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00:00 Hello, welcome to BQ Prime. You're watching IP Order and my company in focus today is
00:05 Sing Nature Global. It's a real estate company operating in the space of affordable and lower
00:10 middle income housing based out of Delhi, National Capital Region. And joining me is
00:16 Pradeep Agarwal, who is the chairman of the company and Rajat Katoria, who is the CEO
00:20 of the company. The company is coming out with an IPO which opens on September 28, closes
00:24 on 22nd, price between 366 to 385, a fresh issue of 602 crores and OFS of 127 crores.
00:32 It's roughly coming to 13.48% of the post-issue equity capital and the OFS is primarily a sale
00:42 by investor IFC in the IPO. Mr. Agarwal, thank you very much for joining us on BQ Prime. Let
00:50 me begin with asking the basic question. You're raising 602 odd crores. What is going to be the
00:58 use of proceeds for this amount? So, Sajid ji, first of all, thank you very much for inviting me to this program.
01:05 So, the proceeds of 603 crores, out of this,
01:13 approximately 463 crores will be used for debt repayment and the balance amount
01:22 will be utilized for working capital and growth funding. Give me a sense of, Rajat,
01:29 the business that you are in, how many ongoing projects are there, in which region and at what
01:36 stage? Sure. So, thanks again from my side as well for inviting us to the program.
01:45 So, see, we are a fairly young company, established just about 10 years ago. 2014 was when we launched
01:52 our first project in Gurugram under the affordable housing policy of the government.
01:57 And the journey has been not that long, but fairly impressive. We've seen a lot
02:05 of support from our customers during this journey. That has led to strong growth of
02:11 the company over the last decade. So, as of today, we focus on affordable and
02:18 mid-income housing projects. Gurugram is our primary market. In our local market, we've
02:25 created a very strong brand name, led by very clinical execution of projects,
02:32 good quality of project which we've delivered. So, a very strong word of mouth exists
02:38 which has helped us in creating a good brand for the company. Like any other consumer
02:46 business, we have a fairly strong distribution network along with our own in-house
02:52 team which helps us in achieving fast-paced sales. Also, we have a very strong in-house
03:00 construction capability. We try to use the best available technologies available to do
03:05 the construction. So, some of these factors have fueled our growth and we feel this is
03:13 like the right strategy going forward. Mr. Agarwal, you've been growing at a fast
03:18 pace, 1553 crores at the end of FY23, but you're still loss-making on the profit
03:29 after-tax level. When do we see your operations getting profitable?
03:35 So, Sajid, the thing is that, actually, the company is very young, as Rajat said.
03:43 We've grown rapidly in the last nine years. When you launch back-to-back projects,
03:50 your agenda, other expenses, marketing costs hit your P&L. But when you talk about
03:58 project level, you see a profit margin at every project level. We've shown that in
04:05 our DRHP. So, of course, you see a loss in P&L at today's rate, but because all the
04:14 projects are profitable, I think you'll see a balance sheet in the future.
04:20 You said that every project has a profit margin. How much profit margin do you
04:27 see? So, I've given the number in DRHP, in affordable housing, we're showing a
04:36 profit margin of 24%. And in low- and mid-income housing, we're achieving a
04:44 profit margin of 30%. So, if we see that you're taking a profit margin of 24-30%,
04:52 so, is this profit margin back-ended towards the end of the project and on completion
04:57 and OCE? Or you can recognize some of the revenues as you complete or meet certain milestones?
05:05 So, the basic model is that when you receive OCE, and when you achieve 95%
05:11 money, only after that you can recognize the profit. Because it's a business model,
05:16 because it's based on the completed cost method. So, because our projects are going to be
05:23 completed in the coming time, so, as I said, in the coming years, as and when those projects
05:29 are completed, P&L will be profitable.
05:32 Dajit, it's interesting because you work under two major policies, which is the affordable
05:38 housing policy of Haryana, and the other one is the central government-led policy, which
05:43 is Dindyal Jan Awad Yojana. In one of them, the OCE comes at the beginning, and then the
05:53 completion certificate comes. And in Dindyal, the completion comes first, and the OCE comes
06:00 at the end. So, how do you recognize this kind of revenues going forward? And which
06:09 are the projects which are now pending getting OCE or completion certificate under the various
06:14 policies?
06:15 So, see, under both the policies, the fundamental principle, the accounting principle is that
06:21 once you've handed over the apartment to the customer, that's when the accounting policy
06:28 says that the risk and reward with regard to that particular product can appear in the
06:34 profit and loss account.
06:35 Which means OCE, right?
06:37 Which means, I would say even a step further than OCE, because after getting occupation
06:41 certificate, till the time you don't hand it over and you've not significantly collected
06:46 receipts from the customers, you can't recognize those profits. So, just for instance, you
06:51 complete a project on 30th of March, but let's say you hand it over on 5th of April, hypothetically,
06:56 the accounting recognition will shift to the year within which that 5th April exists, just
07:02 as an analogy, no specifics to this.
07:05 So, it's actually basis handing over of units.
07:09 Our endeavor usually is to complete our projects within good span of time. We've given enough
07:16 instances in our offer document wherein we've tried to deliver projects within 4 and 5 years,
07:23 despite going through the COVID period. And in Delhi NCR also, we've seen a lot of NGT
07:31 related ban on construction. So, despite these challenges, we've completed our projects
07:36 within the span of 4 to 5 years and multiple such projects.
07:39 So, going forward, we do see that more and more projects which are under development,
07:47 a lot of mid-income projects which are under development are getting completed. And that's
07:52 a very promising situation because our gross profit margins on mid-income projects tend
07:57 to be higher than affordable projects.
