A lost quarter: Prestige Estates’ slow start leaves it a lot to catch up
- The real estate developer could launch only two residential projects in the financial first quarter in Bengaluru, its home turf, mainly due to delays in project approvals. Prestige has set itself a huge target for 2024-25. Now it has to rush to achieve that.
MUMBAI : As anticipated, Bengaluru-based Prestige Estates Projects Ltd began 2024-25 on a sombre note. The June-quarter (Q1FY25) operational update showed pre-sales or bookings fell sequentially and year-on-year to ₹3,030 crore. The villain: fewer launches due to delays in project approvals.
Prestige could launch only two residential projects in the first quarter in its key market of Bengaluru. These projects cover a total developable area of 1.86 million square feet, with a combined gross development value (GDV) of nearly ₹1,400 crore.
True, project approvals last quarter took longer than usual due to the general election. But a slow start to the year means that Prestige needs to catch up on the pace of launches in the subsequent quarters.
After all, timely launches are crucial to meet its pre-sales target of 25-30% year-on-year growth in the current fiscal year. In the March quarter (Q4FY24) earnings call, the management had guided for a launch pipeline of 59.2 million square feet for FY25 with a potential GDV of ₹59,100 crore. Any revision in these targets will be crucial.
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In the upcoming quarters, Prestige aims to launch an extensive pipeline of projects across geographies, such as Prestige Pallava Gardens in Chennai, Prestige Forest Hills in Mumbai, and The Prestige City Indirapuram in the National Capital Region.
Prestige's diversification strategy is positive as it reduces its dependence on the Bengaluru market, but it could take time to yield results due to competition in newly ventured markets.
In Q1FY25, Bengaluru contributed a meaningful 43% to the company's pre-sales, followed by Hyderabad and Mumbai.
Further, in Q1FY25, average realizations for apartments, villas and commercial spaces rose 16% year-on-year to ₹11,934 per square foot. Plots saw a meaningful improvement in average realization rising 46% year-on-year to ₹7,285 per square foot. Overall, collections for the quarter rose 6% year-on-year to ₹2,916 crore.
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Meanwhile, Prestige is also making efforts to boost its annuity portfolio, which comprises offices, retail and hospitality assets. Prestige eyes exit rental from office assets of ₹3,930 crore by FY28. This is a substantial jump from its FY24 exit rental of ₹740 crore. As of now, a turnaround in overall office leasing trajectory and rentals is still awaited.
Improvement in office demand, potential fundraising and an initial public offering for the hospitality arm are a few triggers for the stock, according to Nuvama Research. On the flip side, piling debt and elevated cost of borrowing can be dampeners.
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In the last one month, the Prestige stock has fallen by 5%, but it is still up sharply by 54% so far in 2024. Hereon, the stock's futurecourse hinges on launches and pre-sales trends.
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