Eldeco Housing & Industries Ltd Q2 FY2024 Concall Summary

Key Takeaways

• Accounting lags operations by years: Revenue crashed to ₹17.1 crores (vs ₹32.9 crores YoY) because reported numbers reflect registries of projects launched 3–4 years ago, not current activity. The real story is in sales bookings, land acquisition, and launch pipeline.
• Sales bookings signal momentum: Q2 FY24 bookings grew 6.5% YoY to ₹24.7 crores, driven by the Latitude 27 launch, and management targets more than doubling last year's ~₹100 crore full-year bookings.
• Margin peak is behind us: Q2 EBITDA margin jumped to 43.6% (vs 29.1% YoY) on low-cost legacy land, but management explicitly guided new projects will settle at 25%–35% margins as higher-cost land enters the book.
• Two large launches are imminent: Imperia Phase-2 (6.3 lakh sq ft) and Eldeco Trinity (luxury high-rise) together add ~11 lakh sq ft of saleable area, with RERA approvals expected within weeks to months.
• What to watch next quarter: Whether Imperia Phase-2 gets RERA and launches in Q3, the pace of land acquisition in H2, and whether the festive season converts Latitude 27's pre-commitments into allotted bookings.

The Revenue Recognition Gap

• Reported revenue is a rear-view mirror: Q2 FY24 revenue of ₹17.1 crores and H1 FY24 revenue of ₹41.9 crores reflect registries for projects launched 3–4 years back and delivered in the last half-year. Current operating performance is indicated by land acquired, new approvals, project launches lined up, fundraises, and sales bookings of recent launches like Latitude 27.
• PAT followed revenue down: Q2 FY24 PAT fell to ₹6.4 crores from ₹88.9 crores in Q2 FY23, and H1 FY24 PAT dropped to ₹14 crores from ₹19 crores, driven entirely by the same recognition lag.
• Deliveries were modest: ~38,000 sq ft (~30 homes) were delivered with registries in Q2 FY24, with recent completions including Regalia Arcade, Uday Joy, and East End.
• Near-term delivery visibility exists: Twin Tower and Imperia Phase-1 are very close to delivery, with completion certificate applications expected in Q4 FY24 or early FY25. These projects have enough booking numbers already achieved to show more strength on reported revenue than this quarter.

Jaiswal: "The accounting performance is basically the reflection of the actual registries that we do in favor of customers and the real indicator of our current latest performance or current period performance would be, the land that we have acquired last quarter or the new approvals that we have received in the last quarter, the project launches that have been lined up, that will come up in coming months."

Sales Bookings & Launch Pipeline

• Latitude 27 drove Q2 bookings: Launched in July, the project achieved 50% sales (~40–41 units allotted till September), contributing to ₹24.7 crores in Q2 bookings. Pre-commitments not yet allotted in H1 should get allotted in H2, adding further to booking numbers and collections.
• Imperia Phase-2 is the next catalyst: Layout approved in September 2023, RERA expected within October. This is the most significant project this year with 6.3 lakh sq ft saleable area across 28 acres, and launch visibility exists in either Q3 or Q4 FY24.
• Eldeco Trinity adds luxury exposure: Layout approved in September 2023, with RERA application expected within 10 days and approval by December-end or January. A luxury high-rise on Shaheed Path, launch is hoped for within Q4 FY24.
• Combined inventory release is material: Imperia Phase-2 and Eldeco Trinity together add ~11 lakh sq ft of saleable area. Management expects 50%–60% of the ₹200–220 crore booking target to come from these two projects.
• Pricing ranges indicated, not committed: Imperia Phase-2 expected at ₹4,000–₹4,500 per sq ft (last sales in Imperia Phase-1 were ₹4,000–₹4,200). Trinity expected at ₹6,500–₹7,500 per sq ft, if not more. Actual pricing will be set closer to launch.
• Delivery timelines stretch 3–4 years: Imperia Phase-2 (horizontal development) hoped for delivery in 3 years. Trinity and Latitude 27 should take 4 years from now. Revenue recognition follows post-delivery.

Jaiswal: "This year we are hoping to more than double our sales bookings that we did last year, last year it was around 100 crore and a year before that it was around 250 crores or so, this year we are hoping that the number should be double of last year, maybe more than that."

Margins: Peak Behind, Normalization Ahead

• Q2 margin spike is legacy land: Q2 FY24 EBITDA margin of 43.6% (vs 29.1% YoY) and H1 FY24 margin of 36.4% reflect projects built on land acquired historically at very low cost. These margins are not sustainable for new projects.
• New projects will compress margins: Management guided that new projects will carry EBITDA margins in the 25%–35% range, with plotted and horizontal developments having higher margins than group housing. The 35%–40% historical range was an artifact of legacy land cost.
• No specific margin guidance given: When asked for expected EBITDA margins over the next 2–3 years, management declined to provide a specific number, only offering the 25%–35% range as a directional framework.

Jaiswal: "The EBITDA margins that we are achieving up till now to answer this kind of very high, probably they are the highest in the industry, typically in real estate sector, these high EBITDA margins are not there."

Land Acquisition & Balance Sheet

• 18.1 acres acquired in Q2: Purchased in July–August 2023 as part of ongoing land aggregation strategy. Of the 20.6 acres acquired in H1, 3.2–3.5 acres are for Eldeco Trinity and the balance 17–18 acres are in aggregation mode, with location undisclosed to avoid disturbing the aggregation process.
• ₹160 crores funding secured: From Piramal and ICICI Bank, with ~₹80 crores already deployed for development. Management is open to taking more debt for good land opportunities, though current H2 acquisitions have enough dry powder.
• Advances to subsidiaries fund land: ~₹98.6 crores in total advances, with the recent 18-acre acquisition costing ~₹80–85 crores. Capital resides in EHIL and advances are shown to subsidiaries for land acquisition.
• Land acquisition is a funnel game: Management looks at 50 deals before zeroing in on one or two that make sense on all fronts. The process is ongoing, with hopes to acquire more land in H2.
• Geographic focus stays on Lucknow: Primary focus remains the Lucknow market, with openness to opportunities in cities closer to Lucknow that can be managed by the Lucknow-based team. Projects in Gurgaon, Sonipat, Ludhiana, and Greater Noida sit in the unlisted group entity, not EHIL.

Subsidiary Structure & Related-Party Items

• Multiple subsidiaries are structural, not optional: Required due to the Land Ceiling Act (which limits acres per entity) and to avoid cross-liabilities across projects for RERA compliance.
• Loan to EIPL carries protected terms: ₹41 crore loan outstanding to Eldeco Infrastructure and Properties, given under a protected commercial understanding with minimum guaranteed return or 50% beneficial interest in the Bareilly project, whichever is higher. The Bareilly project should be in a position to apply for OC next year, post which distribution and loan repayment would occur.

Guidance & Commitments

Key Metrics