Arihant Superstructures Limited (506194) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Arihant Superstructures Limited Q4 FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Deepak Lohia, CFO, Arihant Superstructures. Thank you, and over to you, sir.

Thank you very much, sir. Welcome, everyone, and thank you for joining us for Q4 FY '20 Result Ended March 31, 2020 Earning Call for Arihant Superstructures. I'm Deepak Lohia, CFO of Arihant Superstructures. Please note that the digital and presentation have been mailed you, and you can view on these BSE India site also. To take us through the results and to answer your question today, we have Mr. Ashok Chhajer, Chairman and Managing Director of Arihant Superstructures. We will be starting this call with a brief presentation giving a overview on company performance followed by question and answer. The revenue of the Q4 versus Q4 FY '19, the revenue is INR 686 million for this quarter compared to INR 622 million earlier quarter. The EBITDA each -- increased INR 140.48 million to INR 154.91 million. The PBT also increased INR 49.63 million to INR 81.07 million. The PAT is also increased INR 35 million to INR 69 million over to -- last corresponding quarter. If you compare consolidated financial figure for Q4 FY '20 versus Q3 FY '20, the revenue is INR 641 million to INR 622.98 million. The EBITDA is INR 138.88 million to INR 154.91 million. The PBT is INR 62 million to INR 81.07 billion. The PAT is INR 41.02 million to INR 69.05 million. With that said, I would turn the call over to our CMD, Mr. Ashokkumar Chhajer, Chairman and Managing Director of Arihant Superstructures.

Good evening, everybody. Welcome to the investors conference. And well, the current days of COVID are a different story, but the year ended up -- had only in the effect of 15 days of COVID. And that was a very peak period also because it happens to be Gudi Padwa, near to Ram Navami, the real chunk of sales happen. Still, when we compare about -- when we talk about the annual figures, [indiscernible] sale of around 874 flats and -- which was to tune of 774,000 square feet and a value of INR 325 crore. So out of which the major has been contributed by Mumbai MMR 774 units and 100 by Jodhpur, Rajasthan, 100 units by Jodhpur, Rajasthan. And the revenue was -- Jodhpur was 32 and Mumbai MMR was 293. We would have touched up to the base of nearest to 950 or maybe luckily would have been 1,000 if the COVID wouldn't have happened. We launched up a new project in the last financial year, that was 4 ARIHANT ANAIKA, where this was a new purchase, outright purchase being done by the company. And that is a business development part which is continuously ongoing on a year-on-year basis. And we are not struck to the only original old projects to be completed and then hunt for new buying. And the new project, 4 ARIHANT ANAIKA had a good launch. It also forms to be under the category of all income tax exemptions, that is no tax under the [indiscernible] of the income tax act. The projects have already kick started. It has -- construction has reached up to around ground foundation stage coming up because it started -- construction started in December, we launched the project in November. And we got a fair good response to the project by -- around a sale of 180 flats, which is approximately 60% to the inventory. And this year, the first 2 months and probably, we can call it rather than 2 months after the lockdown, that was a closed lockdown and now June and July because of labors not being there in very large quantity, it's an open locked down. I think everything would resume very fast, largely in the same speed as it was in old days by the third week of July. But still during this point COVID period also, we had our workers on the site, where they left after the lockdown was open, partly. Still, some are already there, where construction is happening. We have done construction -- slab constructions in some of the sites. And all the sites are moving in terms of finishing works, certain small speed. But yes, nothing is at a stand stage. And during the COVID period also, we had our -- we activated our digital medium of sales, which was -- which resulted into a far good response. And the backbone or been total processors has been set for the digital network -- digital method of marketing, where a client is given all the previews so that he does not have to come 2 or 3 times on the site. So after that, it is a final call when he comes and he would be booking up the flats. And that is where our response has been received also in the month of April, May and June. When compared to any other projects in and around, it is told to be nice enough. And well, all the financial results are with the -- all shareholders and investors. I -- so the platform open for all of you to interact and question on any aspects of the businesses. So we welcome everybody. Over to all attendants.

[Operator Instructions] The first question is from the line of Tirath Muchhala from Elusividya Advisory.

I wanted to understand what was the -- like, how many units will we launch in this financial year, FY '20?

FY '20, total launch was around 270 units.

Okay. So it's interesting because our launches for FY '21, you were just saying 2,000 units, correct?

Yes, where the projects are under approval. And if all the approvals come in the existing projects, which has different phases, that is where we see that we would be targeting around 2,000 and it's something we can take around K. If some of the approvals don't go, still we will be able to at least touch out of 5 -- 3 to 4 projects being received commencement certificate. It should be something around 1,500 or 2,000.

