Arvind SmartSpaces Limited (ARVSMART) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the conference call for Arvind SmartSpaces Limited's discussion on financial results for the quarter ended 31st December 2021. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Krishna Patel, Christensen Advisory. Thank you, and over to you, ma'am.

Thank you, Rochel. Good evening, everyone. On behalf of Christensen, I welcome all participants on the Q3 FY '22 earnings conference call of Arvind SmartSpaces Limited. We have with us today Mr. Kamal Singal, Managing Director and CEO; and Mr. Ankit Jain, the Chief Financial Officer of Arvind SmartSpaces Limited. Please note that a copy of disclosures is available on the Investors section of the website of Arvind SmartSpaces Limited as well as on the stock exchange. If you note that anything said on this call, which reflects the outlook towards the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risk that the company faces. With that, I would like to hand over the floor to Mr. Kamal Singal for his opening remarks. Thank you.

Thank you, Krishna. Thanks a lot. I'm also joined by Mr. Avinash Suresh, who is the COO of the company in this call along with Ankit Jain who is the CFO. A very good evening to all of you, and thank you very much for taking time and joining this call. As I can understand, this time, there are quite a few people who have joined the call for the first time. So I'll find it appropriate to spend 5 extra minutes to explain and tell a little more about the company for their benefit. And then we get down to the normal business of telling about the numbers and the business as usual. So for this for the benefit of the newcomers or the new joinees in the call, we are Arvind SmartSpaces, part of the Lalbhai Group which has a legacy of more than 120 years, possibly one of the oldest business houses of this country. We got demerged from Arvind Limited in the year 2015. Before that, we had been operating as a division within this company, the flagship Arvind Limited only and we got demerged in the year of 2015, became an independent company, so to say, are primarily focused on residential development. But within residential development, we have a very wide spectrum of products and services that we offer to our customers, which includes a large, medium and small size of projects, horizontally, vertically, every type, which includes very, very large township developments, very high-end villas to medium size villas to apartments which are low priced, which are medium priced, and which are luxury apartments as well. So we cover pretty much a very, very wide spectrum of residential products. Right now primarily focused on Bangalore, Gandhinagar and Ahmedabad. We maybe started our business some time back and to just have our feet wetted there, we did one project, which is currently underway. This will help us in understanding business there, the [indiscernible], regulatory challenges there. And in general to understand the marketing a little more detailed Mumbai and MMR and Pune. We're going through that grind and we now believe that it's time for us to take a significant step forward and expand geographically in the city of Pune MMR. And in that process, we just rolled out our major investments in these cities as well. So this is as far as our product and customer segmentation is concerned. We have had a very important relationship which got going with HDFC Capital. HDFC Capital, after having invested in a platform with us pre-COVID have now finally joined the company at the equity level itself, the parent company, which is Arvind SmartSpaces Limited. They picked up a little, it's been 9% equity into the company. We developed those real investments from HDFC caps where they have invested into a parent company as an investor, so to say. The company has been on a small base growing very, very consistently. Last 5 years, we've seen a consistent growth of anywhere between 30% to 50% in various important variables and parameters, which we'll come to in the later part of the presentation. Moving on, just to take you through the time lines of the company in 2015, as I said we got demerged from Arvind Limited. First, [indiscernible] what is happening in 2016 through application route. Then again in 2018 promoters infused further money. In 2019 we announced our strategic partnership with HDFC Capital through our platform investment. So it was an equity platform, mind you, or a broadly equity platform, generally they tend to be structured debt kind of an investment with developers on a platform basis, but this was truly in the sense of it an equity thing, distributions are happening or supposed to be happening based on our waterfall mechanism. We are on the X and we get our X-plus [indiscernible], so to say. In 2021 we crossed the first milestone of INR 500 crores of fresh sales despite disruptions due to COVID and otherwise. And this year also, we are on track to register a healthy growth from there onwards. We issued 7.4% to the NPA as well in 2021. And obviously in the same year this potential allotment to HDFC and promoters happened. As far as promoters are concerned, this was the third infusion, so to say, from them in the year 2021. Coming back to the business, as I said, we are primarily focused on residential. Pretty much 97% of what we do is residential and within residential around 70%, 71% is mid-priced. That's where we do a lot of business, so our sweet spot has been INR 50 lakh to INR 1 crore ticket in the cities like Bangalore, Ahmedabad, Pune, et cetera, and 22% is luxury. By luxury we mean some of those kind of products which are in excess of say INR 3 crores to INR 5 crores. In the city of Ahmedabad, we have a few projects where we sell units on an average at around INR 5 crores. And expensive ones within the project might go as high as INR 15 crores to INR 20 crores as well. But that's also a healthy proportion as far as the whole mix is concerned. In the ultra-affordable, we are small. We don't do much there, but nevertheless we have a little bit of that and that accounts for around 6% of our portfolio. On the capital side, more than 70% is done through JDs and the balance is outright purchase. So we always look over to have a healthy mix of JDs, JVs, deals, et cetera, along with the bought out land as well. We believe that while the volumes and scale can be achieved recurring faster and in a better way through JDs. But at the same time, we cannot underestimate the importance of having our own skin into the play and hence we keep a very healthy share of our own project, which are acquired and purchased on an outright basis as we grow. As we speak, we have taken up a total development of around 25.4 million square feet, out of which we have delivered just about 3.8. We will be delivering some this year or very, very early next year. But ignoring that, the components are 3.8 delivered. Ongoing projects account for 14.9 million square feet and 6.6 million square feet is planned. So this is how 25.4 totally stand up. When I say planned 