Eldeco Housing & Industries Ltd Q1 FY2023 Concall Summary

Key Takeaways

• Demand holds firm despite macro noise: Residential demand in Lucknow and UP remained unabated through the quarter, with the market in a short-supply condition that lets the company pass on cost increases.
• Collections flat, but for a benign reason: No new launches meant collections came only from old bookings, holding at a ~₹200 crore annualized rate; management expects this to rise as new projects launch.
• A bold doubling pledge: Management committed to doubling the company on every metric within three years, calling anything less a disappointment, and plans to add at least three new projects this fiscal to fuel that growth.
• Land prices have plateaued: After a sharp post-unlock spike and a further 5–10% rise last quarter, the pace of land price increases has now flattened, easing a key input challenge.
• What to watch next quarter: Whether the 2–3 planned project launches actually secure their 6-to-9-month approvals in time, and any clarity on full-year sales volume guidance.

Demand & Market Dynamics

• Lucknow is the core bet: Management views Lucknow as a short-supply market with unsold inventory not exceeding 2,000 units and offtake nearly matching that, making it the company's most attractive geography right now.
• Emerging economic magnet thesis: Lucknow is compared to Pune and Bangalore 20–25 years ago, with enough demand to sustain the company and absorb a number of new projects beyond the three currently planned.
• Affordability headroom: Management would not worry about affordability in Lucknow until average realizations reach ₹5,000–5,500 per square foot, implying significant runway from current levels.
• Cost pass-through is working: Because of the short-supply situation, the market absorbs any cost increase the company wants to pass on, including rising home-loan interest rates. Construction cost is only 30–40% of total sale, so even a 20% rise impacts just 7–8% of the overall scheme.
• Land price inflation has cooled: The pace of increase softened after an initial post-unlock spike and a subsequent 5–10% quarterly rise; prices have been flat since, though strong demand continues to make land acquisition at suitable locations a challenge.

Pankaj Bajaj: "I think Lucknow has enough demand or more I think it is a short supply market and it is one of the emerging new economics magnet of the country, just like Pune and Bangalore and many of these newer cities were about 20 years, 25 years ago."

Project Pipeline & Launches

• Current pipeline duration: The existing revenue pipeline of about ₹750 crores represents roughly 3.5 years of projects, which management acknowledges looks thin but expects to replenish before it runs out.
• Forthcoming project expansion: The list of forthcoming projects will grow from 5 to 8 as three new ones are added; simultaneously, three existing forthcoming projects will move to ongoing status, bringing the forthcoming count back to 5.
• Launch cadence: At least two or three of the forthcoming projects are planned for launch in the coming quarters within this financial year, subject to approvals.
• Approval bottleneck: Launching any project requires at least 10 major approvals and another 15 minor ones, taking 6 to 9 months, and the pace of approvals continues to be slow across the board.
• Shift to larger projects: The company is moving toward a township model with individual project sizes of 3–5 lakh sq. ft., a significant step up from the earlier 20,000–50,000 sq. ft. launches.
• Upcoming approval applications: In the current quarter, the company will apply for approvals for group housing projects in Eldeco City, either GH4 or Crest, whichever comes first.

Pankaj Bajaj: "It looks a little thin right now, but I assured in our previous concall also that before this gets exhausted, we are confident of adding more."

Pankaj Bajaj: "The pace of approval does continue to be slow it is not company specific it is what it is. ... if you have to launch any projects you need at least 10 major approvals and another 15 minor ones. So, that is what takes time and that does take 6 months to 9 months there is nothing new to recall there."

Growth Strategy & Commitments

• Three-year doubling target: Management stated it would be very disappointed if the company has not doubled from its current size within three years, with the outcome possible before that or up to six months after, but definitely within the window.
• Doubling applies to every metric: The target is not limited to revenue or delivery but encompasses all metrics of the business.
• New project additions: The company is confident of adding at least three new projects to the development portfolio within this financial year.
• Geographic focus: Lucknow and UP remain the core focus for capital deployment; the company will look outside only if it cannot deploy capital within Lucknow, which currently appears big enough to absorb reserves plus some debt.
• Bareilly consolidation: Tentative steps have been taken in Bareilly, with plans to roll the Bareilly project into the main company by taking a majority stake; a Big Four agency has been appointed to advise on arm's length valuation since it is a related party transaction.

Pankaj Bajaj: "In the next 3 years if we have not doubled I would be very disappointed. So, it could be before that, it could be 6 months after that, but in 3 years definitely we should have doubled from our current size if not."

Financial Position & Capital Strategy

• Collections trajectory: Without new launches, collections will remain at the current ~₹200 crore annualized rate, drawn only from old bookings; they will rise gradually as new projects launch.
• Debt strategy shift: The company will now take on debt selectively, supplementing substantial cash surpluses with a judicious amount of debt for both construction finance and land acquisition, after previously prioritizing a low-debt approach.
• Leverage guardrail: Debt-to-equity is not foreseen to exceed 1:1, with the absolute debt number depending on the quantum of projects taken on.
• Free cash flow undisclosed: When asked for the actual free cash flow number generated during the quarter, management did not have the figure and offered only that collections from customers with minimal depreciation equals operational cash flow.

Pankaj Bajaj: "Judicious capital structure is very important and not taking too much debt is a good thing ... but not taking any debt is also not a good thing to ask. So, we are going to be taking debt selectively."

Guidance & Commitments

Key Metrics