Aditya Birla Real Estate LtdQ2 FY23
Aditya Birla Real Estate Ltd Q2 FY23 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Price: ₹1,198Market Cap: ₹14.4K CrSector: Realty
Management growth scorecard
Revenue
Category 2
Margin
Category 3
Fundraise
Yes
Order
N/A
Capex
Yes
2 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 2- →Textile Business: Expected turnaround and better growth starting Q4 FY'24 with improving market sentiment; continuous cost-saving efforts ongoing to improve profitability.
- →Paper Business: Capacity planned to increase from ~5 lakh tons to 6.25 lakh tons over 3 years; target EBITDA margins of 22%-23% going forward through capacity expansion, efficiency improvements, and cost rationalization.
- →Real Estate Business:
- → - Targeting INR3,000 crores in sales bookings for the current year, aiming for INR5,000 crores next year.
- → - Aspires to reach INR10,000 crores in bookings within 3-4 years.
- → - Sales velocity expected to improve with new launches starting late Q2/Q3 FY'24.
- → - Focus on premium and luxury segments with strong demand; limited presence in 4 key cities covering ~65% of market.
- → - Residential market expected to see multi-year traction with rising prices and reduced inventory.
- →Overall expectation: Gradual improvement and robust growth driven by real estate launches, paper capacity expansion, and textile business recovery.
Margin guidance
Category 3- →Textile Business: Expected turnaround from Q4 FY '24 with improved market sentiment and demand both domestically and internationally. Continuous efforts on cost savings anticipated. (Page 19-20)
- →Paper Business: Ongoing cost reduction measures have saved INR80-90 crores annually; further cost savings expected through efficiencies and capacity expansion from roughly 5 lakh tons to 6.25 lakh tons over 3 years. Targeting EBITDA margins of 22-23% going forward. (Page 18-19)
- →Real Estate Business: Targeting INR3,000 crores sales booking in current year and INR5,000 crores next year, with aspirations to reach INR10,000 crores bookings in 3-4 years. Aim for sustainable growth with focus on premium segment. Expected PAT margin around 20-25%, with some projects achieving over 50% EBIT margins. (Pages 13-17)
- →Debt management: Expect debt to remain stable around INR2,000-2,500 crores as cash flows kick in, supporting growth without significant leverage increase. (Pages 5-6, 14)
- →Overall, business expects improved profitability driven by market recovery, cost controls, capacity expansion, and premium market focus especially from Q4 FY '24 onwards.
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Fundraise plans
Yes- →The company is open to exploring strategic tie-ups and platform funding for additional growth capital, similar to models used by Mahindra and Godrej.
- →Currently, funds are not very interested in residential equity, but discussions are ongoing for future possibilities.
- →No immediate equity fundraising planned as the company feels well-capitalized for current plans.
- →Debt levels are targeted to remain around INR 2,000-2,500 crores by the end of next year, with potential peaks depending on new deal signings.
- →The blended cost of borrowing is around 7.5%, expected to rise to close to 8% after shifting to long-term borrowings.
- →The company is moving from short-term to long-term debt, including lease rental discounting models to manage interest costs.
- →Debt could increase to INR 3,000-4,000 crores cautiously if required to fuel real estate growth, with capacity up to INR 5,000 crores if needed.
Order book
- →The paper and pulp segment is experiencing subdued demand currently; several new government tenders for publishing books are expected between August 15 and October, with order placements likely from late October or November.
- →Overall, the real estate business is optimistic, targeting INR3,000 crores of sales bookings for the current year and hopes to cross INR5,000 crores next year.
- →Real estate bookings are aimed to reach about INR10,000 crores in the next 3-4 years.
- →Current major project launches include significant GDVs such as INR2,800 crores in Delhi (7 acres, 1.4 million sq ft) and INR8,000 crores in Thane (31 acres, 5.5 million sq ft).
- →Rental income is stable at approximately INR130 crores annually with 100% occupancy and expected to increase.
- →The company recognises a current lack of inventory in some markets like Worli, with new launches planned in Q4 to boost sales velocity.
Capex plans
Yes- →Paper Business:
- → - Capex planned to increase capacity from ~5 lakh tons to 6.25 lakh tons over 3 years.
- → - Capex also aimed at efficiency improvements and cost rationalization measures.
- → - Expected to drive EBITDA margins to around 22%-23%.
- →Textile Business:
- → - No significant capex planned currently.
- → - Focus is on restructuring to save fixed costs and enhance profitability.
- →Real Estate:
- → - New land acquisitions with potential project launches in Bengaluru, Mumbai (Walkeshwar), and others.
- → - Project launches planned in FY '24 and FY '25 (e.g., Walkeshwar, Devanahalli, Rajarajeshwari Nagar).
- → - Exploring platform funding and long-term borrowings for growth capital.
- →Debt Management:
- → - Plans to replace short-term debt with long-term debt.
- → - No specific debt cap but cautious evaluation based on growth and cash flows.
How does Aditya Birla Real Estate Ltd rank vs peers in Realty?
Pro feature1Aditya Birla Real Estate Ltd
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