattopadhyay
So our debt would be relatively flat if we look at it?
Atul Goyal
It would have been relatively flat except for loans which we have taken for Tech Gardens and WTC Chennai where adequate loans are there and construction is going on.
Adhidev Chattopadhyay
Second question is on the office leasing.
So you mentioned your 0.6 pipeline in Bangalore, 0.2 million square feet in Chennai.
So does that exclude the hard option you mentioned in the presentation or does that include the hard option?
M.R. Jaishankar
It excludes the hard option.
It is a new pipeline.
Adhidev Chattopadhyay
If you could give us an update on both Chennai and Tech Gardens like with all the new tenants, so when do we see the rental start to come in and even for hard option, have they actually exercised the option yet or when will we get clarity on that?
M.R. Jaishankar
We expect the Chennai rentals to start mostly by 1st of January or middle of January or so.
We have three major clients there which you may know – Amazon, Caterpillar and McKinsey.
I think depending on this, it will start sometime during January.
And in Tech Gardens, the new rental commencement is limited as compared to Chennai.
That should also happen maybe in Q3.
Adhidev Chattopadhyay
Following on Chennai, so this includes the hard option area also, the one you are saying from January or it is…?
Brigade Enterprises Limited August 13, 2020
M.R. Jaishankar
No, it does not include hard option.
Adhidev Chattopadhyay
But these would be the same tenants right who would have opted for this hard option, right, the big three you mentioned, among them…?
M.R. Jaishankar
No.
Adhidev Chattopadhyay
Clarity will come you are saying in three, four months from the hard option or it is less than…?
M.R. Jaishankar
It is expected like that.
In the current scenario it may be one has to take six months time.
And we also need to be slightly flexible during this period at least till some normalcy returns.
Otherwise, like naturally we will be keen to lease them as early as possible.
At some stage, if there is other serious interest, we may request the client to exercise hard option or make it FRR.
Moderator · Conference Operator
Thank you.
The next question is from the line of Yash Gupta from Angel Broking.
Please go ahead.
Yash Gupta
My first question on the cash flow to Atul sir.
Can you give breakup of total collection of Rs.375 crores, how much have we received from Rs.82 crores and what collection we get for 0.4 million residential sales?
Atul Goyal
Residential was around Rs.282 crores, leasing was around Rs.82 crores and hospitality was Rs.12 crores.
So this is the breakup of Rs.376 crores of collection which is there.
Yash Gupta
My question is how much we have received from the new residential that we have clocked 0.4 million?
Atul Goyal
New residential is only 0.4 million and it will not be much but for earlier on, whatever we have done the sales in last quarter you can say around Rs.20 crores.
Yash Gupta
Second question on the demand side.
In the last quarter and the current quarter you have said in the opening remarks also that NRI customers demand side has doubled almost.
So have you seen any change in the type of demand that customers in pre-COVID and the post-COVID?
M.R. Jaishankar
Our CEO of Residential, Mr. Joshi, will respond to this.
Rajendra Joshi
Good afternoon.
So couple key changes that we have seen in demand for residential units is that the demand for the larger unit has certainly gone up as Jaishankar mentioned, the average unit size has gone up by about 15%.
Second is the demand from the NRI customers has definitely gone up and this is more towards the completed and nearing completion inventory.
So, those are the three key things.
One, larger unit sizes, NRI customers and demand for the completed or near completion projects.
Those are three key trends which are different.
Prior to COVID, it used Brigade Enterprises Limited August 13, 2020 to be largely new launches, new projects that used to see a lot of traction.
Overall for us in Q1, the sale for the completed project went to close to about 30% of our total sales, which used to be in the 15% to 20%.
Yash Gupta
Is there any other change for the commercial pre-COVID and post-COVID?
M.R. Jaishankar
Mr. Subrato Sharma will answer.
Subrato Sharma
So in Commercial, we are seeing a kind of requirement from tenants who want to migrate or who want to consolidate while reducing.
So they are wanting to move from the pricier market to the low cost markets.
So that is what we are seeing.
But site visits are still very limited, but there have been enquiries for managed office, but mid-size segments have become more active now.
Moderator · Conference Operator
Thank you.
The next question is from the line of Dev Varma from Antique Stock.
