Home / Markets / Mark To Market /  Residential segment holds the fort for Brigade Enterprises in Q4

Robust sales in the residential segment translated into solid March quarter earnings for Brigade Enterprises Ltd. The company clocked its highest-ever quarterly sales of 1,018 crore, up 56% year-on-year and 10% sequentially. The previous highest, in terms of quarterly sales, was in the December quarter, suggesting momentum is on the side of the company.

Pre-sales volume grew to 1.66 million sq. ft in Q4FY21. The company’s management said new launches contributed 30% to increased sales and the balance was driven by existing projects. Its key market Bengaluru contributed to 60% of the sales, while the balance was achieved in the relatively newer markets of Hyderabad and Chennai combined, the management added.

After a stellar Q4 performance, analysts caution of some near-term pressure in the company’s residential segment, on the back of covid-led restrictions impacting construction of projects as well as demand outlook.

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Although there were some signs of recovery in the company’s retail business in Q4, the regional lockdowns have dampened the short-term outlook for this segment. The management said that for malls, rental concessions during the current lockdown would be the same as extended during the first lockdown. Retail rentals halved in FY21 from around 120 crore in FY20. Further, given the ban on international travel, the hospitality business would continue to be a laggard unless normalcy resumes, analysts said.

“With a fall in labour availability, lower occupancy in hotels, and reducing footfalls at malls, we expect a muted 1QFY22. Also, the company continues to face headwinds in the commercial segment," analysts at HDFC Securities Ltd said in a report on 19 May.

In Q4FY21, the company was able to lease only 0.05 million sq. ft of space in its commercial Brigade Tech Garden (BTG) project. Enquiries and site visits for leasing of commercial spaces started gaining traction prior to the lockdown, but have slowed since, the management said.

It, however, said that the office leasing pipeline stands at around 1 million sq. ft, of which 75% is for the BTG project. For its WTC Chennai project, the management expects rents to commence from Q2FY22. Analysts say, in the current scenario, closure of leasing deals could be delayed, clouding the near-term outlook for incremental leasing.

Meanwhile, in the past year, the stock has seen a massive rally of 175%, outperforming the Nifty Realty Index, which rose 95% in the same span. Analysts attributed this sharp rally in the stock to lower real estate prices, cheaper home loan rates and sustained trend of work from home. However, with these macro positives already priced in, company-specific factors such as cash-flow trend and revival in leasing would decide the stock’s future course.

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