Prestige stock up, so is appetite for debt
PremiumPrestige Estates is on a spree to launch residential and commercial projects and is also foraying into new markets
Prestige Estates Projects Ltd is eyeing pre-sales of more than ₹12,000 crore in FY23, with residential projects in key markets such as Bengaluru and Mumbai likely to contribute ₹8,000 crore and ₹2,500-3,000 crore, respectively. This guidance is higher than the record sales bookings of ₹10,382 crore in FY22.
Little wonder then the stock rose 5% on the NSE on Thursday in reaction to the upbeat commentary.
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The Mulund project in the newly ventured Mumbai market is seeing good traction, the management told analysts in its earnings call on Wednesday. It plans to launch Daffodils, Pali Hill & Ocean Towers, Marine Lines in FY23 along with subsequent phases in The Prestige City, Mulund. In Q1FY23, the Mumbai market accounted for around 24% of its gross sales booking, the management said.
“The Mumbai region was seen as a litmus test for Prestige Estates’ success and the solid initial response to its Mulund project aids long-term revenue visibility for the company," said an analyst with a domestic brokerage house requesting anonymity. However, the FY23 pre-sales target set for Mumbai is ambitious, he said. “We expect the company to do around ₹2,000 crore of sales in this city," he said.
Apart from the sales trajectory in Mumbai, investors will also need to monitor its net debt levels. Prestige Estates is on a spree to launch new residential and commercial projects and is also foraying into new markets, so the increased need for capital could push its debt higher.
The company’s net gearing (net debt to equity ratio) is comfortable at 0.4x and is expected to rise to 0.5x over the next few quarters, said analysts at Jefferies India Pvt. Ltd. In Q1FY23, net debt increased by ₹550 crore sequentially on investments in the ongoing projects and capital expenditure for hotel assets. The company aspires to increase its presence in the National Capital Region and Pune along with with the slated launches in the Bangalore, Mumbai, and Hyderabad regions.
The company’s management aims to maintain net debt to equity ratio at around 0.5x for FY23. Investors would remember that Prestige Estates was struggling with a situation of elevated leverage and had to sell some of its assets in 2021 to the Blackstone Group to pare debt.
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Meanwhile, so far this calendar year, the Prestige Estates stock has declined by around 4%, lower than sector index Nifty Realty’s 9% fall. It is 13% away from its 52-week high of ₹554.90 seen in January. Analysts said near-term positives are largely priced-in, so the stock’s recovery from the current levels will be gradual.
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