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Aditya Birla Real Estate Ltd

| Q3 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤4th Feb 26

Summary : Aditya Birla Real Estate reported exceptional Q3 FY26 presales and collections, driven by strong demand in luxury and premium segments, with a robust pipeline of new launches and business development deals despite some project approval delays.

Management Perspective positive : We are delighted to share robust momentum across our launches and ongoing portfolio. We continue with our optimism for the current year, and we are confident about exceeding our last year's presales target. We are very bullish about it in general, not just for us, but as a feature.

Concall Report Analysis & Insights

Business Overview

  1. Achieved Q3 FY26 presales of INR2,536 crores, a 276% year-on-year increase.
  2. Collections rose to INR1,290 crores, up 157% year-on-year for Q3 FY26.
  3. Successfully launched Birla Pravaah in Gurugram, selling out within 24 hours.
  4. Expanded into Pune with the launch of Birla Evam, diversifying the portfolio.
  5. Birla Niyaara received National Safety Council and BREEAM certifications.

Future Growth Prospects

  1. Maintains FY26 sales guidance of INR8,000 crores, confident of exceeding last year's target.
  2. Multiple launches planned for Q4 FY26, including Thane, Arika, Pune Punya, and Evara new phases.
  3. Optimistic about concluding INR10,000-INR15,000 crores in new business development deals by March.
  4. Targeting INR1,000 crores in annual gross rentals from commercial portfolio within 4-5 years.
  5. Projected growth to INR150 billion by FY28, supported by strong BD pipeline.

Management Insights

  1. India's growth momentum remains strong, supporting housing demand.
  2. Premium and luxury housing segments continue to drive market traction and price appreciation.
  3. Focus on design excellence, customer centricity, safety, and quality for long-term value.
  4. Careful selection of markets and prudent land pricing contribute to successful project launches.
  5. Very confident in the resilience of all four operating markets: Mumbai, Thane, Pune, Bangalore, and NCR.

Signs of Skepticism

  1. Niyaara Tower C launch repeatedly delayed, initially Q4 FY26, now H1 FY27.
  2. BD guidance of INR10,000-INR15,000 crores for FY26 is still pending conclusion by March 31.
  3. Company does not technically qualify for the BMC land tender due to experience requirements.
  4. Leasing income was down 11% year-over-year, attributed to internal consolidation adjustments.

Risk Factors

  1. Delay in Niyaara Tower C launch due to legal and approval issues, pushing to H1 FY27.
  2. Unanticipated Supreme Court order and BMC standoff caused project delays.
  3. Challenges in qualifying for the BMC land tender due to stringent experience criteria.
  4. Difficulty in ensuring consistent quarterly project launches due to approval complexities.
  5. Potential for increased supply pressure in Bombay micro markets post EC clearance.

Good To Know

  1. Q3 FY26 real GDP growth was 8.2%, the fastest in 5 quarters.
  2. RBI revised FY26 growth forecast to 7.3%, constructive for housing demand.
  3. Achieved approximately 58 million safe man hours on construction sites.
  4. Became a principal sponsor of Gujarat Titans in the IPL to strengthen brand visibility.
  5. Net debt is INR3,500 crores, with a debt-to-equity ratio of 0.8, indicating strong financial health.

Key Drivers

  1. Strong Q3 presales growth of 276%.
  2. Multiple new project launches in Q4.
  3. Robust demand in key micro markets.
  4. Significant business development pipeline.

Key Analyst Discussions

Competitive Environment

  1. Q: How do you view the South Mumbai real estate market's health, given its large GDV contribution?
  2. A: Management is confident due to strong brand, right product, pricing, and understanding of consumers.
  3. Q: Do you anticipate supply pressure in Bombay from projects receiving EC clearance?
  4. A: Not overly concerned, as launches are concentrated in specific micro markets where the company has strong demand.
  5. Q: Would the BMC land parcel be a disadvantage for competitors due to its small size?
  6. A: The 6-acre land with 500 tenants presents a competitive advantage if the company can participate.

Market Trends & Consumer Behavior

  1. Q: What is the market outlook for Worli, given recent luxury launches?
  2. A: Optimistic about Worli due to product pricing, location, size, and brand strength.
  3. Q: Are you seeing demand pressure in Pune?
  4. A: No, Birla Evam in Pune sold over 35% of inventory in one month, indicating strong demand.
  5. Q: Which markets show resilient demand, and which price points are under pressure?
  6. A: Mumbai, Thane, Pune, Bangalore, and NCR (Gurgaon, Noida) show strong demand across luxury and mid-premium segments.

Financial Highlights

  1. Q: What was the operating cash flow generation for Q3 FY26?
  2. A: Collections were INR2,300-INR2,347 crores, with project development costs around INR1,300 crores, resulting in strong positive cash flow.
  3. Q: What are the margin expectations for ongoing and upcoming projects?
  4. A: Margins are typically 25-30%, with own projects exceeding 40% and JV projects at 30-35%.
  5. Q: How much cash has been invested in land acquisitions and approvals to date?
  6. A: Approximately INR4,500-INR5,000 crores has been invested in land acquisitions and approvals.
  7. Q: What is the post-tax cash expected from the sale of the paper business?
  8. A: Due to MAT credit, the entire amount is expected to be a cash flow event with no significant tax impact.

Product Composition

  1. Q: Why was the GDV for Thane increased from INR1,700 crores to INR2,700 crores?
  2. A: Increased GDV reflects strong market prospects and demand, allowing for a larger inventory launch.
  3. Q: What is the GDV for the next phase of Evara in Bangalore?
  4. A: The new balance phase of Evara is expected to have a GDV of about INR1,600 crores.
  5. Q: Why were GDVs for Birla Arika and Birla Punya scaled down?
  6. A: Arika was divided into two parts for redesign and exceptional value creation; Punya is being phased out to manage multiple launches.
  7. Q: What percentage of upcoming launches will be luxury versus mid-market?
  8. A: The company will continue to target high-potential micro markets in both high-luxury and mass-premium segments.

Strategic Considerations

  1. Q: What is the timeline for Q4 FY26 launches, and is there a risk of spillover?
  2. A: RERA approvals for Thane, Arika, and Boisar are expected in early February, minimizing spillover risk.
  3. Q: What is the progress on the India Hume Pipe project in NCR?
  4. A: Approval issues are being resolved, with a launch targeted for the next financial year.
  5. Q: What is the strategy for expanding the commercial portfolio and team?
  6. A: Actively looking for a partner for commercial projects, progressing on design, and will expand the team at the appropriate time.
  7. Q: What is the progress on the ITC deal?
  8. A: CCI approval received; awaiting MoEF approval and lease transfer, hoping to close in the next two months.