Arihant Superstructures Limited (506194) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Arihant Superstructure Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded. I now hand the conference over to Ms. Kunjal Agarwal. Thank you, and over to you, ma'am.

Hello, and good afternoon to everyone. On behalf of Arihant Capital Markets Limited, I thank you all for joining the Q3 FY '26 Earnings Conference Call of Arihant Superstructure Limited. Today from the management, we have Mr. Ashok Chhajer, Chairman and Managing Director; Mr. Parth Chhajer, Whole-time Director; and Mr. Udit Kasera, CFO. So without any further delay, I will hand over the call to the management for their opening remarks.

Thank you. Good afternoon, everyone, and thank you for taking time to join Arihant Superstructures Limited conference call for Q3 FY '26 to discuss on results and business updates. I believe you've had the opportunity to review our presentation, which is filed with the stock exchanges. I will now request our CFO, Mr. Udit Kasera, to take you through the financial highlights for the quarter, after which I will share the key operational highlights and business updates.

Good afternoon, everyone. Let me first start by briefing you on the financial highlights for the quarter under review. The consolidated operating revenue for Q3 FY '26 stood at INR 126 crores, a decline of around 16% year-on-year, while showing a sequential growth of about 3% compared to Q2 FY '26. The EBITDA stood at INR 29 crores, declining by approximately 32% year-on-year and about 3% quarter-on-quarter, with an EBITDA margin standing at 22.94%. PAT for the quarter stood at INR 8 crores with a PAT margin of 6.59%. For the 9-month period, the operational revenue stood at INR 370 crores, representing a growth of about 7% year-on-year, and EBITDA was at INR 96 crores, an increase of 17% and EBITDA margin improved to 25.92%. The PAT stands at INR 34 crores with a PAT margin of 9.23%. With this, I will hand over the call to Mr. Parth Chhajer to talk about the operational highlights.

Yes. Thank you, Udit. Now moving on to the key operating highlights for the quarter. During the quarter, the company achieved sales bookings of 288 units, which is equivalent to 370,000 square feet of area amounting to INR 278 crores in booking value. The average price per square feet achieved for the quarter was INR 7,505 compared to INR 5,594 in Q3 FY '25, reflecting a year-on-year increase of 38%. The average price per unit sold stood at INR 96.4 lakh. The collections for the quarter were INR 132.5 crores. On the business development front, we signed some additional 3.5 acres of land at Chowk Manivali for our town Villas project, which is -- this deal is on an area sharing basis. With this addition, the total township size has now increased to 96.5 acres. During the quarter, we also received OC for Arihant Aloki at Karjat, wherein we delivered 127 units equivalent to 79,000 square feet of area. Our development pipeline remains robust, backed by a strong land bank, and we expect value unlocking as projects advance through construction and launch cycles. At the same time, our inventory position remains comfortable with unsold -- ready inventory being at only 81 units and having a total value of INR 17 crores. Navi Mumbai today stands at the cusp of transformative growth, supported by a series of landmark infra projects and developments, which are set to define the entire real estate landscape for the next coming decade. With the Navi Mumbai International Airport starting operations at the year-end of 2025, connectivity is improving meaningfully. In addition to that, the government also has announced the Gold Line for the Metro 8, which is Line 8, connecting the existing Mumbai International Airport with the Navi Mumbai International Airport. So this will significantly reduce the travel time and potentially serve more passengers on a year-on-year basis as well. With the Atal Setu being operational for more than 2 years now, these developments are making large parts of Navi Mumbai significantly closer to the Southern Mumbai, Eastern suburbs as well as Western suburbs compared to before. What is also encouraging to tell you that in recent months and weeks, the price rises in Navi Mumbai have also been increasing faster than compared to Mumbai as per multiple knowledge partner reports. However, there's still strong affordability advantage in certain areas of Navi Mumbai, which really will pull in more crowd and cater to the first -- cater to being the first choice for migrants coming from other parts of the country. Given our leadership position and deep presence across multiple micro markets in the Navi Mumbai region, we remain optimistic about the opportunities going ahead. We also are confident about the medium- to long-term prospects of the MMR region, which is entering a new phase of growth supported by accelerating infra development across the entire geography. This is also we're going to improve the social infrastructure and we expect better end user demand going ahead as well in the majority of our micro markets being focused. So given our strong land bank and diversified portfolio across affordable mid-income and premium category and with many projects being in and around the significant large infra developments, I think we are at the right place to take advantage of the -- one of the best times to come for real estate for this part of the city going ahead. With this, now I open the floor for question and answers.

