The Shapoorji Pallonji group’s real estate arm will contribute a third of the group’s revenues in the next 2-3 years. Currently, the segment contributes a fifth of the 160-year group’s $5-billion (over Rs 41,000-crore) revenues.
“The group’s mindset is aligned to real estate, which will be one of the biggest growth engines going ahead. We have put together land parcels and have 90% of the approvals,” said Venkatesh Gopalakrishnan, director, group promoter’s office, and MD & CEO, Shapoorji Pallonji Real Estate (SPRE). The balance 10% approvals is expected in 3-6 months.
The group, helmed by Shapoor Mistry, is into construction, infrastructure, real estate, energy and others. “All businesses are doing well. Real estate is a fundamental outperformer, not a relative outperformer,” Gopalakrishnan said when asked about whether real estate will grow faster than other businesses.
“The property development business has good margins if land is paid for,” Gopalakrishnan said. Real estate has margins of 20-25% if land is to be bought now and can go up to 40% if land is already paid for, he said.
“We will unlock value though IPO in the next two years, and also do some non-core asset monetisation and grow our business,” he said, adding that it is prudent to sell non-core assets in a good market to get healthy valuations.
Experts such as Vimal Bhandari , vice chairman and CEO at Arka Fincap, said it is a good move to consolidate holdings as it will lead to a better cashflow management, and help get both domestic and international investors.
Another investment banker, who did not want to be quoted, said the group is doing “everything possible” to release pledged shares and to reduce its debt, which rose to Rs 45,000 crore in March 2020 due to high-cost construction projects and working capital shortage during the pandemic. The group pledged its 18.37% stake in Tata Sons to raise Rs 26,000 crore.
“Real estate is on an upcyle. That’s why they are banking on it,” he said.
The group is also raising Rs 15,000 crore from Power Finance Corporation against the cashflows from SPRE and other sources, according to reports. It is also coming out with an IPO for its infrastructure arm, Afcons, later this year.
New launches
SPRE is looking at revenues of Rs 18,000 crore by FY28 with some large projects it is launching in the coming quarters, said Gopalakrishnan. The group is looking at Rs 7,000 crore revenues from real estate in FY25 with a y-o-y growth of 40% compared to FY24. Currently, it is developing 25 million sq ft of projects.
The company is looking to launch residential projects in Colaba in South Mumbai, Juhu and a new tower in Imperial Tardeo, Swadeshi Mills project and Sant Nagar in Mumbai, and Manjari in Pune.
He said the project in Colaba will be the largest in the country with an area of 7 million sq ft and a revenue potential of Rs 50,000 crore. Juhu project will be an ultra luxury one with a selling rice of Rs 100,000-120,000 per sq ft.
The company’s mid income housing arm, Joyville, is also looking to launch three projects in FY25 in Pune, Thane and Mumbai, he said.
“Interest rates will go down in six months but prices won’t go up like they went up in the last 2-3 years. But it will be a good time for real estate in the next one-and-a-half to two years,” he said, adding that macroeconomics factors and geopolitics could have an impact on the property market.
SPRE has a debt of Rs 6,500 crore and the average cost of debt is around 12.5%. The company is looking to repay Rs 2,500 crore in FY25. Though SPRE is looking to repay Rs 1,200-1500 crore every year, he said.
“After repayments, the cost of debt will move southward,” he added.
SPRE is looking to get into “built to lease” properties such as data centres and warehousing in next one to two years, and do a joint venture with an investor for warehousing.
“We have synergies with group companies such as Sterling & Wilson, which is one of the largest EPC company for data centres and SPCPL has built 40 million sq ft of warehousing ,” he said, adding that they work with group companies on an arm’s length basis.
SPRE is focused on five cities — Pune, MMR, Gurugram, Kolkata and Bengaluru — and is looking at Hyderabad, Chennai and Ahmedabad, among others, he said.
From: financialexpress
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