Arihant Superstructures Limited (506194) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q2 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. Amit Thakkar from Valorem Advisors. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and a very warm welcome to you all. My name is Amit Thakkar 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 second quarter and the first half of the financial year 2024. Before we begin, let me make 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 be 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 and making any investment decisions. The purpose of today's 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 today and hand it over to them for the 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, Amit. Good evening, everyone, and thank you for taking the time out to join Arihant Superstructures Limited conference call to discuss about Q2 FY '24 results and business updates. The Indian real estate sector continues its up cycle on account of increased demand in infrastructure implementation and players like us have -- with approval track record and high credibility are benefiting from the upward trend. I guess most of you would have gone through the presentation, which is filed on both the exchanges. Just to brief you on the quarter and the half yearly performance. In terms of consolidated financials, the total consolidated revenue for Q2 FY '24 was INR 109 crore against INR 120.8 crores in Q2 FY '23, registering a change of minus 9.76%. The total consolidated EBITDA for Q2 FY '24 stands at INR 25.4 crores against INR 19.1 crores in Q2 FY '23 registering a 33% growth on a year-on-year basis. The EBITDA margin for Q2 FY '24 stands at 23.3% versus 16.7% in Q2 FY '23, registering a growth of 39.5% in the EBITDA margin. The profit after tax for Q2 FY '24 stands at INR 16.1 crores against INR 11.75 crores in Q2 FY '23, registering a growth of 37%. The PAT margin for Q2 FY '24 stands at 14.77% against 9.72% in Q2 FY '23, registering a growth of 51.95% precisely. The net worth of the company has also increased to INR 276.8 crores in Q2 FY '24 against INR 225 crores in Q2 FY '23, registering a growth of 22.7%. Now talking about the key operating highlights for Q2 FY '24, the company has achieved sales bookings of 365 units in the first quarter, which is equivalent to 3.29 lakh square feet of area amounting to INR 221 crores in value. Q2 being one of the toughest quarters of the year, we try to match it to the Q1 FY 2024 numbers. Although the average selling price per unit has increased to INR 6,744 per square feet in Q2 FY '24 versus INR 5,797 per square foot in Q1 FY '23. Also, the average price per unit sold is close to INR 60 lakhs in Q2 FY '24 compared to INR 48 lakhs in Q1 FY '24. This is indicating that the contribution from premium housing and mid-income housing projects has been increasing over the past 1 year. And the total collection for the quarter stood at INR 136.7. On the business development front, in this quarter, we have acquired an additional 2.5 acres of land at Taloja near Kharghar for an affordable housing project, which is in a very high velocity market wherein the company has a very high market share and has a very good delivery track record as well. The development potential from this project is to be around INR 175 crores and the total estimated saleable area would be 3.5 lakhs square feet of area. And we could expect approximately 450-odd units coming in this project as well. With respect to the market scenario and the demand. We've seen that the demand for residential loans has continued to remain robust despite price inflation. Interest rates have been stable in this quarter compared to the last quarter, and we have witnessed buyers participating highly across all segments of housing. Construction activities have also continued despite heavy monsoon rains during the quarter in the Mumbai related market. Infrastructure projects nearing completion, such as the MTHL link and Navi Mumbai metro Phase I shall spike up the demand in the coming months. FY 2025 is also looking to mark the inauguration of the Navi Mumbai International Airport, and that should ensure multifold growth for this region over the next decade. We are focused also on sustainment and activations in this quarter with respect to sales of the ongoing projects and have witnessed a good response in the affordable housing sales as well. Our mid-income and premium housing projects have contributed well to the presales in this quarter, and we see that the demand would increase for the same in the coming months as well. We have geared up for new launches in the coming quarters, which is also highlighted on Page 12 in the presentation of -- that is uploaded on the exchanges. So almost INR 900,000 crores of inventory would be brought up and launched up in the coming second half of this financial year. Our projects at Vashi, Kharghar and Chowk will position us strongly in the high-income group market, which should be beneficial to the company and adding a lot of presales as well, which is almost 19%, 20% of the total portfolio as on today. And being in 11 different markets has given us the largest capital spread in the entire MMR region, and we are able to offer apartments from INR 20 lakhs to INR 3 crores, which will make our business model sustainable and scalable going ahead. I'll now open the floor to the question and answers.