[Operator Instructions] The first question is from the line of Juhi, an investor.

Do we have more management...

So my question is the World Villas township includes 221 key hotel and Gymkhana for annuity income. Given villa sales are stagnant, what is the investment -- number one, what is the investment outlay, expected IRR and payback period for the hotel or Gymkhana? Number two, what -- when will construction begin? If villa sales don't pick up, will you delay or cancel these components? Number three, have you finalized the hotel operator brand partner? And what gives you confidence in hospitality that is a complete new vertical when core real estate sales are struggling?

Yes. Regarding the Gymkhana and hotel query you raised, so the total investment in the Gymkhana is envisaged at INR 125-odd crores. And for the hotel, it will be INR 225 crores. So total investment outlay will be INR 350 crores for both these projects. To update you on the status, we have started work for the Gymkhana. The plinth of the entire Gymkhana is already complete. We have started work for the first slab, and then there's one more slab to go. We are confident that this project will be ready in the next 2 to 2.5 years' time from now for members to come and participate in the daily activities of the club. With respect to how we are funding it, there we have already tied up with the State Bank of India for construction finance. So regardless of Villa sales being slightly slower or not being so great, we'll still be able to complete this because financial closure for Gymkhana is already in place. And similar is the case for the hotel. Hotel, the excavation work is complete as on today. We expect the hotel to be ready in next 4 years from now. We are in the final stages of finalizing the operator. So once it is signed up, we'll be happy to come and update the investors about the same. The breakeven time expected for both these assets to breakeven will be around 8 years. That's the time frame we're expecting to achieve the breakeven.

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

So my question is connected to the debt-equity ratio. What is the targeted debt to equity range and average blended cost of borrowing because I think so this has doubled compared to the last quarter?

So debt has not doubled in 1 quarter...

Interest on debt INR 9 crores, INR 18 crores year-on-year.

Yes, that is with respect to the recognition of revenues happening in this quarter compared to last year. So that's as per the [ NDA ] standards. The debt, we'll be increasing the debt by, say, another INR 150-odd crores because for the development of the annuity assets of the Gymkhana and hotel. The balance -- we are parallelly also repaying certain debt, which was from Tata Capital. So parallelly, debt increment as well as repayment is happening at different project levels. But at consolidated level, we expect it to be increased by another INR 150-odd crores from here on. And we are very comfortable on that because these are long-term debts, especially for the annuity assets. And they have a late payback period. So it is comfortable to manage with that.

And another question was like a macro view. Like do you see like because of the geopolitical situations and AI and all these developments which are happening, the IT sector might get affected. You can see today also in the stock market, all the IT stocks are down. The bookings which are happening, like will the bookings continue because most of the real estate are being booked by IT employees. So the slowdown in this sector will affect our sector as well. What is your view on this?

No, I think in Mumbai, Navi Mumbai, it's not only the IT sector, which is dominating the real estate sales. There are many other industries, especially in Navi Mumbai area, you have the MIDCs, which host large corporate houses in the industrial belts. We also have tech companies on the Thane-Belapur Road, but I don't see real estate demand being largely affected because of the dip in the IT sector.

And sir, can you also share what is the marketing cost compared to the revenue in percentage terms?

Marketing cost is -- so direct marketing cost goes to around 1.5% average.

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

So I was saying projects like Advika, like we did in Vashi, so are 72% complete, but only 35% has been sold. So why the absorption slow despite the excellent connectivity?

So I mean, when we started the project in 2022, we were able to sell about 10% of the inventory. But between the stage of the plinth till the RCC completion, we did not witness great sales. Last few months and weeks have been doing very well for this project. And sales are now up. We're able to average somewhere around 8 to 10 units per month. And since now the product is ready, the building is visible, painting work is ongoing. So people have more clarity, have more belief. This is more of a ready to move in market, Vashi, because people don't like to go on rent. The majority of the owners already have their own property and their main purpose to purchases for the purpose of upgrading themselves from a 1 bed to 2 bed, 2 bed to 3 bed, 3 to 4. So their decisions are slightly late compared to other projects that we are doing. That is till date has been slower. But going forward, I think we rise in for the next 1, 1.5...

