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«“Oberoi Realty Earnings Conference Call” October 24, 2016 MANAGEMENT: MR. VIKAS OBEROI – CHAIRMAN AND MANAGING DIRECTOR, OBEROI REALTY LIMITED ...»

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“Oberoi Realty Earnings Conference Call”

October 24, 2016

MANAGEMENT: MR. VIKAS OBEROI – CHAIRMAN AND MANAGING

DIRECTOR, OBEROI REALTY LIMITED

MR. SAUMIL DARU – DIRECTOR (FINANCE), OBEROI

REALTY LIMITED

Page 1 of 14

Oberoi Realty Limited

October 24, 2016

Ladies and gentlemen, good evening and welcome to Oberoi Realty’s Earnings Conference Call

Moderator:

for the Quarter 2 Financial Year 2017 that ended on September 30, 2016. We have Mr. Oberoi the Chairman and Managing Director of the company and Mr. Saumil Daru, the Director Finance of the company with us for the call. Please note that this call will be for 60 minutes and during the duration of this conference call, all participant lines will be in the listen only mode. This conference is being recorded and the transcript for the same maybe put up on the website of the company. After the management discussion, there will be an opportunity for you to ask questions. Should you need assistance during this conference call you may signal an operator by pressing ‘*’ then ‘0’ on your touchtone phone.

Before I hand the conference over to the management I would like to remind you that certain statements made during the course of this call may not be based on historical information or facts and maybe forward-looking statements, including those relating to general business statement, plans and strategy of the company, its future financial condition and growth prospects.

These forward-looking statements are based on expectations and projections and may involve a number of risks, uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by such statements.

I would now like to hand the conference over to Mr. Oberoi, the Chairman and Managing Director of the company. Thank you and over to you sir.

Vikas Oberoi: Good morning, good afternoon and good evening to all of you as per the time-zone from which you have logged in and welcome to the conference call of second quarter financial year 2017 results and business update. Thank you all for taking time out for this call. A quick update; we are delighted to announce that we have signed a Pharma company, Teva Pharma, for about 100,000 sq. ft. for our Commerz-II. This is again Teva’s head quarter

–  –  –

Saumil Daru: Thank you Mr. Oberoi. I guess most of you must have gone through the presentation available on our website along with the results which have been filed with the exchanges. The results for the quarter ended September 30, 2016 are as per the Indian Accounting Standard applicable from April 1st 2016. The results for the quarter ended September 30, 2015 have been recast to facilitate comparison. In terms of consolidated financials, we achieved the consolidated revenue of Rs.

264 crores for this quarter as against Rs. 203 crores for Q2 FY16 and Rs. 330 crores for Q1 FY17. The consolidated PBT was Rs. 124 crores for Q2 FY 2017 as against Rs. 109 crores for

–  –  –

Q2 FY16 and 163 crores for Q1 FY 17. The consolidated PAT was Rs. 83 crores for Q2 FY17 as against Rs. 74 crores for Q2 FY16 and Rs. 108 crores for Q1 FY17.

I would now like to move to the asset level performances and to begin with our investment properties. Our investment properties continued their steady and strong performance. Oberoi Mall which is the retail asset contributed about 24 crores to the operating revenue for Q2 FY17 as against 24 crores for Q2 FY16 and the Q1 FY17. The EBITDA margin in this vertical stands at about 93%. Commerz, our office space asset contributed about 11 crores to the operating revenue for Q2 FY17 as against 12 crores for Q2 FY16 and 11 crores for Q1 FY17. The EBITDA margin in this vertical is at around 100% but in this quarter it is predominantly due to an adjustment on account of property tax. In Commerz-II Phase-I the total top-line was about 4 crores for Q2 FY17 as against 1.75 crores for Q2 FY16 and 3 crores for Q1 FY17. The Westin Mumbai Garden City contributed 29 crores of operating revenue for Q2 FY17, this is as against 30 crores for Q2 FY16 and about 28 crores for Q1 FY17. The EBITDA margin in this vertical is at around 28%.