[Operator Instructions] The first question is from the line of Darshit Vora from Robo Capital.

Yes, hello, am I audible?

Yes you are.

Yes. Hi.

One moment, sorry to interrupt you. The line for the management dropped. Please take a moment while we reach on the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Grupesh sorry -- Darshit, I'm sorry, but please go ahead with the question.

Yes. Okay. so good evening. Am I audible now?

Yes, yes.

Okay. My first question is from revenue recognition perspective, what will you think will be the revenue and PAT margins for the second half of the year?

We are -- we won't be able to answer you very precisely because it's a forward-looking statement. But from the FY '23 numbers, we are looking at a growth of 25% minimum from the -- on all the verticals of PAT revenue, EBITDA, even the presales. So from FY '23 figures, we are looking at 25% growth minimum.

On our land, all right. Okay. And what would your broad sense be on FY '25 and '26, like some kind of internal targets or some deals that you've already struck.

So in terms of the numbers going forward also, we would like to grow, and we are expecting to grow at the rate of 25% for the next 3 years at a CAGR of 25%, I would say.

Right.

So 25%, 26% also should be on the similar line of 25% CAGR.

The next question is from the line of Ajit Individual Investor.

Yes. Is my voice signal okay now, please?

Yes, now it's audible

Yes. Okay. A very good evening to the Managing Board and congratulations for a very encouraging set of numbers. My question is to Mr. Chhajer. Sir, you may find my question a little indirect but I would be happy to get some information. See, I was looking at your set of ongoing projects. And I found the 2 ongoing projects in the Vashi zone, which I believe are kind of redevelopment projects. I think one of them is called Aleenta and the other is Arihant Advika, if I remember right. Is that correct? Is my understanding correct that these are like redevelopment projects?

Aleenta is not part of Arihant Superstructure Limited. Arihant Advika, it is a redevelopment project and it is in one of the subsidiaries, Arihant Aashiyana private limited.

Okay. And the first one you said is the listed company, Arihant Superstructures has no interest in Arihant Aleenta.

No, no, there is no interest of anything in Arihant Aleenta because that's a legacy project, which was taken before the company was listed.

Okay. So if I may just ask you, sir, like maybe that's the reason it's not listed in your investor presentation on our website. But if I see the holdings of Arihant Superstructures over the MMR city, then the project seems to be listed along with the other projects. So -- but like you're clarifying, that it is not under the listed company.

Correct.

Okay, thanks for the clarification. But about -- I wanted to ask your views -- so the other redevelopment project, I just wanted to understand how do you view redevelopment as a strategic thing going forward? I mean I would just like to know your views. See, ASL, I understand it's very strong in the MMR region, and you're looking at new projects more towards the outskirts of this where the land is available. But are you at the same time also exploring redevelopment projects under our listed company? That is my question. Like how does the management view redevelopment projects vis-a-vis a completely fresh project?

So see, we get opportunities from a very, very large geographical base and from many, many locations. So we evaluate each and every opportunity that comes to the table. We obviously follow our matrix, which is related to the population of the city and select our projects accordingly. We are currently obviously evaluating more projects across all the lines. Like right now, we just acquired a new project in affordable housing. So it's not like Arihant is only going to do redevelopment or Arihant is only going to do affordable housing or mid-income housing. We'll be doing everything. And when the time is right, we'll obviously look to add up another redevelopment project once this Arihant Advika project is reaching a good advanced stage of completion. So that is another time where we are already exploring some opportunities in this prime micro market in Vashi area, in and around that. So that will continue to do so. And just to let you all know that there is -- apart from the legacy products, which were taken before Arihant got listed, there is no other project, which is outside of Arihant superstructures as on today. So everything new that is being even scouted at is going to come to the company level to the listed company level entry and be it at holdco level or at the subsidiary level. Just for your information, last 2 years, all the new acquisitions have been directly in the holding company itself. So there is no separate vertical of our group, which is scouting projects separately. Whatever was a legacy had to be kept it that way because we did not bring anything to the listed entity by way of valuation. So we've been very strong on that. But going forward, everything is happening in ASL.

