In which year did we first invest?
We first invested in Prestige Estates in 2019.
Where is their head office?
The head office is in Bangalore, Karnataka, India.
What does the company do?
It is a leading South Indian developer with a good reputation for executing and completing projects, covering segments such as residential, commercial, retail, hospitality and property management.
Why do we like the investment?
We regard Prestige Estates as a quality developer with a strong track record of residential housing development and a growing investment property portfolio. Founded in 1986, the group has completed more than 270 projects through the years. It has continued to show decent growth in pre-sales, completions, launches and rental income. Having been a leading player in South India, Prestige is looking to drive growth by diversifying from its base in Bangalore to other parts of India, such as Mumbai and New Delhi. Its expansion strategy has been sensible, as it is opting to add new projects through tie-ups with developers in other regions, such as HDFC in affordable housing.
Prestige has more than 150 million sq ft of real estate space in its pipeline and around a quarter of this is in locations outside south India. Its most recent updates have highlighted a new asset creation cycle as the company is planning an aggressive scaling up across all its business segments over the next five years, including the rebuilding of its shopping mall pipeline. Capital discipline is key and we would monitor how the company executes on this, albeit operating cash flows have been strong and pre-sales momentum remains positive. There is also support from a substantial improvement in the company's liquidity position, following the conclusion of a spin-off of assets to Blackstone and a stake sale in one of its office blocks.
More broadly, the government's bold housing programme is taking shape with affordable homes being built across the country, while sector reform such as the Real Estate (Regulation and Development) Act (RERA) has triggered large-scale consolidation in the industry, with the strongest impact on the residential segment. We expect good quality developers with strong balance sheets and brands, such as Prestige Estates, likely to benefit the most. The consolidation theme is still happening with Prestige getting more deals from banks offloading their assets. We also see urbanisation and population growth, combined with increasing disposable income and the increase in nuclear families, as fuelling the overall demand for housing over the longer term.
With regard to the environment, social and governance (ESG) aspects, Prestige Estates has yet to have an MSCI ESG rating, but we are encouraged by the company's efforts towards a greener planet. The company is committed to designing and delivering assets with "green building" certification, while also incorporating water conservation and waste recycling. For instance, the company has installed rainwater harvesting mechanisms at all its project locations. Compared with conventional buildings, overall Prestige has conserved more than 30% of water in its portfolio of green buildings. Its freshwater consumption also fell by 19% in FY2022. The company also recycled 29% of its overall waste in FY2022. As for the social aspect, in terms of talent management, Prestige uses online learning resources to enhance the skills of its workforce, with a learning platform that has videos, articles, podcasts and TED Talks on various topics and interests. In addition, it has in place an employee well-being policy and Prevention of Sexual Harassment (POSH) policy that applies to all employees. We have also seen some progress in corporate governance. Independent representation on the board of directors is about 56%, while Prestige increased the number of female directors on the nine-member board to two in FY2020 from one previously.
Expanding beyond the south: Having been a leading property developer in South India, Prestige Estates is looking to drive growth by diversifying from its base in Bangalore to other parts of India, such as Mumbai (with its Prestige Jardan Classic residential development pictured above) and New Delhi.