Arihant Superstructures Limited (506194) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Earnings Conference Call of Arihant Superstructures Limited hosted by Arihant Capital Markets. [Operator Instructions] Please note that this conference has been recorded. I now hand the conference over to Ms. Nirvi Ashar from Arihant Capital Markets. Thank you, and over to you, ma'am.

Hello, and good afternoon to everyone. On behalf of Arihant Capital Markets, I thank you all for joining into quarter 1 FY '25 earnings conference call of Arihant Superstructures. Today, from the management, we have Mr. Parth Chhajer, the Whole Time Director; and Mr. Dhiraj Jopat, Chief Financial Officer. So without any further delay, I'll hand over the call to Mr. Parth for his opening remarks. Over to you, sir.

Thank you. Good evening, everyone, and thank you for taking time to join Arihant Superstructures Limited conference call to discuss Q1 FY '25 results and business updates. I guess most of you would have gone through the presentation, which is filed on the stock exchanges. So I'll just brief you about all the financial numbers for this quarter. In terms of the consolidated financials, the total consolidated revenue for Q1 FY '21 -- '25 was INR 84 crores against INR 121 crores in Q1 FY '24, which is a decline of 30%. The total EBITDA for Q1 FY '25 stands at INR 11.1 crores against INR 27.4 crores in Q1 FY '24, which is a decline by 59.5% on a year-on-year basis. The EBITDA margin for Q1 FY '25 stands at 13.1% versus 22.6% in Q1 FY '24, registering a decline by 146 basis points. The profit before tax for Q1 FY '25 stands at INR 2.6 crores against INR 21.1 crores in Q1 FY '24, registering a decline of 87%. The profit after tax for Q1 FY '25 stands at INR 1.99 crores against INR 17.3 crores in Q1 FY '24, which is a decline of 88.4%, although the net worth of the company has increased to INR 325.3 crores in Q1 FY '25 against INR 260.9 crores in Q1 FY '24, registering a growth 24.6%. Now talking about the key operating highlights for this quarter. The company has achieved sales bookings of 304 units in the quarter, which is equivalent to 3.29 lakh square feet of area amounting to INR 166 crores in terms of value. The average price per square feet was INR 5,063 in the quarter. The average price per unit sold is INR 54.5 lakh. The total collection for the quarter stood at INR 127.9 crores. Of the total presales of INR 166 crores, 30% happened in the Premium Housing segment, 24% was a part of the Mid-income Housing segment and 46% of the sales was part of the Affordable Housing segment in terms of value. On the business development front, we have signed a term sheet with Taj Group Hotels, which is the Indian Hotels Company Limited for the hotel management contract at our development in Chowk. Also company is exploring more opportunities on outright JV, JDA as well as three development projects, which are currently on the tracks. Now just talking about the quarterly performance in terms of financials and what -- how it comes down to the P&L. So there were a lot of mega projects, which are nearing completion, and OC will start in Q3 and Q4 of FY '25 such as Arihant Aalishan at Kharghar; Arihant Aspire in Panvel; Arihant Anmol in Badlapur; Arihant Aloki at Shilphata; and Arihant Aloki at Karjat. So at the flag end of the project, the revenues are always less as customers booked -- who have booked have already paid majorly earlier to this. So on RCC structure, the expenses are -- so after RCC structure, the expenses are more towards the finishing, which does not get captured in stages of construction linked plan, which we offer to our clients. Hence, the reworking of actuals to estimate gets to a more accurate -- accuracy and in the percentage completion method. The balance unsold flats at this stage also achieved a higher price when sold on ready possession and for those flats, margin will increase in the coming days as book values for the construction of those flats are seen. This quarter and the following quarter, I have not seen any new fresh projects being triggered towards the revenue recognition. Has it triggered in this quarter? The blended results would have not seen a drop in the bottom line as it has been. The presales numbers will also see a higher up on new launches in the ongoing and in the forthcoming quarters, such as Arihant Adarsh, Arihant, Anaika 7 and World Villas. So to follow apart from these launches in the upcoming quarters, we have Arihant Avanti, a palace at Shilphata, which will follow through after these launches. The presales done in these quarters also shall contribute after 3 to 4 quarters from here on. The collections have been robust at INR 127.9 crores for this quarter. The funds utilized -- in this quarter, the funds utilized for 3 preoperative and administration expenses of a launch were more, which is a general behavior as we have been starting up many new projects and the engineering could not speed up as in the months of April and May due to the general elections, there was a shortage of labor. However, the business development is very bullish in acquisition of new projects. The company has been selected for a redevelopment project in Thane, which is on an asset-light model. And company has also acquired a few small pieces of land and registered, which are greenfield developments to take place in Panvel. Despite Q1, we are confident that our targets of business operation in the whole financial year, the company has done a big launch of World Villas in the quarters 2, which is showing -- have a good big numbers and big sales at the location on site and shall reflect in the presales for Q2 and Q3. Company still has a sizable inventory of around INR 10,000 crores in terms of projects in hand. And we will be taking up a few price hikes over the next quarters to cover up the administrative expenses for this quarter. So with this, I open the floor for questions-and-answers. Thank you.