Okay. So just a clarification, sir, because I am personally familiar with this micro market that you mentioned, Vashi and Navi Mumbai. Like you said, I'm sure the company is listed for like how many more than 10 years, around 10 years?

12, 13 years now.

Okay. But this particular legacy project that you're mentioning is still -- I mean, I think it just kicked off just during the lockdown or after lockdown. So how would you explain this mismatch of time the company has been listed for 12, 13 years, but this legacy project, which is actually maybe just about 25% complete now is not a part of the -- so why this time lapse was there if it's a legacy project? Why has that picked up now?

We have signed up with the society in 2009, we got listed in 2010. So that's how it has automatically become a legacy project. And the other project area in Arihant Advika was signed up in 2013. So that's when we were listed, and we took it in one of the companies of the listed entity.

Okay. Fair enough. That's a very fair clarification .

[indiscernible] taken a lot of time. That's why the -- you're seeing these projects go live just 1, 2 years from today. That's why people may be thinking that, but these were actually supposed to happen in 2014, '15, but due to multiple challenges -- external challenges, I would say, things have got delayed. But nevertheless, today also opportunities are good. We are benefiting from these projects and the time is right, premium housing is doing well. So it's going well.

Okay. My last question, if I may, quickly. Also on the same bandwidth, you may have also noticed that when a company of the pedigree of Godrej properties has also picked up a redevelopment project in the vicinity of your legacy project. So I'm just trying to understand that what is your personal view? Do you see a place like Vashi and Navi Mumbai going for very long prospective cycle of redevelopment in the coming maybe 5, 10 years because everyone wants to upgrade and everyone cannot move on the fringes of the city or out of the city. People probably want to stay in the heart of the city, but still want to upgrade from their existing old construction to new construction. So will this be like a priority area for ASL in the coming 5, 10 years?

Yes, absolutely. So we'll have a good share of Penem housing redevelopment projects, and we'll want to take up more new projects, although there are not many available even today, because it's a very long process to get a project on board to get multiple challenges, multiple approvals, recommendation that the -- some people have to accept you as their developer. So it is not going to be very easy for anybody for that matter. And I just -- I don't think in 5 years, we'll see maybe like 100 new redevelopment projects in Vashi. It's going to be a long journey for at least 15, 20 years. So maybe after 25 years, we could see a different guideline in the locality of Vashi, but not happening very soon in the next 5, 10 years.

Okay. So one cannot and should not really take you from like the transformation that we have seen in, let's say, lower Parel or Prabhadevi area, of course, that has also taken 20, 25 years. But the way the Skyline has changed in that part of the city is possible in MMR and Navi Mumbai region going forward over the next 15-20 years.

Vashi also has taken 40 years developed to what it is today as a location. And any locality takes minimum 30 years to develop in a very matured manner. Like if we talk of Kharghar. Arihant has been doing projects in Kharghar since last almost 2 decades. But yes, Kharghar is not fully developed. We see at least 10, 12 years more of development happening in Kharghar and then we can call it a developed area and then maybe it will take at least as much the same amount of time for it to get redeveloped also. . So developing new cities in Mumbai area is at least a 50-, 60-year process for development to full maturity and then going into redevelopment and then having a full new facelift to the city.

Next question is from the line of Krupesh Shah investor.

My first question is, what's the reason for the decline in the revenue in this quarter? And what would be the trend going ahead in the next few quarters?

So obviously, some revenue recognition could not take place. So -- and because of the monsoon, the work happening on site could not happen to that speed. Because the monsoon is a challenging environment to work in. So that is why we've got a slight decline in the revenue. But we made up for it in the profitability, the efficiencies have gone up in this quarter and the PAT margins are at 14.77% from 12.89% in the previous quarter.

One more question that we are going -- issuing of warrant over year. So what would be the funds utilized for? And within how much time period the same funds would be utilized?

So the funds will be utilized for general corporate purpose and development and development of the ongoing projects. So that's the main utilization. And so it's a warrant issue. So some part of the fund, 25% will come now and some part will come in 12 to 18 months. [indiscernible] then everything that is happening in the company, basically.

Okay. So it's [indiscernible] some specific project excess.

No. Not specific project. It will be a general use. So we are obviously running many projects. So it will help out to speed up the cycles of the ongoing projects.

Next question is from the line of Vignesh Iyer from Sequent Investments.