07:59 Pradeep, tell us, in FY21-22, we saw aberration because some of your completion of projects
08:08 flowed into the next financial year and came in FY22, FY21-22.
08:15 In FY23, how many projects have been pushed in FY24?
08:22 So, our biggest strength is to construct quickly. Because our core strength is that
08:30 we've designed it on a factory model. So, it's a process. Sometimes, when you go to the ground,
08:38 you face some difficulties. Like Rajat said, when the NGT ban is imposed, you can't
08:45 get an idea whether it's for a month or two. So, it does happen in the future. But basically,
08:54 look at the company's intent. It's very clear that we have to construct quickly and deliver
09:00 our aspirational buyer.
09:03 Mr. Agarwal, I agree with that part of it. But you're coming to the market and markets
09:07 would like to have more clarity on the numbers. So, that's why I'm asking, what is the
09:12 quantum of projects which are completed by you but pending OC and completion certificate?
09:18 So, Sajid, I'll have to answer this question again. Because it's in a process. You can't
09:25 define it.
09:26 How many projects are there? You can tell that. If you can't tell the value, you can tell
09:30 the projects.
09:32 The ongoing projects. So, the total ongoing projects are around 17 million. So, in the
09:39 ongoing project, because OC is such a part, if any portion is completed, 0.5 million or
09:46 1 million, it comes partially. So, the total ongoing project is around 17 million.
09:52 And how many of them are there, in which, these ongoing projects are completed, your
09:56 projects?
09:57 Under construction.
09:58 Under construction. How many projects are there with complete construction?
10:02 The ones we have delivered, total.
10:04 The ones that are going to be done, can you do it in the future?
10:07 Okay. So, I said, these 17 million, these 17 million, should be delivered in the next
10:12 year, in 1 to 1.5 years. This is our aspiration.
10:15 Okay. Rajat, we've seen a lot of, you know, volatility in policies also, right? The affordable
10:24 housing policy of Haryana. While at some point it has given you the, you know, much more,
10:30 you know, benefit of higher price, which you can charge. But also, in some of the, you
10:35 know, policies like, still plus 4 floors, that has gone, has been put on a ban. Many
10:42 of the projects have been cancelled. Where are we on this? And how do you manage this
10:47 kind of, you know, policy flip-flop, which is happening?
10:51 So, see, Sujith, in terms of framework, as far as affordable housing is concerned, for
10:59 the high-rise apartments, there's a particular policy, within which, which is called the
11:03 affordable housing policy. We started our work within this policy and tasted a lot of
11:09 success, you know, in the initial years, while working in a focused manner, only under the
11:14 affordable housing policy. Starting year 2017, we, you know, started working into, you know,
11:23 Dindayal Janawasi Yojana as well. But if you talk of the framework within the mid-income,
11:31 you know, housing market, you know, there are multiple policies within the state of
11:35 Haryana, within which one can work. So, yes, government has been actively, you know,
11:43 improvising on these policies. But if you look at the current situation, we are working
11:48 across the spectrum, across various policies, which the government has provided for mid-income
11:53 housing.
11:54 I like the term improvising that you used. But, Mr. Agarwal,
12:01 what has been the kind of average price realization that you get per square feet from these
12:09 projects?
12:10 So, if we talk about affordable housing, the fixed price is Rs. 5000 per square feet.
12:17 And if we talk about the mid-income, the price of the Guru Gram today varies between Rs.
12:22 8000 to Rs. 9000, depending on locations.
12:26 So, is the pricing completely dependent on market conditions or is there a government
12:31 norm that will keep the price in check?
12:35 So, look, the affordable housing price is fixed by the government. But when we talk
12:40 about the mid-income, the price is market determined, as is the demand in the market.
12:46 But our main aim is that we are working for a middle class.
12:52 Majorly, you see, the company that is focusing on the middle class.
12:56 So, whatever prices we keep, we should allow the middle class pocket.
13:01 We definitely have the aspiration that we should achieve those numbers,
13:05 that at least we can come in the list of the first developers and they will reach our table.
13:12 And what is the minimum ticket size for flats from affordable to mid-income?
13:17 Look, the price range in affordable is around Rs. 25 to 30 lakhs.
13:21 And after that, the price is on an average mid-income of Rs. 1.5 crore.
13:26 Yeah, Rajat, just give me a sense of how the market is, especially the Guru Gram market
13:38 and Sohana where you have two, these are two markets where you have maximum projects.
13:43 How pricing has been there? And is there a way you're looking
13:48 at expanding your market beyond the two cities as of now?
13:52 So, the market situation is very buoyant, you know, across Gurgaon.
13:59 So, what's happened over the last decade is that a lot of good things happened in
14:04 terms of infrastructure developments, you know, whether it's the Gulf Coast Road,
14:08 which got developed, you know, the National Highway Authority developed this Sohna elevated corridor.
14:14 The DMIC got operational, which is starting just from south of Gurugram, where
14:20 exactly, you know, our Sohna projects are in that vicinity.
14:24 There's multiple, this full growth, which has happened in the office space,
14:30 you know, leasing in the local market. Whereas, if you look at the housing side,
14:35 you know, over the last eight to 10 years, the kind of supply which would have been added,
14:41 didn't really kind of come up. And there could be multiple reasons why it wouldn't be the right
14:46 forum to discuss that. So, right now, you know, while there's a lot of demand, we feel that
14:52 supply is still kind of constrained. It's not keeping up with the kind of demand which is there.
14:59 We've even disclosed in our offer document, the strong response which we've often received on the
15:04 project, which we launched, you know, we, we managed to, you know, sell these projects within
15:09 a short span of its launch. So, the market is very buoyant. The per square foot realizations have
15:16 gone up over the last two years, especially post the pandemic, you know, situation. So,
15:22 it's quite a favorable market situation by and large.
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