No, so just to understand, in this kind of a scenario, don't you think the number is very ambitious because, I think, the highest number of launches we'll ever have. Or am I wrong?

No, it's not about ambitious. We already have the land with us. And some of the phases which have yet not received approval, that is where with some -- it is undergoing. One of the project, there is a change of plan so that it suits to the current market. And we have designed up more smaller houses now in one of the projects where it would be a new format of living where built in offices are also being incorporated in the house for work-from-home people. And I think that is what is the need of the hour also so built-in offices, not office spaces, but office rooms, built in office rooms inside the flat. So [Foreign Language]. And there is no extra expenditure where the call should not be taken. And majorly, as we see that 95%, 90% of our total projects are under the small bracket size, below INR 75 lakhs, INR 50 lakhs and INR 25 lakhs around, which is where the demand is there. And we -- from the on the ground reality, we have seen that Navi Mumbai has shown good response even after the COVID in June. And that is where we see that there is a traction and we can have a market share larger than the earlier years. So there is a real sale happening. And demand is there in this bracket of INR 25 lakhs, INR 50 lakhs and INR 75 lakhs. For INR 1 crore and above, yes, it is very slow, where one of our project is about INR 1 crore-plus, that is [indiscernible]. Rest all the projects of the company are in the range of INR 25 lakhs, INR 50 lakhs and INR 75 lakhs and below. So I think it is achievable. And starting off new phases, would mean that at least the project cycle is started off. And under launch, even if 25% to 30% is sold and sustenance around the year for the next product cycle ranging from 2 to 3 years, 3.5 years, you would be easily able to sell the currently launch inventory.

Okay. And what project is the one where you are changing the configuration for the plan?

It's a Panvel -- at Panvel Arihant Aspire, which is the largest one of the company, that is 3.1 million, 31 lakh square feet [Foreign Language].

Okay. No, so it's interesting that even in Aspire, where I think you guys have not sold as many units, you would go ahead and do 1 more launch. Or is it part of a reconfiguration and relaunch?

No, the 2 buildings, which are already started off are upright. So there cannot be any change in plans in the ongoing projects ongoing to buildings, which is -- in which also out of 650, we have sold 300-plus, so 50% of the inventory of the ongoing project is already sold. It is the construction phase, which will match up with the additional substances. This would be one additional building. So it would be a different product in the same project.

Okay, okay. Shall I come back into the queue for more questions?

Yes, please. Welcome.

[Operator Instructions] The next question is from the line of Pradeep Mehta from -- a shareholder.

Sir, I just want to know that you have launched an ANAIKA 4 and almost 60% is already sold out. So in the coming year, are you planning for new projects to be launched further, considering the lockdown situation and all those things?

Yes, in the lockdown also, we launched up a small project of Arihant 4 Extension. And now Arihant 5 Extension plants are under approval, in may be 30, 35 days, we should have everything in hand. So this is the location where we have already done up 1,650 flats in the last 4 years. And we already enjoy a market share of around 40%, 45% of the region of Taloja, Got and Koyna Camp, that region. And the new project also would be tune of 300 flats, where the marketing team is confident of achieving the same style of response as it achieved in an Arihant 2, 3, 4. So new projects [Foreign Language] this would be one. There would be new purchases also which are ongoing. Some of them are already registered, potential land details -- the potential projects land details are already shared with each of you in the fact file and the IR presentation. So in terms of budget allocation, we have something around INR 20 corer, INR 25 crore, INR 30 crore would be put in for new purchases also and rest would be utilized for the existing projects. So we would be able to come up with new projects and new products, new launches in the existing projects.

My second question is, sir, on a standalone basis, I see that top line is down by around 15% on an annual basis. Is it due to product mix or price reduction or due to lower volume of sales as compared to previous year?

Well, revenue recognization is not directly with the sales, it is connected with the progress of percentage of -- percentage completion method. And in this year, some of the projects like Arihant Aspire, ARIHANT AALISHAN and that had less percentage of completion. Though the sale number of units of fresh shares were large, but the percentage of completion was less and the fixed expenditure of interest and provisions as well as administrative expenses remained the same or marginally less to the last year ended March '19. So that was the reason. I think this is getting -- we can tell that it is getting accumulated and would be seen in the years to come.

Sir, my last question is, do we hold finished goods inventory aged above 1 year? And is there any constraint to sell those inventory?