We now move on to our development properties; for Esquire of the total project of about 21.22 lakh sq ft, we have booked little over 25,100 sq. ft. in Q2 FY17 as against 4390 sq. ft. odd in Q2 FY16 and a little over 8000 sq. ft. in Q1 FY17. Till date we have booked about 11.56 lakh sq.

ft. which is about 54% of the inventory. The total booking value for this quarter is Rs. 53 crores as against there was 8 crores in Q2 FY16 and Rs. 16 crores in Q1 FY17. The cumulative booking value till date is Rs. 1666 crores, total revenue recognized for this project in Q2 FY17 is Rs. 102 crores and the cumulative revenue recognition till date is Rs. 955 crores. For Exquisite, of the total project of 15.47 lakh sq. ft. we have booked about 16,920 sq. ft. in this quarter as against 38,600 sq. ft. in Q2 FY16 and 18,200 sq. ft odd in Q1 FY17. Till date we have booked 13.53 lakh sq. ft. which is about 87% of the inventory in this project. Total booking value in this quarter is Rs. 40 crores as against 89 crores in Q2 FY16 and Rs. 40 crores in Q1 FY17. The cumulative booking value till date is Rs. 2,177 crores, the total revenue recognized for this project in this quarter is Rs. 40 crores and the cumulative revenue recognition till date is the entire amount of Rs. 2,177 crores on account of 100% of project completion.





For Prisma of the total project of 2.68 lakh sq. ft. we have booked about 11,400 sq. ft. in Q2 FY17 as against 9170 sq. ft. in Q2 FY16 and about 20,188 sq. ft. in Q1 FY17. Till date we have booked 1.64 lakh sq. ft. which is 61% of the inventory. The total booking value for Q2 FY17 is Rs. 19 crores as against Rs. 16 crores in Q2 FY16 and Rs. 34 crores in Q1 FY17. Cumulative booking value till date is Rs. 289 crores. The total revenue recognized for this project in Q2 FY17 is Rs.19 crores and cumulative revenue recognition till date is Rs.156 crores.

For Mulund in Eternia in Q2 FY17 we booked 15,380 sq. ft. as against little over 7000 sq. ft. in Q2 FY16 and 5000 sq. ft. in Q1 FY17. Till date we have booked 4.52 lakh sq ft. The total booking value in this quarter is Rs. 23 crores as against 10 crores in Q2 FY16 and Rs. 8 crores in Q1 FY17. The cumulative booking value till date is Rs. 682 crores. For Mulund Enigma in

–  –  –

Moderator: Thank you very much Sir. Ladies and gentlemen, we will now begin the question and answer session. We have the first question from the line of Puneet Gulati from HSBC. Please go ahead.

Puneet Gulati: First of all, a clarification here when you talked about the Teva deal, is that already in the Q2 numbers or is that over and above the leasing volumes?

–  –  –

Puneet Gulati: Is it possible to update on what is the launch plan for your Exquisite third phase, Iven and Maxima?

Vikas Oberoi: Exquisite third phase hopefully like I said that either will be before the end of this financial year or maybe the first quarter of next year, Maxima also is the same.

Puneet Gulati: And Iven?

–  –  –

Vikas Oberoi: Iven, we are considering doing a shopping mall there so we are in a very advanced stage for designing and all.

Puneet Gulati: Some thoughts on your peers, they continue to acquire lot of new projects in their portfolio, possibly on lesser brands than yours. How are you thinking differently about the acquisition of new projects versus them?

Vikas Oberoi: We continue to look at land parcels. I mean our threshold is very simple. It should firstly be in a good location; second it should be available at a price, where if we look at the lifecycle of the project it should meet our demand for return on investment and that's how we look at it. If somebody desperately goes and buys land we don't want to follow them as such. We have our own internal standards that one needs to meet and other than that we will happily let it pass.

Puneet Gulati: What are your implied returns on investment assumptions and do you model a price increase from the current prices in the market or no?

Vikas Oberoi: We don't put any price increase for the future because future is not certain and it's not in your hand. So we don't factor in the increase in price and internally at least we want to earn 20% return on investment and maybe more.

Moderator: Next question is from the line of Saurabh Kumar from JP Morgan. Please go ahead.

Saurabh Kumar: First question is on this Worli Three Sixty West, so 8 units have good outcome but in what time frame do you think you can hit that 50 apartments threshold by which you start recognizing revenues on this project?

–  –  –

Saurabh Kumar: By the end of this year?

