Ganesh Housing Ltd Q3 FY2023 Concall Summary

Key Takeaways

• Net debt free milestone reached: Peak debt of over ₹650 crore eliminated in ~3.5 years, with Q3 FY23 marking the net debt free turn; finance costs down >60% in 9M.
• Revenue lapped a tough comparable: Q3 FY23 revenue dipped slightly YoY because the prior-year quarter included high-velocity sales from the Maple Tree project; 9M revenue still grew 91%.
• SEZ is the next growth engine: A development management partnership with Tishman Speyer is in place for Phase 1 (~0.12 crore sq ft GLA commercial), with launch targeted in two to three months and first revenue possible in FY24.
• No unsold inventory pressure: Unsold completed inventory stood at just 0.01 crore sq ft valued at ~₹4 crore as of December 2022, while residential realizations have moved from ~₹3,300 to past ₹5,000 per sq ft.
• What to watch next quarter: The Retreat residential launch timeline, SEZ Phase 1 master plan rollout and pre-leasing traction, and the promised cash flow disclosure in the investor presentation.

Deleveraging & Balance Sheet Transformation

• Peak to net debt free: The company carried over ₹650 crore of debt ~3.5 years ago and has now reduced borrowings to just ₹14.3 crore, with cash and fixed deposits exceeding that amount.
• Finance cost tailwind: The 60%+ reduction in 9M finance costs flowed directly to PAT, which rose 22% YoY in Q3 and 38% in 9M, amplifying the operating profit growth.
• Repayment funded by asset rotation: Debt was repaid from cash accruals generated by inventory sales from pre-COVID stock, new project surpluses, and land sales; in the last two to three quarters, land sales contributed more than inventory sales to the repayment pool.
• Land monetization is part of the model: Non-contiguous, non-core parcels near Godavi were sold over the past two to three quarters, realizing ~₹300–350 crore; management buys land early at low prices when future growth is anticipated and sells parcels that are not earmarked for self-development as the surrounding area matures.

Rajendra Shah: "We are very happy to announce that the Company has become a net debt free in Quarter 3 financial year 2022-23 from a peak debt of over 650 crore around three and a half years back."

SEZ Project & Tishman Speyer Partnership

• Phase 1 scope: ~0.12 crore sq ft GLA of commercial development on a lease model within the processing zone; the non-processing zone will carry residential on a sale model, with future phases potentially mixing lease and sale even inside the processing zone.
• Tishman Speyer role: Development management, leasing, international benchmarking, quality assurance, and marketing via its global network; the partnership is not formally exclusive but an unwritten ethical understanding limits both parties from similar arrangements with competitors within a reasonable radius.
• Economics stay with Ganesh Housing: The entire project belongs to Ganesh Housing, which bears all construction cost; Tishman Speyer is paid for its development management and leasing services, while all revenues and profitability accrue to Ganesh Housing.
• Location thesis: The SEZ sits at Vaishno Devi Circle on S.G. Highway, described as the emerging new CBD, with Adani Shantigram nearby, a rumored Reliance corporate office, and Zydus office already on the circle itself.
• Rental ambition: Management expects around ₹60 per sq ft, possibly 10–15% above normal market rentals, though it calls this a conservative estimate pending initial traction.
• GIFT City complementarity: The SEZ does not compete with GIFT City, which is focused on international finance, BFSI, exchanges, and foreign AIF funds; the target markets are distinct.
• Phase 1 cost and funding: Construction cost estimated at ~₹300 crore with peak capital requirement of ~₹100 crore at a 60:40 debt-equity mix; management states the company has sufficient resources to meet this, while residential projects require hardly any debt given strong pre-booking interest and internal accruals.
• Construction timeline: ~30 months to complete at least 50% of Phase 1 gross leasable area (~600,000 sq ft), with a further 600,000 sq ft launch planned but not yet dated.

Neeraj Kalawatia: "There is no sharing as such between Tishman and us. The entire thing belongs to GHCL only, Ganesh Housing. The construction cost is therefore to be borne by Ganesh Housing only."

Neeraj Kalawatia: "That's the new CBD because Adani's Shantigram is close by. We hear Reliance is coming with a corporate office that side, and a lot of Zydus Hospital is, I mean, Zydus office is just on the circle itself. So, that's the place where the CBD is moving, and then that's where this SEZ is."

Residential Business & Launch Pipeline

• Malabar County 3 delivered ahead of schedule: 100% construction completed in ~22 months, well ahead of planned timelines; Occupation Certificate application submitted to AMC, expected in Q4 FY23.
• Retreat project imminent: A ~4.5 lakh sq ft residential project in the final leg of approvals, with Raja Chithi (permission to start construction) expected and RERA application to follow; launch conservatively targeted in 2–2.5 months, possibly within one month.
• Pricing power holding: Residential realizations have risen from ~₹3,300 per sq ft at launch to past ₹5,000 per sq ft currently, and absorption remains strong at the ₹3,800–4,500 price band even amid rising interest rates.
• Why no launches for two years: The SEZ project faced unclear government policies on FSI and occupant flexibility at both state and central levels, only recently clarified; Gujarat state elections caused a 2.5–3 month approval freeze from November through end-December; and the SEZ is a large project giving 7–8 years of visibility, demanding meticulous planning with design feedback from Tishman Speyer.
• Pipeline beyond Retreat: The non-processing zone residential phase within the SEZ is on the drawing board; project launches are expected to be a continuous exercise over the next five to seven years, with multiple projects in the pipeline launching sequentially as approvals come through.
• Mix going forward: The next planned projects are roughly 40% commercial and 60% residential.

Rajendra Shah: "For visibility, we don't need to launch even a single new project. Because by other means and other revenue streams, we have been managing our revenue and bottom line very well. However, it is our passion for doing construction and going ahead with delivery of fresh players and our new products that we will be launching new projects."

Demand & Market Context

• Upcycle intact: Management describes a favorable market trend with an ongoing upcycle; price hikes have been well absorbed even in a rising interest rate environment, with salaried-class and end-user demand driving the mid-income segment and the luxury market picking up.
• Ahmedabad tailwinds: The city is benefiting from manufacturing, IT, and GIFT City attracting international talent; more than half of GIFT City's commercial real estate is already occupied, with high interest from banking and financial sectors and increasing demand from foreign investment.
• Inventory position is lean: No inventory remains in ongoing projects as of December 2022; unsold completed inventory is just 0.01 crore sq ft valued at ~₹4 crore, leaving the company well positioned to capture price upside on new launches.

Financial Performance & Profitability

• 9M revenue surge: 91% revenue growth in 9M FY23 was driven by strong operational performance across the portfolio, even as the Q3 standalone quarter faced a tough YoY comparable from the Maple Tree project.
• Operating leverage flowing through: EBITDA grew 48% YoY in Q3 and 82% in 9M, reflecting the combination of revenue growth and improved profitability.
• Return expectations maintained: Management targets equity returns of ~25% to 35% going forward, consistent with its historical range, while cautioning that return metrics can be deceptive when comparing leasehold versus sale-model projects because project payback periods differ materially.
• Cash flow disclosure coming: Following an analyst suggestion, management committed to including cash flow details (collections required, expected, and costs to complete projects) in the next investor presentation.

Guidance & Commitments

Key Metrics