Shriram Properties plans to enter fractional ownership model
Real Estate

Shriram Properties plans to enter fractional ownership model

Shriram Properties (SPL) is considering entering the fractional ownership model, anticipating significant momentum. Simultaneously, the company aims to expand in Pune and monetise approximately 60 acres of land in Kolkata.

For the financial year 2023-24, SPL has provided market guidance of about 4.8 million sq ft of pre-sales volume and sales value in the range of Rs 24-25 billion. Additionally, the company plans to deliver around 3,000 units by the end of FY24 and launch three new projects during Q3 FY24.

In Q2 FY24, SPL achieved sales volumes of 1.15 million sq ft, sales values of Rs 6.08 billion, and gross collections of Rs 4.3 billion. For H1 FY24, the company accomplished sales volumes of 1.9 million sq ft, sales values of Rs 10.66 billion, and gross collections of Rs 7.21 billion.

SPL aims to complete and deliver approximately 7 million sq ft over the next two years. Murali Malayappan, Chairman and Managing Director, and Gopal Krishnan, Executive Director & Group CFO of SPL, discussed the company's future plans in an interview.

The company's performance in April-September 2023 has been positive, showing continuous growth since its listing. The outlook for H2 FY24 is optimistic, with confidence in surpassing projected numbers comfortably.

For the current financial year, SPL plans to complete about 4.3 million sq ft, with 1.8 million sq ft already delivered and the remaining 2.5 million sq ft planned for H2 FY24. The pipeline includes 51 million sq ft, with 22 million sq ft in ongoing projects (78-80% sold) and the rest awaiting launch. Approximately 65% of the pipeline involves joint development agreements (JDA) or joint ventures (JV).

Land acquisition is not part of SPL's strategy, as the company prefers an asset-light model, particularly the development management (DM) model, which is considered a low-cost growth engine. The focus on DM and JDA/JV models aligns with the company's approach to managing capital efficiently.

Regarding a Chennai project under Ask Property Fund, SPL and ASK Property Fund jointly invested Rs 2.06 billion in an ongoing project, Shriram 122 West, with an aggregate revenue potential of Rs 12 billion in the next five years.

As of the latest update, SPL's net debt is Rs 4.3 billion, with a debt-equity ratio of 4.38 and a cost of debt ranging from 11.3% to 11.4%. The company has maintained a stable financial position, and the joint venture exit with Mitsubishi Corporation has resulted in incremental revenue.

In terms of investment, SPL has invested about Rs 1.75 billion in the last 18 months, with a similar trend expected to continue. Regarding Shriram Group's exit from Shriram Properties, it is an ongoing consideration, and if an opportunity arises, there might be a buyout of their stake.

For Pune, SPL plans to launch a 2 million sq ft project under the development management model, with potential for more projects in the future. The current average price realisation stands at Rs 6,378 per sq ft as of September 30, 2023, reflecting a 14% increase compared to March FY23.

SPL expresses interest in fractional ownership, awaiting regulatory clarity, and anticipates launching projects in this segment. On the topic of Real Estate Investment Trusts (REITs), SPL believes the main challenge is the scarcity of Grade-A assets, and the company intends to focus on developing high-quality assets with the capability to generate a 20-30% internal rate of return (IRR).

Shriram Properties (SPL) is considering entering the fractional ownership model, anticipating significant momentum. Simultaneously, the company aims to expand in Pune and monetise approximately 60 acres of land in Kolkata. For the financial year 2023-24, SPL has provided market guidance of about 4.8 million sq ft of pre-sales volume and sales value in the range of Rs 24-25 billion. Additionally, the company plans to deliver around 3,000 units by the end of FY24 and launch three new projects during Q3 FY24. In Q2 FY24, SPL achieved sales volumes of 1.15 million sq ft, sales values of Rs 6.08 billion, and gross collections of Rs 4.3 billion. For H1 FY24, the company accomplished sales volumes of 1.9 million sq ft, sales values of Rs 10.66 billion, and gross collections of Rs 7.21 billion. SPL aims to complete and deliver approximately 7 million sq ft over the next two years. Murali Malayappan, Chairman and Managing Director, and Gopal Krishnan, Executive Director & Group CFO of SPL, discussed the company's future plans in an interview. The company's performance in April-September 2023 has been positive, showing continuous growth since its listing. The outlook for H2 FY24 is optimistic, with confidence in surpassing projected numbers comfortably. For the current financial year, SPL plans to complete about 4.3 million sq ft, with 1.8 million sq ft already delivered and the remaining 2.5 million sq ft planned for H2 FY24. The pipeline includes 51 million sq ft, with 22 million sq ft in ongoing projects (78-80% sold) and the rest awaiting launch. Approximately 65% of the pipeline involves joint development agreements (JDA) or joint ventures (JV). Land acquisition is not part of SPL's strategy, as the company prefers an asset-light model, particularly the development management (DM) model, which is considered a low-cost growth engine. The focus on DM and JDA/JV models aligns with the company's approach to managing capital efficiently. Regarding a Chennai project under Ask Property Fund, SPL and ASK Property Fund jointly invested Rs 2.06 billion in an ongoing project, Shriram 122 West, with an aggregate revenue potential of Rs 12 billion in the next five years. As of the latest update, SPL's net debt is Rs 4.3 billion, with a debt-equity ratio of 4.38 and a cost of debt ranging from 11.3% to 11.4%. The company has maintained a stable financial position, and the joint venture exit with Mitsubishi Corporation has resulted in incremental revenue. In terms of investment, SPL has invested about Rs 1.75 billion in the last 18 months, with a similar trend expected to continue. Regarding Shriram Group's exit from Shriram Properties, it is an ongoing consideration, and if an opportunity arises, there might be a buyout of their stake. For Pune, SPL plans to launch a 2 million sq ft project under the development management model, with potential for more projects in the future. The current average price realisation stands at Rs 6,378 per sq ft as of September 30, 2023, reflecting a 14% increase compared to March FY23. SPL expresses interest in fractional ownership, awaiting regulatory clarity, and anticipates launching projects in this segment. On the topic of Real Estate Investment Trusts (REITs), SPL believes the main challenge is the scarcity of Grade-A assets, and the company intends to focus on developing high-quality assets with the capability to generate a 20-30% internal rate of return (IRR).

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