6.6 million they are from projects, either they are the phasing of the ones which are already launched for sale, and the subsidiaries are lined up for launch or these are lands which are already either acquired, they are coming to our main or definitive agreements have already been signed and part payments have already been done. So this is how the project pipeline turns out. I mean I think a lot of these details will be available in the investors' presentation, which has been refreshed recently today itself. And you are encouraged to go through the presentation. This will have quite a bit of information on specifics about what kind of projects, where, and how the different projects are stacking up, et cetera. A little bit about what are the key sort of strategic pillars that we have in our business. One is the satellite model, as I said 70% is JDs. We have a very balanced risk profile. When we say balanced risk profile, it is on multiple accounts. One is, we have been managing our debt at a very, very reasonable level. So we have always kind of target to keep that equity at below 1. I mean, as we speak, the way business has evolved in the last 7, 8 quarters, the cash flows have been exceptional and hence, we kind of find out our entire debt [indiscernible]. So net debt actually is negative. But nevertheless, the policy we know that we will not be crossing more than 100 equity. We have a very, very strong remission cycle when it comes to products and market our premium solutions, et cetera. This is one of our project we have a very clearly spelt out evolution or something that surprises the customer in the form of one or the other USP, very, very customer-centric as an organization. And in some very, very strong governance and systems and structures in place -- having as a manufacturer from our DNA of 120 years. We know what it means to be having systems and regimentation, et cetera, et cetera, and the importance of having governance pretty much in place to be able to scale up the business the way we wanted as a little business that we have been doing in the past. So these are pretty much the 5 pillars that we had as our ambition. The company really can boast of several of its trends, which are like one of the very strong brand that we have in cities like Bangalore, Bangalore is our second home. We have like thousands of people there, [indiscernible] the entire brand side of business, the routine side of business of the group is headquartered there, and of course everybody who knows, so to say. And we have a very strong Gujarati connection, MMR in Pune too is quite a familiar terrain for us. One of our business is early business, so obviously a telecom is housed and he is out of Pune. And hence we know that market has come to her as a group, so to say. We have some very robust partnerships throughout our group. And even within real estate and SmartSpaces levers, we have some very, very strong relationship with landlords and with other stakeholders. That's one of our strengths. We have a comparatively smaller base still. And as you know that once we are done with your working capital requirement, which is the case in our case, we will bank money for growth challenge. That's one of those headwinds that we face if we are not efficient on working capital. And if there is nothing to bridge as far as project conclusions are concerned, the working capital requirements are concerned, are they guidelines? Otherwise it's very challenging to raise funds from the formal banking channel, but nevertheless, that basically is one challenge that we are trying to work on through various initiative like the HDFC platform and [indiscernible] coming in the form of being a strategic partner and alternate sources of money to fund our growth. And we speak the debt levels are so low, they are negative as such. We have a huge opportunity to use this headroom to fund our growth for the next cycle of investment. Industry has been consolidating as you all know and various reasons. Cash flows have been tight post several classes that industry has faced, and hence the number of active developers in the market have gone down dramatically. One extreme we see is that the developers in major cities are going down in excess of 50%. And some cities it could be 70%. So if there were 100 developers operating, today maybe there are 30 to 40 in many market maturity. So this consolidation reveals 2 things. One is that the sector is generally looking up and consumers are looking forward to investing in real estate not only as an asset class, I mean, that's one part of it. But the other parties that housing is something that is a must. That is something that is more than investment, that convention and investment together -- so the post-COVID and during the COVID people have realized the importance of having their own homes. And that means, generally, there is a demand push, and this push is not short term in our understanding. We have been this push last several quarters. And we always believe that this is here to stay. This is a sustainable trend. This is one source of growth for the industry in general. But the other thing that we are seeing is consolidation side of the whole process, where even if industry grows at X as far as organized corporate developers with brands and track record, I think they will see a 2x growth because they will have more developers coming their way, one from the industry growth in general, which is quite sustainable and looking up after a long time. And the other is the consolidation side of it, which obviously benefit the specific class of developers, and we are clearly seeing these statements coming our way. We have been able to do whatever we have been in the last few quarters. So that's as far as the strength and some of the challenges are concerned. The company clearly has some very important competitive advantages. Just to name a few, land sourcing has been one of our key strengths. We have a very, very strong BD and land sourcing team. Most of our landing, in fact all of them have been possibly benchmarks in the way they are structured and the way we have been fair to the landlord and the way they create value and like focus is on creating value rather than sharing to maximize the share, et cetera. We've been able to source some wonderful team, wonderful land. We continue to do that. Our investment cycle slowed down in the initial phase of COVID with various uncertainties and which was a natural reaction to see that will hold investment for the time being before uncertainties are pinned down. But now we're in the mode where we are effectively now spending our pipeline and quite a few announcements have been done. This quarter, we announced a large deal in Pune, which marks our sort of beginning of major investment cycle in that region. Second important competitive advantage that we have is very, very successful partnerships throughout the group and within real estate business and all our JDs and JVs are pretty successful. We have some very, very healthy relationships. People are keen