[Operator Instructions] The first question is on the line of Jojo Shaju from Alfa Invesco Research Services.

Sir, my question is on the presales side. So out of this INR 166 crores presales that did in Q1, which are the major projects that contributed, and can you just give what is the project-wise presales, at least for the major projects?

So major contributions, I think 20 -- around INR 19 crores to INR 20 crores was from Arihant Aalishan. Arihant Aspire was INR 30 crores. And Arihant Adarsh was another INR 38 crore. And some -- I mean these were the major contributors. So INR 20 crores plus INR 30 crores and INR 38 crores. So INR 88 crores were came from these projects, and the balances distributed amongst the other projects.

Understood, sir. Sir, again, but like in the basis, it actually have came down by 32% Y-o-Y Q1, but if you look at all other listed developers, so they have done very well on the presales part. So I just want to check how is the market shaping up, what is the demand outlook? And how is the sustenance sales going on?

No. So we are -- I mean, the first quarter was slightly on the lower front, but I think June onwards, the pieces have come back stronger. And with the new launches in Q2 and Q3, which has been showcased in the presentation also, we are confident to catch-up and meet with our growth estimates of 25% CAGR.

Okay. Got you, sir. And sir, 3 quarters back, we have occurred close to 118 acres of land in Chowk. So any update on the projects that are coming to? So when can we expedite launch in that land?

No. So that is just an announcement that was done that we had signed a term sheet, so we did not want to have any undisclosed information. The due diligence is still in process for that acquisition. And we expect half of the acquisition to happened in the couple -- next couple of quarters. And it will be at least 9 months from them for the launch and curtails to begin.

The next question is from the line of Nirvi Ashar from Arihant Capital Markets.

Yes, sir. So you mentioned about the realization is around 5,000 per square feet. So what kind of realization are you looking out for next 2 to 3 years?

So yes, maybe we'll be averaging it out to INR 6,000, INR 6,200. So some quarters, wherever there is more contribution in the presales coming from affordable, the average realizations will go down. But then if some quarters contribution is more from the premium sales and the average realization will go up. But at a group level, it will be anywhere between INR 6,000 to INR 6,500 as an average realization over the next 2 to 3 years. So I mean, prior to FY '24, '23, we were realizing at around INR 4,500, INR 4,800 on a year-on-year basis FY '20, '21 and '22. Although last 2 years, it has gone up to around INR 5,000, INR 5,500 as well. And in the next 2, 3 years, we expect it to grow and reach to the levels of INR 6,000, INR 6,500.

Sure, sir. And other question was on we are strong here in Navi Mumbai. And also, we are looking for Jodhpur expansion plans. So what kind of expansion we are looking there as well?