I have one more question. So my question is the 19% of ongoing development is under asset-light model, JV or JD, so you recently signed a 3.5 acer JD...

What was the question? Your voice is...

So my first question is like what are the terms of this new JV area sharing ratio, your capital commitment and the profit split as well?

It's an area sharing JV. We have to give a certain number of units to the landowner. There is no capital commitment or profit commitment.

And my next question is, are you planning to increase the share of asset-light projects to reduce capital intensity and debts?

Yes, we are open, but it will not happen significantly because majority of the projects that we do are where we purchase the land. But yes, we are exploring some opportunities for redevelopment. So the proportion of the asset-light model can increase from 19% and increase to upwards of around 25% odd.

So the last question would be, how do JV projects compare on margins versus wholly own projects?

Well, margins are similar on a revenue P&L basis. Only the capital infusion is the difference in a JV versus outright purchase project. But margins are...

The next question is from the line of Amish from Knowise Investments.

Sir, last year, if my notes are correct, we have done a presales of INR 890 crores. Can you remind us what is the presales that we had for this year, 9 months? And what is likely for, say, this year, one? Second, sir, our EBITDA margins is moving in the range of 25%. And if you can give us some sense of based on our pipeline, GDP pipeline, we say that our cost of land is below INR 500 per square feet. I'm assuming that our margins on the land bank that we own could be higher. So if you can give us some sense of blended EBITDA margin of the pipeline that we have. And the third question, sir, is if you can give us an update on the villa projects, both World villa and the other one. I think in one of the project we have received the approval and we have launched. The other is we are waiting. So if you can give us some sense of when are we launching that and whether -- what kind of blended margins we should assume in those projects?

Yes. For 9 months, the total sales we achieved was INR 664 crores in value, which was 890,000 square feet in terms of area and these were around 760 units...

Sir, you are referring to presales, right? The presales number, right, or sales or in terms of revenue. I was asking for the presales number.

This is presales.

Sure, sir.

Yes. With respect to your question on margin, we expect margins to increase because the blend of the higher-margin projects is starting to contribute to the revenue and the P&L. So the EBITDA margins, which are around 23%, 25% today, should increase to 28%, 29% in the coming quarters. The forthcoming pipeline that we have is a mix of villa projects as well as phases of the existing projects. So in villa projects, we are expecting higher EBITDA margins of around 45% whereas in the apartment projects, we'll be working on EBITDAs of -- to the tune of 30% to 33%.

Sure, sir. That's very heartening to know. And sir, I was -- if you can update us on both the projects launch...

So World Villas already launched. We are working on 180 villas in Phase 1. Work is ongoing in full swing for more than 100 villas as on to date, where construction and RCC work is already taking shape. With respect to town villas, we are in the approval stage. So this launch is expected to be in next financial year.

Okay. And sir, because the villas are kind of self-contained unit, I'm assuming, how will we recognize the sales here? Because my guess is, one, as you said, the total project can elongate up to as long as 7, 8 years, as you said. But is it possible to recognize the revenue as we go forward and we kind of create the phases within the project and kind of book the revenue? Any thoughts on the accounting part of the villa sir?

So yes, I mean, we are working on the phase-wise model only for recognition of the villas. So I mean, we have not started -- we've not reached the threshold yet for World Villas also. But yes, that's the framework we have worked on for apartment projects also. So we'll have to follow the similar pattern for these villa development.

Sure. So just to kind of refer to the numbers that are shared in the presentation, we're seeing World Villa Phase 1, which is named at location Chowk with 176 units, we booked 51 and you're saying probably a completed 100 unit as a completion. So once this project is complete, we can book this revenue, which is probably something in the range of INR 600 crores, INR 700 crores, right?

Sorry, we don't follow a project completion method. We follow percentage completion method. So once we cross the 10% project completion threshold, we start recognizing revenue for a particular project. So that's for all the developments that we are carrying out. So maybe in a quarter or 2, World Villas will also start contributing to the revenues.

[Operator Instructions] The next question is a follow-up question from the line of Amit Agicha from H.G. Hawa.

Sir, my question was connected to the margin and selling price as well as the cost, the 3 things. Like what is the average selling price trend that you are seeing? And the cost is also increasing, I think so. And if you can please share the view on this?

