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    TARC Ltd

    TARCGood
    Realty·12 Nov 2024
    Management Summary

    TARC Ltd reported strong operational performance in H1 FY25, with presales growing 6x YoY to ₹1,322 crores, reinforcing confidence in its ₹5,000 crore FY25 guidance. The company successfully refinanced ₹1,000 crores of debt, reducing interest costs and setting a target to be debt-free within two years. Project execution is on track, with Tripundra nearing completion, and a robust pipeline of luxury residential developments is planned from its extensive land bank.

    Highlights

    8
    • H1 FY25 presales totaled ₹1,322 crores, marking a 6x growth over the previous year.

    • The company maintains its FY25 presales guidance of ₹5,000 crores.

    • Three launched projects have a combined revenue potential of over ₹7,500 crores.

    • TARC Tripundra is 80% sold, with OC expected by Q4 FY25, contributing roughly ₹1,000 crores in revenue.

    • Current total debt stands at ₹1,650 crores as of September 30, 2024, after refinancing ₹1,000 crores of NCDs.

    • Management aims to become totally debt-free within the next two years.

    • Approximately 200 acres of the 500-acre land bank are developable over the next 3-5 years.

    • Unsold inventory across the three launched projects is ₹4,500 crores, with an average selling price of ₹20,000-25,000 per square foot.

    Concerns

    1
    • Unaudited subsidiary financial statements

    Key financials

    Single quarter

    06 metrics
    1. 01Presales H1 FY25₹1,322 Cr+5%YoY
    2. 02Total Revenue Potential (3 Projects)₹7,500 Cr
    3. 03Current Debt₹1,650 Cr
    4. 04Collections (3 Projects till date)₹750 Cr
    5. 05Unsold Inventory (3 Projects)₹4,500 Cr

    Guidance & targets

    11
    CategoryTargetPriority
    Presales
    FY25 Presales
    ₹5,000 crores
    High
    Presales
    FY26 Presales
    Higher than FY25
    Low
    Presales
    USD 1 Billion Presales
    USD 1 billion
    Medium
    Debt
    Debt Reduction
    Totally debt free
    High
    Project Completion
    TARC Tripundra OC
    Obtain OC
    High
    Project Completion
    All 3 current projects completion
    Within 42 months
    High
    Collections
    Additional Collections
    ₹700 crores
    High
    Land Bank Development
    Developable Land
    200 acres
    Medium
    Compensation
    Compensation Realization
    ₹300 crores
    Medium
    New Project Launches
    Number of Projects
    5-7 projects
    Medium
    Free Cash Flow
    FCF Generation
    ₹500 crores
    Medium

    Risks & concerns

    4
    RiskSeverity

    Unaudited subsidiary financial statements

    Auditor commented on 26-29 subsidiary companies having unaudited financials, leading to analyst concerns about manipulation; management stated these are land-holding companies and audits were delayed.Analyst acknowledged

    high

    Collections lagging presales

    Analysts noted lower collections relative to high presales, which management explained is due to project launch timing and the phased collection structure.Analyst acknowledged

    medium

    Debt levels and interest costs

    Analyst raised concerns about increased debt, which management clarified is being actively managed through refinancing and has a clear two-year debt reduction plan.Analyst acknowledged

    medium

    Areas of Evasion(1)

    • Specific reasons for the delay in auditing 26-29 subsidiary companies beyond 'audit could not be completed on time'.

    Q&A highlights

    3

    “The total debt on the company is roughly between 1,600-1,800 crores. We have not taken any additional debt. ... The total rate was around 17% or 18%. So, that has been reduced to 12.75% now.”

    Addressed analyst's concern about rising debt and clarified the impact of recent refinancing on interest costs and total debt figures.

    asked by Priyansh, Individual Investor

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Presales Performance & FY25 Outlook

    TARC reported an impressive H1 FY25 presales figure of ₹1,322 crores, representing a substantial 6x year-on-year growth. This strong performance underpins the company's confidence in achieving its ambitious FY25 presales guidance of ₹5,000 crores. Management highlighted that three recently launched projects collectively possess a revenue potential exceeding ₹7,500 crores, indicating robust demand and successful market penetration.

    02

    Key Project Updates and Inventory Status

    Updates were provided for TARC's flagship projects: TARC Tripundra, a luxury development in South Delhi, is 80% sold, with construction in its final stages and the Occupation Certificate (OC) expected by Q4 FY25, contributing an estimated ₹1,000 crores in revenue. TARC Kailasa in Central West Delhi is 45% sold with a total revenue potential of ₹4,000 crores. The latest launch, TARC Ishva in Gurugram, comprising 385 apartments on a 7-acre parcel, has already achieved 40-45% sales. The combined unsold inventory across these three projects is valued at ₹4,500 crores, with an average selling price ranging from ₹20,000 to ₹25,000 per square foot.

    03

    Debt Management and Refinancing Strategy

    As of September 30, 2024, TARC's total debt stands at ₹1,650 crores. The company successfully refinanced ₹1,000 crores of Non-Convertible Debentures (NCDs) from Bain Capital through Indian banks and NBFCs, effectively reducing the overall interest cost from 17-18% to 12.75%. Management outlined a clear strategy to become 'totally debt free within the next two years,' intending to utilize cash flows generated from the ongoing projects—Tripundra, Kailasa, and Ishva—for debt repayment.

    04

    Land Bank and Future Launch Pipeline

    TARC holds a significant land bank of 500 acres, with approximately 200 acres earmarked for development over the next three to five years. This developable portion is expected to yield at least five to seven new luxury residential projects. The Gross Development Value (GDV) for three upcoming projects is projected to be in the range of ₹7,500-8,000 crores. Additionally, the company anticipates receiving ₹300 crores in compensation within the next year, which will be directed towards further debt reduction.

    05

    Collections and Revenue Recognition Dynamics

    While presales have been robust, collections from the three launched projects currently total ₹750 crores. Management expects an additional ₹700 crores in collections for the remainder of FY25. The company clarified that reported losses, despite strong presales, are primarily due to Ind AS 115 accounting standards, which mandate revenue recognition only upon project handover or receipt of the Occupation Certificate, while construction costs are expensed as incurred.

    06

    Market Outlook and Strategic Focus

    TARC remains highly optimistic about the luxury real estate market in Delhi and Gurugram, projecting a 10-15% year-on-year price growth over the next three to four years. The company's strategy is to exclusively focus on the luxury residential segment for at least the next 18-24 months, leveraging its brand and experience centers to attract end-users. TARC is also actively evaluating joint development opportunities within the luxury segment to expand its project portfolio.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.