Oberoi Realty Ltd. is one of the leading real estate development company, headquartered in Mumbai. The company is focused on premium developments in the residential, office space, retail, hospitality, and social infrastructure verticals.
In the real estate space, Oberoi Realty is an established brand with an impeccable track record. Its primary aim is to build aspirational developments for its customers with distinctive designs, functional aesthetics and quality finishes that translate into landmark projects through its mixed-use and single-segment developments.
This mix of innovative design, planning initiatives and use of cutting-edge technologies has enabled the company to successfully deliver 42 completed projects across Mumbai, the financial capital of India.
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- Shareholding pattern
- Founder Chairman & MD
- Oberoi Realty projects
- Revenue Segments & Projects detail
- Key Financial Analysis
- Overall Real Estate View & Mumbai Real Estate overview
- Concall Highlights & Management Outlook
- Growth Opportunities & Risks/Concerns
(A) Shareholding Pattern
Mr. Vikas Oberoi who is the promoter of the company holds 58.55% of total share capital. However, the promoters shareholding in the company has been reduced from previous years. Shareholding fell by 4.13% after March 2018.
(B) About Chairman & Managing Director
Mr Vikas Oberoi is the Chairman and Managing Director of Oberoi Reality. A Harvard Business School Alumnus, Mr Vikas Oberoi has been on the Board of Directors since the inception of Oberoi Realty. Moreover He has over two decades of experience in the real estate industry. As an integral part of the key management, he manages a portfolio spanning across Residential, Office Space, Retail, Hospitality and Social Infrastructure projects.
(C) Group Structure of Oberoi Realty
(D) Projects by Oberoi Realty
(a) Residential Projects
Oberoi Realty has completed over 15 residential projects in various locations of Mumbai and 6 projects are ongoing. Skyheights by Oberoi, Enigma and Eternia are some of most loved residential areas in Mumbai.
(b) Commercial Projects
Oberoi Realty had 3 completed commercial projects in Andheri and Goregaon. Oberoi Chambers, Commerz and Commerz II.
(c) Retail Projects
Oberoi Mall is one of Mumbai’s finest retail malls. Situated on the Western Express Highway, and spread across 700,000 sq.ft., Oberoi Mall has occupied a significant position in the minds of customers and retailers.
(d) Social Infrastructure
Oberoi International Schools in Goregaon ad Andheri are the Social Infrastructure Projects made by Oberoi Realty.
Located in the thriving business district of Goregaon, The Westin Mumbai Garden City offers its guests a soothing, contemporary environment for work and play.
(E) Revenue contribution
(i) Busines Segments
Residential Housing is the fastest growing segment in realty sector. Residential segment contributes to around 81% of the revenue of Oberoi business. Even during the pandemic company’s all residential projects received robust interest.
Rental sector contributes to around 15% which includes Oberoi Mall and other rental properties. However due to the ongoing COVID-19 pandemic and lockdown, the operations of Oberoi Mall severely impacted and the Company had not recognized the revenue from the mall for the quarter ended June 30, 2020.
(ii) Revenue from Investment Projects
- The EBITDA Margin of Commerz and Commerz II declined by 8.96% and 0.67% YoY. Oberoi Mall and Westin Mumbai Garden city was the most affected investment properties due to Covid-19. Thus their EBITDA Margin also got affected. EBITDA Margin of Oberoi mall declined by 2.97% YoY and area leased reduced by 13107sqft YoY. Moreover the EBITDA Margin of Westin Mumbai Garden city declined by 49.82% YoY. Average room rate reduced by Rs. 3581 YoY in addition the occupancy rate fell by 42.72% YoY.
- Also, On the annuity portfolio, in mid 2020, the company leased 1.1 million sq. ft. in Commerz III, upcoming commercial building at Oberoi Garden City, Goregaon to a leading international financial services company (Morgan Stanley) making it one of the largest office space transactions in India.
(iii) Oberoi Realty Synopsis of Development Projects till Q4FY21
Update for the Quarter 4 of FY21
- Exquisite project has registered 14,710 sq ft, 15,05,096 sq ft of bookings during Q4FY21, till date while total booking value was at 36 crore, 2,530.3 crore respectively. For Esquire, 64,416 sq ft, 19,14,120 sq ft of area was booked during Q4FY21, till date, respectively. Total booking value in Q4FY21, till date was at 148.2 crore, 3,250.0 crore, respectively.
