Arihant Superstructures Limited (506194) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '23 Earnings Conference Call of Arihant Superstructures Limited, hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kapil Yadav from Dolat Capital. Thank you, and over to you, sir.

Thank you, Michelle. Good afternoon, everyone. On behalf of Dolat Capital, I would like to thank the management of Arihant Superstructures Limited for giving us the opportunity to host the Q3 FY '23 earnings call. From the management team, we have Mr. Ashok Chhajerji, Chairman and Managing Director; Mr. Parth Chhajer, Promoter and Whole-Time Director; and Mr. Abhishek Shukla, Chief Strategy Officer. I would like to hand over the call to the management for their opening remarks. Over to you, sir.

Thank you, Mr. Kapil. Good afternoon, everyone, and thank you for taking the time out to join Arihant Superstructures Limited conference call to discuss Q3 and 9 months to FY 2023 results. Firstly, I will go through key business parameters for Q3 FY 2023, followed by the financial highlights of the quarter before handing over to Mr. Parth Chhajer. To start with, the company has achieved sale booking of 505 units in the third quarter, which aggregates to INR 224.3 crores in value terms. This is a growth of around 21% to 22% Y-o-Y. With this, the sales for the 9-month period is 1,159 units and INR 548 crores in booking value. The total area sold for this period is close to 9.5 lakhs square feet, and the total collection for the quarter and 9-month period stood at INR 89.8 crores and INR 318 crores, respectively. During the quarter, the construction was commenced for our latest affordable housing project Arihant Aaradhya, which is located near Kalyan. The project was launched in December '22, and we have already sold 35% of the launched inventory, that is about 440 units. We are gearing up for new launches in the next 2 quarters which we will brief you over the course of the call. We are also venturing in project development, paced with addition of 25 acres of Mumbai-Pune Highway near Hiranandani Fortune City, Panvel. We'll again throw more light in the call later. With this, the company has added approximately 2.4 million square feet with a gross development value of INR 1,100 crores plus to the project portfolio in this financial year. Now coming to the financial highlights. The total revenue for the quarter stood at INR 115.21 crores as against INR 88.6 crores in Q3 FY 2022, registering a year-on-year growth of 30.1%. At EBITDA level, the figure stands at INR 29.93 crores as against INR 18.47 crores in Q3 FY 2022. That is the year-on-year growth of 62%. The company has also registered a strong growth in consolidated profit after tax of 72.3% to INR 19.95 crores in Q3 FY 2023 as compared to INR 11.58 crores in Q3 FY '22. The 9 months [ FY '22 ] is showing a good picture. The revenue, EBITDA and profit after tax have grown by 24.7%, 28% (sic) [ 28.1% ]and 34.7%, respectively. The revenue for this period is INR 325.7 crores, EBITDA is INR 69.2 crores and PAT is INR 42.4 crores, which are very close to the full year figures for FY '22. This quarter also marks a break out in terms of our PAT figures, which has in trailing 12 months has crossed INR 50 crores. To be precise, it is about INR 52 crores. The EBITDA margins have also improved by 57 basis points to 21.25% and PAT margins by 97 basis points to 13.03%. With this, now I will hand over the call to Mr. Parth Chhajer, Additional Whole-Time Director, Arihant Superstructures. Thank you.

Good afternoon, everyone, and welcome to the conference call for Q3 FY '23 Earnings and Business Update. Thank you, everyone, for joining. We are happy to see business grow despite the inflation and higher mortgage rates. The Union Budget 2023 has provided the realistic sector with crucial support and incentives. The government has announced several measures to stimulate investment and economic growth with an increase in capital expenditure on infrastructure investment to INR 10 lakh crores, which shall boost the economy and create new job opportunities. Growth in real estate is expected in line with the increase in outlay of PMAY and CLSS schemes to INR 79,000 crores until 2027. In Q3 FY '23, our company's construction activities have picked up quite well in the quarter, and we have seen tremendous progress in the execution across all our sites in Mumbai, MMR and Jodhpur, Rajasthan. We have received OC for the new tower at Arihant Adita. Other sites in MMR region are also closing towards delivery and OC applications. We also launched our Kalyan project in this Q3, Arihant Aaradhya, and we have seen a good response from the homebuyers. The product has created a slight disruption in the Kalyan micro market and offers quality living to our homebuyers at an affordable price when compared to premium pricing in the vicinity. Construction activity is in full swing for 4 towers. We have also received approvals for Arihant Aayan at Titwala and revised approvals for Arihant Arshiya at Khopoli in Q3, which shall be open for sale in the upcoming quarter. After heartening response of the Della Tower last year, we are also gearing up for the new launch at Arihant Aspire in Panvel. On the business development front, we have acquired 25 acres of land at Chowk, which is off the old Mumbai-Pune Highway. This is a total outright purchase of land wherein we would be venturing into horizontal development. We shall be coming up with plotted development being offered to the plot buyers. The project development potential shall be around 6.6 lakhs square feet area spread across 275 plots. Going forward, we also have a good robust pipeline in the coming quarter as well as financial year 2024, which is explained out in the presentation uploaded on the exchanges as well. With this, I would like to now throw the floor open for questions. The management is there to take the questions. So over to the questions.

