Arihant Superstructures Limited (506194) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '23 Earnings Conference Call of Arihant Superstructures Limited. [Operator Instructions] I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, Mr. Sonpal.

Thank you. Good evening, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Arihant Superstructures Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the fourth quarter and financial year ending 2023. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Let me now introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We firstly have with us Mr. Ashok Chhajer, Chairman and Managing Director; and Mr. Dhiraj Jopat, Chief Financial Officer. Without any further delay, I request Mr. Ashok Chhajer to give his opening remarks. Thank you, and over to you, sir.

Thank you, Anuj, and good evening, everybody, and welcome, everybody. Thank you for taking your time out to join the company's earnings conference call for the fourth quarter and the financial year ending 2023. Firstly, let me take you through the key business highlights followed by the financial performances. On Q4-to-Q4 basis, we could true up a top line of INR 66 crores versus INR 70 crores. And the total comprehensive income after the -- for the period has been 106 negative when compared to 881 on the 31st March -- on the previous quarter four 2022. Annually, still we have been able to do a reasonably same. It was INR 330 crores of top line, which had an increase of 18% rising to INR 390 crores this year ending from the previous year. And the profit before exceptional items and the -- and that's to be INR 48 crores last year versus this year, INR 52 crores. And the profit on -- after elimination and minority interest and controlling interest, the last year it was INR 41 crores and this year it is INR 31 crores. So for the fourth quarter, the company achieved in terms of sales bookings of 650 units, as there was a launch which was largely awaited for the project Arihant Aspire, which took time for approvals getting nodded off and it took almost 13, 14 months to get the approval for the one particular project or else it would have come in the earlier quarters as it was an envisage. With this, there was a growth of 29% on a quarter-to-quarter basis of the area sold vis-a-vis when we talk about sales on an annual basis, we are almost equal to or an inch less than the last financial year. During the same period, we did when total 5.6 lakh square feet, which aggregated to INR 336 crores of sales in this quarter. And the collections have grew by 21% from previous quarter. The company launched a new tower Galenia and Arihant Aspire, which made the contribution of higher -- total sales of the year. FY '23, total units, as we told, we have sold 1,552 minutes versus 1,650 in the previous year, square feet wise, it has been almost the same. And the collections, the booking -- the collections for FY '23 stands to be INR 483 crores. And the company has done a gross development of INR 1,005 crores to the project portfolio in this financial year. The revenue yet to be recognized on the sales to be done is to a tune of INR 680 crores. The financial year 2023, we entered into new markets of Titwala, which were just preparedness of launch, and the launch has happened up in this quarter of -- Q1 of this financial year. And on the outright basis, we also entered into asset light model by entering into and JV at a very hot premium spot just [ adopting ] after the new tunnel, which is in -- a new tunnel road, which is passing from [indiscernible] to Shilphata, a 7 acres of land. It is on an asset light model. The plans are done, and it is under the approval. You would see a construction start of daylight in the Q2 of this financial year. 25 acres of more land was also purchased at Chowk in the Q3 at -- where we are about to design for revenue income that is rentals and consistent income from hospitality as well as also from plotted development and villa development constructions. The blended current margins currently today has been 18%, which includes our older projects also. So trends, when we see margins, the larger contribution this quarter also and are coming from the larger projects that is Arihant Aspire and Arihant Aalishan, which are projects undertaken in 2012, '13, '14 and '16. And due to that, due to the capitalization, the margins for these projects individually stands would be 10%, whereas the new projects try to contribute to an extent of 35%, which happened even in the past year at the holding company, Arihant Superstructures Limited, where 1 project only Arihant 4Anaika contributed to a tune of INR 35 crores, so -- which was around 35%. So new projects always contributes larger only due to the lag of the slowness of real estate in the past decade. And the projects have been stretched due to which we find margins less today. But what we find tomorrow coming up, we see Ambedkar link, which is happening to be the core center of this area, and the price acceptance in terms of increasing price of sale price from 5% to 10%, 15% also will not be surprises. And if that happens up in this financial year, the margins in the old project also will get increased. The new other projects, which are on the other hand, are churning out these margins. And the acreages of land as in terms of business development, what we envisaged at the start of the financial year, we was to double up the size of the portfolio of land and construction. It stood at -- the projects of 1.2 million square feet stood at 130 acres of land in start of this financial year. We could add up to 130 to 165 acres in this financial year. And another odd 45, 50 acres would be added up which are ready to be done up in this quarter 1. Some due diligences are pending. Hence, the agreements have not taken place. The funds for the required lands to buy outright are already in place and with the company, it has been already arranged. So for the fourth quarter, the revenue stood at INR 66 crores then EBITDA of INR 11 crores and EBITDA margins at 16.4 percentage, while profit after tax was INR 24,00,000 as we saw it about. And whatever -- the future outlook, what we see is that the interest rates have already peaked out. And every new news where even a drop-off an interest rate in home loans would see -- would be seen as a great positiveness in terms of sales and price rise of the product in the coming days. And we are ready for -- we have a ready inventory -- we have inventory, which can cater to these large sales, which is to a tune of 1.4 crore square feet to a tune of INR 7,700 crores of top line. This financial year, we see that the new launches would contribute to around -- launch of 2,500 plus of the project sizes with an estimated revenue of INR 1,000 and the unsold inventory from the current ongoing happens to be at 1,600 north sold another with an estimated of INR 1,000 crores. So coupled up, it would be -- on the platter would be 4,000 flat on sales within estimated revenue of INR 2,000 crores. We target -- the company targets to achieve around 60% of the total inventory of these 4,100 and INR 2,000 crores. So if a few of the approvals are in time, we would be able to see these numbers. And the Board has recommended a final dividend of INR. 0.50 per equity and the dividend policy is in place for Y-o-Y in the coming years. As the funds are more -- the promoters around their willingness have redrawn the right to this dividend, which results in savings to the company for around INR 1.5 crores. I'll open up the floor for question and answers. Open the floor.