- Both projects are 100% completed. In the Maxima Project, 43,498 sq ft, 1,03,077 sq ft area was booked in Q4FY21, till date, respectively, while total booking value in the project was at 66.6 crore for Q4FY21, 164.5 crore till date.
- Similarly, in the Eternia and Enigma Project, total area booked during Q4FY21 was at 45,360 sq ft, 97,891 sq ft, respectively, with booking value of 69.4 crore, 153.3 crore, respectively.
- For the Sky City project, the project attracted bookings of 2,55,527 sq ft during Q4FY21 with value of 443.9 crore
- Construction of Elysian and Sky tower is not complete yet. Although the company has Commenced bookings for the new project Elysian, Goregaon (East) and bookings for the sixth tower at Sky City, Borivali (East). 1.7 mn sq.ft. of saleable area of Sky city sold in FY21 with a Gross sale value exceeding Rs. 3,425 crore.
(F) Financial Parameters
- The sales value was up in FY21 by 8.3x YoY. This was largely driven by new launches – new Goregaon tower named Elysian, which clocked sales volume of 0.53 msf (~50% of overall sales volume of the q4 fy21) and launch of sixth tower in Borivali project (Borivali contributed 0.26 msf (~25% of sales volume).
- The cash flow from operations increased in FY21. The management commented that the company has enough cash to build 4 towers.
- Moreover, Oberoi Realty is low debt company. The debt to equity ratio is decreasing from past few years which is a good sign.
- Hospitality sector of the company was affected by various lockdowns thus the commercial, retail and hotel performance remained muted amid Covid.
(i) Real Estate Industry Overview
The real estate market in India is one of the pallbearers of the economy, it is the second-highest employment generator in the country after agriculture. The sector is deeply interlinked to as many as 220 allied sectors. It accounts for nearly 6-7 per cent of the economy and is set to account for nearly 13 per cent by 2025 if all reform measures announced are executed well. Moreover The sector has been one of the biggest wealth creators in the past few decades.
After temporary shocks in light of structural reforms such as GST and RERA, the enhanced liquidity in the banking system and a restoration of buyer confidence were slowly trickling through in the real estate sector before COVID-19 hit Indian shores. Therefore, the pandemic-influenced slump is, at best, a short-term blip across all sectors of the economy. With the rollout of the vaccine and resumption of normalcy, the real estate market will certainly bounce back with renewed vigor.
(ii) Mumbai’s Real Estate Market
Home sales in India’s eight prime residential markets increased by 12% in the January-March quarter compared to October-December quarter of 2020. Average value of property sold also rose 14% to Rs 66 lakh. The past few months have re-laid the foundation of the real estate sector, not just in the Mumbai Metropolitan Region (MMR) but entire Maharashtra, largely owing to measures taken by the state to boost demand during the pandemic. MMR and Pune accounted for 53% of total sales in top seven Indian cities in the fourth quarter of 2020-21.
Property markets of Mumbai Metropolitan Region (MMR) and Pune are driving the most housing sales among the country’s top seven cities as indicated by the rising contribution of these markets in total sales led by reduction in stamp duty, discounts and appropriate product strategies of developers. The stamp duty cut is effective till March and while it rose from 2% to 3% starting January, it is still lower than 5% prior to the pandemic.
The city’s real estate market bounced back from the brief slump with a roar owing to sharp sales jumps and affordability showing an improvement by 32% since 2010.
Mumbai Metropolitan Region (MMR) emerged as one of the most buoyant residential property markets in the country in the first quarter of 2021 with seven-year high decline in unsold units led by sales momentum despite new launches.
(G) Management Discussion and Concall Highlights Q4 FY21
(i) New Launches
The company is currently at the designing stage to launch newer projects for Thane and Worli locations. The management is optimistic of launching Thane project which is one of its kind by October 2021. Additionally, the management is contemplating launching one more tower in Elysian project by October 2021. Moreover the company will launch one more residential building in FY22 close to sept or oct.
(ii) Affect of Covid – 19 on sales
Lockdown in Maharashtra affected the sales of the company. However, the management expects a pick-up in sales post lockdown period with potential demand and launches planned. Additionally, construction pace has been impacted in most of the projects mainly due to unavailability of desired labour owing to second wave of Covid-19.
