Presales boom masks profit collapse as margins compress and collection guidance slips

The quarter presents a classic disconnect: headline presales growth masks deteriorating profitability. Revenue and profit growth diverged sharply—presales surged 15.9%, but net profit fell 12.9%, driving net margin down to 9.6% from ~10.9% prior. More alarming: reported revenue is only ₹2,675 Cr against ₹6,579 Cr in presales, a gap that signals severe revenue recognition timing lag and backlog completion risk.

Of the ₹2,675 Cr reported revenue, management completed only three projects in Q1 (4.37M sqft) with zero major handovers contributing to the quarter. That timing mismatch cascades into reported EBITDA of ₹1,600 Cr—down 4% YoY—despite presales up 15.9%. The CFO attributed the margin miss to 'no major completions,' claiming project-level margins remain intact. That claim rests unverified, but the underlying cost pressure is real: geopolitical oil price spikes and labour disruptions (elections in Assam, West Bengal) added 2–3 months of cost overruns per management. The combination of revenue timing and cost inflation is the story, not demand weakness.

Collections guidance revision—silent but material. Prior call expected collections growth 'similar margin' to 15–20% presales growth, implying ₹21–22K Cr FY27. Q1 came in at ₹4,802 Cr; at this run rate (~₹4.8K per quarter), full year would be ~₹19–20K Cr. The CFO acknowledged this in the call ('at current run rate… ₹20–21K Cr') but positioned it as temporary. If Q2/Q3 collections don't accelerate materially, the miss is ₹1–2K Cr, or ~5% of guidance floor.

Approval delays are now a recurrent pattern. Q1 saw four Bangalore projects (Avon, Battersea, Garden Breez, Springwood) slip from Q1 to Q2. The CFO's language ('every week we promise next week and it doesn't come') signals RERA delays are structural friction, not one-off. This is the second consecutive call flagging approval timelines as 'our major stress.' The ₹45K Cr launch pipeline pending approvals faces H2 concentration risk.

Debt increased ₹1,000 Cr QoQ despite 'marginal' FY27 guidance. Net debt jumped from ₹10,900 Cr (Mar 2026) to ₹11,900 Cr (Jun 2026). The CFO attributed this to business development spend (₹650–700 Cr borrowings) and land acquisitions (₹400–500 Cr cash deployment). However, if collections miss ₹1–2K Cr and presales conversion slows, debt reduction will lag the ₹1–1.5K Cr marginal guidance, risking leverage creep. D/E is already 0.69.

The market confirmed the fundamental read. Day-1 reaction was -4.67% (delivery 46.5%) post-announcement; the sell-off held, fading only to -4.78% by day 5. The stock now trades 11.92% below its all-time high and sits below its 50-day and 20-day moving averages, suggesting conviction among sellers. Ownership has shifted: FII trimmed 93 basis points QoQ (from 14.20% to 13.27%), while DII stepped in (+92 bps to 23.51%). That's a mixed signal—domestic institutions adding, but larger foreign players cautious. Promoter holding is steady at 60.94%. The positioning reflects what the numbers say: solid presales growth offset by profit compression and collection guidance risk.