Prestige’s debt reduction comes as a big relief to investors
Summary
- The Bengaluru-based realty developer plans project spends of around ₹2,500 crore over the next three years
Bengaluru-based realty developer Prestige Estates Projects Ltd reported a steady performance in the March quarter. Pre-sales volume at 2.76 million sq. ft improved 35% year-on-year (y-o-y). In value terms, sales increased by 53% y-o-y to ₹1,854 crore in Q4FY21, leading to record collections of ₹1,767 crore, up 32% y-o-y.
But analysts say investors in the stock are more pleased by the company’s focus on deleveraging. An asset monetization deal with Blackstone Group helped the company cut its net debt by ₹7,150 crore to ₹1,314 crore at the end of Q4FY21. Consequently, the company’s debt/equity metric improved to 0.19 times.
On 10 March, the company concluded phase 1 of the transaction with US private equity giant Blackstone Group worth ₹7,467 crore. It should be noted that the total enterprise value of this deal is approximately ₹9,160 crore.
In a post-earnings conference call, the company’s management said that it expects the second phase of the deal to be completed in July and post that it would become net-debt free. However, since the company has a slew of projects lined up in the commercial and residential segments, it would require funds and will be considering a mix of debt and equity to meet this requirement, the management added.
The company plans project spends of around ₹2,500 crore over the next three years.
That said, the company aims to maintain its debt-to-equity ratio at 0.5 times in the medium term. With debt concerns behind, investors’ focus would shift to timely completion of upcoming projects in the Bengaluru and Mumbai regions, analysts said.
The company has launched two new projects in Bengaluru, aggregating 4.74 million sq. ft during the quarter. In FY21, the company launched seven projects of around 11.85 million sq. ft. In the residential segment, the company has 11 upcoming projects and 13 projects in the commercial segment.
Sharing timelines, the management said its residential projects in Byculla and Mulund are expected to be launched in Q2FY22 and Q3FY22, respectively. The Jijamata Nagar project is likely to be launched in the next fiscal year.
On the commercial side, the company is waiting for regulatory approvals for some projects like the Bandra Kurla Complex Phase 1. Meanwhile, the Prestige stock surged 8% intraday on Wednesday, reacting to Q4FY21 earnings, but ended the day’s session down nearly 2% on the National Stock Exchange.
Analysts say that after the recent sharp uptick, the positives of a leaner balance sheet are factored in; timely completion of projects will decide the future course of the Prestige stock.