Prestige Estates Projects Ltd becomes largest listed property developer with record sales 10,382 crore in FY 2012, supported by strong demand for Prestige City project in Bangalore and new launches in Hyderabad.
In this financial year, the company has set a sales guidance of more than 10,000 crore, which is expected to be achieved through a robust pipeline of projects. The total launch in FY22 was 16.77 million square feet (msf).
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Until recently, Prestige Estates was a large regional developer focused on select markets in South India. In that context, FY22 sales performance is impressive, but the success of new launches in regions other than South will decide its fate.
Earlier this month, the company launched residential projects in the Mumbai Metropolitan Region (MMR), including Prestige City Mulund, Prestige Daffodils in Pali Hill and Prestige Jasdan Classic. So far, the response to these projects at the launch event has been good, management told analysts in a call.
“While the initial response to MMR projects has been positive, continued momentum in non-Bengaluru markets and timely and consistent launches in these markets is the key to the next phase of growth, given that over 50% of the planned launches are being skewed. Is. Bengaluru,” analysts at Antique Stock Broking Ltd said in a report on May 30. Also, some projects in Mumbai will be developed with a partner, which increases the chances of delays.
Prestige aims to achieve Annual sales of Rs 3,000 crore from MMR projects.
“Mulund market is very competitive; That’s why we think it’s difficult to achieve this number even in the best-case scenario. As of now, their total inventory in MMR is not enough to meet this target,” said an analyst at a domestic brokerage requesting anonymity. Prestige has execution capabilities, but even Its FY23 sales target is also aggressive and any slowdown in residential sales will increase the company’s debt, he said.
In 2021, Prestige announced the sale of some of its commercial and residential properties to the Blackstone Group in two phases with the aim of reducing debt. The total enterprise value of the deal was approximately 9,160 crores. Phase II of the Blackstone deal concluded in FY22 and the remaining 250 crore is expected in June, the management said.
Management reiterated its target of maintaining the key net debt/equity ratio at approximately 0.5x over the medium term. In Q4FY22, it had a net debt equity ratio of 0.35x. net debt fell Q3FY22 to . 4,170 crore in 3,360 crore in Q4FY22. However, analysts caution that debt may be monitored as the company will need to invest in more projects to maintain its sales momentum.
Under its annuity portfolio, Prestige has 29msf of office space and 5msf of retail space at various stages of implementation. Analysts at Kotak Institutional Equities said leasing in the annuity segment has been a concern for the market. “The pace of sales in the residential segment is likely to generate free cash; Timely execution in the annuity segment will be the key focal point for further value creation,” said Kotak’s May 31 report.
Like the competitors, the Prestige is also facing high construction cost. To offset the impact of input cost inflation, it has increased prices by 7-8%.
Meanwhile, the company’s shares have risen 57% in the past 12 months, giving investors more than double the returns against the benchmark index Nifty Realty. Shares climbed 4% on Monday 429.15. However, a meaningful bounce in the stock from current levels will largely depend on the sales trajectory in MMR.