Having made Prestige a household name in Bengaluru, can billionaire-developer Irfan Razack do the same in India’s most expensive and competitive real estate market ?
In 1990, when Irfan Razack sold his second real estate project in his home market of Bengaluru for Rs 1 crore, he began planning his retirement. Elated with the money he had made, Razack thought he could spend his days indulging in his favourite hobby—horse riding. But twenty-five years later, the now 62-year-old chairman and managing director of Prestige Group is still hooked on to real estate. “My friend had warned me that making buildings is like a drug. He said, ‘You will become addicted to it’,” says Razack, who heads Prestige Estates Projects Ltd, the group’s flagship company.
A self-professed “clear thinker” who prides himself on being meticulous, he believes that life is about conquering the next big milestone. “Money loses its charm after a while. It is the creativity that keeps you going,” says the billionaire, who, with a net worth of $1.23 billion, ranks at No 77 on the 2014 Forbes India Rich List.
Prestige Estates Projects, India’s second-largest listed real estate company, is on the brink of greater things. Now more than ever, it needs its leader. Retirement is not an option for Razack.
For the first time, in financial year 2015, Prestige has overtaken India’s largest listed real estate developer DLF Ltd in pre-sales (new sales). Last year, the difference between the pre-sales of the two competing companies was Rs 1,424 crore with DLF in the lead. But Prestige ended the recently concluded fiscal 2015 with Rs 5,014 crore in pre-sales compared to DLF’s Rs 3,850 crore of pre-sales much to the surprise of analysts who were initially sceptical of Prestige meeting its new sales target of Rs 5,000 crore.
Now, Razack expects to touch Rs 20,000 crore in pre-sales in the next three years. And this time around, everyone, competitors included, is paying attention.
To put things in perspective, prior to its initial public offering (IPO) in FY09, Prestige had recorded revenues of Rs 889 crore. Since 2010, its market capitalisation has grown from Rs 2,000 crore to about Rs 10,000 crore currently. Its subsequent rise in these last six years has coincided with DLF’s decline in growth. DLF’s market capitalisation has been on a downward spiral from a high of Rs 2 lakh crore in 2008 (a year after its IPO) to approximately Rs 22,000 crore.
These comparisons don’t sit too well with Razack. “We are the number two developer by default, rankings don’t matter,” he says.
But how did he ride the crests and troughs of the real estate market? For nearly three decades, the Bengaluru-based developer built an enviable portfolio by focusing mostly on his home turf (85 percent of its ongoing projects are in the city) compared to its larger rival DLF, which has projects across India. Luck had a hand in his success, too. Bengaluru, along with Mumbai and Delhi, is one of the top three residential property markets in India, and has held steady unlike the National Capital Region (NCR) where DLF has most of its projects.
In terms of revenue, Prestige pales in comparison to DLF. The New Delhi-based real estate company ended FY15 with Rs 8,168 crore in revenue compared with Prestige’s modest estimated revenue of Rs 3,200 crore for FY15. Prestige was scheduled to declare its audited financial results for FY15 on May 30, 2015 (after Forbes India went to print).
What has largely gone unnoticed, however, is that a substantial portion of the Bengaluru developer’s sales have not yet come in for revenue recognition. Real estate firms recognise revenues once their projects reach the threshold limit of 25 percent completion. Because many of Prestige’s projects haven’t reached that limit, the company is sitting on unrecognised revenue (sales made but yet to come in for recognition) amounting to Rs 8,377 crore as of December 31, 2014. Much of these sales will kick in by FY16.
Not that Razack is sitting around waiting for the numbers to kick in. He has far bigger plans.
source: http://www.forbesindia.com / Forbes India / Home> Features – Big Bet / by Shabana Hussain & Debojyoti Ghosh / June 09th, 2015