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

So I just wanted to understand the debt situation. Like going ahead, what are the plans for the company? And other thing is how do we look, if you can give some outlook on revenue and margins as far as some prudent on this 3, 4 years ahead, so where do we look ourselves?

So the debt as on today on 31st March stands out to be to an around of INR 324 crores with all the entities. The [ attributable ] debt forms are to be for ASL with its stake in the subsidiary, works out to be INR 238 crores. So the split of the INR 324 crores of debt is that INR 175 crores of debt is from unsecured loans from the promoters, which are almost like CLSA equity, and which stands in the books continuously. And the institutional debt forms out to be another INR 150 crores. Servicing of the debt has been in time and the cash flows to service the debt has been very comfortable. And in spite of this debt, we have been able to manage the top line to be INR 390 crores, where engineering and spends have been done to an extent of INR 250 crores. With respect to the revenue in the coming years, as a management and as a company with key projects on the Board, we see that a few of the things if they fall in place, it did not happen in the last financial year '22, 2023. If everything is in place, we could see then CAGR of around 35%, 40%, very comfortably in sales. And revenue can be relatively have an increment of 25%. And on the same proportion, the margins would also see an increment, as I told right now that old projects when they contribute largely, the margins are lesser due to the interest being capitalized to the cost of the land. And the new projects when it starts off. So there are good new projects on the platter that is again are around 10 lakhs to 9 lakh square feet at Kalyan, which has saw a very good start and launch in the Q2 of this financial year. Again Aayan and Titwala has -- is on the Q1 of this financial year. It is under the process of launch. There are a few more phases which are going to launch. So more and more new projects would get launched, which will have higher margins. And blended with the lower margin of projects of the past years, which would phase out very soon. We see that the margins will be increasing on a Y-o-Y basis. And same proportionately, what we see the -- so it will depend upon who contributes more. So old projects versus new projects, which are seeing the first day of daylight that would make a difference. So construction and everything when we talk about -- we don't see a dip in the margins. But how much would it increase that would depend upon the behavior of the projects, which are under construction. So it's a little difficult for me to comment on it, how much margins would increase, but I surely see that there is no dip in the margins.

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

Hello. Am I audible?

Yes, you are.

Yes. So my question was regarding Arihant Aakarshan. This -- the project has been completely shared up, right, sir?

No.

Okay. Due to the...

Shelved off?

Sorry.

It is halted. It is not shelved off.

Okay. But sir, we have...

We have; a, today also at this hour, we have all the permissions of construction in place. We have the environmental clearance from the environmental body SIA. We have the consent to establish from MPCB also. The story when it goes like that, we launched up the project in the month of April and which could see up on 350 units of sale at the first 1.5 month and varying on sustenance on every month-on-month basis, we were able to do around 30, 35 flats every month. And with that, it was looked that we would touch up and the Arihant Aakarshan would contribute to around something less than 600 units of sales to the company in this financial year. The construction was also initiated and started off in the month of July after the RERA has come place after the excavation has done. In the month of August, it happened that the Taloja Manufacturer Association, which is the Taloja Industries Association in and around felt that there would be an requirement of some development plan variance to be taken and hence, they filed up an objection in the NTT level, where all the government bodies are also be party. And when that happened out in the month of -- first hearing was taken in the month of October and that is when the Panvel Municipal Corporation were granted up the Commencement Certificate on humanity grounds had asked us, wrote us to halt this construction as an good citizen so that only after clearances -- further clearances and further clarification from the much more higher authorities of environment from the state to the central, we would start the construction. And that is where we halted construction . Good for the good cause that we called up each and every customer of ours at that time within 7 days of the finding this letter to our office. And that has really given the credibility to the company to a very large extent. The 400-plus customers, none of them have panicked. Everybody on the boundary came and told that "Wow, it's good that we are hearing it from your -- from your office itself rather than from the market." And that is what we have been relying on Arihant. The trust, there is a reliability. But in such a situation, what is the stand you would like to -- we would like to take -- have been asked by customers. And we told that such clearance are sometimes staying a longer period. You should either opt for switching it over to any ongoing project or they can refund back. So it was almost, almost out of all the 400 cases to a tune of 275 units. We have given the money back to the clients. There has been no huge and cry in terms of complaints, cases, RERA, et cetera, not that single thing that's coupled up and scaled up to disturb the -- or to be answered rather than disturb and it has brought up lot of credibility to the company saying that the other developers in the vicinity have not taken such type of measures and to appraise the clients. And relatively, they have some huge voices being raised with those developers. And going forward, it looks like that the authorities would be able to conclude it within 3 to 6 months from now. So there are 2 scenarios. One scenario is that the project would see a continuity. And so the sales and numbers would again start up in the same and similar manner, the potential of the land cannot be diluted by the authorities in any way, as an Constitutional Rights also and under the Property Acts Right. And the scenario 2 is that EP government wants to do a reservation of the requirement of land for these buffer zones and et cetera. Then the only measure which the government can do is and would be directed is to acquire all the lands in and around and which would mean that they have to pay up and 5x the price of the current ready reckoner price and the market price blended. We see that a minimum of INR 100 crores and above would be received by the company. And if that happens, anything between INR 100 crores to INR 200 crores. We see that, that would be -- there would be a big cash flow for the investments of only INR 16 crores done in the land and INR 4 crores for the development, so vis-a-vis the profitability or the company is very much secured about its revenues from the land either in the form of compensation or in the form of starting the project. So that is where we stand today.

