Shriram Properties Announces Strong Quarter

BY Realty Plus

Shriram Properties (“SPL” or “Company”) has today announced its financial results for the first quarter ended June 30, 2023/(Q1FY24). The Company has reported yet another strong quarter with quarterly improvement in key operating and financial metrics for Q1FY24. SPL also inducted Ashish Deora as Director on the Board of the Company.

The Company has achieved Q1 sales volumes of 0.78 msf (+17% YoY) and sales values of Rs.459 crores (+47% YoY), driven by strong sustenance sales in ongoing projects and two successful launches during Q1FY24. Robust rise in sales value reflects the change in product mix and improved pricing. The share of plotted development stood at ~21%, while the DM model accounted for 12% of sales volumes during the quarter. Given the seasonality in our business (Q1 being the weakest and Q4 being the strongest), sequential growth (QoQ) comparisons may not provide a reasonable conclusion.

During the quarter, SPL launched ‘Shriram Esquire’, a premium residential project in Koramangala, Bangalore and ‘Shriram Hebbal 1’ at Bangalore, both of which received excellent market response and achieved sales-at-launch of 38%. The Company has lined up two launches in Chennai and another launch in Bangalore during Q2, and is targeting 3 further launches during Q3FY24.

Blended avg. realisation for constructed units was higher at Rs.5,463/sqft in Q1FY24 vs. Rs.4,694 / sqft in Q1FY23 (+16% YoY). On a comparable basis, mid-market units clocked 1-6% higher realisation across projects and averaged at Rs.6,525/sqft, while affordable units registered 8% YoY growth at Rs.4,711/sqft in Q1FY24. Plotted unit realisation averaged at Rs.3,045/sqft.

Project execution remained robust during Q2FY24. Construction activities in projects stated for completion during the year are on-track and the planned start of construction in 3 new projects in Bangalore and Chennai would fuel growth in construction spending during the remainder of FY24.

During the quarter the Company achieved ‘completion’ in 3 projects viz., Shriram Blue, Shriram Rainforest and Eden144, with an aggregate development area of 1.36 msf) during the quarter. The Company is on-track to hand over 3,000+ units in FY24, which should boost revenue recognition in FY24 during the year.

The Company has reported excellent financial results for the quarter, reflecting the impact of improving scale and operating leverage, robust project execution and consistent fee contribution income from the DM model.

Revenue from Operations grew 10% YoY to Rs.135.0 crores, reflecting continued handover and registration momentum in recently completed projects. Total Revenues grew by 8% YoY to Rs.157.2 crores and DM Fee income accounted for 12% of Total Revenues.

Total Operating Expenses declined 5% YoY to Rs.103.8 crores, supported by 15% lower cost of revenues and 2% lower employee costs. Reflecting improved revenue recognition and cost control, EBITDA margins stood strong at 34%, against 24% in Q1FY24.

Interest expenses were down 14% YoY at Rs.16.0 crores (vs. Rs.18.7 crores in Q1FY23). In addition, the Company has provided for a non-cash finance charge of Rs.5.1 crores (same on YoY basis and relates to 4% NCF on Bengal) and non-recurring interest cost of Rs. 6.9 crores associated with the acquisition of a new project in Chennai during May’23.

Remarkable reduction in recurring interest expenses reflects success of our ongoing efforts to reduce absolute debt and cost of debt. SPL expects cost of debt to drop to ~11.5% levels in Q2FY24, from 11.9% in FY23 and 13.7% in FY21, amidst rising benchmark rates.

Profit Before Tax and JV Income stood at Rs.18.3 crores, up 134% YoY, in Q1FY24.

The Company’s share of profits from JVs stood at Rs. 6.1 crores reflecting sustained revenue recognition momentum at Shriram Park63 Chennai, a JV with Mitsubishi Corporation of Japan. The impact was partly offset by SPL’s share of marketing and refinancing costs at three other JVs that have not yet reached revenue recognition thresholds.

Net Profit stood at Rs.16.6 crores in Q1FY24, compared to Rs.10.5 crores in Q1 last year, reflecting a growth of 59% YoY.

The Company has strong visibility on income recognition from projects scheduled for completion and handover during the remainder of the year and thus remains confident of strong earnings momentum for the full year.

The Company’s gross debt stood 12% lower at Rs. 488 crores, while net debt stood at Rs.403 crores as at the end of Jun’23. This was despite the assumption of debt related to the acquisition of a new project at Chennai during May’23, which is being launched as “Shriram 122 West” shortly. With the proposed transfer of Shriram 122 West to the ASK co-investment platform by end-Aug’23, the Company’s gross debt would drop materially during Q2FY24. SPL remains focused on reducing debt and the cost of debt further in the future.

Shriram 122 West will be the 2nd investment by the SPL-ASK Co-investment Platform, set up with a capital commitment of Rs.500 crores in Nov’22. For Shriram 122 West acquisition, the co-investment platform will invest ~Rs.205 crores, and the transaction is expected to be closed by the end of Aug’23. With this, the SPL-ASK platform would have used 60% of its committed capital and is evaluating further opportunities for investment during FY24. The platform’s maiden investment was launched as premium plotted development, under the brand Shriram Pristine Estates, and is performing well exceeding expectations on volume and pricing since its launch in Feb’23.

The Company remains confident of its outlook. Supported by positive market trends and robust opening stock in ongoing projects and planned launches for forthcoming quarters, we see strong outlook for volumes and pricing. Project execution activities remain strong and are likely to gain further momentum with the planned commencement of construction in new projects. Continuing revenue recognition momentum and relentless focus on costs should help sustain margins and profitability even in the coming quarters.

The Company’s long-term prospects remain strong. Promising demand outlook, especially in the mid-market and affordable segments and favourable market trends augur well. Supported by a strong operating platform and a strong pipeline comprising of 49 projects with an aggregate saleable area of 52msf (including 23 msf in ongoing projects, ~75% of which is sold already), SPL is well positioned to benefit from ongoing consolidation in the industry. SPL intends to complete and deliver over 10 msf over the next 3 years. While supporting income recognition and free cashflows, this should help sustain growth momentum and deliver significant value for its stakeholders.

Commenting on the performance, M Murali, CMD, Shriram Properties said: “We are encouraged by the continuing strong operating and financial performance. Our impressive results achieved by Shriram Properties serve as a resounding testament to the unwavering dedication and strategic approach. These favourable results not only validate our relentless pursuit of excellence but also fortify our resolve to continuously enhance the Company’s landscape. Looking ahead, with our launches we remain positive in our commitment to, delivering homes and contributing meaningfully to the growth of the Company.

Tags : Shriram Properties announced financial results Ashish Deora Director Board of Company sales volume projects premium residential project Koramangala Bangalore M Murali CMD Shriram Properties