Arihant Superstructures Limited (506194) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '24 Conference Call of Arihant Superstructures Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, Mr. Sonpal.

Thank you, Misha. Good afternoon, 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'd like to thank you all for participating in the company's earnings call for the first quarter of financial year 2024. 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. Now let me introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We have with us Mr. Parth Chhajer, Whole Time Director; and Mr. Dhiraj Jopat, Chief Financial Officer. Without any further delay, I request Mr. Parth to start with his opening remarks. Thank you, and over to you, sir.

Thank you, Anuj. Good afternoon, everyone, and thank you for taking time to join Arihant Superstructures Limited conference call to discuss Q1 FY '24 results and business updates. The real estate sector continues its up cycle on account of increased demand and infrastructure creation, and players like us with a proven track record and high credibility [ to ] benefit from the upward trend. I guess, most of you would have gone through the presentation, which is filed with the exchanges. I'll just take you briefly through the financial numbers for this quarter. In terms of the consolidated financials, the total consolidated revenue for Q1 FY '24 was INR 121 crores against INR 89.6 crores in Q1 FY '23, registering a year-on-year growth of 35%. The total consolidated EBITDA for Q1 FY '24 stands at INR 26.4 crores as against INR 19.1 crores in Q1 FY '23, registering a 38.7% growth on a year-on-year basis. The EBITDA margin for Q1 FY '24 stands at 21.82% versus 21.32% in Q1 FY '23, registering a marginal growth of 50 basis points. The profit before tax for Q1 FY '24 stands at INR 19.4 crores against INR 13.8 crores in Q1 FY '23, registering a growth of 40.6%. The profit after tax for Q1 FY '24 stands at INR 15.6 crores against INR 10.7 crores in Q1 FY '23, registering a growth of 45%. The PAT margin for Q1 FY '24 stands at 12.89% against 11.94% in Q1 FY '23, registering a marginal growth of 95 basis points. The net worth of the company has increased to INR 260.9 crores in Q1 FY '24 against INR 213.7 crores in Q1 FY '23, registering a growth of 22.1%. Now talking about the key operating highlights, the company has achieved sales bookings of 454 units in the first quarter, equivalent to 3.9 lakh square feet of area amounting to INR 245 crores in value. This is a growth of 4.43% in terms of sales value on a year-on-year basis. The average price per square feet has increased to INR 6,282 per square foot in Q1 FY '24 from INR 5,797 in Q1 FY '23. The average price per unit sold is close to INR 54 lakhs in Q1 FY '24 compared to INR 44 lakhs in Q1 FY '23, indicating that the premium housing contribution has been increasing over the past 1 year. The total collection for Q1 FY '24 stood at INR 105.6 crores. On the business development front, in this quarter, we signed the remaining portion of Shilphata land admeasuring 3,630 square meters, which now completes our acquisition to 31,860 square meters of area, which is approximately 8 acres of land at quite a prime location on the main Shilphata Road. Our team has started with the approval procedures for the same and a 2D sketch of the design is showcased on Page 2 of our latest presentation. We have also added on additional 51 acres of land at Chowk to the acquired 25 acres of land, totaling to 76 acres of fully paid up land acquired in just 8 months' time from November 2022 to June 2023. We would be developing constructed villas and annuity income assets in this project. Now just giving you a brief on the company level and the market scenario. We have seen the demand for residential loans continue to remain robust despite interest rate hikes and price inflation. Construction activities have continued despite external challenges in Mumbai real estate market. The mega infrastructure projects are taking up good shape in Navi Mumbai MMR region and we shall witness a big change in the way Navi Mumbai is recognized as a city. Our launch at Arihant Aspire, Panvel, continued during this quarter from Q4 FY '23, and we have seen a great response to the new tower as well. We have geared up for more new launches in the coming quarters across all the segments, and we'll also be having small refreshing launches in the ongoing projects to boost the sales as well. Our projects at Vashi, Kharghar and Chowk shall position us strongly in the high-income group premium housing segment, which comprises of 19% of our total portfolio today. Today, our company has presence in 11 different micro markets of MMR, which is the largest geographical spread by any developer in the MMR region. Offering a wide range of products to choose from INR 20 lakhs to INR 3 crores, we shall capture a good share in the premium housing segment as well going further. Our unique business model, sustainability and scalability shall show its -- shall also guide us well in the going forward times. With this, I now open the floor for question and answers. Thank you.

