Page 29 - Kolte Patil AR 2019-20

Overview
In the business of real estate development, a critical success factor is the ability to keeps
cash flows moving. This ability
is not just derived from the ability to generate higher
sales; it is complemented by
the competence in collecting receivables on schedule. The latter aspect is proving critical
at a time when the economy is sluggish, consumer sentiment weak and there is a premium
on collecting receivables on schedule. During the year under review, the Company reported a record C1368 Crore in collections, 9.7% higher than the previous year.
Drivers of success
The Company reported a contrarian performance in the area of collections for some good reasons.
The Company serviced the needs of serious buyers as opposed
to investors, translating into a greater responsibility in servicing their instalment obligations on schedule.
The Company arranged for a high proportion of apartment purchases to be backed
by mortgage financing, strengthening the assuredness of its cash flows
The Company actively communicated the phase-wise construction of purchased apartments, enhancing the customer’s clarity of the quantum and schedule of the next payment
The Company focused on making quality sales, selling only as much as the market could bear without compromising payments (or realisations)
The Company focused on liquidating sustenance apartment inventory, which usually comprised completed apartments, generating sizable inflows
The Company generated incremental cash flows from 2.5 msf of sales made in the previous year coupled with the handover of 1601 apartments in FY20
The Company aggregated Pune, Mumbai and Bengaluru collection teams into one unit; the daily monitoring enhanced collection efficiency
Big numbers
965
C Crore, Collections, FY17
1368
C Crore, Collections, FY20
Perspective
“At Kolte-Patil, we protected our competitiveness through clarity of focus: on cash flows in hand more than cash profits
on paper. The result is that we did not just focus on selling more apartments; we focused on timely construction and collections that lubricated our cash flow and reduced working capital, keeping the virtuous cycle in motion.” – Gopal Sarda, Group CEO
How we strengthened our collections efficiency
The Company focused on selling existing inventory
The Company enhanced sales, increasing inflows
This generated sizable inflows of largely completed apartments
The Company centralised its collections team for enhanced specialisation
The Company worked with home financing partners, accelerating its receivables
The Company segregated collections
from the sales function, increasing focus
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