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00:00 [MUSIC PLAYING]
00:03 Hello and welcome.
00:09 You're watching the Small and Mid-Cap Show
00:11 here on NDTV Profit.
00:12 I'm Harsh Saita.
00:13 With me is Mahima Vachchajani.
00:14 And we're going to speak to two very interesting guests
00:18 on our show today.
00:19 One is Mr. Abhishek Kapoor, Group CEO, Purvankara.
00:23 And the other one is Pranav Gundlapally of Bernstein
00:27 with regard to banking.
00:29 But let me first off welcome on board Abhishek Kapoor,
00:31 Group CEO, Purvankara, to talk to us about the numbers.
00:34 Welcome to NDTV Profit, sir.
00:36 Firstly, thank you, Harsh and Mahima,
00:39 for having me on the show.
00:40 So the new project we're talking about is the Thane one,
00:43 which we have acquired.
00:45 We are looking at a GDP of 4,000 plus crores
00:48 in this particular project.
00:49 It's a residential project with attached retail.
00:53 It's at a very, very prime location in Thane,
00:56 a very well-developed location.
00:57 So we are very excited with this entry into the Thane project.
01:02 And we're looking forward to the launch as soon as we can.
01:05 Right.
01:06 Mr. Kapoor, so Mahima also joining in,
01:08 I want to understand that with respect to this project,
01:12 how does the funding look like?
01:13 How are you going to source the funding from?
01:16 Look, Mahima, that's a good question.
01:18 So what we're really doing is, if you see our cash flows,
01:21 they are very robust.
01:23 We have collected over 3,600 crores last year.
01:27 And we have an operating surplus of about 1,270-odd crores,
01:32 with net operating surplus of more than 500 crores.
01:34 So business itself is generating a lot of internal accruals.
01:37 And of course, our debt is on a constant rotation
01:40 because a lot of it is self-retiring.
01:42 So a large amount of it is coming
01:44 from within internal accruals.
01:46 And whenever we require capital, of course,
01:48 you heard about the HDFC platform.
01:51 And we are looking at partnering with capital providers, which
01:53 is equity-like in nature, and raise more capital
01:56 for further acquisitions whenever required.
02:00 Got it.
02:01 And Abhishek, how's the Mumbai projects really playing out
02:07 for you?
02:07 Because what we've been hearing is pricing in Mumbai
02:10 is holding up very, very well.
02:14 Talk to us about the latest trends, especially
02:16 from the Bombay market.
02:18 How is it playing out as of now?
02:20 Because we had a report which came out sometime early
02:22 this week, which was talking about pricing in Mumbai being--
02:26 or rather sustaining.
02:29 Look, I believe that pricing in Mumbai
02:31 will continue to sustain.
02:33 And I would expect it to have a single-digit appreciation
02:36 on an average annually.
02:39 So it will remain stable.
02:41 And in my view, it will sustain because demand-supply
02:45 situation, the way it is today, is fairly balanced.
02:49 And we are seeing continued traction
02:51 in terms of absorption numbers.
02:53 So my view on the depth of the market is very high.
02:57 And we know we move volumes here.
02:59 And this is one of the largest real estate
03:01 markets in the country.
03:02 So I'd like to believe that we'll
03:04 continue to see that trend.
03:05 And it will remain stable.
03:06 In fact, I personally believe that the volumes will continue
03:10 to grow in this market.
03:12 Understood.
03:12 Mr. Kapoor, on the financial aspect of the company,
03:17 as per Q3, FY24, your debt was around 1,700 crores.
03:20 And Q4, it went to around 2,150 crores.
03:24 So I want to understand as to going in FY25,
03:29 what does the debt number look like by the end of FY25,
03:33 let's say?
03:35 See, look, I think I'll answer this question in two parts.
03:38 One is the way we look at debt is in context of the business
03:41 that you're doing.
03:43 If you look at our debt trends for the last four years,
03:47 our debt has come down from about 2,100 pieces per foot
03:51 to about 870 odd pieces per foot on per square foot area
03:54 under development basis.
03:56 What I mean by that is that relative to the area which
03:59 is under development, your debt per square foot
04:01 is coming down, which means whatever
04:03 interest savings you're having, you're
04:04 adding to the bottom line.