[Operator Instructions] We'll take the first question from the line of Abhishek Getam from Alpha Invesco.

Am I audible?

Yes, sir. Please proceed.

Yes.

Sir, Parth, I wanted to know what is the update on Aakarshan project since it is halted? So have you received any communication from authorities side?

No. As of now, it is status quo. By the end of the second quarter, we should expect to get clarity from the authorities, and only then we'll be able to tell you the way forward. But as we all know, both options are open for us. Either we develop the project or the government acquires the land, either ways for ASL it would be a cash flow accretive.

But in your opinion, what is the expected outcome in this?

We don't know yet. So we'll have to wait till what the authorities come out with, and we'll have to adhere to their outcomes. So by end of Q2, hopefully, we should have clarity on the same.

Sir, another was on plan to raise INR 500 crores. So, I understand that the villas project will need INR 250-odd crores. What would rest of the amount used for? And how is the plan for this, direct equities or warrants, preferred, and so on?

So that's an enabling resolution which we take every year. So depending on when the opportunity is right, we'll decide on how much to dilute. So, it's not like a specific requirement, but it's just an enabling resolution which we renew on a yearly basis.

Sir, just another guidance question. Sir, what do we expect presales number for FY '24 and '25?

So '24 -- FY '24, we are expecting presales to touch INR 1,000 crores, and FY '25 should be INR 1,300 crores, INR 1,350 crores.

This is taking in consideration our existing inventory and upcoming projects, sir? Upcoming -- Shilphata project also is included in this?

Yes. So Shilphata we are expecting to launch in the fourth quarter of this financial year.

[Operator Instructions] We'll take the next question from the line of Madhur Rathi from Counter Cyclical Investment.

Sir, I wanted to get some clarification on the project that we are hoping to launch this year. What is the -- what percentage of that we have shown in the Q1? And going forward, what will be the trajectory for that?

So we have multiple launches lined up in this financial year. In the Q1, we have sold INR 245 crores as a total at a group level, and there is a contribution from all the ongoing projects.

And there's a INR 904 crore crores, like a pipeline project that you have guided. So, regarding that?

Which project?

INR 904 crore pipeline for 2024 that we had guided in the...?

Yes. So those are projects which have already been acquired, and the further phases of those projects would be launched up in this financial year. So we have launches lined up at Badlapur, Karjat, then at Kalyan, and Panvel also again, and then 2 big launches which would be fresh new projects. They would come from the Shilphata project, Arihant Avanti, and also the World Villas project which is at Chowk. So it's a contribution of multiple projects which will take shape in the next 8 to 9 months.

Sir, so what portion you have -- have we sold already?

No, we have not started sales for any of those. The sales will begin as per the schedule and once we receive the approvals going ahead.

And sir, the INR 5,000 crores revenue that we had guided for development, so what kind of time line do you have for executing that and selling that, say, in next 3, 4 years? Or like, how it will be going forward?

So the company today is around 1 -- sorry, 17 million square feet in terms of developable area, and the total top line that would come from these projects is around INR 9,900 crores, which would be constructed over the next 7 years. So we expect 75% of the sales of the INR 9,900 crores to happen over the next 5 years, and then the balance would happen over the 2 years for -- after the fifth year. So in 7 years, we…

Sir, so the order booking, are you expecting to be in similar lines? Or we expect some kind of increase going forward or something like -- how will it be, so -- if it's not one-off then?

No. So obviously, we are a company who is at a good CAGR level also, and we expect to grow at a good CAGR of 25% to 30% on a year-on-year basis from today. So the sales will obviously pick up from what -- from where it is today and that -- in that fashion, we should be able to complete the ongoing projects in the time line of 7 years.

[Operator Instructions] We'll take the next question from the line of [ Yash Dalvi ], an individual investor.