to invest once again with us from JDs and otherwise. So it's been in our DNA and this is how we know the business to be conducted for the benefit of not only us, but also our partners. We have a very, very strong exhibition team. We are delivering everything on time. Till now we have delivered quite a few projects and all of them have been 100% on track. As we speak, all the projects which are underway have been ahead of time on delivery. So there are no concerns or [indiscernible] on deliveries till date. We definitely take up project in a very, very conservative way when it comes to evaluating and selecting a land dealer or a project team. Value for money is something in all categories, be it affordable or mid-priced or luxury, we always are very careful about to make sure that an equivalent branded player. We don't compete with the locals, but we do compete with the best of brands in our industry in the macro markets. And there we ensure that if X was our competitor, similarly perceived and branded player will leave at least 10% to 12% of money on the table and try to offer a little bit more in terms of specs and designs, et cetera. And therefore, for the benefit of all your -- [indiscernible] is the architectural capital of this company. We brought so many first in the country. And it has evolved significantly ahead of many markets that we see around. For example, here, we are doing quite a bit of work in Bangalore and we do a lot of work in Ahmedabad. [Indiscernible] started. If I were to compare the 2 market sizes, I put Ahmedabad at 150 on a scale of 100, if Bangalore was 100, when it comes to designing the facades, the way the designs have evolved, et cetera, et cetera. And many big names including [indiscernible], et cetera, et cetera, and they actually hail from the city. So that brings a very, very specific attention and focus on design and [indiscernible], et cetera, when it comes to building design. And of course we have a level that we brand, which is a very, very long history of being a credible name and brand, a lot of businesses that the brand is involved in. The presentation which you might -- might exist from the website, investment presentation, it will tell you the trajectory of growth in various things. For example, our fresh sales has been growing at a CAGR of around 49% the last 5 years. It was around INR 73 crores in '16, and it has reached INR 529 crores last year, and the target of this we hope that will be able to cross this seasonally this year as well. Same way, our EBITDA has grown from INR 25 crores in 2015 to INR 89 crores in 2020. '21 was a little bit of a dip because of resections and various things and -- due to COVID first wave. But otherwise, there as well, we've had a very, very healthy growth. Our PAT has gone in a single direction from INR 11 in '15 to INR 39 crores number in 2020. Going forward, a bit of information about how we look at the markets from here onwards. We definitely want to continue our focus on residential development. That's one. And that's our kind of way of remaining a little conservative at least in the medium. As we said, we said we will be leveraging one aspect of the risk in the business. Residential focus is another in our understanding where the capital requirement is comparatively low. And it's less kind of cyclical in the form of demand/supply, et cetera, and it makes more sense that our life cycle or a life stage to have more focus on residential investment we are doing. We will -- we have been very, very conservative about geographical expansion in the assumption that every geography is a new business. It's not cutting and pasting or it's not copying and pasting. Every new market is very, very different kind of responses to any different kind of situations and ground realities. And that's how we've been doing business like you start in Ahmedabad and we expanded in Bangalore, we presented quite a bit in -- obviously, a lot of scope to multiply there, and that's what they're trying to do right now. But having said that, the cut marketing actually for us was Pune and Mumbai, the customer mix, the INR 50 lakhs to INR 100 lakhs, and some sort of a premium blend of this, the expense in these 2 cities as well. But we ensure that rather jumping into the market, we took up a project, wetted our feet there, went through the grind, understood lot of ground reality use or regulation use and other things. And we are now very confident to say that, look, we've gone through all this and we know the market from consumer's point of view, from product point of view and from regulatory environment point of view. And this is a time for us to pay the bill, and that's what we've just started doing and we acquired a large one as recent years this month itself. We -- obviously, we tend to have a very judicious mix of medium-term and long-term projects. We believe that some large parcels, if they are not put at [indiscernible] are very helpful in sustaining the numbers and consistent cash flow. That's what we have done in 3 or 4 large projects that we've taken up in past from their connectivity routine as well. So our philosophy is that we take up decent size of project where we can create value, we can create destinations. So project should be on its feet to start with. But at the same time, as we progress through the project, it could create independently because of creation of destinations as we call it, as you move ahead and create disproportionate value towards the end of the project. That's what we have been doing and that's what our purpose has been, that's what we intend to, further consolidate. We have a very significant headroom to these funds. We have had very healthy round of capital infusion. We have had some very, very strong cash flows, internal accruals. And at the same time, the company is now debt free. Even while we remain within conservative norms of debt equity, et cetera, we know that it's a very significant from produce fresh take and all these 3 sources are significant. And this investment cycle has been kicked off, and we acquired 3 projects recently, all of them large ones and been looking forward to closing a few more deals in the months to come. So that's pretty much how we look at it. Of course, HDFC has been a great addition. One of their nominee directors is on board, [indiscernible]. Some of you must be knowing him, who heads HDFC Capital is now a member of our mode as a nominee director. We have a lot of expectations from this relationship because we have some very, very important in the past and very kind of experience that a fund as they [indiscernible] as we could with their experience, we only hope to leverage on their knowledge about business in general, but also about sourcing land, kind of the kind of opportunities. They are into this from a very different perspective and point of view. And they're seeing this market from a wider lens, but the individual developer could see. So we are very hopeful that this relationship is going to be very, very fruitful for both of us. Coming to the specifics of