04:06 So that's point number one.
04:07 Point number two is that there are two parts of debt.
04:11 One is which is self-repaying, self-generating,
04:14 where we have already launched the projects.
04:16 And that's in excess of about 2,000 crores.
04:18 So we see that continuous repayment
04:20 will continue to happen from the project itself.
04:23 Having said that, obviously, new acquisitions will happen.
04:26 And they will be done from a mix of internal approvals.
04:29 And a lot of that will be where we are reallocating capital
04:32 from one region to the other.
04:34 So we will see a fairly balanced debt equity
04:38 approach going forward.
04:39 Having said that, I think what's very important
04:41 is that over the next three to four years' timeline,
04:44 we look at further optimizing our debt
04:47 and bringing it down, which is the general trend that we
04:49 are working towards.
04:51 So I think over a period of time,
04:52 over the next three to four years,
04:54 you will see significant bringing down of debt.
04:58 OK.
04:59 Abhishek, I want to again switch focus back
05:01 on the latest project.
05:04 4,000 crore of GDV, how quickly do we launch?
05:08 Of course, you've just about acquired a parcel as of now.
05:10 So how quickly do we launch?
05:12 And where should we go in terms of the margins
05:17 on this project and completion?
05:20 Look, so as far as the project is concerned,
05:23 our target is from the date of deployment,
05:25 all the projects we launch within nine to 12 months.
05:27 So our goal will remain the same.
05:30 Target is to try and launch it within this financial year.
05:33 So therefore, before March, that's
05:35 the target we are working towards.
05:37 Having said that, I think, as I said,
05:39 our margins in the past also have always maintained
05:42 is on an average across markets and regions for the group
05:47 is at about 30%.
05:48 Some may be lesser, some may be higher.
05:51 But as far as this project is concerned,
05:53 we believe that we will get to that target
05:55 margin of about 30% here.
05:58 Sure.
05:58 And Abhishek, what's the pipeline of launches in this year?
06:02 How many launches are we looking at?
06:04 And how many new projects, acquisitions
06:07 are you looking at in terms of land acquisitions?
06:11 That's a good question.
06:12 So this year, we are looking at about 14 million
06:14 square foot of launch already, which is in the pipeline.
06:17 That obviously did not include Thane.
06:20 So that will get added.
06:22 Now, as far as the acquisition is concerned,
06:24 if you see today, we have about 32 million
06:26 square foot under construction.
06:28 We have a balance of about another 31 and 1/2 million
06:31 square foot, which is yet to be launched, of which we will
06:34 take about 14 million to market.
06:36 So approximately 22 million will be left with us.
06:39 What we intend to do is replace what we have already sold,
06:42 which is last year we sold about 7.35 million square foot.
06:45 And this year, as of today, we are
06:48 talking about 14 million square foot.
06:49 So we need to replace that inventory
06:51 and go back to 40 million square foot oil of land bank
06:54 so that we can continue to grow.
06:56 So our goal will be to acquire between 18 to 20 million
06:59 square foot in this financial year and early next year.
07:02 Understood.
07:03 Well, one last quick question to you, Mr. Kapoor,
07:05 that this 18 to 20 million square foot
07:07 that you're planning to add, your non-Bangalore projects now
07:11 comprise of 47%.
07:13 So going forward, what will be the mix like?
07:15 What kind of geographies are you planning to expand to?
07:18 And geographical area-wise, what are the margins like?
07:24 Look, so I'll answer it in two parts.
07:26 One is the geographic spread and the way
07:30 we are looking at the business.
07:31 Clearly, the focus is to scale up our best business.
07:34 So eventually, in the next three to four years,
07:37 you will see West contributing almost 40% of our business.
07:41 And South, of course, will consolidate our position.
07:43 But what you need to look at is in the context of the growth.
07:47 Because our growth is going to be pretty fast-paced.
07:50 As you saw last year, we grew by about 90%
07:53 in terms of resale numbers.
07:56 And we intend to continue to push the growth numbers
07:59 in the consolidating market.
08:01 So therefore, while we will scale up our West operations
08:04 and the contribution, we'll also continue
08:06 to consolidate in the southern region.