Congratulations, sir, on good set of numbers. I have a couple of questions. So, sir, collections have gone down both Q-o-Q and Y-o-Y basis. So what would be the major reason for that?

So in this quarter, there were some external challenges which led to the increase of the raw material prices such as metal, and that had a slowdown of at least 2.5 to 3 weeks in the construction phase, also across major of the sites of all the developers in Mumbai MMR region. So because of that, the cycle came down in terms of the pace. But going further ahead, we'll be able to improve on the collections in the coming 3 quarters.

And sir, our sales have also gone down on Q-o-Q and Y-o-Y basis. So just -- I wanted to just understand, so is there a structural slowdown which is coming in the affordable housing space?

No, there's not a structural slowdown at our end. Our major affordable housing projects have been sold, or reached at a stage where the sales have almost reached the maturity levels, and more contribution now is actually happening from premium housing also. So the premium housing projects such as Arihant Aalishan, Arihant Advika. And also the other mid-income housing projects, Arihant Aarohi, Arihant Aspire, they are contributing more in the sales. And that is why the number of units and the area sold is coming down. But if you see the values, there is a slight increment of 4% in the -- on the Y-o-Y numbers. And last quarter, if we compare it Q-on-Q, the last quarter was the launch of Arihant Aspire, which was a big launch in itself. So whenever we have big mega launches, that quarter performs well compared to [ sustenance ] quarters where there are not many big launches.

And one last question from my side. Sir, our interest cost has gone down from the previous quarter. So what would be the reason for that? And what would be our debt level as on 30th June, if you could give me that figure?

The interest cost is -- sorry, can you repeat again?

Sir, our -- so our interest cost has gone down from the previous quarter. So what is the reason for that? And if you could just give me -- give us the debt levels as on 30th June?

So the debt as on 30 June stands at INR 412 crores at a total company level. But when -- if we -- it's split into 2, the secured debt is INR 156 crores and the unsecured is INR 256 crores. And if you see the debt-to-equity ratio, it is for the secured loans come down to 0.57:1, which is good, I would say. And -- so that's what has come down in this quarter.

We'll take the next question from the line of Madhur Rathi from Counter Cyclical Investments.

The INR 200 crore -- INR 200 acre land bank that we are planning to have at the end of 2024, so are we -- like have we pipelined projects for all of those land? Or there is some land with us and the projects are in -- under way or -- so like, if you could highlight on that?

So, this was the guidance that we had given in the last con call, that we'll be growing our land bank from the existing INR 165 crores at the end of March 2023 to INR 200-plus crores -- sorry, existing 165 acres at the end of March 2023 to 200-plus crores (sic) [ acres ]. And if we see the business development in Q1, we are already at 217 acres of land today, which is put up on the drawing board and the projects and square feetage and everything are being modeled out from there. So that was a guidance note for this financial year, which we have completed in the first quarter.

And the whole 217 acres has been utilized for our projects, like the INR 9,000 crores pipeline that we have, or…?

Yes. Everything is utilized and put into square feetage -- square footage. So there's no land which is just lying idle as an investment on the company's books today. So everything is converted to a project and then will be sold or developed.

And sir, just a follow-up. This - and -- the resort and the gymkhana that we are planning to build at Panvel, so for the INR 200 crores, INR 250 crores investment, are we seeing a 15% IRR for that also? Or the 15% IRR is for the plotted development at that location?

No. So the 15% IRR indicated is for the annuity asset, the 200 key resort as well as the gymkhana that we'll be creating. So from that, the investment that we make into those assets will yield us a IRR of 15%.

And for the project development, what would be the IRR that we are expecting?

For the IRR, I'll get back to you, but the margins that we are expecting at an EBITDA level would be around 35% to 38% for the plotted development project -- for the Villa sales, I would say, and that would yield -- should yield us a PAT of around 28%.

And sir, just a final question from my side. Sir, what will be the ROC or the margin that we expect before embarking on any project?

So whenever we look at a project, we usually look at a average IRR of 33%, 35%, whenever we are looking to acquire any project, and the PAT margins we expect around 24%, 25%. Sometimes it goes higher also, sometimes it could go lower, but that is a mean range that we look at whenever we are planning to acquire any project.