this quarter now, the Q3 financial year 2022. Cash sales for the quarter is sustaining, sustaining healthy. It is at INR 158 crores for this quarter vis-a-vis INR 144 crores last year, which represent a growth of around 10%. But when it comes to [ ITV ] numbers, the growth has been very significant. The year-to-date number [indiscernible] is INR 451 crores against INR 322 crores for the same period 9 months last year, which is a growth of around INR 40 crores. Just to recap, we had closed the last year for the first time with a fresh sales of more than INR 500 crores, INR 529 crores to be precise. And this year, in the first 9 months ending December '21, the fresh sale number cumulatively stands at INR 451 crores. One important parameter very well that we always keep an eye on is the unrecognized revenue, which is material sold, [indiscernible] sold, but not recognized in the books of account. It has moved up from INR 1,162 crores as of March '21 to INR 1,035 crores as on December '21. This INR 1,035 crores does not include the share of sales, other projects which are happening on [ DM ] basis. Of course, that turnover, that sales figure, although it's their interest in number, but it does not reflect in our books of account. There -- in the D&C reflecting our books of account. And that's how these numbers are calculated and INR 1,035 crores does not include such sales. On collection side, it has been record kind of quarter once again against INR 105 crores collection last year same quarter, this quarter we've collected INR 54 crores, a very healthy growth. Even on a YTD basis, collections have been extremely strong. Last year, we collected for the year as a whole something like INR 192 crores in the first 9 months. And this year, first 9 months, we collected INR 434 crores. The collection is very healthy, a little about net interest building funds that is basically debt position. We started last year December at INR 197 crores debt for the company as a whole, which is now minus INR 85 crores. So there's a delta from INR 300 or there about crores. We write of the debt, and we are sitting on the sales and surplus as of now. This money is waiting to be invested, and we are very aggressively trying to deploy additionally as soon as possible. And in the same time, we have to come back to the previous levels of debt and maybe increase little more because the debt [indiscernible] finished quite a bit, mainly on account of the profits, obviously, during these periods and also on account of additional equity which has flown in from [ SDS ] in promoters, et cetera, during the period. A little bit of information about the last project that we signed, very recent project, it is a project in Pune in the micro-market called Bhugoan. This is a 35 acres of land parcel, which we are buying on an outright basis. The definitive deal has been signed. We have paid part money already. And preliminary dealings is over and we are hoping that the final dealings and other things will happen at Arvind Space. But as far as finalization is concerned, the permit is all done. And this is a recently sized project measuring 35 acres, which has indicated salability of 1.3 million square feet, if you were to develop only villas on this land. That's our initial idea that we'll be developing villas there. We have some -- we have had some great experience in developing world-class villas in multiple locations in Ahmedabad. So we did that in Bangalore as well, and we believe that we can build in this [indiscernible] villa kind of projects. There are so many revenues in kind of solution that we could bring into the market. And that's what we want to replicate in Pune in this first -- the first one was not that big as such. Just -- as I said, just about wetting the feet there. But now this one is in large 35 acres with a potential top line of around INR 700 crores. Just to explain a little bit about project pipeline. We have taken up -- as I said, sorry. As of March '21, we were at 22.8 million total project taken up out of which 3.8 was completed. Today, as we speak, the number has gone up to 25.4 out of 3.8 is completed. And from the balance of 14.9 right now is [indiscernible] 6.6 will -- plan. So you can get actually much more sort of retail developing this representation, which is a product recently. In the financials, I mean post-completion, normally that we used to recognize revenue on completion, but now we are supposed to be realizing only when the projects are getting completed. One word of caution here is that for the company, which is not too big at this point in time and projects are not as many as you could see some of the other mature and bigger players, we always have these ups and downs when it comes to booking of sales in our books of account based on this accounting standard. So it always leads that sort of going up and down in books of account. Nevertheless, for the quarter, we are at INR 42.9 crores this quarter against INR 34 crores last year. So it shows a decline of 3%. But when it comes to PAT, we've grown by 18% at INR 5.9 crores from INR 5 crores last year same quarter. PBT is also up by 21% to INR 9.3 crores from INR 7.7 crores last year. EBITDA, however, is a little down at INR 12 crores from INR 14.4 crores last year. This is the quarterly numbers. On a YTD basis, the numbers are looking a little better at INR 95.6 crores against INR 84 crores last year. There's a growth of 13% on revenue. That has grown by 28%. PAT at -- grown to INR 27 crores against INR 25 crores last year. EBIT has grown healthy at around INR 15.7 crores against INR 5 crores last year. PBT and PAT is at INR 11 crores, INR 11.1 crore to be precise against a figure of INR 2.2 crores last year actually December. So that's now the financial numbers have been moved. The shareholding pattern I talked about, I talked about the debt already that reduce -- debt equity ratio is minus 0.21. And on a net basis, our net interest-bearing funds are now going down to minus INR 35 crores, between surplus money lying in the bank on as we speak. Shareholding pattern remains broadly the same, a little bit because of [indiscernible] sharing issue to HDFC from 56.88% denominated promoter and commercial group, it has come down slightly to 54.34% and accordingly, 9.51% has now gone to our fleet investment fund from 0% previously. And according the public float has gone down drastically from 43% to 36% right now. So that's pretty much the story. We have lot of details, which are given in various ways of slicing and dicing on our investors' presentation, which can throw a lot more light on various things project-wise, location-wise, type of inventory-wise and [indiscernible] both unsold value, et cetera, et cetera. So I think it will be helpful if we go through those numbers and we'll be happy to respond any specific detail that we have been required still once you have gone through those numbers. So with this, I'm pretty much calm as far as numbers are concerned. And maybe we are now open for any questions that might be required to be asked.