Firstly, I would like to know what is the total pipeline for FY '24? How much we have done in H1 and how much you are expected for H2?

So in terms of presales, we have done INR 466 crores in H1. And our target is we're looking at INR 1,000 crores for the total financial year. So for H2, it looks at around INR 535 crores or that is what we are targeting minimum in terms of presales.

And do we have any new launches in H2?

Yes. Yes. So we have multiple launches in H2. So we have launches in the affordable housing, mid-income housing and premium housing categories. So just to name a few projects, Arihant Aradhiya will have almost 220-odd units being launched in second half at Kalyan. Shil Phata is a new project, which will come up to the market for the first time, very hot location, very hot market. It's doing the largest volumes in the entire MMR region, and we are very happy to be a part of this micro market. So we're expecting around 425 units launching in that location in that project, which will be around INR 200 crores of value. The flagship project Arihant Volt Villas also is expected to launch in Q4. So this is under the premium housing category where the first lot of 75, 80 Villas will be opened up for sale and development. Also one new tower is expected to be launched in Q3 and an Arihant Aspire, Panvel, which has been doing very well in the last 1 year, 1.5 year. And we are expecting a similar traction coming from that project also estimated revenue potential is around INR 210 crores. So total nearly almost INR 970-odd crores of new stock value is going to be launched in this coming H2 FY 2024.

So when we talk about these new launches, usually how has it been historically when it comes to bookings. I mean a lot of real estate companies have a booking of roughly around 30%, 35% when the project launches, launches at event and then good chunk comes when the project gets finished. So what is that ratio for you? I mean what -- historically, it has been for Arihant superstructures?

So beside of which micro market we are launching and what we are bringing on the table some time, we have done sales of maybe of 15%, 20% sales -- 15%, 20% of the inventory that we've opened, sometimes we've been able to sell 85-80 -- 80%, 85% as well. So it depends all on what is being brought on the table and which micro market it is in. We are obviously open to selling as much as possible. We target to sell 100% in the launch period, so that our working capital is very well taken care for that project and we will do or move on to a newer phase or a new tower or new project after that. So our targets are always higher, but then obviously, these are all based on the feedback and the environment that you create and the response that you get from the market. So it could range anywhere between 15% to 80%. That is what has been in the past. But in these new launches, I think we would be having a minimum 15% sales in any launch and we would be targeting to do even better than that.

So with [indiscernible] launches, I mean we would require a lot of earnings cash flow to be deployed, right? I mean so what is the peak that you can see in our business going forward. Maybe what you [indiscernible] haven't been written in FY '24, '25, I mean, just to get an idea because we are already around INR 400 crores [indiscernible].

Yes. So what our company's policy is that we only want to take debt majorly for the acquisition and the approval. So we don't depend on debt a lot for the construction. And that is why we are very much inclined to sell as much as possible in the launch phase, which takes care of our working capital. So INR 400 crores is the ongoing there, I think INR 405 crores precisely. And I think some of it would be repaid in FY '25 also. So I think ICICI Ventures, which is INR 45 crores will get repaid by December 2024 and there will be some repayment in the STCI loans as well. But yes, this will be -- the peak from there will be somewhere around INR 400 crores, INR 425 crores for the next 3 years. So the peak level will be that because we are adding new projects also, the company is growing. It has added considerable inventory in the last 2 years to its portfolio and to get these projects off and running sales will be the first target. And if required, then we may raise some working construction finance for the particular project is needed. And I think this volume issue is also going to help us manage out the working capital requirements in the coming 1, 1.5 years.

So as of now, your company is around 1.8x to 2x debt to equity. But we can say, even if more a lot of lucrative projects come in and lets say the company decides that they want to get the project. So we will be maintaining it around this level, right 1.82x debt to equity.

Yes. So out of this debt of INR 405 crores, INR 152 crores is only the secured debt, which is to be serviced on a monthly basis. The balance debt of INR 273 crores is unsecured, and that is stable then enabled. So we really don't have a big crunch in the working -- in the cash flows on a monthly basis and it is very comfortable to service INR 150 crores of debt for a company of this size. If you see the debt-to-equity ratio for the secured loans is only 0.48:1.

