Bangalore: Puravankara Projects Ltd doubled its net profit for the December quarter to ₹ 64.4 crore on record sales during the three months, the Bangalore-based real estate firm said on Monday.
Revenue jumped 60% to ₹ 310.6 crore as the company sold more than 900,000 sq. ft of space during the quarter, with the premium Puravankara brand contributing around 73% and the affordable housing arm Provident Housing Ltd the remaining 27%.
The performance reflects the expectations of property analysts that Bangalore developers will outshine real estate companies based in other parts of the country in terms of sales because of a robust local market.
The stock rose 2.48% to ₹ 107.25 on BSE on a day the Sensex ended unchanged.
Joint managing director Ashish Puravankara, the 33-year-old son of chairman and managing director Ravi Puravankara, in an interview after the results were announced, said the company’s strategy of keeping the premium and affordable brands separate has helped. He also spoke on plans to reducing promoter shareholding and on garnering sales despite prices rising. Edited excerpts:
Puravankara’s third-quarter results show a significant rise in revenue. What are the reasons that could have propelled sales, when in other cities sales are only slowly inching upward?
The interesting part of our December performance has been the role played by our ready-to-move-in inventory of projects, which has contributed nearly 28% to our quarterly revenues. The ready-to-move-in inventory has risen to about ₹ 750 crore, which is good because customers are looking at projects at an advanced or a near-complete stage.
In 2009, right after the economic slowdown, Puravankara launched Provident Housing, the brand under which you build and sell affordable apartments. Has the strategy of keeping two brands—Puravankara for premium housing and Provident for affordable housing—paid off?
The strategy of keeping these two brands into two separate companies, with individual teams, has been a good idea because it has also kept the focus and execution capabilities intact. Provident has been a success story because the demand has remained high without any slowdown in sales. I would think we have mastered the model under Provident.
We have been present in southern markets such as Bangalore and Chennai and we will enter north India with a focus on joint development deals, as there are good opportunities.
The rise in property prices, particularly in Mumbai or even the national capital region, has been a matter of debate in recent months. What’s your outlook on price movement for Puravankara and on the Bangalore property market?
In the December quarter, average price realization for Puravankara has been around ₹ 4,300 a sq. ft, and ₹ 2,750 a sq. ft for Provident. During the quarter, we did around 0.9 million sq. ft of sales under both brands. Fresh project launches in January have happened at ₹ 6,000 a sq. ft for Puravankara, so there has been a steady rise in prices, but that hasn’t dampened sales.
I would think Bangalore would also see a good 15-20% increase in prices annually.
After another Bangalore firm Prestige Estates Projects Ltd diluted stake through an institutional placement programme (IPP) last week, will we also see Puravankara going the same route to comply with Sebi’s (Securities and Exchange Board of India’s) minimum shareholding guidelines?
The chairman holds 89.96% stake in the company, which needs to be brought down by about 15% by June. We have already had a couple of meetings with Sebi and are exploring the options it has made available for this purpose that include an IPP, FPO (follow-on public offer) among others, either individually or in a combined way.
Puravankara recently raised around $70 million of debt from JP Morgan. Has that increased the company’s debt significantly?
The debt from JP Morgan was raised at an interest rate of 16%. The money will not only be used for a large 54-acre city-centric project in Chennai but to also accelerate execution of other projects in our portfolio. Having said that, our debt as of December stands at ₹ 1,500 crore, and that’s not worrying because the focus of the company right now is to accelerate execution and boost project cashflows.
What’s the strategy on land acquisition? Will you buy land or go for the more economical joint development agreements (JDA)?
We are looking at both outright buying of land and JDA. Right now we are negotiating for a JDA deal in Hyderabad for a Provident project and a couple of outright (purchases), and JDA deals in Chennai for both our brands.
Good sales are giving us the confidence to buy land and launch new projects.