[Operator Instructions] The first question is from the line of Balasubramanian from Arihant Capital.

Congratulations for good set of numbers. My first question is regarding the Aayan project. Earlier, it was planned Q3 FY '23, now it's moved into Q4, and one more project Shilphata project is planned in Q1 FY '24. I think now it's moved into Q3. Could you please mention some specific reasons for the delay in the projects?

A, it has taken -- not only these, 3 to 4 projects have taken up delay in approval of times. And with the Shilphata project, we are still adding on small portion of more land. Hence, the design would be completed along with that. There have been the planned approvals for at least 2 to 3 phases, which were in Q1, Q2 later in this year, could not happen up and the delay -- due to delay, this would be having -- this would be seeing daylight in this quarter and the coming quarters. So we will be able to see up more launches continuously from this as well as in the next quarters.

Okay, sir. My next question in terms of interest costs are increased a little bit, INR 5 crores to INR 8 crores. Like what would be the debt levels? And what is the finance cost? And what kind of maximum peak debt levels we may expect by this year?

Our construction finance happens to be at 12% per annum, which is from ICICI and HDFC Limited. And because new acquisitions have been done and hence, the borrowings have been taken up for purchase and acquisition of the new land, and due to this reason, the finance cost still has already gone up a bit, but the business opportunities are more far yielding which can easily satisfy. And still when you talk about debt-to-equity ratios and our control -- debt versus our project receivables, we are fairly on a very good comfortable side. As till now also, we have only 3 projects, which are mortgaged out of 14, which are under construction. This is how we balance it out that the company is at a very low risk when it comes to debt.

Okay, sir. Sir, on the realization side, we have seen improvement in FY '22, the realization around the INR 5,536 per square feet, but in 9 months FY '23, INR 5,768 per square feet, so almost more than 4% increase. You have taken any price hikes during the quarter?

Yes. We have taken up the price hikes, and in spite of taking price hikes, we are seeing sales happening, and this has secured the company's businesses and will not erode the profits, which have to be with the result to be taken care due to the rise in construction costs from the last 1 year.

Okay, sir. And sir, we got 25 acres land in outright purchase in Mumbai-Pune Highway. So what would be the land cost?

It is INR 38 crores. INR 38 crores plus stamp duty and registration around INR 40 crores -- INR 41 crores.

[Operator Instructions] The next question is from the line of Ketan Kotecha from Ketan Kotecha & Company.

First of all, congratulations for the fantastic quarter 3 results. Since company has seen impressive growth and scale-up in the last 2 years, my question is, can we expect the same growth momentum on the business scale-up in the coming year?

Ketan, as we have been always told -- we tell that we are into percentage completion method and the income tax and companies that both match each other, and percentage completion method ensures that the profits are booked in time. And when we see that the sales are growing, automatically on percentage completion method, the revenue recognition as well as the EBITDAs and PAT numbers will always have in CAGR. And it is not like this is one-off and windfall type of quarter, we are aware that, yes, whenever there would be rise in sales, we'll see up the same type of performance after each sale around -- in the next quarters. So be tuned to it, we would be able to do up similar kind of performance as we have done in the last 10 quarters when we talk about after COVID. When we see the all 10 quarters, the company has been able to do a better number than the previous quarter.

[Operator Instructions] We have the next question from the line of [ Ghanpal Pangal ], an Individual Investor.

Am I audible?

Yes, sir.

First of all, congratulations on great set of numbers. Last year performance, we have covered in 3 quarters. So my question is on the PAT margins. So these are sustainable margin, 13%, or there is any chances of decreasing in the coming time, rate of interest rising scenario?

Basically, the new -- any project which is envisaged and which are taken on newly or worked out within at margins of around 20-plus percent and when we had clean-up and bad cycle of 5 years, which has passed through in the past -- in the last 1 decade and the majority of the lands are already procured in 2010, '11, '12, and it has been carried out in construction office right manner. In spite of a longer tenure, the projects are profitable. And undoubtedly, when we talk about 1 or 2 projects which are off and which are off 2012 -- '10, '11, '12 purchases, the PAT margins are less, but blended out at the new projects and the new and the old projects, we would be able to see a similar kind of PAT margin in the coming quarters also.

That's fair enough. And sir, one more question. Is there any fundraising plan or our internal accruals are enough to project the ongoing sites?

For new acquisitions, funds will be raised. For the current projects which are ongoing, as we have always mentioned in our earlier conference calls also, that we don't -- the company does not require any working capital. It is good enough to raise -- to have collections and run the projects which are existing without having additional facilities in large. For the new acquisition, yes, the funds will be required and this is the right time to acquire businesses. As we have seen in Mumbai Metropolitan region and Navi Mumbai, in particular, seeing a big growth, a large growth which has been witnessed by and which have been accoladed by the Honorable Prime Minister also during his visit to Mumbai this last January also -- this January. And this is the time to get the best of the businesses acquired, so that the company will have profitable transactions in the next 5 years from now. So we will be acquiring and will be for that, plus we invite our investors to participate in the issuance of equity. And in that case, if it is required, a little bit of debt also would be pocketed.