Right. So I was looking more into mid-term to short-term and at some point of a long-term plus short-term I mentioned. So I was considering the entire debt.

Long-term some debt from the unsecured loans also would get paid off in the subsidiary project that we have. We have almost INR 180 crores of debt in the subsidiary. So long term, maybe in the next 4 years, we could expect that to come down to a very large extent.

So say, let's consider this project in Shil Phata. So just to get an idea what is -- because it is an area, I mean, which have seen a lot of launches in last 2, 3 years, [indiscernible] project which is a big project. So what is our selling point there? Because it's kind of very far I mean from what we will call a lifeline for Mumbai being the local trains, right? Or the other way around it is very close by road to get into Navi Mumbai, but that's the only part of it. So what would be our selling point? Is there a certain set of customers that we are targeting on what extra amenities that we are going to provide just to -- for us to be the selling point. I mean because that is a big investment and we already have 1 or 2 competitors have set up -- startup construction and many even delivered in last 3 to 4 years.

Yes. So yes, Shil-phata is actually the largest market in the MMR region in terms of unit sales. And we have already just completed -- almost completed in our Arihant ROE. So we've been in this micro market since last 5 to 6 years, and we know the current demand and that's how we have positioned our product also in that fashion. So we'll also be coming up with a 1- and 2-bedroom, hall, kitchen configuration, and which will be priced at somewhere around INR 40 lakhs or 1 bed, 60 lakhs of 2 bed. So pricing is going to be very correctly done so that we get the maximum customers attracted to our project. Secondly, on the location, and we are very much on the Navi Mumbai side. So [indiscernible] well far off it is at least 6, 7 kilometers or takes almost 25 minutes of driving time from our location. So we are closer to the Navi Mumbai area from the main Shil-Phata junction, it's only 800 meters of traveling distance. And our major target audience is going to be people who are living in Navi Mumbai and working in and around the IT belt of Navi Mumbai from [indiscernible] for them because for them, INR 60 lakhs is a very lucrative price and in Navi Mumbai, you don't get 2 bedroom, hall, kitchen in INR 60 lakhs today. And with the level of amenities and the other design factor, we'll be able to compete with everyone in the market, including the Runwal and Lodhas and position ourselves as a premium project. And obviously, that will give us good velocity and volumes.

Okay. Right. Sir, just last question from my side. On this Kharghar project, we are waiting for approval or we have said that there is a compulsory acquisition from the government comes in. So how are things spanning out now? And is there any visibility on how this is going to be going forward?

So I think Kharghar. I think you're talking about Taloja?

Akarshan, right?

Akarshan. Yes, sir. That's in Taloja.

Okay, sorry.

For Arihant Akarshan, there is a positive development in this quarter. So we have gone for a revised approval for one portion of the land, which is somewhere around 22,000 square meters out of total 40,000, 44,000 square meters that we have. And therein, we are developing 700 units, which will have an estimated saleable area of 5 lakh square feet and would generate a top line of INR 250 crores. We have also renamed the project in our presentation from Arihant Akarshan to Arihant Adarsh. This would obviously help us in refreshing the launch of the project and rebranding. And there will not be any baggage of the old name. So one or the other portion of the land, which is the balance, 18,000 square meter odd area. That would be surrendered -- mostly would be surrendered to the government and we'll get a compensation out of it. How much is the compensation we are yet to receive the clarity, but there is a specific rule which is set out by the government. So they will have to follow that. So there can't be any deviations on it, but we should benefit out of that as well. So the investments made in this project combined for the entire 10.5 acres of land area was somewhere around INR 20 crores, which would have gone to INR 25 crores after accruing of interest. And we expect to cover up the INR 25 crores of land investment from the sale of just one portion. And over and above, even generate more profits out of the 700 units that we will be developing.

[Operator Instructions] As there are no further questions, I will now hand the conference over to the management from Arihant Superstructures Limited for closing comments.

Yes. Thank you, everyone, for taking time out to join the call and we love to hear from you if you have any more further queries, you can get in touch with our IR team, Valorem advisers and they'll be happy to assist you and if needed, we can also get connected for any queries that we may have regarding the company going ahead also. And wishing everyone a very happy Diwali and a prosperous new year going ahead.

Thank you very much. On behalf of Arihant Superstructures Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.