After receiving a robust response during the subscription period from investors, real estate major Parsvnath Developers has listed with good premium of 80% over its offer price of Rs 300 per share.
Pradeep Jain, Chairman of the company, gives some insight to where the company is headed and informs investors about growth plans and future prospects of the company.
He says that the company plans to come out with 14 SEZs across the country, and have already received the government approval for 11.
He also notifies that the company will be developing 14 five-star hotels, the land for which is already acquired, and plans to complete this in the next 3-4 years.
Q: This is a big listing for you; more than Rs 550, but now your investors would want to know all the details of your land bank, which you could not quite talk freely about before your issue. Could you lay out where all the land banks are and what kind of reasonable market value one can ascribe to those?
A: We have land banks across the country; we are enjoying the truly pan Indian presence across the country. At present, we are working in 41 cities, 14 states in all the verticals, which includes integrated townships, shopping malls, office complexes, standalone housing complexes and the unique thing we are enjoying is the Delhi Metro.
The total-developing rights with the company as of today is about more than 180 million sq ft. Also, we are coming out with 14 SEZs across the country, and out of 14 SEZs we have already got approval for 11 SEZs from the Centre as well as from the State Governments.
A: In Delhi we are developing a Metro. In Gurgaon we are developing a number of projects, and also in Noida and Greater Noida it is the same. If you divide 108 million sq ft area, about 40% of it is in North India and the rest of the area is in other parts of the country like Tamil Nadu, Kerala, Karnataka, Andhra Pradesh, Maharashtra.
We are also on the way to set up 14 five star hotels across the country for which the land is already acquired by the company. The blueprint is also ready and we are on the way to sign the management contract with the operator and then we will start. We are expecting to complete all these hotels in three-four years.
Q: There are some research reports about valuations of your company and some of them predict that in FY07 you could actually go on to get revenues of a couple of thousand crore which could go up to Rs 4,000 crore of actual revenues realized from your projects by FY08. Are those reasonable estimates you think?
A: I am not going towards the number, but from the last five years our annual growth is more than 140% and we keep continuing with that because we have a big land bank. A lot of projects are already secured by the company. We plan that our results will be better than the numbers you have just mentioned.
Q: Are you saying that it could be even more than Rs 4,000 crore of booked revenues in FY08?
A: I am not talking about the numbers, but in FY06 it was Rs 653 crore and historically, for the last five years our annual growth is more than 140%. We are expecting more than that in time to come.
Q: Could you break up your expected cash flows without going into specific numbers on how much would come from residential development, commercial property development and how much from other shopping malls, multiplexes that you are seeking to develop?
A: As far as the commercial side goes, we are leasing out all the metro stations- not selling. The seven properties out of eleven are on the way to be completed by March 07. The rest of the properties will be completed in next two and half to three years. And related to the other commercial developments, 60-75% we will be leasing and rest we are selling.
Talking about revenues, 70-75% of it will come from the residential side- either from the integrated township or standalone housing complexes- and 25% will come from others related to the lease rentals and from sale of the commercial places etc
Q: Of this 108 mn sq ft that you have in terms of a developable land bank, how do you see yourself staggering the sales over the next three-four years in terms of development and realizing the cash flows?
A: The construction of almost all the projects is going on but we foresee this 108 million sq ft area to be completed over a period of next three-five years.
Q: Will it be staggered towards the end of the fourth-fifth year or will it evenly spread out more or less over the next four-five years?
A: The completion of the projects is over a period of three-five years. The residential and integrated township revenues keep coming in during the year. The lease rental and the hotel revenues keep coming in regularly. Apart from this 108 million, as I have already said, we have 14 SEZs and from these 14 SEZs we have already got an approval for 11 SEZs. From these 11 SEZs, four are going to start this financial year and the rest in the next financial year after getting all the approvals from the concerned authorities.
Q: What kind of landbank acquisition programme do you have from hereon aside from developing, what you have on hand at 108 million sq ft, do you see yourself aggressively adding to your landbank over the next couple of years and what kind of capital expenditure would you have outlined for that?
A: It is very difficult to give you the numbers related to the land acquisition valuation but apart from this 108 million related to the SEZ about 257 million sq ft area to be added, which is not take much time to acquire and we are into the real estate as you know from last more than fifteen years and our business is basically to acquire the lands and to develop.
This is a continuous process with us after this 108 million even in these days, number of the tenders and the negotiations is going on and this keeps increasing day by day. We have very strong management team within the house to acquire and to go to the smaller town sites at tier II and tier III cities apart from the metros and we keep increasing the landbank in a big way time to come.
Q: Some analysts have valued at current market rates your landbank at 5,000 crore, is that an accurate assessment?
A: We are not in the business of selling real estate land as such; we are in the business of to selling or leasing out the finished products we develop. Analysts have worked out their valuations in their own way. But all I can say is that the cost to the company of 108 million sq ft area is less than Rs 200 per sq ft. Now you can do your own mathematics or the investor and the analysts can do their own mathematics to work out what is the valuation of the land and what is the realization valuation of the land today.
Q: Who is going to be the operator for these 14 five-star hotels?
A: We are talking to big operators globally, but so far we have not decided nor signed up with anybody.
Q: These are large hotel companies?
A: Yes, theses are large hotel companies with whom we are negotiating. Our hotel team is very closely working with the hotel operators and very soon we are going to sign up some of the transactions.
Q: Would it be a hotel management contract you would sign with them or would there be equity participation?
A: It will be purely management contracts; we are not offering equity participation to any of the operators.
Q: And this will not be done through a separate JV but through the listed Parsvnath Developers entity?
A: We are doing in a single balancesheet of Parsvnath Developers Ltd. We do not have the multiple JVs or multiple companies. Whatever I have spoken about will be done through Parsvnath Developers Ltd only, which is the listed company.
Q: How do you see yourself compared to the other big boys in the real estate space like Unitech and DLF, the comparisons are inevitable in your line, how do you see yourself, in terms of strategy, landbank, all of it?
A: The management of the Unitech and DLF are the well-wishers of my company. I started working twenty-three years ago as a real estate broker and I used to work with all those who are the big boys today in the market and with their blessings I am here. I am not comparing myself with them at all.