Vikas Oberoi: As in the year from when we started in May but I would say that yes before end of March if we can do 50 apartments we would be internally very happy.

Saurabh Kumar: Just to confirm on this Worli project your economics is essentially you will get the entire construction cost you spend, the 2000 crores odd back, you get the 300 crores deposit and of the price you realize you get 30% of that?

Vikas Oberoi: Correct.

–  –  –

Vikas Oberoi: Whatever we have invested we will obviously get that back. We will also get our profits.

Saurabh Kumar: So in terms of cash flow this will be a much bigger project.?

–  –  –

Saurabh Kumar: If I can just confirm your expectations for recognition of Mulund and Borivali next year?

Saumil Daru: We would be looking at both of them coming in into the earnings in FY18.

Saurabh Kumar: It should be like first half of second half?

–  –  –

Adhidev Chattopadhyay: Just on Worli for the further FSI is there any visibility of more FSI getting released in the project during the year?

Vikas Oberoi: We have enough and more FSI for the project, FSI is not the issue. It's only like I said height.

–  –  –

Adhidev Chattopadhyay: On this Goregaon Phase-III, so do you have all the FSI in place to launch it and is there any plans to launch it now may be in fourth quarter or this quarter?

–  –  –

Moderator: The next question is from the line of Ritwik Sheth from Span Capital. Please go ahead.

Ritwik Sheth: Where are we in terms of construction for Mulund and Borivali?

Vikas Oberoi: Both Mulund and Borivali work is in progress. Mulund obviously we have now finished the foundation, Borivali we’ve done our excavation and we are preparing for foundation as well.

Ritwik Sheth: We will be under 10% of the construction is that fair to assume?

–  –  –

Saumil Daru: Yes correct. It is 25% to 30% of the gross revenues less the construction cost, you are right.

Ritwik Sheth: Basically the gross profit we split with the partners?

–  –  –

Abhishek Anand: But any changes you observed especially in Maharashtra regulation because at least what I could see was that one of the things which came in was the phased approval required versus the project level approvals required so there were some changes there.

–  –  –

Abhishek Anand: Just wanted to know how much spend is remaining in our Worli project, if you could give me bifurcation between the hotel and the residential part?

Saumil Daru: We can discuss more details of this offline because the aspects of what is the total spend will also depend on the height approval and all of those so we will get into too much of a discussion on this in this call so maybe we are better of discussing this off-line.

Abhishek Anand: Have we now finalized our plans in Borivali as well as our Worli Glaxo land, are we going through with the retail and if yes then what are the timelines we should be looking at?

–  –  –

Vikas Oberoi: So yes we want to do retail, it was always our plan right from the beginning that we want to do some part of Borivali as retail, Worli of course we’ve been contemplating again for a while. If you all study the metro line, one, metro station is just outside our Worli property so this makes it very attractive, two, we also are looking at Palladium doing very well. We want to almost I would say compliment and compete with Palladium. We believe that we are well-located; we are closer to the Annie Besant Road. We are on the metro lines; we are not in Lower Parel which is good again if you see the development just on the Annie Besant road is fantastic. So I guess doing a nice high-end mall in Worli will also really do well. Of course, Borivali everyone knows that we’ve been receiving a lot of traction from some of the major retailers. So yes the plan is to do that and you will hear with probably either the next quarter or the quarter after that.

Moderator: The next question is from the line of Pooja Bhatia from Morgan Stanley. Please go ahead.

–  –  –

Pooja Bhatia: So we expect the pace of sales to be higher than this.

Vikas Oberoi: Either it will be higher than this in the subsequent quarters or the least is they will be higher in spurts. Like I said that we have sold 400 so in your own math we sold about 25%. If you look at historically the projects that we have done, you will see similar run rate also. You will see another 20%-25% getting sold when it's completed and the central 50% is which gets sold when the super structure is getting ready and in and around that time. Then people have that confidence that ‘Yes okay this building is now fully up and ready and let's move in there’. You have to understand that a lot of people also sell their existing apartments to move in here, not everyone has additional cash. So these are people who come at the fag-end of the project and it’s very much in line with what we are doing elsewhere.

Moderator: The next question is from the line of Atul Tiwari from CITI Group. Please go ahead.



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