Construction Industry News
Shriram Properties (SPL) is considering adopting the fractional ownership model and anticipates significant momentum. At the same time, the company is looking to expand in Pune and monetise around 60 acres of land in Kolkata.
For FY 2023-2024, SPL has provided market guidance for approximately 4.8 million sq ft of pre-sales volume and sales value in the range of Rs 24-25 billion. Additionally, the company plans to ship around 3,000 units by the end of FY24 and launch three new projects in the third quarter of FY24.
In Q2FY24, SPL achieved sales volumes of 1.15 million sq ft, sales value of Rs 6.08 billion and gross collections of Rs 4.3 billion. During the first half of FY24, the company achieved sales volumes of 1.9 million sq ft, sales value of Rs 10.66 billion and gross collections of Rs 7.21 billion.
SPL aims to complete and deliver approximately 7 million square meters in the next two years. Murali Malayappan, Chairman and CEO, and Gopal Krishnan, CEO and Group CFO of SPL, discussed the company's future plans in an interview.
The company's performance in April-September 2023 has been positive and shows continuous growth since its IPO. The outlook for the second half of FY24 is optimistic and there is confidence that the expected figures will be surpassed comfortably.
For the current fiscal year, SPL plans to complete approximately 4.3 million square meters, of which 1.8 million square meters have already been completed and the remaining 2.5 million square meters are planned for the second half of the year. fiscal 24. The portfolio includes 51 million square meters, of which 22 million square meters are ongoing projects (78-80% sold) and the rest awaiting launch. Approximately 65% of the portfolio includes joint development agreements (JDA) or joint ventures (JV).
Land acquisition is not part of SPL's strategy as the company prefers an asset-light model, particularly the development management (DM) model, which is seen as a low-cost growth driver. The focus on DM and JDA/JV models aligns with the company's approach to managing capital efficiently.
As for a project in Chennai under Ask Property Fund, SPL and ASK Property Fund have jointly invested Rs 2,060 crore in an ongoing project, Shriram 122 West, with a total revenue potential of Rs 12,000 crore over the next five years.
As per the latest update, SPL's net debt stands at Rs 4.3 billion, with a debt-equity ratio of 4.38 and debt servicing costs ranging between 11.3% and 11.4%. The company has maintained a stable financial position and the exit from the joint venture with Mitsubishi Corporation has led to an increase in revenue.
In terms of investments, SPL has invested around Rs 1,750 crore in the last 18 months and a similar trend is expected to continue. Shriram Group's exit from Shriram Properties is an ongoing consideration and if an opportunity arises, there could be a buyout.
For Pune, SPL plans to launch a 2 million sq ft project under the development management model, with potential for more projects in the future. The current average realized price stands at Rs 6,378 per sq ft as on September 30, 2023, reflecting an increase of 14% over March FY23.
SPL is showing interest in fractional ownership, pending regulatory clarity, and hopes to launch projects in this segment. Regarding Real Estate Investment Trusts (REITs), SPL believes that the biggest challenge is the shortage of Class A assets, and the company plans to focus on developing high-quality assets with the ability to achieve an internal rate of 20- 30% to generate. return (IRR).