No, we have not communicated about any expansion in Jodhpur. Over the last 3, 4 years, we have been very much focused on expanding in MMR. So we will be continuing to do that going forward as well. And Jodhpur is only -- we only be developing the projects which we have in hand. And once those developments are at a very advanced stage, then we look at something. But realistically, everything seems to be going well in this area of -- in Mumbai MMR, Navi Mumbai is somewhere, where we have a very good leading position, and we are also willing to expand to some more micro markets of MMR like we had announced also about being selected as a developer to redevelop one of the societies in Thane. So that is an opportunity, which we will be looking forward to. And we are continuing to look for more opportunities on JV model, on redevelopment model as well as outright. So this is the area of focus for the next 5 to 7 years.

Okay. And last question, sir, if you can provide some guidance on EBITDA margin as well. So are we planning to maintain it at around 2022 levels or how was it?

Yes. For this financial year, we should see an increase as well from the margin, which has been achieved for the previous financial year. And obviously, maintenance of that margin will happen, although, we expect some increase on the margin level as well.

[Operator Instructions] The next question is from the line of Ashish Agarwal, an individual investor.

I want to inquire about how has the response been to the launch of Arihant World Villas and what kind of bookings has the company done?

So I mean, we just started it in the end of July, and it's happening right now, but it looks promising. It's a very well-accepted design, well-accepted location as well for that kind of a product. Number will -- we are still in the phase of the launch. So we'll work come back to you after the end of the quarter, but it looks quite promising. It looks good. And I think there is still another 45 days in this quarter itself for us to build up a good total. But it has gone up -- gone very well. The launch has started off quite well, and it's -- I mean we invite everyone also to come and have a visit at least at the site from the capital markets as well, just to see the kind of development at the scale that we are doing. So that can give you a better vision about how the company's plans are also going forward.

Okay. My other question would be that why are there competitors in the regional operate of Navi Mumbai? And on what basis do we demand the premium for the land plots we sell.

We are not selling any land plots, first, but...

Sorry, just to highlight -- the first [indiscernible] it began in.

So that is a credit to our business development team and our land acquisition team that we are far ahead of many other players in terms of identifying the new growth market, the new location, and that's where we get the first mover advantage, while it is -- when it comes to procurement of land in terms of competition that in [Technical Difficulty].

Ladies and gentlemen, we have lost the line for the management. Please hold, while we reconnect them. Ladies and gentlemen, we have the line for the management reconnected. Thank you, and over to you, sir.

Yes. Sorry, coming back to Mr. Ashish. So first mover advantage helps us in accumulating land at lower cost. And when it comes to competition as -- in terms of the development where we are competing with the likes of Hiranandani Group and Godrej and Wadhwa and [indiscernible], these are our main core competitors across the markets of Navi, Mumbai.

Okay. Last two questions I had was that are we -- do we have any plans to reduce our debt? And what would be our target debt-to-equity ratio. Along with another question for the World Villas, is that how many total Villas are we planning to sell in the first phase and in overall? And what is the cost and what are you selling it for?

So debt going forward will increase, I would say. And we are very -- we're not shy of it because we are developing big annuity assets for the company. So that will increase, and we are -- we feel we'll be very comfortable with the 2:1 ratio when it comes to the debt-to-equity because the debt is also secured from the cash flow coming in from the project. So it is more of a catalyst, which will come at an early phase, so that the construction of the hotel and the [ Gymkhana ] can go at a faster speed. And then the presales can happen at its own speed. So we're not shy of even 2:1. So that goes on that part. But today, I mean, if you see the secured debt, it is INR 240 crores -- with the network being at INR 325 crores. So it is almost 0.7:1 ratio. And coming to your second question about World Villas. So -- I mean, in terms of unit launches, we don't have any numbers to say, but yes, we've opened up around 180 villas in the first phase, which are registered in RERA and we expect that in the first 2, 3 months, we are at around 65, 70 villas, then it will give us a good start, and then we can build on that post November.

Okay. If I just could squeeze in one last question. Are you planning to move out of Navi Mumbai area to develop projects in the future? Do we have anything in pipeline? Or do we foresee it?

No, we are not going to move out in Navi Mumbai.