[Operator Instructions] Our first question is from the line of Dhananjay Mishra from Sunidhi Securities & Finance Limited.

Sir, can you provide a figure of the total launches we had last year vis-a-vis what was the sales booking last year in terms of volume and also in 9 months, same period launches versus booking?

Sure. Ankit, you will take this question?

Yes, I can take this question. But specific to the details, the details are -- is available on our website in the investor presentation of last year. Nonetheless, I can read out for a quick update for the group.

So this year, 9-month figure -- I mean, launched [indiscernible].

Yes. So last year, mid-year 9 months or last year 9 months?

Yes, both, both. Last year, full year, I am asking FY '21. And this year, first 9 months, which we have published 2.08 million we have already sold. So what was the total launch in terms of this year?

Understood. So last year, total number, if you were to -- total unit total moved area is 28,55,000 square feet. And in terms of value, it is INR 529 crores for the full year as of last year versus current year INR 451 crores for the 7 quarters with the overall total value of 2 million, which is 2.408 million to be precise.

So last year, with 2.8 million we sold for INR 530 crores. And this year, we have sold about first 9 months, INR 450 crore for 2.08, right?

Correct. Correct. Right. That's correct.

Yes.

And coming to the upcoming launches, if you could talk more about this Bangalore project like Devanhalli and other project like OICs in [indiscernible], which is already going on, how is the sales happening and whether we are on track to complete sales on time?

Yes. I mean there's a very detailed presentation there in investment -- in investors' presentation with gives specifics about project-wise details in terms of the size, how much of what is there, has been sold and how much is sold this quarter, et cetera, et cetera. But just to throw a broad line term in Bangalore or otherwise, there are 3 projects which have acquired recently. One of them -- one of the large one has been acquired in partnership with HDFC into the platform that we had, which is right now to the extent of maybe 50 audits was already done. So 50 acres have come into our books and we want to expand more than that, and we are trying to see if we could expand it by another 10 to 20 acres. But nevertheless, our initial idea was to around 42...

Sorry to interrupt. Are Bangalore ongoing projects are all 100%, right? [ Belair ], [ Edge ] and [ Oasis ]?

All 100%, yes. There's no JV at this point in time except for the first one, which is yet to hit the market, which is this Devanhalli project, which is essentially a starting position partnership with HDFC. So that is expected to hit the market in Q1. We have, for the first 27-odd acres was the land use order coming from the government last week. So we've crossed a major milestone there already and I think we're on-track to launch this very soon and maybe by Q1 of next year. That's on Devanhalli. Then the second project we acquired is located at [indiscernible]. This is a JV project, essentially a large development project. There also approvals, et cetera, are now in process. We have signed the initial debt agreement already and further processes are on and idea is to do that also to the market in the Q1 itself. So very definitely -- I mean, we hope that these 2 should hit the market in Q1 of next year, that I mean April to June period. The last one that we've just taken in fully. Obviously, this will take time. The land use has to be changed and [indiscernible] ending between 5 to 6 months' time. So I think that project should be launched somewhere in the major part of the financial year. That's all we are -- whereas the rest of the projects are at a fairly advanced stage of execution, be it Belair, or -- about to be completed. I think we should be able to deliver it with a [indiscernible] within this financial year or early next quarter for sure. So is the case with other projects like Avishkaar, et cetera. Our brandings have been consistently selling [indiscernible] et cetera. So other things are fairly at an advanced stage. And these 3, obviously, 2 of them in the first quarter and one which is last one should be consummated about a year.

So we have 5.8 million square feet on full inventory from ongoing projects, and then we have about 6 million planned. So total about 11 million to 12 million, which we will be booking probably in next 3, 4 years. So what is the -- our target in terms of booking, annual bookings for this year because already we have done 2.08. So what will you target for this year, next year or next to next year [indiscernible]?

See, we don't have specific guideline in terms of targets, specific targets and numbers there, but we definitely have a plan in mind, and that's what we have been pursuing. As you see from our numbers, we have been growing on vitals on at the rate of around 30% to 40%, most of the times. Our investment cycle was a little subdued when the COVID started and we lost some 2, 3 quarters there. But right now we're in the middle of a very aggressive investment plan, and that's how these projects have been added. So what we intend to do is to continue this momentum of sales, which is growing at a very, very healthy pace last few years, and that's what we will continue to do. Of course, it is pipeline to be strengthened and that's where the entire focus is. We are an sensitivity company when it comes to selecting a project, but once done, I mean there is no stopping [indiscernible] fast as we can, that's how we're doing this. We take this business as more like a process industry where land is a raw material, getting the market is a clarity and having no -- even lowest possible, we have to use the idea. So that's what we're doing. Building blocks are in place. We have aggressively acquired the last 3, 4 months. And the next 3 to 6 months, we'll see a lot of action happening. And we got funds tied up for that. And that's how we look at it. All I can say is that we should be looking at a very healthy growth when it comes to face, it's going forward the way we've been doing the last few years.

And lastly, sir, the last question.

I'm sorry, Mr. Mishra, we actually need to move on to the next question. There are several participants waiting for that too.

Yes, yes. I'll come in queue.

Our next question is from the line of K.T. Jain, an individual investor.

Congratulations for a great addition to the business development activities that we have seen consecutively a lot of business development activity is getting added up by the company. Sir, my question is with regard to the further business development activity. In your opening remarks you had highlighted that our cash, which is minus -- I mean, net debt, which is minus INR 85 crores, plus we have the strength in the balance sheet to lever up. What is the level of leverage you will be comfortable? And how much maybe we will try to add further, sir, in the next 12 to 15 months?

That's a very good question. And any investor would like to have a little more on this. I mean, historically, if you see as a declared benchmark, we've always said that we want to be in the region of debt-equity of 1 or thereabouts. Definitely, we don't want to cross beyond 1. And the maximum we have actually achieved on ground is around 0.8. And most of the times we hovered between 0.5 and 0.8 or so in the past. Now with the enhanced equity base and capital increases, et cetera, even if you were to remain at 0.7 or 0.8, and be having no debt -- net debt on the book, could mean that our debt raise of INR 400 crores, INR 500 crores should be comfortably possible. Plus, we have a surplus, et cetera, which we are sitting right now on to the extent of INR 85 crores, INR 100 crores thereabouts. And in terms of growth has been strong. [Indiscernible] for me. We had a lot of focus on we need to -- on various sales initiatives, et cetera. So sales has been healthy. Projects are at very advanced stages of completion in most of the cases and hence there is a very significant cash inflows expected the way it has been happening in the past few quarters. I mean that's how we write out our debts obviously, but this kind of momentum, we expect it to continue for some more time. And obviously things put together means we have a decent amount of money on our hands to augment our pipeline.