Please go ahead.
Dev Varma
My question is on your EBITDA margin on the rental assets.
So I have been seeing EBITDA margin has increased for the rental assets significantly; it was 60%, 65% for the past few quarters, now it has jumped to 74% in this quarter.
Just wondering what would be the reason for such sudden and significant jump and which is good and whether such margins sustainable or not?
Atul Goyal
See, the 74% increase is mainly because maintenance income has been very-very low because there was a lockdown.
So all EBITDA contribution is coming from the leasing segment.
So that is why that EBITDA margin has increased, but yes, in future as revenue increases, we may achieve this EBITDA margin but not quarter-on-quarter till we reach the full revenue potential in leasing segment.
Dev Varma
I was a little bit confused with Bangalore and Chennai office projects.
So just wanted to know about the Tech Gardens and the Chennai projects.
How much in each of these assets leased till date like how much started generating rental out of those leases?
So, I just wanted to know the leasing status, how much have been leased including hard option in both of these and out of these how much have started generating rental and remaining lease area would generate rental from when?
Subrato Sharma
So, as far as WTC Chennai market is concerned, we have 2 million, out of that almost 1.67 million has been leased out.
So, the availability is 0.34 million.
And as far as Brigade Tech Gardens in Bangalore is concerned, in the first phase, to make it easy for you, total is 1.24 million in B-Cluster, out of that 0.49 million, that includes hard option, that is 0.19 million is available for new leases.
And in the C-Cluster, we have 1.76 million, out of which 1.55 million is available for leasing.
Brigade Enterprises Limited August 13, 2020
Moderator · Conference Operator
Thank you.
The next question is from the line of Mohit Agarwal from IIFL.
Please go ahead.
Mohit Agarwal
My first question is on the residential side.
Now you clarified that this quarter you did not take any moratorium on the residential bit and despite that we saw there was no increase in debt.
So clearly it was net cash flow neutral.
If I hear correctly in the initial comment, collections in June are now back to normal levels Firstly, is that correct?
And second part to that question is how do you see the residential business from a cash flow perspective for the rest of the year -- do you envisage any increase in the debt for the remaining year?
M.R. Jaishankar
In June we have achieved around 80% of the residential business collections which were there.
Yes, we have not taken much of the moratorium in residential business and we have sweeps in all the loans, so we have been repaying all the loan also very, very promptly, that is why you can see some reduction in loan in residential segment.
Mohit Agarwal
How do you see residential segment like, do you anticipate any increase in the collections for the residential segment for the rest of the year considering collections are back to like near normal?
Atul Goyal
If you see the debt numbers, it is mainly in the leasing, the debt increase is happening and resi, there will be some debt increase but it will be very minor, because collections will be there and hospitality we do not intend to increase any debt right now, so mainly the debt increase will be in leasing segment for our CAPEX project which is going on right now.
Mohit Agarwal
My next question is linked to that on the overall debt number.
So, assuming resi would not see an increase in debt and also hospitality not significant, I see your total CAPEX requirement that you have shared for leasing and hospitality, total requirement is about Rs.1,000 crores for all the projects.
Now, assuming that you will incur that in next two years, is it fair to say that your CAPEX for FY’21 could be around Rs.500 crores?
Atul Goyal
Yes, you are right, it may be to the tune of Rs.500 crores, but there are new launches which are happening and we may be taking loans there and if you see once we launch the project in resi, initial construction is through loans, so there may be increase somewhat in that loan.
Once the sale is online, then that loan gets start reducing down.
So, there may be some increase in residential but mainly because of the new launches.
Mohit Agarwal
On the numbers that I see on the WTC Chennai, I remember last time you said that the project is nearly 95% lease out.
Was there any cancellation that you saw during the quarter because when I see the number right now it is a little lower than that?
Subrato Sharma
What you mentioned is correct.
So, there has been back out by three tenants, mostly they were affected because of the COVID scenario.
But having said that, here we have like 0.3 million that Brigade Enterprises Limited August 13, 2020 is to be leased.
And since the tenants which are marquee tenants, we have like an internal requirement of approximately 0.2 million.
So we are pretty safe here.
Moderator · Conference Operator
Thank you.
