Eldeco Housing & Industries Ltd Q3 FY2024 Concall Summary

Key Takeaways

• Revenue trough on project cycle timing: Recognized revenue fell sharply because no major project reached completion in Q3 or 9M FY24, a mechanical dip that reverses as completions arrive.
• Demand is running ahead of supply: In Lucknow, management estimates demand is roughly double the bookings they can open, with new launches selling out quickly.
• Margins improved despite the revenue drop: EBITDA margin rose to 42.9% (vs 40.7% YoY) as strong end-user demand lets the company pass through higher land and input costs.
• Product mix is pivoting toward group housing: Management expects a deliberate shift from the historical 80/20 township/group housing split, citing easier land assembly and better market acceptance for the group housing format.
• What to watch next quarter: Whether Imperia Phase II's average realization climbs as more villa inventory is released, the timing of completion certificates for Imperia Phase I and Twin Towers, and any concrete news on the reverse merger evaluation.

Revenue & Realization Dynamics

• Revenue dip is a timing artifact: The low recognized revenue in Q3 and 9M FY24 stems entirely from the project cycle: no major project reached the completion stage during the period. Revenue recognition follows project completion, so the drop is mechanical rather than a demand signal.
• Average realization fell on mix, not price weakness: The headline average realization dropped to approximately ₹4,000/sq ft from ₹4,700/sq ft because the Imperia Phase II prelaunch mix was skewed toward plots rather than higher-value villas. In January, more villa inventory was released and the average is expected to rise.
• Ex-Imperia Phase II realizations are steady: For other projects including Latitude 27, Twin Tower, and Imperia Phase I villas, realizations remain in line with historically achieved levels.
• Imperia Phase I saleable area math: Of the 7.4 lakh sq ft land area, roughly 40-45% becomes plotted or saleable area, yielding approximately 3.05 lakh sq ft.

Pankaj Bajaj: "No, we are not able to meet the demand. The demand is much more than what we can meet."

Launch Pipeline & Project Updates

• Two RERA approvals secured: Eldeco Trinity and Eldeco Imperia Phase II both received RERA approval and formal permission to launch and commence bookings during Q3.
• Imperia Phase II prelaunch underway: Bookings opened in the prelaunch stage during Q3, with 101 bookings received covering 1,28,450 sq ft. Sales momentum and pricing have picked up significantly since January 1, 2024.
• Eldeco Trinity launch delayed to April 2024: The launch was pushed to approximately April to ready the site and present a proper customer experience. RERA approval is already in hand.
• Two more launches targeted by end-FY25: Beyond Imperia Phase II and Trinity, management expects two additional projects to launch by the end of the next financial year, though locations remain undisclosed while land aggregation continues.
• Completion certificates on the near horizon: The company has already applied for the completion certificate for Eldeco Imperia Phase I, expected in March or April and definitely before June. For Twin Towers, the internal plan is to apply around May, with receipt expected in June or July. Both should arrive within the next 4-5 months.

Land Bank & Business Visibility

• 63 acres added in 9M FY24: Three new land parcels spanning 38 acres were added to the portfolio in Q3 alone, all currently in the land aggregation stage.
• Land aggregation timeline is 4-6 months: Management hopes to conclude land assembly and aggregation for the three new parcels over the next 4-6 months, after which the planning and approval stage will take another 5-6 months.
• New project launch window: If all goes well, one or two of these new projects might launch by December of the current calendar year, and at maximum by March.
• Current land held will likely grow: The existing 60.3 acres of land held for forthcoming projects is expected to increase closer to 100 acres, but only if contiguous expansion to existing parcels is possible.
• Lucknow alone provides 3-4 years of visibility: Even without fresh business development, management states the company's size will increase significantly over the next couple of years based on existing land banks and forthcoming projects in Lucknow itself.
• Capital is not the bottleneck: Access to capital is not a constraint; the company can take debt or partner with PE funds and AIFs who are showing appetite for the Lucknow market. The binding constraint is availability of good land parcels at reasonable prices.

Pankaj Bajaj: "We are only constrained by availability of good land parcels at reasonable prices where we feel like we can launch reasonable products at reasonable prices at the moment. So, balance sheet is not a constraint at the moment."

Demand Environment & Pricing Power

• Lucknow market is supply-constrained: The real estate market has seen an upsurge in demand with a shortage of fresh supply and launches. As soon as projects open for bookings, they tend to sell out.
• Demand outstrips supply by roughly 2:1: Per management, for every 100 bookings opened for sale, there is demand for 200. The company is not able to meet the demand currently.
• Pricing power is intact: Margins are not under pressure because increased land prices and input costs are being passed on to the end market, supported by strong end-user demand and insufficient supply. Q4 margins have increased.
• Imperia Phase II realization set to rise: The ₹3,500/sq ft prelaunch average should go up significantly as more villa inventory is released and prices are increased in the current quarter.

Strategic Direction & Adjacent Opportunities

• Product mix shifting toward group housing: Management expects the mix to shift more toward group housing going forward, because land assembly for townships is tedious and group housing has more acceptance as a format. Last year's mix was approximately 80% townships and 20% group housing.
• Reverse merger still under evaluation: Management continues to evaluate the suggestion of a reverse merger and will share details if anything concrete emerges.
• Registered office shift is purely administrative: The decision to shift the registered office from UP to Haryana has nothing to do with business strategy.
• Ayodhya is on the radar but premature: Management is aware of the Ayodhya market upsurge but notes it is mostly for the hotel industry, not residential. Residential demand would be a second-order effect from local employment and wealth generation. For Eldeco, the opportunity is "a little premature" but they are watching.
• No interest in Raibareily or Sitapur: When asked about evaluating opportunities in these adjacent markets, management answered "No, not right now" and redirected focus to Lucknow.

Pankaj Bajaj: "For us, it's a little premature, but we're watching it. Let there be a sustained influx of tourism and local wealth generation and employment job generation, and that's when I think our job comes."

Guidance & Commitments

Key Metrics