So sir, like we would be -- if we -- I'm just taking rough, like it translates to like INR 500 crores of land acquisition, and that should translate to at least a INR 2,000 crores plus of BD next year, sir? Is it a fair assumption?

I'm not able to understand what is the meaning INR 2,000 crores of...

INR 2,000 crores of like today you have given a project of INR 600 crores of announcement you have done, sir.

Yes.

We had like that INR 2,000 crores, can we expect the next 15 months, sir?

It's by -- yes, of course, this INR 500 crores or whatever, I mean are we guessing the same number or a similar number, all this money has to be invested in the next 3 to 6 months' time for sure. This is not -- this is a short- to medium-term plan if 6 months to 8 months is a short- to medium-term plan at this point. So this entire money has to go there. Now it really depends upon what kind of products and projects we do. Sometimes, there can be -- if you were to figure the top line, sometimes the ratio could be INR 100 crore, still will give you a top line of INR 700 crores, INR 800 crores, sometimes it could be INR 500 crores as well, depending on what we want to do with a kind of project coming. But we are doing -- we are focusing more on [indiscernible] for the last few quarters. We have a very clear focus on all the internal projects. So we want to do projects which are villas, plots which are at least not very heavy on at the site. That's for many views that we do. And you continue to do that, then the ratio could be something like 1:6 or 1:7. So a INR 500 crore investment could be giving us in excess of INR 2,000 crore [indiscernible].

Sure, sir. Sir, so your strategy is very interesting. Like why you want to do more of horizontal, sir, like we are hearing from other companies who are listed, all talk about only vertical INR 50 crore, INR 40 crore. What is the thought process about that, if you can give some idea that would be great, sir?

So I mean it's one that we don't high-rise. We have projects which are 22 floors, a lot of them are 15, 14 floors, 14 meters, 17 meters, et cetera, et cetera. We haven't really done some INR 100 crores. But yes, below that 60 meters, 70 meters we have been doing for sure, and that has been our core for a long time. But I mean, we always have put a lot of focus on large funding developments in the past. We have done a very, very strong capability there. But what we want to offer is not a function of what we are experiencing, what we need to be taking to the market is what the market leads. And in our understanding, horizontal has been a little ignored in this country as a whole. If you go to any other developed economy, you will see that it is a core part of city. There is a CBD where you see a lot of high-rises concentrated in the middle of everything. And then as you start going out, the areas start becoming more residential and more and more horizontal and space down to pan down. Now this focus has been there as far as we are concerned. It also optimizes the risk element into the whole thing. The degree of investment or exposure in construction in such project in relation to the land value, the ultimate profit targeted and the top line generated is healthier in case of [indiscernible] development. And hence, the operating leveraging, so to say, is simply entry less. And optimizing the risk profile on the target side. So we have a general affinity to horizontals. That strategy has paid off. But having said that, we do quite a bit of vertical as well. I mean, going forward, if you were to deploy X, then I think 60% of that or even more could actually go into horizontal development.

Mr. Jain?

Okay. Thanks a lot for the...

[Operator Instructions] Our next question is from the line of Prem Khurana from Anand Rathi.

And congratulations, very good numbers this quarter. Sir, my question was, I mean, just to continue on what the previous participant was asking, I mean basically on the business development side. And I just want to understand your thoughts and the way you would like to approach this new -- the idea would be to kind of add more in the existing markets? Or would you be open to look at new geographies as well given the fact that now we have liquidity in place? You also have HDFC platform to be able to kind of use it to your benefit. So the idea would be kind of strengthen your leadership position in the existing market itself or you would like to kind of look at new micro markets as well?

Great question. I think this is a question we live every day, every morning, every evening and the answer is fairly consistent. We have goals clearly deep in the markets of Bangalore and Ahmedabad, if we include Gandhinagar, and Ahmedabad only [indiscernible]. But still, we see a huge potential, I mean if we're doing 4 or 5 projects in Bangalore and I think when we do 15. So on one side, we have a very, very small base as we call it, and we have a significant sort of headroom to go deeper into these 2 core markets. But we know that in the medium term, we can't be a 2 market [indiscernible]. So we need to expand, and we have revised that a few quarters back. That's why we took out one small project to understand the environment that as I said before. And now is the time that we having received this confidence of knowing the macro market, we've started investing heavily in Pune and MMR. When I say MMR, it means outskirts of Mumbai. So Pune and MMR we are treating as one market. Bangalore is one market. Ahmedabad, Gujarat, Gandhinagar, et cetera, is the third market. So having done 2 reasonable way, right now the focus will be -- or a big proportion of our press investments are now flowing into and MMR region, which is a third major city. So in the medium term, I think we have enough and more to do in these 3. They should give us enough and more room to grow and invest in. And once we've done that and we start feeling the same way as we did having done 2 markets and when we entered into the third one, as you will start exploring the fourth. But at this point, we are focused on these 3 and we'll continue to go deeper into these 3 markets. And that's how it is. We will continue to be a little more conservative about expanding holding -- I mean, [indiscernible] in the sense of it, going deeper is a better strategy. We want to be off a very, very decent site in the market that we operating costs before we venture out in the next market, so to say, in terms of geographic expansion.

Sure. And sir, when you evaluate new transactions, so how do we decide on which project will go under HDFC platform? And if it is -- I mean, it is a mid-income [indiscernible], which is what the mandate is for the HDFC platform. So if you get to have an opportunity in the segment, so how do you decide on whether you would want to do it on your own or you wouldn't offer it to the HDFC platform? Or is it that I mean you have the right to kind of for them and then they can eval?

