Keystone Realtors LtdQ1 FY23Realty

Keystone Realtors Ltd

Q1 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 2

Fundraise

Yes

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Full analysis

Revenue guidance

Category 2

→Targeting presales growth of 25% year-on-year over the next few years (Page 4).
→Plan to launch at least one project every quarter with GDV around Rs. 4,000 crores annually (Page 10).
→Business development pipeline is robust with an emphasis on asset-light redevelopment and joint development projects (Pages 8, 10).
→Expect to increase project additions proportional to sales churn ratio (1.5x to 2x sales), with plans to add significantly more projects in square feet terms (Page 8).
→Collections expected at 80-85% of presales, supporting healthy operating cash flows (OCF) (Page 12).
→OCF expected to improve, aiming for about 20-22% of inflows in coming years (Page 12).
→Focus on expansion into emerging micro markets with infrastructure growth like Mahim, Chembur, and Kalyan Dombivli (Page 8).

Margin guidance

Category 2

→Keystone Realtors targets presales growth of 25% year-on-year over the next few years, driven by launches in mid-mass and aspirational segments.
→Operating Cash Flow (OCF) is expected to improve, aiming for a healthy 20%-22% of inflows as new projects mature.
→Margin improvement is anticipated due to completion of legacy projects and shift to projects with better profitability; EBITDA margin improved from 16.3% to 19.7% in FY23.
→Interest costs are expected to decrease due to debt reduction post-IPO, enhancing margin arbitrage.
→The company plans to launch projects worth around Rs. 4,000 crores GDV annually, higher than FY23, supporting revenue growth.
→Economic share from developments will yield margins in the range of 20%-22% on GDV.
→New business development focuses on redevelopment and joint development projects with asset-light models, expected to boost long-term returns.

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Fundraise plans

Yes

→The company plans to more than double investment in new projects in the next financial year, which may require capital deployment.
→No explicit mention of upcoming equity fundraising; the IPO was completed in FY23.
→Mt. K. Capital, a Category-II AIF (Alternative Investment Fund) with a $100 million mandate focused on redevelopment projects, has been launched with Rustomjee as the development partner, raising US $40 million in the first close.
→The fund aims to strengthen project tie-ups and capital deployment capabilities.
→The company maintains a low debt profile with a secured gross debt of INR 452 crores and net debt as low as INR 19 crores, with a maximum target debt-to-equity ratio of 1:1.
→No direct mention of new debt issuance plans, but investment scale-up implies potential raising or deploying existing capital resources.

Order book

Yes

→The Company has a forthcoming project pipeline with an estimated Gross Development Value (GDV) of approximately Rs. 35,000 crores.
→This includes projects where they have received Letters of Intent (LOI), signed development agreements, or have land conveyance in favor.
→The cost to complete these projects is around Rs. 21,600 crores.
→The company is actively engaged in redevelopment and joint development projects, including 5 preferred redevelopment projects chosen in FY23.
→They have demonstrated the ability to manage and increase the area under development, with construction spends more than doubling in the last year.
→New project launches are expected each quarter, with a strong business development pipeline indicating project additions at 1.5 times of sales.
→They maintain a conservative business approach, choosing projects that align with decided margins to ensure profitability.

Capex plans

Yes

- Mt. K. Capital has raised a $100 million Category-II AIF ESG impact fund focused on redevelopment projects in MMR, with Rustomjee as the development partner. - The fund has achieved a first close with investors like State Bank of India and FamyCare; $40 million raised with two project commitments already made. - This fund bolsters the group's firepower to acquire more projects, particularly in select geographies with projects under 3 lakh sq ft and timelines of 4-4.5 years. - The company plans considerable new project tie-ups with over Rs. 1,000 crores capacity this year. - Forthcoming projects pipeline shows an estimated GDV of Rs. 35,000 crores with costs around Rs. 21,600 crores. - Strong emphasis on squeezing timelines between project tie-up and launch. - Infrastructure developments in MMR (metro, airport, corridor) drive market growth supporting investment opportunities. These initiatives indicate active and strategic capital deployment towards redevelopment and new project launches.

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