Well, yes, we hold about 1-year inventory also, which is a tune of around INR 200 crores, which is ARIHANT ARSHIYA at Khapoli in Mumbai and Arihant ARIHANT ADITA and ARIHANT AYATI at Jodhpur. The speed of the construction was very fast during its period and unfortunately, the sales cycle had slowed down in these projects in Jodhpur, especially. And that is why we hold these INR 200 crores-plus inventory. We are -- it's not like it is not being sold, but we constructed far, far, far aggressively and in very large quantity with the anticipation that there will be fast takeoff for the ready-possession properties, and that is where the stock got piled up. We are expecting that the sales would be quite decent in this financial year because in COVID and after COVID, it is found that ready-possession properties are being more liked on rather than under construction, and that will help out to at least get a good number of sales.

[Operator Instructions] The next question is from the line of Tirath Muchhala from Elusividya Advisory.

So regarding our balance sheet, I just wanted to understand the debt position once again. How much is your debt and how much is unsecured from the promoter?

Unsecured stands out to be INR 201 crore from the promoters and that group and INR 160 crores from secured debt, that is banks and financial institutions. It was INR 168 crores in March ending '19, and we have been able to service the existing loans as well as bringing it down marginally by INR 8 crores only. And -- so that is a good sign also when we had seen that the real estate sector and the developers were raising funds largely in the financial year '19/'20, we have been able to make the balance. And this is what we would be -- we have planned out for this financial year also. We should be near to the same figures, 10% plus or minus. And in the last financial year, we closed 2 facilities with ICICI and FTCI also. So the company has been able to do the financial closures of the facilities taken, a, we also service up the existing in time without any delay. So that is about the financials. And with the secured loans, the promoters, I think, when we see about cash flows, it was around INR 188 crores March ending '19; and March ending '20, it is INR 201 crores.

Okay. And if I'm not mistaken, the bulk of the borrowing is for ARIHANT ASPIRE, correct?

Yes, major of the stake is over there because these all projects have done pretty well and -- due to which the cash flows towards the investment done could be written back or there was a breakeven for the projects. In ARIHANT ASPIRE, the project would take around maybe what we are planning across, at least 1 more year to do -- achieve the same -- similar type of pattern and stage. That is why also in the last financial year for the promoter funding to ARIHANT ASPIRE and Arihant Superstructures Limited, the interest rate was dropped down from 15% to 8%, which figured out to be around INR 13 crores less paid to the promoters for the funds plugged in these projects.

And what kind of interest costs are we paying to HDFC Limited for this?

HDFC around 12.5% for this facility.

Okay. Can I ask another question?

Yes.

So regarding the fact that we are launching -- we have a decent launch pipeline. What -- how do you see the debt requirement shaping up for the year and...

And we will be able to maintain and manage the same -- the policy adopted is that largely no funds would be raised, maybe pay -- the repayment and new facility would be to the same amounts or same figures. So we'll be able to match the same figures. We are not looking for raising up large funds for the projects. As we did in the year '17, '18 and et cetera, where we raised funds and we completed the projects at humungous speed. And that is where the inventory also lied up, and we have been seeing interest on it. The strategy has been adopted to largely sell-and-build model rather than build-and-sell model.

Okay. And regarding the premium project of ARIHANT AALISHAN, what are we doing to ensure that sale happens because in that the sales are quite slow?

Well, marketing campaigns are already done. The ICPs and the channel partners are activated. The client visits are there. Good thing is that we have footfalls on each of the project, including ARIHANT AALISHAN for a good large handsome numbers. So it's not like 1 or 2 in a week, it's something around 50, 80 or 90 people walking into the site. Yes, the market has seen a trend where high-value properties, people were not taking call fast maybe this year also. But we will do our best and maybe offer up them some pretty good discounts so that we can at least match up the things.

[Operator Instructions]

We'd like to add up also that, yes, due to this COVID, the 2 months as well as June and July, 4. So it's almost like a 33% of the whole year business has been washed out. And that would affect the balance sheets accordingly. But that is where we have scheduled the new launches so that would give up an equation to -- the equation to balance out the non-business happening in the COVID period.

[Operator Instructions]

We see no more questions, so can wait for few more minutes.

[Operator Instructions] Sir, nobody in the queue. Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to Mr. Deepak Lohia for closing comments.

Thank you, Stanford. Thank you, everybody, to be in our con call. We will be happy to interact with you in next quarter also. Thank you so much.

Thank you very much, sir. Ladies and gentlemen, on behalf of Arihant Superstructures Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.