Well, cost has increased marginally by INR 200 per square foot. Selling price is varying from micro market to micro market. But yes, this quarter, we sold more units in the premium luxury segment, which contributed and helped us achieve an average selling price of INR 7,500, which used to be usually averaging at around INR 6,200 to INR 6,500 in the previous quarters. So average selling price is always a mix of which inventory gets sold in the particular quarter and it's divided accordingly.

And sir, are you also witnessing marginal slowdown in the growth because that was happening earlier?

No, no, we're not witnessing any slowdown in the markets. I think especially after the airport opening, markets have responded quite well over the last 45 days. And we are launching one project in this quarter also at Panvel Arihant Aspire, which is very close to the airport. We expect a good response in that project as well. It's the fourth phase, the fifth tower, which is being opened now before the 4 towers -- the 5 towers -- 4 towers before have received a great response, and we expect that to continue going ahead as well.

What is the average blended cost of interest that we are paying?

Average interest cost we'll be paying is around 12.5%.

So would the company be putting some policy or decisions to reduce it going further?

Yes, we have plans. Going further, we want to take low-cost debt at the maximum level possible, and that's the strategy we are following as well. So we're working on that very aggressively and closely to see how we can reduce the cost of debt and which will help us also change gears.

And any plans to dilute some stake?

Not at the moment. Whenever the markets are timed rightly, we'll think about it at that time. But currently, there's no immediate plans of dilute.

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

[indiscernible] new land acquisition or the annuity assets or deleveraging the balance sheet.

Sorry, can you repeat your question?

So my question is that over the next 2 years, will capital be prioritized towards new land acquisition, the annuity asset creation or deleveraging the balance sheet?

So we'll be doing it on entity and project level basis. So in certain subsidiary projects, the plan is to reduce the debt. And all this -- we target that all subsidiaries become debt-free in the next 2 years. In the main listed entity, the focus is on developing the annuity assets first. Second will be to expand the business by adding more lands. And third would be the debt, but the debt reduction will happen in due course as per the milestones and the milestones set by the bankers. So I mean, it looks very aligned. Everything is set with respect to that. Udit also would like to add more on that.

So one with respect to the annuity assets, right? So we would like to add here that the complete World Villa project, which is there would be a cash-neutral project for the company. When I say World Villa project, it includes the Gymkhana as well as the 5-star hotel. So over a period of time, what actually would happen is that there would be excess cash flow from the World Villa sales, which would be getting reinvested in the Gymkhana and the hotel. So right now, to fast pace the construction and complete these projects in time, we are basically taking the construction finance loan from State Bank. The value of land which we had acquired for these projects has already increased by roughly 3x, which doesn't get reflected in the books of accounts because this is a notional gain, but it would help us to increase the sale price of the villas. So currently, the project is being funded by construction finance. But when the project is complete and ready, the overall project would be cash neutral. And at the end of the project, we would be having 2 annuity assets with us, the Gymkhana as well as the hotel.

The total number of Gymkhana memberships that have been sold to date?

We have sold around 750-odd memberships till date.

Okay, sir. So could you tell me the current membership fee structure in that? So in the last quarter, you had mentioned that it was INR 11 lakhs for 75 years. So has there been any recent price increase or revision in the membership pricing?

Yes, it is today priced at INR 21 lakhs.

The next question is from the line of [ Shah ], an investor.

I'm sorry if the questions asked before. I joined the call late. My first question is the 3 projects, 7 Anaika, Arshiya ph 4 and World Villas Ph1 reported zero areas sold in Q3 and required significant [indiscernible]...

See, at Arshiya, we have witnessed slow response over the last few months. We are working on the project, and we are trying to revamp it by introducing furnished homes. I think that's an area which we've not explored till date. And I think maybe we should be able to get traction on that. World Villas, we'll see good response from this quarter because we completed the show villa at the end of last quarter. And in the last 45 days, visits have been good. There's been good traction on that front. Anaika 7, we just completed the plinth for one building, and we are now looking forward to constructing it in a fast-paced manner. So that will help us get more sales and parallelly at the same time. And it's not a worry. We'll be able to do this up comfortably.

My next question is about World Villas what is the [indiscernible] and time line to revise sales and if such thing doesn't improve by Q4, will you reprice or pause construction or bring in the JV partners?

No, we have no plans to bring in any JV partner. We are developing this project on our own, and we are confident of the sales as well as the execution. So we're not even inclined to have any JV partner for this project.