Sure. So from where -- I mean, where we stand today, as of now, it's up to us and HDFC both to jointly do a project or not do a project. So if both of us agree it can be done if one of don't agree, it cannot be done. Like for example, the only one is being done on our own. We are buying as a company, and there is no other partner, so to say. The [ HK1 ] fund, which created this platform is done. They've completed the investment cycle of that fund and that fund from fresh investment and commitments point of view is over and hence the platform reused at. The second phase of our partnership with HDFC has brought in extreme money, but that has come in the form of equity into the company and hence, it's not produced specifically to pick up a stake there. And hence, what we acquire and what not to acquire is still an internal issue within the company. Now HDFC has recently announced as we understand 2 days back actually a 3 fund which is a huge fund, I mean, it can -- the investment go as high as $2 billion or thereabouts. Now that's an open discussion and obviously, even a very, very strong relationship which HDFC as a group to various sort of an immense platform, equity, et cetera, et cetera. We'll keep exploring how and where and when we can invest with that.

Sure. And just one last from my -- if I may. So let's say, I mean further broader presence in the markets like Bangalore and Pune, generally, what we've seen is that most of these developers, whenever they are planning them explore new micro markets or new markets, they generally tend to kind of go for JD projects because the idea tends to be, I mean, you would not like to go to a market where you don't have expertise or you're already not present in that market, but you don't understand the system well. But for us, I think it seems -- I mean, when I look at Pune that we've done now, the book -- I mean, it's entire 100% yours. So how does it work with us? I mean you're kind of okay to go so low even if it is a new market or the idea to kind of try and derisk and go to some partner early -- I mean, whenever you are planning to enter a new market and then once you have some names, address and then look for low projects? Or you're open, I mean, either way they're okay with it as long as you are able to make a good with the project?

Good question, but the answer is very counterintuitive, so to say. I mean if you are expecting one way on this strategy, we believe the other way around that if you are exploring a new market, it's better done with your own funds first, because then the variables will control and the dependencies and the relationship risks are less. With your own [indiscernible] really focus on delivering something to the customer unhindered and with the kind of specs, whether or not we make money because when you have your own money invested, you can take calls, which otherwise you will not be able to do. And first thing at the time of entrance into a market, which matters the most is to make sure that the customers are happy. Now we don't want to be having constraints there. And that's why we would rather do our own projects to start with. But having said that, derisking our own investment is very key, and that's why we are very, very conservative on investing our own funds into a new market. And that's why we're not in 10 markets today. We are only in the third market that we're at this point of turning to in a big way in the last several years. So we believe that it's safer to be on your own first, deliver the value, deliver the promise and make sure that the customers are happy before we take any chance with the customers, one, in any case we can't take that chance by the way. And more importantly, relationships with the investors or the landowners is as important as our relationships with the customers. I mean if you think that you are not mature enough, then we have no right to be playing with the value and the lands and the money of somebody else and put that relationship and [indiscernible] in danger. We boast of some of the healthiest relationships with various stakeholders, including landowners, and that's what we want to further conserving it. In fact, unless we are sure and doubly sure about success of the project, both in terms of markets, the products and also our capabilities, we won't rather take any chance with somebody else's land for sure. In fact, it comes later.

[Operator Instructions] Our next question is from the line of Rishikesh Oza from Robo Capital.

Okay. Sir, is it fair to say the booking value of this quarter is very much sustainable now? And now going ahead, we will keep on growing this number?

Well, that's the whole idea. We have been doing at a very healthy pace and the last few quarters have been great. And that's why we are promising a lot of [indiscernible] investment into new projects in pipeline. Building blocks are all in place. And if you continue doing the kind of investments in the last couple of quarters, I think we are on track to kind of sustain these numbers on sales. Of course, real estate projects, when you acquire then, some of them take 3 months to hit the market, some of them might take 8 months or 9 months to hit the market. But I think important is that even if there are launches happening at a discrete sort of pace and points, the important thing is that the pipeline has to become bigger. That's where the focus has been. And we are very, very aggressively working on that. The strategy has been revived with a very, very different kind of trigger and vigor, which was not the case in the initial part of COVID. So we are trying to make it up, cover up the lost time. And of course, the environment has helped us with very strong approvals and fresh equity and debt [indiscernible], so additional equity, et cetera. So I think we, on a long-term basis, medium-term basis, we are poised to strengthen our sales. And the same thing by the way is working. A lot of building blocks behind us. But I think we have a very, very strong team, which includes the call center, so what we will see is a digital setup. And I think we have one of the most advanced IT and technology step behind whatever we do on the sale side, the sales paradigm has changed dramatically in the last 8 quarters the way housing was sold and the way industry was transacted. I think there has been a sea change in certain aspects, I think we even crossed some of the developed markets when it comes to tools and [indiscernible] available for any sectors are going to perform as a country, as a nation. I think Arvind -- we have been very, very SME people, and we have a very, very strong technologies that are going behind the sales in -- so I think we are very well-poised to continue our growth in the fresh sales parameter.

Okay. That's great. And my second question is, sir, you're mentioning a PPT around -- not the operating cash around INR 1,500 crores. So if I say approximately how many years can this be realized?

So I mean there'll be a couple of additional slides in the in the investor presentation. And most of our projects are getting over between 1 year to 3 years, 3.5 years' time. So most of what you are reading here from the list of projects which are already launched, this should all be done within a span of 1, 2, 2.5, 3 years’ time from now. And the new ones, assuming that they will be hitting the market in the next 6 months, maybe 3, 3.5 years thereabouts to complete the project. So mostly these are 1 to 4 years, averaging maybe 2.5, 3 years, something like that, yes.