08:09 Now, as far as our projects, launches, and geography
08:13 is concerned, it will be literally
08:15 between Bangalore, Chennai, Pune, Mumbai.
08:19 We are working on Hyderabad, but yet to succeed there.
08:22 And we are hoping to add NCR very soon.
08:25 The PSU banking space took an extreme hit yesterday
08:29 in the trade.
08:30 It was down 15%.
08:32 But right now, the PSU banking space is doing well.
08:34 It's down only around 0.3%.
08:36 But to talk more about the banking space,
08:40 we have with us Pranav Gundlapally, a senior research
08:43 analyst at Bernstein, who joins us now.
08:46 Welcome to the show, Pranav.
08:47 My first question to you is that the PSU banking space
08:52 took a lot of hit yesterday.
08:53 Do you think this is the right time to buy the PSU bank
08:56 stocks?
08:58 Good morning.
08:59 Thanks for having me on the show.
09:00 I think from a PSU banks perspective,
09:04 the peak in terms of its operating
09:07 outperformance versus the private sector banks
09:09 is probably behind us.
09:10 So from a pure operating metrics perspective,
09:14 you would still prefer the private sector banks
09:17 versus the public sector banks, number one.
09:19 And the sharp decline yesterday was on the back of sharp gains
09:26 in the prior week.
09:28 So I think net-net on a year-to-date basis,
09:31 we are still sitting with reasonable gains
09:35 for most of the public sector banks.
09:37 So not particularly cheap compared to what
09:40 their operating metrics are.
09:42 So no, we don't see a big hurry to jump in at this point
09:47 for banks like NSBI even, where we have a market form
09:51 rating for the bank.
09:53 Understood, Pranav.
09:54 Pranav, just some perspective with regard to PSU banks.
09:59 What's caused this huge jitter?
10:02 It's a 15% move in a single day.
10:06 What's your sense?
10:08 Is there something fundamentally different
10:11 if BJP has a majority versus does not have a majority?
10:16 Does policy change in a big way for them?
10:18 Will it impact performance for them in a big way?
10:21 Or is it just a run-up which has led to the cool-down?
10:25 Yeah, I think there are a couple of things here, Harsh.
10:28 I think if you take a step back, I
10:30 think from a banking sector perspective,
10:32 it's probably one of the sectors which
10:34 should be least impacted, whether we
10:36 lean towards more consumption versus capex or investments.
10:40 Because as a sector, it can play on both the themes.
10:43 Consumption is as good as investments
10:45 from a credit growth perspective.
10:47 But for the public sector banks, I
10:48 think a few things had led to their rally
10:52 in the last few quarters.
10:54 I think one is, of course, the operating performance
10:56 improvements, which we are largely behind.
10:59 The second is, I think, the growth in capex,
11:02 or a big boost to the capex, was expected
11:05 to benefit the public sector banks,
11:07 given that with the larger balance sheet,
11:11 appetite for lower ROAs would have put them
11:14 in a better position versus the private sector banks
11:17 to capture a larger share of capex-led corporate goods.
11:22 That is one.
11:23 The second, I think there was some element of pricing
11:28 in, of potential changes in the way these banks are run.
11:33 So we've had a lot of chatter around even divestment
11:37 of certain smaller banks, increased focus
11:40 on specialization for these banks.
11:43 So all of those, I think, would now appear a little less likely.
11:49 And that probably led to the sharp declines
11:53 that we saw yesterday.
11:54 So as a banking sector as a whole,
11:57 we don't think it should be severely impacted.
11:59 But these idiosyncratic factors for the public sector banks
12:03 are probably what led to those reactions
12:05 that we saw yesterday.
12:07 Understood.
12:08 Pranav, I want to understand that increased
12:11 in welfare spending poses a better outlook
12:15 for microfinance lenders.
12:17 So in this space, which companies do you think
12:20 will benefit the most?
12:22 So we have a few focused microfinance lenders
12:26 that will stand to benefit.
12:29 But amongst the larger banks, you
12:31 have the likes of IndusInd, Kotak, et cetera,
12:35 which do have a sizable microfinance exposure
12:38 right now.
