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New Delhi-based real estate firm Shriram Properties (SPL) is gearing up to venture into the fractional ownership model, anticipating significant traction in the market. However, the company does not plan to explore Real Estate Investment Trusts (REITs) due to challenges in acquiring Grade-A assets. The company also has plans to extend its presence in Pune and capitalize on a 60-acre land parcel in Kolkata.
For the fiscal year 2023-24, SPL has set ambitious targets, projecting approximately 4.8 million sq ft of pre-sales volume and sales values ranging from Rs 2,400 to Rs 2,500 crore. Additionally, the company aims to deliver around 3,000 units by the end of FY24 and launch three new projects in the third quarter of the same fiscal year.
In the first half of FY24, SPL achieved sales volumes of 1.9 million sq ft, sales values of Rs 1,066 crore, and gross collections totalling Rs 721 crore. The company is on track to complete and deliver about 7 million sq ft over the next two years.
Chairman and Managing Director Murali Malayappan expressed confidence in surpassing projected numbers for H2 FY24, highlighting consistent growth since the company's listing. Executive Director & Group CFO Gopal Krishnan indicated plans to complete 4.3 million sq ft and deliver 3,000 units by the end of FY24.
When asked about the company's strategy regarding land acquisition, Murali emphasized SPL's preference for the development management (DM) model, citing its low-cost nature and the flexibility it offers in expanding the portfolio. Gopal added that the DM model requires less capital, making it an efficient growth engine.
Regarding the company's debt, Gopal revealed that SPL's current net debt stands at Rs 430 crore, with a debt-equity ratio of 4.38 and a cost of debt ranging from 11.3% to 11.4%. He highlighted the company's strategic move to exit a joint venture with Mitsubishi Corporation, resulting in an incremental revenue of Rs 400 crore.
Looking ahead, SPL is eyeing Pune for a 2 million sq ft project under the development management model. The average price realization per sq ft as of September 30, 2023, is Rs 6,378, reflecting a 14% increase from March FY23.
Murali expressed interest in fractional ownership once regulatory clarity is achieved, citing a substantial demand for this segment. As Shriram Group considers an exit from Shriram Properties, Murali expressed openness to buying out their stake while emphasizing the continuation of royalty payments for the brand name.
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