(iii) Also Focusing on Redevelopment Projects
The management wants to do more redevelopment projects in future. Management has hired and hiring more people for doing redevelopment projects.
(iv) No change in Pricing
The company has not made any alterations in pricing policy. It has not hiked the prices neither discounted the prices unlike its various competitors who discounted the prices for sales growth. The better realization for most projects was mainly due to better floor mix.
(v) Other highlights
- Company is looking at an opportunity to acquire land parcels at prime locations. As management expects that it would aid the company in future developmental growth.
- There are various upcoming projects which will complete in next 2 to 3 years.
- Company is also open to small projects as well. As management think that there is an opportunity in small markets.
- Management is hopeful for more demand in future once the lockdown will removed.
- Maximum sales of the company is from Enigma which is 4 bedroom apartments. In addition, the revenue from it is around 2.5x the small apartments.
(H) Opportunities and Strengths
(a) COVID-19 Lockdowns Brew the Perfect Storm
Leaving the top real estate developers aside, a substantial section of players in the real estate sector constantly stared at – financial distress, lack of execution capability, oversupply of inventory, GST complications, excessive land banking, lack of understanding of the demand supply dynamics, unjustified product pricing, and the absence of social and physical infrastructure in emerging markets. Moreover As per recent studies, a further 30% of realty players will look for an exit route. As small players are exiting the market, there is the opportunity for big players to grow more.
(b) All is Not Lost as a New Post-Covid Era Dawns
India’s property market, currently battered by plunging sales, piling inventory, stagnant-to-falling prices and an acute liquidity crisis, is now primed for consolidation and today, that is the big theme for the top players, who are equipped with money, ethics, knowhow and technology.
This development will strongly benefit the real estate sector and put it on a strong course of recovery. The residential real estate sector, buoyed by high demand for affordable housing, will bounce back strongly as homebuyers will look to invest in quality homes from renowned developers. Moreover As these big players bring along a strong portfolio and a proven execution track record, they will be able to cater to the demand and chart the recovery story of the real estate sector.
(c) Brand Reputation
Orient Realty enjoys higher recall and influences the buying decision of the customer. Strong customer connect further results in higher premium realizations. Moreover the value creation of company is higher in residential projects.
(d) Significant leveraging opportunity
The company follows conservative debt practice coupled with enough cash balance which provides a significant leveraging opportunity for further expansions. In addition the company has built a business model that ensures continuous cash flows from their investment and development properties ensuring a steady cash flow even during the adverse business cycles.
(I) Key Risks/Concerns
(a) Unanticipated delays in project approvals
The delay in project completion is red flag for realty companies. Thus it is very essential for these companies to completed the project in said time. But various unanticipated delays act as an hindrance in timely project completion which is certainly a risk.
(b) Rising cost of construction and Manpower
Cost of construction and Manpower cost are the major cost for realty companies. Thus rising in these costs directly affects the margins and the profit of the company.
(c) Government Regulations
Various Unexpected regulations and Policies are also a risk for these companies. As these companies have to incur huge capital expenditure on projects. Thus any change in tax rates and other policies affects the business of the companies.
(J) Major Players in Indian Realty Sector
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Today, DLF is the largest publicly listed real estate company in India. The company has residential, commercial, and retail properties in 15 states and 24 cities.
Godrej Properties Ltd
Godrej Properties development combines a 122–year legacy of excellence and trust. In 2010, Godrej Properties became a publicly listed company through a successful IPO in which it raised USD 100 million. It is among top 10 real estate companies in Hyderabad.
Moreover In 2016, The company stood 2nd in Asia and 5th in the world in the GRESB (Global Real Estate Sustainability Benchmarking) study, which is an industry-led sustainability and governance benchmarking platform.
Sunteck Realty Ltd
Sunteck Realty Limited (SRL) is a Mumbai-based real estate development company, catering to the ultra-luxury and luxury residential segment. It is the leading real estate companies in Mumbai.
SRL boasts of a city-centric development portfolio of about 30 million square feet spread across 25 projects at various stages of development. It is one of the top real estate companies in India.
It one of the most trusted real estate companies in Mumbai with breathtaking luxury properties in Mumbai. The company within a span of 4 years has completed 6 projects with a developed area of about 2 million square feet comprising of residential and commercial developments.
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References: Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry’s Publications.
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