Okay, sir. My last question is with 19 ongoing [indiscernible] and rising leverage, how are you prioritizing your capital allocation?

Well, a majority of our capital allocated is towards land and approvals. Towards working capital, we majorly depend on the presales to help us fund the construction. So all the net worth of the company is already deployed.

[Operator Instructions] Next question is from the line of Natasha Singh, an investor.

So sir, I just wanted to ask, can you please share project-wise sales background for Q3?

Yes, you can connect with us offline. We will be able to share that.

Okay. Sure, sure. And sir, a follow-up to that, which 3 to 4 projects are actually driving the sales? And what percentage of total sales do you represent from that base?

So right now, [indiscernible] Aspire at Panvel [indiscernible] these are the top 3 projects driving up the sales as well as the revenue recognitions. But more projects are going to be aligned to that stage, World Villas, Arihant Avanti Palace at Shilpata and others. So we have 7, 8 key projects, which will help us sail through comfortably going forward.

[Operator Instructions] The next question is from the line of [ Rushi Joy ], an investor.

I just had one question that in the recent margin movements have been attributed to product mix. So can you disclose your top 3 revenue contributing projects to understand that true margin dispersion?

I can name the projects which have contributed more in this 9 months. It is Arihant Aalishan, it is in Arihant at Kharghar, there is Arihant Aspire. So these have contributed largely in this financial year to the revenue recognition.

Okay. So the last question I have was, let's say, if residential demand slows for 12 to 8 months, then what is the minimum sustainable sales velocity required to comfortably serve that [indiscernible]?

I see we have projects at certain different, different stages. So we don't see a slowdown in some projects at least where it is at an advanced stage of completion. So those projects are self-sustaining themselves like to name Arihant Aalishan, Arihant Aspire, Advika now. So these have reached a threshold where even a slowdown in the entire market will not affect them largely because they are at a very advanced stage of completion.

The next question is from the line of [ Naman ], an investor.

I just wanted to understand, can you break down like for the country -- current inventories and like the unsold units that are completed but not yet sold because I think as you mentioned previously also, the World Villa currently zero was sold. So on the entire portfolio, how is that on the inventory side?

We have inventory at Arihant Arshiya, some units at Jodhpur, 3 to 4 units at Arihant Aalishan and some units in Arihant Anmol, Badlapur. So these comprise of the ready unsold inventory. So total book value for these inventories is around INR 17 crores.

Right. Okay. Got it. And so how are you managing the risks that come with all of this like the regulatory, labor availability and let's say, funding constraint?

So we have to manage that. If labor is available at cost, so if you have to increase a bit on the cost front, that is the -- that is the right way to go ahead because you can't stall the project due to shortage of labor. So increasing little cost to the contractor helps us move forward fast.

Also adding with respect to the unsold inventory, 81 units worth roughly INR 17 crores. So on the total scale at which the company is operating right now and considering the total GDV of the company at roughly 12,000, 12,500 levels, the part of unsold inventory is very miniscule at current levels.

The next question is from the line of [ Moksh ], an investor.

My question is could you tell what is the cost of debt secured borrowings [indiscernible]?

Sorry to interrupt Mr. Moksh, your line is breaking.

So, what is the cost of debt on the secured borrowings and the unsecured borrowings?

Yes, it is blended averaging at 12.5% for both. So we have some secured debt, which is even at 10%, but it ranges from 10% to 16%, whereas the unsecured loans are at an average of 13.5%. So the blended cost comes down to 12.5%.

Can you quantify how much FY '26 and FY [indiscernible] revenue is already secured through book entry? What is the expected time line for revenue addition from these?

So see, we -- the ongoing projects that are in the presentation, we expect them -- majority of them to be completed over the next 2 years.

[Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference over to Ms. Kunjal Agarwal for the closing comments.

Thank you to the management and the participants for joining Q3 FY '26 conference call of Arihant Superstructures Limited. I would now hand over the call to the management for the opening remarks.

Thank you, everyone, for joining the earnings call. I hope you were able to get all answers to your satisfaction. If you have any further questions, please feel free to reach out to our Investor Relations team at Valorem Advisors. And you can also contact our finance department, and we'll be happy to take it forward from there. We also thank Arihant Capital for hosting this call for us. Thank you very much.

Thank you, everyone.

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