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Prestige Estates gears up for big launches in 2nd half of FY25, but timely approvals are key
Summary
- Prestige plans to launch projects with a revenue potential of around ₹52,100 crore and anticipates around ₹16,000 crore of pre-sales in the second half of the fiscal year.
Prestige Estates Projects Ltd’s first half of FY25 was nothing to write home about. Pre-sales or bookings plunged 36% year-on-year to ₹7,052 crore as delayed regulatory approvals continued to weigh on new launches. Prestige unveiled only three new residential projects in the September quarter (Q2FY25).
Nonetheless, the second half of FY25 (H2FY25) appears promising. Prestige plans to launch projects with a gross development value or revenue potential of around ₹52,100 crore and anticipates around ₹16,000 crore of pre-sales/bookings in H2FY25. For FY25, the company has guided for around ₹24,000 crore in pre-sales. Management hopes to exceed this target if the launch pipeline pans out as expected. Given limited unsold inventory, the pre-sales trajectory largely depends on new launches, so timely approvals are crucial.
Big-ticket projects lined-up for H2FY25 are The Prestige City Indirapuram and Prestige Bougainvillea in National Capital Region (NCR), Prestige Southern Star and Prestige Sunset Park in Bengaluru, Prestige Nautilus in Mumbai, Prestige Pallava Gardens in Chennai, and Prestige Spring Heights and Prestige Rock Cliff in Hyderabad. Bengaluru continued to dominate sales with a 48% share in overall pre-sales in H1FY25, thus exposing Prestige to geographical concentration risk.
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It is expanding into margin-accretive markets such as Mumbai and NCR, but could face competition from established developers. “Prestige may encounter difficulties maintaining its momentum in regions outside its core domain. This challenge could extend to its annuity assets, where sustaining a comparable occupancy rate may prove problematic," said an Axis Securities report on 31 October.
Net debt falls
Net debt dropped sequentially to ₹3,591 crore at the end of September from ₹8,179 crore at the end of June. This substantial fall is attributable to the utilisation of funds from a recent qualified institutional placement fund raise. The net debt/equity ratio eased to 0.21x from 0.61x sequentially, in-line with management’s target of keeping it below 0.55x. Further, Prestige is planning an initial public offering of its hospitality business by FY26 to unlock value from this segment.
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Its balance sheet is stable for now, but Prestige is in the middle of an aggressive annuity portfolio build-up across office, retail and hospitality assets. It has pending capital expenditure of ₹16,000 crore, pointing to huge funding requirements, so monitoring debt is critical. Remember, Prestige has struggled with high debt levels in the past.
The stock has rallied 35% so far in 2024, beating the Nifty Realty index, but a further re-rating hinges on the pre-sales run-rate and debt control.
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