The next question is from the line of Parikshit Kandpal from HDFC Securities.
Please go ahead.
Parikshit Kandpal
My first question is you said that June pre-sales was almost 65% in the residential segment.
In July, August, how has been the trend basically first on the residential side?
Rajendra Joshi
Overall, the market seems to be continuing the same trend as in June.
However, the uncertainty due to COVID and income uncertainties and job losses continue in the market.
So, we are being cautious at this point in time.
We expect the same trend to continue.
If there is a substantial improvement in economy and other indicators, probably we will see uptick.
Parikshit Kandpal
Coming to the different businesses of hospitality leasing, so, now one side we see that the retail business and hospitality segment which has been hit hard, once the moratorium gets lifted by this month end, there could be some support required from the parent company.
And on the other side, we have two projects BTG and the Chennai project, BTG is in advanced stages of leasing, Chennai is almost leased out, but rental will start flowing in from Jan, but our CAPEX the servicing will start.
So, if you can highlight how will you match the cash flows on the both sides in the interim for the next six, seven months till the situation normalizes?
Atul Goyal
See, in hospitality, yes, we have kept the war chest that is required, will definitely pay all the interest which is required to be paid for hospitality and we will be servicing all our loans.
And of course, you are right we have to give that support to hospitality.
Right now, they are doing some operation loss of around Rs.3 crores per month.
Since now the lockdown is open and your occupancy is increasing, it may reduce to a great extent.
So, operationally we may not require to fund much in hospitality, but yes, for interest definitely, we will have to support them.
But yes, we are also waiting for the restructuring.
If the restructuring comes in, I think hospitality and retail will be the segments where the RBI or the committee will also look into it.
If there is restructuring, we will definitely like to go for the restructuring in hospitality and the retail business.
Total retail and hospitality that I have it is Rs.500-odd crores.
Parikshit Kandpal
What will be the retail debt?
Atul Goyal
Retail debt is around Rs.600 crores.
Parikshit Kandpal
So, total put together 1,100 crores?
Atul Goyal
Yes, Rs.1,100 to 1,200 crores.
Brigade Enterprises Limited August 13, 2020
Parikshit Kandpal
So Rs.100-odd crores of interest needs to be serviced this year and also there could be some repayments coming.
So what will be the repayment on this Rs.1,100 crores of debt?
Atul Goyal
Repayment during the year is around Rs.295 crores which is there.
Since we have not taken moratorium in other loans also, we have already repaid around Rs.
44-45 crores.
But having said that, I would only like to say repayment cannot be told today because I do not know how after moratorium banks are going to adjust their payment plans because they are also working on it and how the restructuring works.
So it is a fluid situation.
But what I am telling you the number is as per the loan schedules which were there pre-COVID.
Parikshit Kandpal
So the funding requirement for these two businesses have been how much for this year without restructuring, say, what kind of budgeting you have done?
Atul Goyal
So, for both the SBUs, we may require around Rs.80 to Rs.90 crores support which we are already prepared to do that.
Parikshit Kandpal
And nothing is required for the office business, right, because I think these two assets getting commissioned and in between if the servicing start, so, there could be some pressure on you to also service till the time starts flowing?
Atul Goyal
There is no issue on everything of interest there and leasing is happening.
We have already taken LRD on the first phase of Tech Gardens and we are also pushing equity into our WTC Chennai venture.
Moderator · Conference Operator
Thank you.
The next question is from the line of Utkarsh Punkhia from Axis Capital.
Please go ahead.
Utkarsh Punkhia
Sir, would it be fair to assume that our total debt repayment will be around 1,000 crores this year?
Atul Goyal
No, I said, it was Rs.295 crores for the debt repayment, but after moratorium there will be a change in the schedule, so it will be much less.
Out of that Rs.295 crores, we have already paid Rs.45 crores.
Utkarsh Punkhia
We are generally refinancing this amount every quarter for the past three quarters.
So how are we looking to do this for the rest of the year -- are we going to still keep refinancing it, are we looking at equity raising?
Atul Goyal
We have not been refinancing our debt.
I could not get your question.
Utkarsh Punkhia
So would we be looking at any equity financing this year?
