Ganesh Housing Ltd Q3 FY2024 Concall Summary

Key Takeaways

• Land sales dominate, margins hold: Over 90% of Q3 revenue came from land sales, and management expects to exceed current-year performance on a 12-month basis, though it declined to give specific pre-sales guidance.
• SEZ confidence is rising: Management feels "more exuberant than when we did last year" about Million Minds Phase 1 demand, citing Ahmedabad's development momentum and early traction from IT players.
• Tishman Speyer tie-up now operational: The partnership has moved from concept to execution, with Tishman handling both project management and anchor-tenant acquisition for the SEZ, though no tenant names were disclosed.
• New residential launch imminent: Malabar Retreat's official launch is anticipated in Q4 FY24, adding to the project pipeline, while Malabar Exotica nears 96% completion with partial revenue recognition expected in Q4.
• What to watch next quarter: The Malabar Retreat launch details (value, construction cost), any SG Road commercial project announcement, and whether the SEZ completion timeline stays ahead of schedule.

Revenue Engine: Land Sales & Project Pipeline

• Land sales are the business: Over 90% of Q3 revenue came from land sales; only ~5-8% from completed project recognition, and the only completed project with balance sales was sold this quarter.
• Volume trajectory: Cumulative land sales in 9M FY24 were ~60-70 acres, up from ~40-50 acres in the comparable period of FY23, with Q3 alone contributing ~20-21 acres.
• Land bank replenishment: Land acquisition is an ongoing process; as much land as sold has been acquired at various stages, maintaining a land bank of ~550 acres with a development potential of ~4-4.5 crore square feet, of which 3 crore square feet is already announced.
• No new residential launches yet: All pre-sales were already in FY23; only completion project bookings happened in FY24, with soft commitments existing but not counted as pre-sales until project launch.
• Management declined to provide average land sale price per acre, stating it "doesn't really help" because land is at various places and they don't calculate that metric.

Million Minds SEZ: The Growth Bet

• Construction ahead of schedule: Phase 1 has reached 30% completion and may finish ahead of the target date; the SEZ is likely to be completed well ahead of schedule, by FY'25 or FY'26, and will start yielding rental revenue from FY'26 onwards.
• Funding is self-sustaining: Total cost is ₹285 crores; ₹120 crores already spent from existing cash flows and profits; ₹55 crores cash on hand leaves about ₹100 crores needed, which can come from next quarter's profitability and cash flows from new residential projects where land is already paid for.
• Utilization expectations are aggressive: Management expects 100% utilization within the first year after commissioning; even if not, 60-70% is certain, supported by one year of pre-marketing including with Tishman. Lease may start mid-financial-year, so on a 12-month period 100% rental is achievable.
• Lease income floor: The ₹22 crores lease number is based on current lease prices; it can only increase, not decrease, given the kind of customers expected and the 1-1.5 year timeline.
• SEZ policy tailwind: Similar changes to GIFT City, such as liquor sales allowance, could be expected in SEZ going forward, and denotification of SEZ, if needed, can be done easily and doesn't take much time.

Ravi: "Well, frankly, if you ask me, leaving aside modesty, we feel more exuberant than when we did last year."

Tishman Speyer Partnership

• Dual mandate: Tishman is handling both project management, ensuring construction comes up as planned and on time, and tenant acquisition, especially anchor clients for the SEZ.
• No tenant names yet: Management declined to give specific names due to confidentiality and lack of specific arrangements, but preliminary discussions for marketing and business development of Million Minds Phase 1 have been initiated.
• Synergy thesis: Tishman's quality reputation combined with Ganesh Housing's brand value is seen as a "winner" for attracting the best companies; Tishman has a penchant for getting best tenants globally and in India, including Hyderabad. Local players and service industries are also expected to drive demand.

Ravi: "With their name associated and the kind of quality they are known to deliver. And together with that, Ganesh Housing's extremely good brand value, that's a winner in terms of attracting the best of the companies into this."

Residential Projects: What's Next

• Malabar Exotica nearing completion: Now at 96% completion; full finalization anticipated in Q4 FY24, with partial revenue recognition expected in Q4 FY24 that may spill to Q1 FY25.
• Malabar Retreat launch imminent: Groundbreaking ceremony conducted; plan approval in progress; official launch anticipated in Q4 FY24, with comprehensive details on value and construction cost to be shared at launch. Located near Nirma University campus, close to existing projects.
• Smile City 1 (Godhavi) delayed: Launch now expected in the first half of FY25, not by March 2024; management deferred on whether the ₹500 crores booking value still holds, saying price points will be provided at launch.
• SEZ residential project: Will commence in Q1 FY'25; sales will only be known once the project is announced and marketing happens.
• SG Road commercial property: "Absolutely on the cards" and "will be done pretty soon"; management hopes to announce by May FY'24 results if substantial developments occur to their satisfaction, but clarified the ₹1,800 crores figure mentioned by an analyst is not guidance.

Ahmedabad Market & Competitive Position

• Market tailwinds: Knight Frank report cited a 15% surge in housing sales in 2023, with a decade-high 22,500 new units launched; demand is shifting toward the premium/mid-premium segment (₹1 crore+), not affordable.
• GIFT City spillover: The government's plan to attract the IT industry and the PM's announcement on Ahmedabad as an IT sector hub benefit the company's SEZ; diversification of permissible activities in GIFT City, including liquor sales, has increased demand.
• Technology as differentiator: Infrastructure development uses world-class precast and other technologies; in the home segment, IoT-enabled accessibility features normally found in the high-premium segment are now translated to the mid-segment by Ganesh.
• Land strategy: Traditionally done on own, no joint development partnerships historically, but not ruled out; land bank is continuously being acquired.

Ravi: "Ahmedabad has got a very good set of the developers. And headed by, and the leader being Ganesh Housing."

Margins, Cash Flows & Balance Sheet

• Debt-free with surplus: Company continues debt-free with cash surplus of over ₹55 crores, despite spending on ongoing construction.
• Margin sustainability: Management stated margins are sustainable; planning done for next 6-9 months; similar numbers likely to be achieved, though margins may not repeat every quarter identically.
• Cash flow mechanics: Under RERA, 70% of booking proceeds must be used for development of that land, 30% can be taken out, but land already paid for means that amount is in addition to the 30% and can be used; continuous land buying and selling also adds more than necessary amounts.
• Construction model: Projects are given on contract basis; the company's team handles supervision and finishing only, not construction.

Ravi: "But on a 12-month period, yes, I do believe that we will be, exceeding whatever we have performed this year."

Guidance & Commitments

Key Metrics