The next question is from the line of Pratham Garg, an individual investor.

Sir can you please share the completion time line for the ongoing projects?

So we have multiple ongoing projects at different stages, and we are developing those projects in -- projection phase-wise manner. So this year, we expect to complete Phase 1 of Arihant Aalishan, Arihant Aspire; Phase 2 of Arihant Aarohi; Phase 3 of Arihant Anmol at Badlapur; and Phase 4 of Arihant Aloki at Karjat. So these are the expected projects, which will be around 1,500 units approximately that are expected to get delivered in this financial year. And obviously, this is a -- we work like a manufacturing unit, so it's a factory, every year we sell products, we make products, and we deliver products. So it will continue to grow and be at this pace of anywhere 1,200 to 1,500 units on a year-on-year basis for the next 4 to 5 years.

[Operator Instructions] We have the next question from the line of Amay, an individual investor.

My question is regarding the debt level. So are there any...

Sir, can you come to a network area, please. Your voice is not clear.

Yes. My question is regarding the [Technical Difficulty] of the company. Yes. Am I audible now?

Yes.

Yes. My question is regarding the debt levels of the company. So going ahead, like are there any plans to reduce debt?

Yes. So we have two types of debt. One is an unsecured loan, and one is a secured loan. And that is all linked on a project basis. So we have some debt in projects like Arihant Aspire, INR 112 crores from Tata Capital. So that will get reduced over the next 2 years or max to max 3 years, we should be able to repaid that debt. So that is one. There is some debt of unsecured loans are given also the project Arihant Advika. So we are at a mid-level stage today, expect the project to finish the structure in, say, next 6 to 8 months and then 1 year for finishing. So in 2 years, the product will be ready mac to max, we'll assume another 6 to 10 months or 12 months for the entire project to get sold out. So in 3 years, another INR 125 crores of debt will come down from that project. So there are plans to take on more debt for developing new projects or developing some assets, and there is simultaneously reduction of debt happening also at the same time from the ongoing projects, where debt is taken at a good, advanced stage and then repayment has also started. So this is a cycle which will keep on churning as the company is growing. So we are taken more debt in this first quarter also, which has been for expansion and adding on new projects. And that is where the debt increase will happen and the debt reduction will happen in projects, which are nearing completion in entities which are where no more -- no further projects are being taken. So it's a cycle, and we are at INR 531 crores out of debt. It could go peak to around INR 650 crores max. But in 2, 3 years, it could come down also unless we expand more. So it all depends on what we want to do. As a company today, we are seeing very good opportunities in expansion. So that is the first priority rather than reduction of debt. So expansion is more heavily prioritized today.

[Operator Instructions] The next question is from the line of Amit Agicha from HG Hawa.

Am I audible?

Yes.

My question was actually answered because it was connected to debt to equity. I need to follow on it as what is the cost of debt.

Yes. The cost of debt is average at the company level, 13% per annum.

And also about the proposal of visiting the World Villas like we are wishing to join it?

We are more than welcome, let us know.

The next question is from the line of Rishikesh from RoboCapital.

Sir, you just now indicated around 1,500 units that you'll be delivering this financial year. So would it be fair to say that the reported revenues in that cash would be in the range of INR 700 crores to INR 750 crores?

So last year, we were at INR 511 crores, and we've given a guidance of 25% growth on a CAGR level. So that means somewhere around INR 620 crores, INR 650 crores. So that is what we are comfortable in giving a guidance on. It could -- there could be more surprising, but we feel 25% is achievable.

Okay. And what would be your reported level EBITDA margin guidance?

So last year, it was around 22.5%, 23% slightly incremental on that front as well for this financial year.

[Operator Instructions] The next question is on the line of Harsh Shah from [ Sumaira ] Family Office.

So what I wanted to ask is that when I look at Slide #23 and looking at the Arihant Aloki project Phase 3, Phase 4, the number of units booked has reduced sequentially quarter-on-quarter. Like, for example, last quarter, the number of units booked was 183 I guess, and this quarter it is 152. So why is there a decrease in the number of units booked for that particular project?