Brigade Enterprises Limited August 13, 2020
Atul Goyal
We have just taken enabling resolution but there is no plan right now.
We are still looking at it.
And if there is any decision, we will definitely come back to the market.
Moderator · Conference Operator
Thank you.
The next question is a follow up question from the line of Adhidev Chattopadhyay from ICICI Securities.
Please go ahead.
Adhidev Chattopadhyay
Again a follow up question on our rental income for quarter.
What I understand is we have Rs.110 crores of annual rental income from the mall as of Q4. So I am guessing around Rs.27 crores would be the quarterly run rate.
So far this quarter we have lost around Rs.13-14 crores from the mall rental or more than that, how is accounting work --is it on accrual basis or on the terms agreed with the tenant?
Atul Goyal
You can see in our notes also which auditors have put.
We have been very, very conservative in accounting the revenue in retail…yes, we have given concession and what you see the drop down in revenue is only because of that.
What the process we have done is wherever retailers have confirmed that this is the rental they are going to pay; we have only taken that revenue into our Q1 numbers.
Adhidev Chattopadhyay
And the spending whatever you would have now reached in July and August, those will get reflected in second quarter, is that understanding correct just wanted to understand?
Atul Goyal
That is correct.
Adhidev Chattopadhyay
So let us assume 20% of my mall areas for multiplexes, food courts and gaming, entertainment zone.
I am saying the rental waiver of 50% is for the entire area or only 80% of stores which can reopen, just wanted to get some sense?
In multiplexes also, have you reached an agreement?
Subrato Sharma
Whatever rental concession we have given is for the retailers who will come back and open the store.
Those retailers who are yet to be approved for operations by local government, that is multiplex, entertainment and some bit of restaurants and bars, they do not include in this.
So their rentals are not being taken into consideration.
Adhidev Chattopadhyay
Discussions will be done at a later date, right, once they reopen?
Subrato Sharma
Yes, since there is uncertainty, neither the retailer nor we are in a position to conclude.
Adhidev Chattopadhyay
On the residential businesses are coming out, do you have any revised target or guidance for the year or the range you would like to give in terms of what sort of sales you would like to achieve?
Rajendra Joshi
We normally do not give any guidance on the forward sales.
The only thing I would say is that sale definitely was impacted as you have seen in Q1 and as I mentioned earlier, we do expect the uncertainty to continue and therefore we would be cautious at this point in time.
As and when Brigade Enterprises Limited August 13, 2020 the economy picks up, we expect the demand will come back a lot more aggressively than what was expected.
Moderator · Conference Operator
Thank you.
The next question is a follow up from the line of Yash Gupta from Angel Broking.
Please go ahead.
Yash Gupta
My first question is what is the percentage of collection we received for the residential?
Atul Goyal
Maximum collection is there from the resi business only.
Out of Rs.376 crores, Rs.282 crores have come from the residential.
Yash Gupta
What I am trying to get is that like suppose we have called for 350-odd crores for the residential, out of that customer has paid Rs.280-odd crores.
So is that correct understanding?
Atul Goyal
Collections goes, it is a rolling thing.
So we have done more than 4 million and even 1 million last to last quarter.
So, all those collections are coming in.
As and when construction are happening and we are demanding, we have already told you that Rs.20 crores were out of that for the new sales which has happened, rest is all collection which has been done for the demand raise.
Yes, it may be low because there was a lockdown, people were not able to take loan, but definitely sentiments will improve in the coming quarter.
Yash Gupta
Do you think the NRI demand is going to be a continuing process?
Rajendra Joshi
We do think that NRI demand will continue because the two locations which contribute significantly to the Indian real estate market are the GCC and the US.
Given the overall uncertainty in GCC, which was there even pre-COVID, COVID only contributed to it, we do expect that the demand from the NRI customers will continue because I think a lot of them are looking for a place to stay when they come back.
I think that is what is driving the demand right now.
Moderator · Conference Operator
Thank you.
The next question is from the line of Prem Khurana from Anand Rathi.
Please go ahead.
Prem Khurana
Just two questions.
So one was essentially on somewhere in your remarks you said there is rising preference for larger units now.
