QIB = 22.15
HNI = 3.16
RII = 0.94
TOTAL=12.13

Conference Call      
          Oberoi Realty
Additional cost on account of specification change hurts Q2FY12 margins


Oberoi Realty held a conference call on October 17, 2011. In the conference call the company was represented by Vikas Oberoi, CMD and Saumil Daru, CFO.

Key takeaways of the conference call

Oberoi Realty has recorded 45% growth in its consolidated revenue to Rs 256.88 crore. The revenue contribution from three investment properties i.e. Oberoi mall, Commerz and Westin Mumbai was Rs 19.77 crore (up 30% yoy), Rs 10.91 crore (down 3%), Rs 19.05 crore (up 38%)respectively. And the EBITDA margin was 58% for the quarter. The Profit Before Tax for the quarter was Rs 143.17 crore(up 41%) and the Profit After Tax (PAT) was eventually at Rs 111.44 crore, a rise of 17%.

Consolidated Sales for H1FY12 stood higher by 38% at Rs. 471.95 crore and the PAT was up by 24% to Rs 217.21 crore.

The company has witnessed consistent momentum in sales in the past six months despite the tough market conditions. The transparency in the approval process being brought in by the authorities will create level playing field for all the developers and stake holders and is good for the sector in the long term.

The company has strong cash on hand. The company will use this strong cash on hand to acquire more land parcels. The company will be cautious and will buy lands that make sense and feels a fair deal.

The company has bought 50% stake of ICICI Venture (acting for I-Ven Realty Limited from India Advantage Fund I)in Worli project which is on a land little over 4 acres. The balance 50% is owned by the promoters of the company in personal capacity. The 50% investment in Worli property by the promoter was made even before incorporation of Oberoi Realty. The promoters are committed that all or 100% of real estate development will be done by Oberoi Realty, the listed company.

Paid entire consideration to ICICI Venture and due to non disclosure agreement the company could not reveal the amount of consideration.

On segmental basis the EBITDA margin of Rental assets (Oberoi mall & Commerz) was over 95% and that of hospitality was marginally lower as first half of a fiscal is a weak season for the hospitality sector in Mumbai. The EBITDA margin of Residential is 50% for Q2FY12.

Marginal compression in residential EBITDA on sequential basis is largely on account of two counts 1) additional cost on account of change/revision in specifications in respect of Oberoi Exquisite & Oberoi Splendor Grande and 2) the difference between estimated cost and actual cost in respect of Oberoi Splendor in which the company started handing over possession. In terms of additional cost on account of revision of specification the company will get higher price in unsold stocks. Further the company has reduced the interest charge on delay in payment by customers to 9% from earlier 24% in terms of Splendore Grande. This has hurt the margins marginally.

With increase in realisation more than offsetting the additional cost the company expects the residential margin to bounce back.

The launch of Foreshore will be in Q4FY12 and that of Mulund project will be in Q1FY13.

Construction activity is currently going as planned as far as Oasis Realty. The construction contract has been awarded to Samsung C&T. The company will start selling Oasis Realty soon.

The FSI for Worli project is restricted to 1.71.

The Company has sold about 5.67 lakh sqft in Oberoi Esquire, a residential project till date which comprises ~29% of the project. The total sales value till date is Rs 664.87 crore; but there has been no revenue recognition as it is yet to reach the threshold construction completion.

The Company has sold 7.92 lakh sqft in Oberoi Exquisite, a residential project till date which comprises about 53% of the project and recognized revenue of Rs 66.42 crore for Q2FY12 and Rs 112.05 crore for H1FY12.

The Company has sold about 1.40 lakh sqft in Oberoi Splendor Grande, a residential project till date which comprises about 49% of the project and recognized revenue of Rs 31.04 crore for Q2FY12 and Rs 52.53 crore for H1FY12.

The current residential inventory (spread over 5 projects) will get liquidated in the next 5 years.

As far as Oberoi Splendor, a residential project, is concerned the company has sold 11.95 lakh sqft. till date which comprises 93% of the project and recognized revenue of Rs. 58.13 crore for Q2FY12 and Rs 92.34 crore for H1FY12.