Kalpataru Projects International Ltd , a prominent player in the infrastructure and real estate sector, is facing a significant tax challenge through its wholly-owned subsidiary, Azure Tree Lands Private Limited (ATLPL). The company has disclosed that ATLPL has received a substantial tax demand of ₹24.01 crore, raising concerns about potential financial implications for both the subsidiary and its parent company.

Tax Assessment Details

According to the latest disclosure made by Kalpataru under SEBI regulations, Azure Tree Lands Private Limited received an Assessment Order from the Income Tax Department. The order, issued under section 143(3) read with section 144B of the Income Tax Act, 1961, pertains to the income tax return filed for the Assessment Year 2023-24.

The tax authorities have made certain additions and disallowances to the returned income, resulting in a tax demand of ₹24.01 crore, which includes interest. Additionally, the Assessing Officer has issued a show cause notice for penalty under section 274 read with section 270A of the Income Tax Act, 1961.

Company's Response

ATLPL maintains that the tax demand is not justified and plans to contest the order. The company has stated that it is in the process of filing an appeal against the Assessment Order. This move indicates that ATLPL is confident in its tax position and is prepared to challenge the tax department's findings.

Potential Impact

While the full extent of the impact on Kalpataru Projects International Ltd is yet to be determined, the tax demand of ₹24.01 crore is significant enough to affect the subsidiary's financial position. This situation may, in turn, have repercussions on the parent company's overall financial performance.

The development underscores the ongoing challenges faced by companies in the real estate and infrastructure sectors, particularly in matters of tax compliance and assessments. It also highlights the importance of robust financial management and tax planning strategies for corporate entities and their subsidiaries.

As the situation unfolds, investors and stakeholders will be closely monitoring how Kalpataru Projects International Ltd and its subsidiary, Azure Tree Lands, navigate this tax challenge and its potential implications on their financial health and future operations.

Kalpataru , a leading real estate developer in the Mumbai Metropolitan Region (MMR), has announced robust financial results for the first quarter, demonstrating strong operational performance and improved balance sheet metrics.

Strong Pre-Sales and Collections Growth

The company reported a significant 83% year-on-year increase in pre-sales, reaching INR 1,249.00 crore in Q1, compared to INR 682.00 crore in the same quarter last year. Collections also showed impressive growth, rising 37% year-on-year to INR 1,147.00 crore from INR 838.00 crore in the previous year's Q1.

Area Sold and Average Realization

While the total area sold decreased slightly by 9% to 0.56 million square feet (msf) from 0.61 msf in the previous year's Q1, the average realization per square foot saw a substantial increase. The company achieved an average realization of INR 22,476.00 per square foot, up 101% from INR 11,199.00 per square foot in the corresponding quarter of the previous year.

Financial Performance

Kalpataru's consolidated revenue from operations for Q1 stood at INR 443.00 crore. The company reported an adjusted EBITDA of INR 104.00 crore with an adjusted EBITDA margin of 23.4%. However, the company recorded a net loss of INR 52.00 crore for the quarter.

It's important to note that the company follows a Project Completion Method (PCM) of recognizing revenues for projects started after April 2022. This means revenue from such projects is recognized only upon obtaining an Occupation Certificate (OC), while expenses like marketing and corporate overheads are expensed in the quarter they are incurred.

Strengthened Balance Sheet and IPO Proceeds Utilization

Following its recent Initial Public Offering (IPO), Kalpataru has significantly improved its balance sheet. The company raised INR 1,590.00 crore through the IPO and has utilized INR 1,192.50 crore towards debt repayment. As a result, the net debt as of June 30 stood at INR 7,939.00 crore, with the net debt to equity ratio improving to 2.0x from 3.8x as of March 31.

Kalpataru confirmed no deviation in the utilization of its IPO proceeds for the quarter ended June 30. The company's equity shares were listed on BSE and NSE from July 1. During the quarter, INR 500.00 crore was utilized - INR 300.00 crore for repayment of the company's outstanding borrowings and INR 200.00 crore for repayment of subsidiary borrowings. The remaining INR 1,090.00 crore remains unutilized, with the balance proceeds remitted between July 1-3, in line with the stated objectives.

The original allocation included INR 1,192.50 crore for debt repayment, INR 311.36 crore for general corporate purposes, and INR 86.14 crore for issue expenses. CARE Ratings Limited serves as the monitoring agency and confirmed the utilization aligns with the prospectus objectives.

Future Outlook

Kalpataru has outlined an ambitious guidance, targeting pre-sales of approximately INR 7,000.00 crore, which would represent a 55% growth over the previous year. The company also aims to achieve collections of around INR 5,700.00 crore and further reduce its net debt to approximately INR 7,300.00 crore by the end of the fiscal year.

Management Commentary

Parag Munot, Managing Director of Kalpataru, expressed satisfaction with the company's performance, stating, "We are pleased to share the performance highlights of Kalpataru for the quarter ended June — a period marked by strong operational performance and balance sheet strengthening."

Munot added, "We have a strong launch pipeline with a saleable area of 3.16 msf spread across Mumbai and Thane. Looking ahead, we remain committed to deepening our presence in key micro-markets across MMR and Pune, anchored by the trust we've built."

The company's focus will continue to be on timely project execution to drive collections and strengthen cash flows, as well as driving strong pre-sales across its projects.

With its clear strategy, solid fundamentals, and customer-centric approach, Kalpataru appears well-positioned to maintain its growth momentum and deliver long-term value in the competitive real estate market of Mumbai and surrounding regions.