Prestige Estates Projects Ltd: A Promising Second Half Despite Initial Setbacks
Prestige Estates Projects Ltd faced significant setbacks in the first half of FY25, but is gearing up for a strong second half with major launches. Timely regulatory approvals will be crucial for the company to meet its ambitious targets.
Prestige EstatesReal EstateH2fy25Project LaunchesRegulatory ApprovalsReal Estate MumbaiNov 04, 2024
However, the outlook for the second half of FY25 (H2FY25) is much brighter. Prestige has ambitious plans to launch projects with a gross development value of around ₹52,100 crore. They are eyeing pre-sales or bookings of around ₹16,000 crore in H2FY25, with an overall guidance of ₹24,000 crore for the full fiscal year. Management is optimistic about surpassing this target if the launch pipeline proceeds as planned. Given the limited unsold inventory, timely regulatory approvals are essential for the pre-sales trajectory.
Some of the big-ticket projects set to launch in H2FY25 include The Prestige City Indirapuram and Prestige Bougainvillea in the 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 has been the star performer, contributing 48% of the company’s overall pre-sales in H1FY25, which also highlights a geographical concentration risk.
Prestige is expanding into margin-accretive markets like Mumbai and NCR, but it will face stiff competition from well-established developers. “Prestige may find it challenging to maintain its momentum in regions outside its core domain. This could extend to its annuity assets, where maintaining comparable occupancy rates may be difficult,” noted an Axis Securities report on 31 October.
On the financial front, net debt has significantly decreased to ₹3,591 crore by the end of September from ₹8,179 crore at the end of June. This reduction is largely due to the utilization of funds from a recent qualified institutional placement. The net debt/equity ratio has improved to 0.21x from 0.61x, aligning with management’s target of keeping it below 0.55x. Prestige is also considering an initial public offering (IPO) of its hospitality business by FY26 to unlock value from this segment.
While the company’s balance sheet is stable, it is in the midst of an aggressive annuity portfolio build-up across office, retail, and hospitality assets. With pending capital expenditure of ₹16,000 crore, monitoring debt levels will be critical. Prestige has historically struggled with high debt levels, and this remains a key area of focus.
The stock has seen a 35% rally so far in 2024, outperforming the Nifty Realty index. However, further re-rating will depend on the pre-sales run-rate and effective debt management.
Frequently Asked Questions
What was the performance of Prestige Estates in the first half of FY25?
Prestige Estates Projects Ltd faced a significant decline in pre-sales or bookings, which dropped by 36% year-on-year to ₹7,052 crore. This decline was mainly due to delayed regulatory approvals, which hindered new project launches.
What are Prestige Estates' plans for the second half of FY25?
Prestige Estates has ambitious plans to launch projects with a gross development value of around ₹52,100 crore in H2FY25. They are targeting pre-sales or bookings of around ₹16,000 crore, with an overall guidance of ₹24,000 crore for the full fiscal year.
Which regions are Prestige Estates expanding into, and what challenges might they face?
Prestige Estates is expanding into margin-accretive markets like Mumbai and NCR. However, they will face stiff competition from established developers, and maintaining momentum outside their core domain may be challenging.
How has Prestige Estates' financial health improved?
Net debt has decreased to ₹3,591 crore by the end of September from ₹8,179 crore at the end of June. The net debt/equity ratio has improved to 0.21x from 0.61x, aligning with management’s target of keeping it below 0.55x.
What is the current stock performance of Prestige Estates, and what factors will influence future performance?
The stock has seen a 35% rally so far in 2024, outperforming the Nifty Realty index. Future performance will depend on the pre-sales run-rate and effective debt management.
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