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Kolte Patil Developers Ltd.

BSE: 532924 Sector: Infrastructure
NSE: KOLTEPATIL ISIN Code: INE094I01018
BSE 00:00 | 14 Dec 233.90 2.30
(0.99%)
OPEN

231.20

HIGH

234.00

LOW

230.45

NSE 00:00 | 14 Dec 232.60 1.45
(0.63%)
OPEN

229.10

HIGH

233.40

LOW

229.10

OPEN 231.20
PREVIOUS CLOSE 231.60
VOLUME 569
52-Week high 404.25
52-Week low 207.30
P/E 17.99
Mkt Cap.(Rs cr) 1,773
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 231.20
CLOSE 231.60
VOLUME 569
52-Week high 404.25
52-Week low 207.30
P/E 17.99
Mkt Cap.(Rs cr) 1,773
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Kolte Patil Developers Ltd. (KOLTEPATIL) - Chairman Speech

Company chairman speech

Sectoral outperformance

During the last two years - possibly the most challenging encountered by the sector inliving memory - the Company reported a record performance even as the sector was affectedby a weakness in sentiment translating into sales sluggishness.

What gives me deep satisfaction is that the Company reported profitable growth wherebythe percentage increase in the bottomline was higher than the percentage increase in thetopline indicating the robustness of our business model. Besides incremental margins -the portion of profits by which the Company grew divided by the portion of revenues bywhich the Company grew expressed as a percentage - were considerably higher indicatingthe intrinsic profitability of our business.

At Kolte-Patil we believe that this improvement was not the outcome of doing a fewthings right; it was the result of a 360-degree pursuit of excellence. We widened oursales network; our region-specific sales teams (Pune Maharashtra and India) werecomplemented by our international sales channel; we undertook several technologicalinitiatives to reduce the turnaround time in addressing customer needs; we investedproactively in automation; we measured and enhanced agent productivity; we strengthenedour Balance Sheet.

The result is that Kolte-Patil marketed better sold faster widened margins andreported superior financial efficiency.

We didn't perform; we outperformed. We didn't just play the game; we transformed it.

Robust customer collections

At Kolte-Patil we recognised that a sluggish macro-economic and sectoral environmentmeant that customers would be more selective in their apartment purchase: they would trustonly those realty brands that provided them with the best value built with speedcommunicated periodically and delivered on schedule.

During the course of the sectoral slowdown we brought a distinctive urgency to ourbusiness: we continued to invest in systems processes and technologies that wouldaccelerate construction. The result was a stronger traction for our properties whencustomers recognised that our projects would not slow down; besides their trust wasreflected in timely instalments. The result is that even as the broad realty sector in thecountry was affected by a decline in liquidity our collections increased 15% Y-o-Y fromRs.965 crore in 2016-17 to Rs.1109 crore in 2017-18.

Marquee financial partnerships

In the business of real estate development one of the most precious drivers is theavailability of financial resources. At Kolte-Patil we strengthened our Balance Sheetand in turn reinforced our non-debt funding pipelines that provided us with access tolow-cost net worth to sustain the growth of our business.

In the past the Company entered into associations with marquee brands like ICICIVentures IL&FS ASK Investment Managers and Portman Holdings (USA) that enabled us tomobilise higher net worth. In 2015-16 the Company had entered into H120 crore agreementwith a J.P. Morgan Asset Management affiliate for the Jay-Vijay Society redevelopmentproject in Vile Parle (E) Mumbai.

In December 2017 the prominent global investment firm of Kohlberg Kravis Roberts (KKR)committed Rs.193 crore in the R1 segment of our flagship Life Republic in Pune whichhelped the project attain financial closure address working capital requirements andreduce the overall cost of outstanding debt attributable to that project's development. Webelieve that these relationships validate the strength of our management and BalanceSheet making it possible to mobilise low-cost net worth that helps monetise our landparcels faster and more profitably creating a prospective pipeline of superior revenuesmargins and profits. More importantly these partnerships have enriched our businessinsights strengthened our discipline helped improve governance practices moderated ourgearing to one of the lowest levels in the sector and reinforced our asset-lightness in acash-intensive business.

Over the last two years the Company did not just repay debt and strengthen its BalanceSheet; it also enjoyed lower cost of borrowing on its books following its enhanced creditrating (CRISIL A+/ Stable) the highest by CRISIL to any publicly listed residential realestate company in India. The result is that the average cost of borrowings declined from13.5% at the end of 2015-16 to 10.4% at the end of 201718 strengthening our liquidity andinterest cover.

Multi-city expansion

A key performance positive during the year under review was the increased momentumcoming out of our presence in Bengaluru.

The Company grew its Bengaluru revenues from 3.6% of sales volume in 2016-17 to 12.9%of sales volumes in 2017-18; it recorded the highest-ever sales and collections in2017-18. We expect Mumbai projects to pick up in FY19 following the government'sinitiatives to resolve dumping ground issues and announcement of Development Plan 2034leading to improving projects and revenue visibility for our company. The Company reportedsignificant 61% Y-o-Y growth in collections to Rs.156 crore in Mumbai accounting for 14%of our overall collections in 2017-18.

Execution discipline

When we embarked on the process of transforming our company a few years ago thebiggest priority that we selected to address was construction discipline.

The Company had always been respected for building properties on time. However werecognised that as properties got larger the number of concurrent construction sitesincreased and our geographic footprint widened what had worked for us at one point nowneeded to be re-assessed and restructured.

Besides the focus was timely. As the markets slowed and consumers were wary oftrusting their hard- earned resources to long-gestation projects we believed that thewinners would be companies that built faster than promised resulting in a superior returnon the customer's employed capital.

The ‘Finish on time' statement virtually helped reinvent our company: through anoverarching focus through multiteam commitment technology investments superior workingcapital management and the effectiveness of every single function.

This power of execution translated into quicker completion timely handover lowerconstruction costs better equipment utilisation better technology-led project controland informed decision-making.

Business outlook

At Kolte-Patil we have never been more optimistic of our business model.

We expect to strengthen our 360-degree business model that covers the residentialdemand spectrum covering all price points in the key micro-markets of Pune Mumbai andBengaluru.

We expect to launch -4.4 msf of properties across Pune Bengaluru and Mumbai in FY19.

We believe that we possess attractive projects visibility to grow our Mumbai andBengaluru revenues from 11% in 2017-18 to -25% of our revenues by 2020 broadbasing ourgeographic footprint and business stability.

We possess a strong 1.4 msf pipeline in Mumbai across 14 redevelopment projectswarranting low capital deployment. In Bengaluru we launched one project (Exente on HosurRoad) and are poised to launch another project (Koramangala).

At our company the focus will not be to merely scale the number of projects underexecution but to strengthen business quality as well through an enhanced focus onexecution collections and cash flows. We will continue to evaluate strategic andfinancial partnerships that enable us to scale or accelerate operations while limiting ourcapital commitment. We are evaluating acquisitions and partnerships across the MIGaffordable housing and luxury project categories.

Overview

The broad message that I have for our shareholders is that we have only just begun.

In this reinvented Kolte-Patil we expect to strengthen sales from around 2.1 msf in2017-18 to a projected 5 msf five years from now. This means that compared to what wereported in the last two decades in our business we expect to achieve more than twice thatin only the next five years.

In doing so we expect to enhance value for all our stakeholders in a more decisive waythan we have done until now.

Rajesh Patil

Chairman & Managing Director