Oberoi Realty Ltd's Q1FY19 consolidated net profit rises 241.57% yoy to Rs309.60cr : Beats Estimates

The company’s consolidated revenue stood at Rs888.30cr, up 240.68% yoy and 157.5% qoq.

July 30, 2018 5:45 IST | India Infoline Research Team

Oberoi Realty Ltd Q1FY19

Consolidated Results Q1FY19: (Rs. in cr)

Q1FY19 YoY (%)
Revenue 888.30 240.7
EBITDA 461.70 240.7
EBITDA Margin (%) 52 0
Net Profit (adjusted) 309.60 241.6
***EBITDA margin change is bps

For Q1FY19, Oberoi Realty Ltd’s revenue from operation jumped 240% yoy to Rs888.3cr as against Rs260.7cr in Q1FY18 beating the consensus estimates of Rs350cr. The company’s EBITDA margin stood at 52% unchanged from the same period a year ago. The EBITDA came at Rs461.7cr beating the consensus estimate of Rs179cr. The company’s Adj.PAT increased by 241.6% yoy to Rs309.6cr as against Rs91.21cr, which was above consensus estimates of Rs143.11cr.

**Please note that the numbers of Q1FY19 are not comparable to those of the previous year/quarter as the current quarter numbers are accounted for with the new accounting standard IND-AS 115, which is effective from April 01, 2018, which replaces existing revenue recognition requirements. 

 Q1FY19 Result Highlights
  • Ind AS 115 'Revenue from Contracts with Customers', is a new accounting standard effective from April 01, 2018, which replaces existing revenue recognition requirements. In accordance with the new standard, and basis the company's contracts with customers, its performance obligations are satisfied over time.
  • The company has opted to apply the modified retrospective approach, and in respect of the contracts not complete as of April 01, 2018 (being the transition date), has made adjustments to retained earnings, recognizing revenue of Rs493.24cr, only to the extent of costs incurred, as the relevant projects were in early stages of development. Consequently, there is no impact on retained earnings as at the transition date.
  • While recognising revenue, the cost of land has been allocated in proportion to the construction cost incurred as compared to the accounting treatment hitherto of recognising revenue in proportion to the actual cost incurred (including land cost).
  • Consequently, in respect of the quarter ended June 30, 2018, revenue is lower by Rs1,128.20cr, operating cost is lower by Rs951.13cr, tax expense is lower by Rs51.56cr and profit after tax lower by Rs125.51cr. The basic and diluted EPS for the period is Rs.9.04 per share, instead of Rs12.71 per share. Under modified retrospective approach, the comparatives for the previous period figures are not required to be restated, and hence are not comparable.
  • During the quarter, on June 21, 2018, Oberoi through Qualified Institutions Placement (QIP) allotted 2.4cr equity shares to the eligible Qualified Institutional Buyers (QIB) at a price of Rs500 per equity share of Rs10 face value (inclusive of premium of R490 per share) aggregating to Rs1,200cr. The issue was made in accordance with the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. Pending utilisation of the funds raised for the stated purpose, the funds are temporarily invested in Liquid Mutual Funds (Rs.720cr) and Fixed Deposits (Rs.480cr).
Highlights from the Concall:
  • Oberoi continues to follow percentage completion method of accounting.
  • The only difference is, till the company achieves a level of certainty, revenue is recognised to costs. Margin is not considered and the difference is added to opening reserves.
  • Once a project has crossed the threshold level, revenues are recognised according with margin.
  • Since the system is fairly new, there is a lot of uncertainty and the company will have to wait for a few quarters to understand ramifications.
  • Exclude land costs while arriving at % completion level
  • Since the contract is binding to both buyer and seller, Oberoi can use percentage completion method over project completion.    
  • Enigma project is doing very well especially after the interest subvention schemes. This is because the apartments are comparatively smaller and hence are easier to sell at the construction stage.
  • Eternia consists of bigger apartments and people tend to defer buying till apartments are complete. Even after the interest subvention schemes, people are buying apartments on the lower floors, rather than the higher floors which has led to the reduction in average price realisation from Rs16,000 to Rs14,000 per sq.ft.
  • Oberoi mall has seen an increase in annuity revenue as many contracts have come up for renewal for which rentals have been increased reflecting current market prices.
  • Goregaon phase 3 project and JVLR project will be launched this year.
  • The company is scouring for attractive options to deploy funds raised from the QIP. These funds will not be utilised to repay debt but rather to invest in growth.  

Technical View:

Oberoi Realty Ltd is currently trading at Rs. 490.10, up by 9.15 points or 1.9% from its previous closing of Rs. 480.95 on the BSE.
The scrip opened at Rs. 483.25 and has touched a high and low of Rs. 498.75 and Rs. 483 respectively. So far 2,96,567 (NSE+BSE) shares were traded on the counter. The stock is currently trading above its 200 DMA.

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