When you say there is rising demand, it is in absolute terms, let us say, I mean, pre-COVID you were selling 100 a month, now it has become 110, so let us say I mean we were selling 200, 100 were your larger units, the overall sales have gone down to let us say 100 and you are doing 60 of larger units now, so is it proportion or you have seen absolute number go up there?
Rajendra Joshi
What we mentioned is that in absolute numbers, the unit size that we were selling prior to the lockdown and this one, there is increase in about 15% in terms of the unit sizes which we also Brigade Enterprises Limited August 13, 2020 said is that during the lockdown, there seems to be demand for larger unit sizes across all our projects.
Prem Khurana
Why I ask this question is because essentially there could be a situation wherein there was a buyer who was looking for a two BHK and let us say he started his career, very, very recently and they want to kind of buy their own property because these people would be more susceptible, not exactly sure of how things would pan out in terms of their career, there could be a situation wherein they would either defer the plan for the time being or not planning to go ahead with the decision now and people who have been in the service for three, four, five years they have savings, given the fact that the market conditions are such that they are in a position to come and negotiate these guys are there in the market buy larger units because they have savings as well and they are in a position where they are less insecure in terms of losing their jobs?
Rajendra Joshi
You are absolutely right, in terms of segment of the buyers who are in the market now, they are people with assured income streams and we are also seeing that the age profile in this quarter has slightly increased because those are the people who have income assurance much more than the younger ones who are just entering the income stream.
So your assessment is right.
Prem Khurana
Also, we have recently done this launch Jasper, EL Dorado.
What made us go ahead with this launch at this point in time wherein the situation still seems to be fluid and should be taken as a kind of we would go ahead with all the launches irrespective of the market condition, the idea is to launch as and when the approvals are in place or how has the response been for this Jasper, the new that we launched in EL Dorado?
Rajendra Joshi
Well, in this particular project, this particular tower has slightly larger units.
This is largely an affordable housing project.
We had felt that there is a demand for slightly larger units in this location which is why we went ahead with the launch of this specific tower.
To your question on how has the launch gone, it has gone on our expectation post the COVID, pre-COVID it would have been a lot better, but post COVID looking at the current scenario, I think the launch has gone on expected lines.
Prem Khurana
How about the new launches -- these will be launched as and when you get the approval or you would try and understand the market better and then only come to the market?
Rajendra Joshi
This we have already launched, but for the upcoming launches, we will take it based on market situation.
Moderator · Conference Operator
Thank you.
The next question is from the line of Rajesh Ranganathan from Doric Capital.
Please go ahead.
Rajesh Ranganathan
Since there is so much flux with respect to the rental business in the sense that when will actually clients begin paying rental and so forth, could you please update what is the current thinking in Brigade Enterprises Limited August 13, 2020 terms of what is the rental run rate fourth quarter from office and retail of last year and then say the fourth quarter of this year, that is the Jan March quarter, what do you expect it would be based on what you have currently already leased?
And then, obviously, future leasing, the rental only will start from I guess next year, would it be possible to share that information?
I am asking the absolute number.
So let us say the run rate of rentals was x in fourth quarter last year, what did you expect it to be fourth quarter this year, after whatever you have leased already, they start occupying and I assume they will start paying us from January, but I do not know what your internal programs are?
Atul Goyal
Rajesh, we will give you that number offline and then we will take forward.
Rajesh Ranganathan
But currently your expectation is that whatever you lease, they will start paying from January in WTC and Tech Gardens?
Atul Goyal
Some more leasing which has been done and I think start will happen also around October, November.
Rajesh Ranganathan
So you think for Tech Gardens started paying from October already?
Atul Goyal
Yes, for the new leases, old leases are already paying, we are getting around Rs.9-10 crores lease rental income.
Rajesh Ranganathan
I think we have roughly about a million and a half square feet at least total ballpark.
What is the pipeline currently looking like?
Subrato Sharma
Overall inventory that we have, will be approximately 2.5 million, spread across all the projects and the pipeline as Pavitra said that currently we have like positive pipeline of 0.6 million total.
But having said that, there are a number of enquiries from our existing tenants also which we feel will mature over a period because now documents in offices are hardly any, that is the reason.
Otherwise, it would increase significantly once people start operating from offices.
Rajesh Ranganathan
For the retail, when will you start charging 100% rental?