12:39 So they could stand to benefit if we
12:41 have a significant increase in the welfare spending
12:45 and the rural consumption indeed picks up.
12:47 There are also parts of the CV segment,
12:51 say for example, the LCVs and the three-wheeler segment,
12:54 which could benefit from an increased rural consumption
12:58 or welfare spending narrative.
13:01 Right, Pranav.
13:03 I want to also talk about some power financiers, REC, PFC,
13:07 IRIDA.
13:08 What's your sense on that one?
13:10 Especially REC, PFC, sharp cuts is what we've seen,
13:13 25% lower in terms of their stock price.
13:18 Of course, the run-up has been steep.
13:20 But do you believe that this is an opportunity to buy
13:24 or it warrants this kind of a derating?
13:28 I think from an operating metrics perspective, Harsh,
13:31 I don't think there'll be any big changes, either
13:35 in terms of growth, maybe a slight tapering
13:38 towards the later years.
13:40 But either for the banks or even for the power sector
13:43 lenders or any of the broader, even the CAPEX-focused players,
13:47 we don't expect a big change in the operating metrics.
13:50 I think what has changed is overnight
13:53 is probably the positive sentiment around reforms
13:58 in the sector and what it could do
14:00 to the health of the loan books is probably what has changed.
14:04 And for that to once again come back,
14:07 we would need more clarity on how,
14:11 if and how there could be changes
14:13 in the policy landscape.
14:15 So for example, improvement in receivables,
14:19 all those had a big factor to play
14:23 in a re-rating of the sector.
14:26 So we'll have to see if those hold up.
14:29 Pranav, on valuations per se,
14:32 some of these power financiers looking okay now?
14:35 See, I think for their ROEs and growth,
14:39 they've always been reasonable
14:44 versus any of the other lenders.
14:47 So I think now it's more a question of outlook on the policy
14:50 and therefore the quality of the loan book
14:53 rather than pure metrics.
14:55 Sure, and last off, I wanna touch on private sector banks
14:58 as well as maybe small mid-cap banks, if I may.
15:02 With regard to private sector,
15:04 which ones are you most bullish on?
15:07 Quick couple of reasons as to why,
15:09 and mid-banks, something small and mid-cap,
15:13 anything that interests you at this point?
15:14 Because we've seen a cool off there as well.
15:17 Okay, amongst the larger banks,
15:19 our view is the book value growth
15:22 or the returns in terms of the profit growth
15:24 over the next couple of years
15:26 would be largely similar across the top three or four banks.
15:29 And therefore the attractiveness largely comes
15:33 from where we see room for re-rating, right?
15:37 And we do see a clear room for re-rating for HDFC Bank,
15:41 to some extent ICICI as well, and now, and Axis as well.
15:46 So I think if you were to put a pecking order,
15:48 we'd put HDFC up there, followed by Axis,
15:51 and then an ICICI.
15:52 Now, Kotak, yes, is cheap,
15:54 but I think the re-rating will have to wait
15:56 until the regulatory action lifts,
15:58 which probably could take a little more than 12 months.
16:00 So no near-term upside there.
16:02 In terms of the smaller banks,
16:04 I think with the rate cuts getting pushed out
16:08 or potentially getting pushed out,
16:10 many of the smaller banks would appear less attractive today
16:14 versus the past,
16:15 simply because some of those stories,
16:18 that is a near-term thesis,
16:19 was centered around easing of cost of funds
16:22 with a cut in rates, which might get pushed out.
16:25 So for now, we would stick with the larger banks,
16:29 HDFC being the topic amongst them.
16:32 - Great perspective, thank you so much, Pranav.
16:34 Some amount of re-rating is what Pranav is suggesting.
16:38 Play banking through re-ratings
16:41 rather than through the macro theme
16:46 is seems to be the suggestion.
16:47 Thanks so much for that perspective.
16:49 It's a pleasure having you here.
16:51 Well, with that, completely out of time
16:53 on this edition of the Small and Mid-Cap Show
16:55 from Mahima, myself, everyone who puts the show together,
16:58 thanks so much for watching.
16:59 Stay tuned to NDTV Profit.
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