So that could be a reason of some cancellations that could have happened between last quarter or this year. So that is why there is a decrease in that.

Okay. Okay. So that particular project, there is a decrease in number of unit growth, whilst others, there is no change. So is there any like challenge there? Or it is a part and parcel and no particular?

The cancellation to the tune of 15% are quite regular in this market of MMR, wherever people are developing for below INR 1 crores. That is where cancellations are to the tune of 15%. So it's a standard practice.

Okay. Okay, sir. And another question is like I wanted to understand the portfolio development strategy at the company, right? We have always mentioned that we try to mirror the population at meet rates. So I wanted to understand like little bit change in the strategy of like we are moving towards focusing on the premium segment. And like on Slide #21, we can see that the demand for premium and villas is 5%, and our share is now that with the launch of World Villas and other projects.

Yes. To answer your question, yes, we -- in the next couple of -- in this and next financial year, we will look to equate the income groups that we are targeting to make products for. So right now, it is 55% affordable, 26%, mid-income and 19% higher income. So we'll make the affordable say around 40% and the other 2 segments, 30% and 30%. So going forward, that could be the distribution. This is because we are taking some -- I mean we envisage to take some more projects in the villa and plotted development scheme. So that is -- that gets added on as a higher income group project. So which is why the distribution could change going forward. And I think as a company, it's a good strategy because we want to scale up from the existing book of INR 10,000 crores to INR 20,000 crores. So only affordable will not take us there. We know that we will have to have a good mix and going forward, big premium projects will help us reach to that scale, that level faster. So that changes the idealogy going forward.

Okay. Okay. That helps a lot.

[Operator Instructions] The next question is from the line of Nirvi Ashar from Arihant Capital.

So sir, if you can just throw some more light on what type of deals you have made with Taj Hotels in Chowk and also on the redevelopment project in Thane?

So in redevelopment, we've just been selected by the society. And I mean, due diligence and all the other things are still on course. But yes, it's Thane, so it will be a good products, you can say, INR 20,000 in RERA carpet are is what we can envisage as a trials. And the deal with Indian Hotel Company, it's a pure management contract model, which is the standard practice in the industry across the globe. So that is the similar model. Everything will be in the books of the company. So just to inform you also that we have transferred this land to a wholly owned subsidiary so that we are able to analyze and assess the hotel business more clearly and better, and it will be more transparent to the investors as well. So it already announced 221 rooms approximately will be there in the hotel. And it will be focusing more for the [ miles ] and the weddings and the corporate event and the location being in and around Karjat, so that makes it a very attractive destination also. And with the airport coming in 1 year from now, I think it should start operations. So it is hardly a 30-minute drive. So the future looks bright for this destination. And I think, I feel will do a good job.

Okay. That one helpful. Apart from that, ongoing and future plans of launches, do we also have any land parcel? Or are you looking at anything like that?

So our business development team is continuously looking at more opportunities, more projects and we are looking to add on and build our book from where it is today. So continuous focus is there for business development as well. And the time is right because land prices have already doubled or gone 3x also over the last 2, 3 years. And there's still a lot more potential even if we take up our new projects or new lands today, the project feasibilities are healthy, are good and sustained.

And lastly, you can provide some more light on presales for next 2 to 3 years?

So yes, we'll continue to grow at this 25% CAGR. So this year, next year and the year after, it should continue at the same speed. Airport operations -- airport starting operations could bring up a big surge in terms of either velocity or prices. So we'll wait to witness that. But we have enough in the platter in and around the airport and the MTHL link, which are going to be beneficiaries as projects for the company.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing remarks.

Yes. Thank you, everyone, for joining the earnings call. I hope you were able to get all the answers to your satisfaction. If you have any further questions or would like to know about the company, please reach out to our Investor Relations team at Valorem Advisors, or you can contact our finance department and our CFO, and team will take it forward. And thank you to Arihant Capital for hosting this call as well. Thank you.

Thank you so much.

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