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Leasing momentum to continue | Existing assets to fully lease out in three-four quarters

We met the management of Brigade Enterprises (BEL) to understand the business outlook. Key takeaways are as follows (1) the company is on track to launch its 7.5msf of projects in FY24. The launch of projects on TVS land in Chennai is expected to be the key growth driver in FY24 (2) with concerns about interest rates in the past, the management expects strong demand momentum for the next two-three years, supported by robust economic growth (3) management does not perceive any significant concerns regarding demand for SEZ office space and expects to lease out vacant spaces in their operational portfolio over the next three-four quarters (4) the management acknowledged that the current market conditions present an opportune time to divest a partial stake in its hospitality portfolio.

Expects Chennai to be key driver of pre-sales growth in FY24

* In FY23, BEL delivered 34% YoY growth in sales volumes to 6.3msf, while the booking value grew 36% YoY to INR41b. The significant growth can be attributed to an uptick in project launches, as the company launched 5.5msf of projects vs. 3.8msf in FY22

* In FY24, the company expects to launch 7.5msf of projects. The company has strong visibility for 4.5-5.0msf of these launches. Out of the total 7.5msf, 5- 6msf is expected to be in Bengaluru. The estimated GDV for these projects in Bengaluru is expected to be INR35-40b

* The company also plans to launch its luxury project at TVS land in Chennai. It is expected to consist of 0.6msf of residential development, 0.3msf office, and the remaining in high street retail with a residential GDV of INR12b. * BEL has set an aggressive target to launch the Chennai project in 4QFY24, i.e., within one year of acquisition. Apart from this project, the company’s launches are likely to be similar to those in FY23. Therefore, the successful launch of this project is likely to be a key driver of growth in FY24.

* As per the management, rising interest rate was never going to be a concern, but with rates now peaked out, demand momentum is expected to remain strong for the next two-three years, supported by robust economic growth.

* Management abstained from giving any guidance for FY24, but reiterated its target of 15-20% volume growth over the next three-five years.

BD momentum to continue; specific focus on Hyderabad

* In FY23, BEL added 8.7msf of projects with GDV of INR50b for a total consideration of INR9.5b. It currently holds 448acres of land with development potential of 46msf. Of this, 83% is meant for residential and commercial sale.

* Assuming 10-15% of volume growth, current land bank will suffice for next four-five years of growth and through its BD strategy, management intends to maintain similar level of visibility each year.

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