[Operator Instructions] We have a follow-up question from the line of Balasubramanian from Arihant Capital.

Sir, on the balance sheet, receivables, trade receivables have been increased around INR 60 crores to INR 84 crores from FY '22 to 9 months FY '23. Throw more light under the [indiscernible]

As and when the sales will increase, always the trade receivables will be spiraling up to the earlier ones. Yes, still the collections are into good flow. And when we see about how home loans being disbursed, it generally takes around 90 days to 100 days per home loan disbursement from the day of client booking. Hence, trade receivables would be always in growth and we would see an increase, and this would mean that in spite of good collections if the trade receivables are increasing, that shows that the sales and the client -- the sales numbers are also increasing.

Okay, sir. Sir, on the project delivery side, I think we have done 471 units in 9 months FY '23. We may assume in Q4, we can able to deliver 232 to 250 units? Hello, sir? Am I audible?

Yes, you're audible.

Yes, sir. Sir, on the project delivery unit side, we have achieved 471 units in 9 months FY '23. Is that possible to achieve another 200 to 250 units in Q4?

Yes. So we are lined up for the new deliveries wherein we've already applied for OC for some projects in Taloja. So we should be able to get another 350 units to 400 units under this category in this financial year, hopefully.

[Operator Instructions] The next question is from the line of Abhishek Getam from Alpha Invesco.

Am I audible?

Yes, you are audible.

Sir, I wanted to ask, on the presentation you have released, you've noted that we've acquired 25 acres, and we also have an approval of 51 acres land to be acquired in Raigad. So is this different from the one which we have already acquired?

Yes, it is in addition to the 25 acres and adjoining to the 25 acres. So on the completion of acquisition and transaction being completed, this will total up to 76 acres.

76. Okay. This will have a revenue potential of 6.6 lakhs square feet -- the 76 acres or the 25 acres?

Yes, we will be going into plotted development, which is the [indiscernible] thing today across India. And we are seeing up this change due to the better infrastructure facilities where horizontal development is possible. And the travel time is reduced due to the MTHL link, the JNPT corridors, et cetera, which are already done up in Navi Mumbai. And so the larger projects generally sees up and start to completion cycle of 7 to 10 years. In a plotted development, it would see in cycle of 2 years to 3 years. So the turnout would be more faster.

Just wanted to understand, so the 76 acres which we'll be acquiring in Raigad. So this in all will have a potential of 6.6 lakh square feet?

Yes, approximately, it would be same -- it can be any large.

Sorry to interrupt, the 6.6 lakh square feet is for the 25 acres.

Understood. So 76 acres will have how much? So basically okay, 3x.

We'll have to get back to you.

Yes, it will be approximately 3x. For your information, it would be sold not on square feet but on plots. And we see around 275 bungalow plots in first 25 acres. And similarly, another 500 plus in the next 50 acres. So the plotted development would result out to something around 700 bungalow of plots. Here FSI is not important. Here plotting is important because FSI will be constructed by the developed -- by the plot buyer himself.

Okay. And sir, in this area -- so this is mostly -- what will be the buyer segment -- buyer type for this? Will this be a second home for the buyer? Or I mean like a vacation or more sort of away from…

The first target customers are for second home, which have seen up a big, big, big spurt in the last 1.5 years right after COVID also. And we have seen plotted development by Wadhwa right now taking up a huge success in the month of January, [indiscernible]. And on the same lines, we see that it is a less risk of job and, undoubtedly, the target would be second home. But when we see this region geographically, we find that we are just 5 kilometers away from Hiranandani, which is a high-rise development and where flats are -- where it is apartment living of 2 bedroom and 3 bedroom, and a person would be getting up more than 3x the total area of what he gets in apartment in the same cost. So the living style will [Technical Difficulty] in the nearest future, we will be seeing hospitals all around.

Sir, I'm sorry to interrupt. Your voice broke. Can you repeat your last line, sir, please?

Hello? Hello?

Yes, sir, we can hear you now.

For [Technical Difficulty] nearby industrial area as well as the Navi Mumbai area.

Understood. Patalganga area, sir, right? Patalganga west -- hello, am I audible?

Hello, somebody can take it over?

Yes. So this we have acquired is in our Chowk area, precisely which is close to Hiranandani Fortune City at Panvel, so it's not Patalganga.

Okay, I understood. So we said that just to get the number there, 25 acres, we bought it for INR 41 crores, right? That transaction is done.

Including stamp duty and registration charges, yes.

Yes. And so we raised some debt from HDFC. And then we are now looking for one more capital raise of INR 150 crores. So that will be a mixture of debt or debt and equity only?

This [ level ] would be equity and acquired for the business acquisition, it would be a mix also.

Okay. So INR 150 crores, you're looking for our equity ratio of [indiscernible].