BRIGADE - Brigade Enterprises Limited Share Price

Management provided an optimistic outlook for Brigade Enterprises, highlighting the continued demand resilience in their key markets of Bangalore, Chennai, and Hyderabad. The company reported a pre-sales figure of INR 7,424 crores for FY26, a 5% decrease from FY25 primarily due to project approval delays. However, Q4 was strong with pre-sales of INR 2,521 crores, a robust 44% increase quarter-on-quarter. The average realization improved by 9% year-on-year to INR 12,107 per square foot, driven by disciplined pricing and a favorable product mix.

Looking ahead, management set a target for FY27 pre-sales to reach INR 9,000 crores, anticipating at least 20% growth from FY26. The residential launch pipeline for FY27 is projected at 11.6 million square feet with a Gross Development Value (GDV) of INR 11,900 crores, with planned launches of 4.5 million square feet in Bengaluru and 3 million square feet each in Chennai and Hyderabad. Efforts will be made to front-load some launches in H1 FY27.

From a commercial standpoint, Brigade secured INR 15,000 crores of GDV across new projects in FY26, focusing on Bengaluru and Hyderabad. Their leasing segment recorded stable performance with 1.1 million square feet leased. The company anticipates a positive office market outlook and a pipeline of approximately 10 million square feet to be launched over FY27 and FY28, with estimated capital expenditure of INR 6,000 crores over the next four years.

In retail, the Orion Malls portfolio showed growth, with a 7% increase in footfalls and 25% growth in retailer sales year-on-year for Q4. Hospitality also maintained resilience despite geopolitical challenges, with an average daily rate (ADR) growth of 8%.

Overall, management's forward-looking points emphasize maintaining robust demand across segments and strategically positioning the company for growth, despite external economic challenges.

1. Question: "My first question is on the World Trade Center, Bengaluru. So, I believe it may be Amazon, which is exiting there. That's why you see a drop in the area under lease. So, just help us understand how you intend to fill the space up, do we already have someone lined up or it will take a little bit longer?"

   Answer: "Yes, Amazon has vacated their 630,000 square feet. We've secured nearly 100,000 square feet with other tenants. We're seeing high-potential client interactions and expect leasing to occur floor-wise. While we may not fill the entire space with one tenant, we're optimistic about leasing it out over the next couple of quarters."

2. Question: "If you could help us understand currently with the land bank and projects we have, what is the cumulative GDV, which is available for launch over the next 2 years?"

   Answer: "We have about 57 million square feet in our land bank, with 75% allocated for residential. For the coming year, we anticipate a GDV of around INR 11,900 crores to INR 12,000 crores from our pipeline of 11.5 million square feet. We're focusing on replenishing land primarily in Bengaluru and Hyderabad."

3. Question: "Regarding the pre-sales guidance of INR 9,000 crores, if I look at the unsold inventory of around INR 10,000 crores, is it safe to infer you're building sales from new launches at around INR 3,500 crores?"

   Answer: "Yes, that's a conservative estimate. We also consider past sales trends specifically for Chennai, which usually shows a more evenly distributed absorption over time. Additionally, potential launch delays can impact sales visibility, which prompts us to maintain cautious guidance based on inventory and market dynamics."

4. Question: "How should we look at the trajectory of cash flow going ahead? Because what we have seen is the construction costs have seen a material increase?"

   Answer: "Our operating cash flow generation will improve as new launches follow through. While construction costs have risen due to increased area, our cash flows are expected to align closely with sales growth. We anticipate a positive trajectory as we achieve milestone completions, leading to heightened collections from ongoing projects."

5. Question: "Can you update us on your Chennai project, specifically the Velachery project, regarding response and sales absorption?"

   Answer: "In Q4, we launched Brigade Stellaris, a high-end project of 284 units priced around INR 6 crores each, selling about 30 units shortly after launch. We expect stable sales throughout the construction lifecycle. Additionally, the Morgan Heights relaunch should occur in Q1 FY'27, which is critical for our upcoming residential sales."

6. Question: "For the 10 million square feet of commercial projects to be launched in the next 2 years, can we get a rental projection once they become operational?"

   Answer: "Yes, we estimate that the commercial projects under development, once operational, could generate rental income of approximately INR 800 crores. That figure is based on the current projects being monitored and a blend of different commercial spaces coming online."

7. Question: "On the residential pricing side, what is the situation now in the market?"

   Answer: "We anticipate a year-over-year APR increase of around 13%, with a typical increase of 7% to 9% at launch based on micro markets. We're experiencing a shift in product mix to mid to upper mid-segment homes, and the current inventory is priced above INR 12,000 per square foot. We expect competitive pricing to attract end users."

8. Question: "Could you share the pre-sales geographical split for Q4 FY26?"

   Answer: "In Q4, 65% of pre-sales came from Bangalore, 20% from Chennai, and 15% from Hyderabad. These figures represent a consistent performance across our markets, reinforcing our stronghold in Bengaluru while also maintaining growth in Chennai and Hyderabad."

9. Question: "Are we seeing any softness in the walk-ins or the EOIs from any of these cities due to expected layoffs?"

   Answer: "We are not seeing any softness in walk-ins; in fact, our recent launches have had healthy inquiries and conversions remain steady at 10% to 12%. The demand primarily comes from end users, and while conversion cycles may be slightly longer, the overall market sentiment appears robust."

10. Question: "How do you see the commercial leasing run rate going ahead?"

    Answer: "We aim to grow our annuity income portfolio by retaining larger projects while evaluating smaller ones for potential sale. The increase in our commercial leasing run rate, which currently stands at INR 550 crores, reflects our commitment to managing project quality and optimizing portfolio value over time."