And sir, so we had guided a few quarters back that because -- like, from demonetization and COVID, our margins were hit. So the projects in current pipeline will -- that we already have or we'll be launching will have this -- like the IRR and the margin that you have guided right now, right?

So the projects that were taken long time ago, which was in 2011, '12, '13, they may not have these high margins, but the new projects that we are taking do definitely have margins of these levels because -- the reason is because the interest has been charged on those projects which have been acquired in -- maybe in 2010, '11, '13, whenever. So because of the interest, there is a slight dip in the PAT margins. But the new acquisitions are all taken into consideration good margins so that there's sustainability even in the long run of 5, 7 years from today.

We'll take the next question from the line of Raj Mehta from RoboCapital.

I just had a couple of questions. The first part is, what is the total value of projects that we -- could be launched in FY '24?

To be launched in FY '24 is around INR 900 crores of top line that we will be opening up for sales. The new inventory, basically.

What would be the pending collections from the ongoing projects that you've already sold?

So the collections from been sold and to be received are around INR 660 crores, which we expect to happen in the next 2 to 3 years' time from today maximum. And the unsold value of the ongoing projects is around INR 1,117 crores.

Also sir, what will be the sales velocity -- estimate of sales velocity?

Q1 was INR 245 crores. We are expecting that it would continue in the forthcoming quarters as well. And we are expecting that this year we do INR 1,000 crores in terms of presales.

Also on a reported basis, what would be the revenue and EBITDA margin that we look at for '24 and '25?

That would be forward-looking, so I cannot comment on that.

[Operator Instructions] We'll take the next question from the line of [ Darshika Khemka ] from [ AV Fincorp ].

I have a couple of questions. Firstly, what are your plans on debt reduction? And how do we plan to reduce it going ahead? And on a similar line, I also have a question that, you are planning to do a fund raise of INR 500 crores. So would you be planning to do this [ in ways ] to reduce your debt? Or what is the reason for this fund raise?

So the first question on debt reduction. The debt we have on our books is sustainable. I mean, if we see the secured debt, it's INR 156 crores, and we are able to manage that out, and that would be reduced with the time lines on the dues that are there and agreed with the institutes. The second part of the debt which is the unsecured is payable when enabled. So whenever more surplus or free cash flows are coming in from the projects, that's the time when the company will decide to reduce that debt. So it's -- we don't have any particular deadline on it. But yes, company is looking at that also. And maybe once the projects are at a very good, mature stage where not excess cash flow is required, then the company can take a call to reduce the debt. And second question, on the INR 500 crores, it's just an enabling resolution which we renew every year. So, even if we raise any new capital, that would be only for acquisition of new projects and not to repay the debt. The debt that is there on the books, we get paid back from the internal accruals as well as the surplus cash flows coming in from the ongoing projects.

Also, I had missed the number that you had said in the opening remarks for the per square feet pricing value. I think INR 6,274, if I'm not wrong?

Yes. So this quarter we achieved an average pricing of INR 6,282 per square foot at an average price. And [ at the ] start of the financial year, it was INR 5,797.

I had another question. So, what -- now that your luxury projects or luxury segments are increasing, what are your plans on increasing the luxury projects?

So we'll -- I mean, we are looking at opportunities at all levels, not just luxury. Although luxury is a trend today, but we are able to sustain and sell and grow in all these segments of affordable housing as well as mid-income housing. So right now there's not many plans to do everything in luxury. And we'll continue to do what we are doing right now. Obviously, company is getting a good feeling that the Villas can do well over the next decade from year on, and that is something that will change the real estate landscape and real estate market also. So we are exploring more new opportunities in the Villa segment, which is quite rare in the MMR region. Apart from that, we are getting many more opportunities. But then, as per the availability of the capital, the company will have to take the best calls.

We'll take the next question from the line of [ Rishabh Rathore ], an individual investor.

Firstly, speaking about the premium project, can you speak more about -- on that? And secondly, what kind of total GDP we are looking from this project? And can we expect our margins to be better from upcoming new premium projects?