Okay, sir. So sir, to get this right, we got the land of INR 16 crores, right? How much was it? How much [indiscernible]?

This is panicle.

Panicle. Okay. So INR 16 crores for land cost, how much for development?

Around INR 4 crores.

And we had started some construction those back in during is open up?

That hardly we spent something. It was on the excavation.

Okay. Okay.

So -- it's not much of it. Around INR 20 crores, INR 22 crores, maybe INR 1 crore here or there.

INR 20 crores, INR 22 crores. Okay. So sir, we will get this INR 100 crores. So maybe multiple payments or TDR, right?

No, this is state compensation in form of cash.

Cash, okay. In the press release you mentioned partial TDR also.

Pardon.

In the press release, you mentioned partial TDR also.

It can be.

Okay.

It is the authority's decision would -- I don't think we have mentioned about TDR in the press release, but it can be -- I hardly see about it because I think we have to acquire the land, or we have to -- TDR does not generally come into acquisition of lands. It is only by way of compensation. Reservations, if it happens, then it is in the form of TDR.

Okay. Sir, and just another question on the same project is. So we had launched almost 600 units. And the Phase 2 was another 2,000 units for the same project, right? 1,900 around that figure?

The project was split into 2 approvals. So 1,000 flats each, so total was 2,000 flats. And we started with the launch of 600 flats in the Phase 1. So yes, 1,400 was yet to be rolled out to the market. So imagine this all would have been in the smooth run and has the -- as this would have not happened, our targets to sales would have been to the same tune of what we would have -- what we had in statement that there would be a CAGR of 25%, 30% and a little more than there depending upon the approvals. So it's 1,550 plus 600 would mean around 2,150 flats being sold, which nearly we almost reached out. So we are almost geared up to our statements on it. We would have even contributed to the PAT margins because within a year's time, the revenue recognition would have started off, and it would have added on to the top lines and the bottom lines both.

So total revenue potential for Phase 1, Phase 2 both was around INR 900,000 crores for Aakarshan?

That would take a span of almost 4 years of cycle of the whole project. It will not be -- it will not come up in 1 year.

Yes. Yes. No, but...

The cycle of the building was that? Yes, 2,000 flats into a INR 40 lakhs or INR 45 lakhs is something around INR 800 crores, INR 900 crores of sale.

Okay, sir. Understood. So we are still confident that we might start the project, right? Because in the presentation, we've still maintained it on the launch pipeline?

We as a cautious management have always felt that the disclosures and the governance has to be in the priority. And hence, boldly, we have come out to the markets, investors and the shareholders by being an elaborated view on our projects, which are seeing a little installment. And this is what we have believed into in transparency. And rather than just not detailing it out. So we have detailed of the minerest thing to the shareholders, investors and the markets.

Understood, sir. Sir, another question was, so we have given sort of a guidance of 35% CAGR presales, right? So earlier Q4 FY '22, I remember our sales target was around 45%, 50% CAGR and the revenue CAGR of 45%. So why have we softened this guidance?

A, for this large contribution, which got stalled of Arihant Aakarshan; b, the project at Shilphata, which would start off in the Q2 of this financial year. Almost 75% of the land was done up in terms of development agreement in the past April 2022. And the last piece of the frontage of the land happened up in March '23. So that is where that project also would be contributing now this year. So that is a large size of project with around 1,500 units and 12 lakh traffic.

[Operator Instructions] The next question is from the line of Manav Kapasi, an Individual Investor.