Yes. So the new premium project that we have acquired is the Arihant World Villas, which is the Villa project. So the total revenue expected is around INR 1,000 crores from this project. And we are looking at slightly higher margins compared to the average margins that we do in the other segments. So as I said, the EBITDA levels we are looking at is around 38% for this project and PAT should be around 28%, 30% coming from the sales of this project. So it's a big land parcel. We've just given a glimpse of it also in the presentation of the layout. And we are not only doing sales, but we'll also be developing annuity assets, which would yield a good IRR to the company going further ahead in future.

And another question related to gymkhana and resorts. Would it be managed by ourselves or would it be managed by a third-party? And when can we expect it to be operational or when can it grow? When can we expect it to be launched? And thirdly, what kind of membership fee are we looking at?

So yes, as of now, we have thought that we'll be managing these assets internally only by recruiting experts and tying up with the expert human resources available to manage up these assets. And we are expecting that we'll start the construction for these also at the same time when we start the construction of the Villas. And the construction time line for the gymkhana is expected to be 2 years. And for the result, it would be around 2.5 years from January '24 onwards. And the membership fee, what we have thought of for the Villas is around INR 5 lakhs. It's at an early stage, but that's something that is exciting to the market also, because it's not just like a sports club. It's a club which is a lifestyle club also, and it's quite rare combination. And, I mean, in Navi Mumbai, we don't have anything like this. I've never been to any lifestyle club which is based on 10.5 acres of land area and providing everything right from sports to leisure to lifestyle to dining experiences. So everything that we have thought of is quite unique and will excite the market going further. So the plan what we have thought of is that INR 5 lakhs for the first member, and then -- the balance, if they want to add on their family members, like spouse and 2 children, you can top it up with another 2.5 lakhs to 7.5 lakhs for 4 members, is what we are thinking. Also it makes it around INR 1,87,500 per person, which is quite a good offer. So that is something which we have thought of, and it is yet to be rolled out.

And in terms of launching the product, can we expect it by '25, '26 calendar year?

No, so the launch will be in January, February of this -- 2024. So Q4 is when we are expecting the launch of the Villas. Membership is something which we can launch today also because it doesn't require RERA. But the Villas will be launched once we get the RERA approval.

We'll take the next question from the line of Gopal Rathi from Globe Capital Market Limited.

Sir, can I ask what is the status of Arihant Aakarshan project which has halted?

So as of now, it is status quo from the last con call update, and we expect to get clarity by Q2 FY '23 from the authorities, and we'll be able to tell you the way forward after that. So as we said, both options are open today also. Either the authorities allow us to develop the project and then we go on the same manufacturing style wherein we develop and sell and construct and complete the project, or then -- or if not that, then the government will acquire the land for which we'll be compensated. So it is going to yield cash flows to the company either ways.

Sir, my next question is, going forward, do we expect more luxury projects like this?

So like I said, we are looking at more projects for the Villas because that is something which is a unique product in today's market in the entire MMR region also. So on the Villas side we are looking at exploring more new projects. But yet, obviously, our parameters should match and we should be able to get land at a good cost to make such -- to develop such projects. So we are looking at more villa projects in the luxury segment.

Lastly, I want to ask, what kind of impact will it have on margins since our average land acquisition cost have gone up from INR 250, INR 300 per square feet to INR 400 like -- as I'm seeing?

So the margins are still intact. So we've taken price hikes also. And the average has gone up because the Villa pricing per square foot is around INR 600, because it's -- Villa is sold only on carpet area basis. So that's why the pricing has increased. But the margins will remain intact. So we don't see the margins dipping down because, if we see the year-on-year average realization also, there is an 8% increase in the sales price from Q1 FY '23 to Q1 FY '24. So prices of the products are also increasing in the similar fashion to protect our margins.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management of -- from Arihant Superstructures Limited for closing comments. Over to you, sir.

Thank you, everyone, for joining the call, and do get in touch with us or our Investor Relations team, Valorem Advisors, in case of any further queries or details. So we'll be happy to reconnect.

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

Thank you.