Our next question is from the line of Rithvik Sheth from One-Up Financial.

Sir, most of the questions have been answered. Just a couple of questions. Firstly, you mentioned MMR. So are we -- so is it at -- something is at an advanced stage? Are we looking to launch any new -- any project in this calendar year itself, anything at an advanced stage?

So we -- as I said, we treat Pune and MMR as one market for us, so to say, from a region point of view. And obviously, we're actively looking at the entire bank from Pune to Mumbai on that side, outskirts of Pune and some other outskirts of Mumbai as well. It has so happened that we are able to close the first deal, first major deal with 2 [indiscernible] 35 acres in Pune. But of course, we are actively looking at options within Pune, outskirts of Pune and outskirts of Mumbai. So I mean, you see a binary situation. Next one could come from Pune itself, next one could come in the outskirts of Mumbai towards Pune, or vice versa, et cetera, et cetera. But yes, within the season we will definitely be adding a few more projects in the future.

Sure, sir. And sir, in one of the earlier questions, you mentioned about a new fund from the HDFC platform, which is for 2 billion. So can you just rephrase this, what is this related to? So do we...

No. Yes, this is just a market information I'm telling you and sharing with you. All I wanted to say was, we got investment from the first one, HK1 fund into our SPV and also into our parent company. They are now coming up with the second project, which they've announced in the market couple of days back. It's a huge fund. So that's just a market information. Nothing at this point in time as far as that fund is concerned and [indiscernible] announced the market and possibly we'll have clients to start investing from there.

Right. So potentially that could come to us on the SPV platform which...

They've been investing in various ways with us. They have been investing in various ways with us, including platform and from the [ 11-2 ] fund, 2 various kind of structure that they have within their set up. So obviously, we're likely to explore with them in terms of what we can do from this new fund and otherwise. This is a group, has been a credit provider also. They have been our #1 banker, also this journey of almost 7, 8 years. They are the prime lenders to our business, at Smarts business. So in multiple ways we have had some very full and strong relationship with them. So obviously, we hope that we can further consolidate. We will keep restoring partnership as we go forward.

Sure. And sir, 2 bookkeeping questions from my end. What would be the land cost for this Pune land, which you are going to acquire?

Should be less than -- I mean, INR 90-odd crores thereabouts.

Okay. INR 90 crores, sir. And sir, the estimated operating cash flow that we have mentioned in one of the slides, so that would be at project level, right?

So which number are you specifically kind of...

The slide which mentions the operating cash flow at about INR 1,500 crores in the presentation.

Yes, yes. This is net cash flow towards after accounting for land, this year of landlords, all the expenses for development, overheads and everything, if you can take out every single thing which is out of pocket. This is net of everything which remains with us.

At project level, right?

This is at -- Ankit, can you explain this a little more [indiscernible]?

Yes, this is after allocation of corporate overhead. So this is a net EBITDA for the company.

Okay.

For sure. For sure. This is net of overheads, of costs...

Yes, that is what I was trying to understand.

This is the money that we see in the business for us.

Great. Great. And yes, just one last comment or your view on this. So if I look at the projects that we have done till date, it's about INR 2,500 crores, INR 2,700-odd crores of cumulative ongoing projects in completed and ongoing projects, where we have unsold value of inventory and also the booking value of about INR 2,500 crores, INR 2,700 crores. And you mentioned earlier that in next 1 year, we're looking to invest about INR 400 crores to INR 500 crores if we get the projects, which could have a multiplier sales value of 5x to 6x, depending on the type of the projects that you acquired. So we're talking about INR 2,500 crores to INR 3,000 crores already incremental projects from this cash flow. So just one question on this. Are we ready in terms of bandwidth to handle this level of projects? And what needs to -- what needs to click over the next 1 to 2 years?

Understood. So just one small flag here, this ratio of 1:5 or 6, whatever, so it is INR 500 crores, it means a INR 3,000 crores, that is also based on an assumption that we buy out all the land parcel that we invest in. So INR 100 crores spend means an outright purchase which is also this kind of a turnover. But obviously, we also have a very significant component coming in from JVs. Our Sarjapur project, for example, has a upfront investment of INR 15 crores giving us some INR 700 crores of top line. So that changes numbers dramatically. So INR 500 crores is not entirely for outright only. So a 50-50 breakup of these funds, maybe that's too high, you can say, even if it is 60-40, 40% going towards [indiscernible] and 60% on outright, that will mean that the number of INR 3,000 crores for a INR 500 crore year mark will grow dramatically up in terms of top line. That's one flag I wanted to raise. On your question of bandwidth, yes, that's extremely important. End of the day, on the business side, any business, I think the primary constraint is the bandwidth of the managerial capabilities and talent pool et cetera, and not money and not land. Of course, land is abundant, isn't it? So we have been very conscious about it. We have been building teams way ahead of time. We think that the first investment that we need to do even before the piece of land is to invest in products bonding and even a little more on the manpower and the managerial capabilities, et cetera. That's how we have evolved, and that reflects in our delivery so far. We have had one of the best sales as we understand on a small base, we've delivered every single project on time. And we have been quite upfront about investing in people. Today, as we speak, we have had some very, very senior and very, very experienced, very, very dynamic set of people joining this company in the last 3 to 4 quarters. Avinash himself is an example of that. It's [indiscernible] COO, we had head of our national sales [indiscernible], with very vast experience into Mumbai and Pune market. We knew that focus is going to be in these markets [indiscernible]. So we have been quite -- Ankit himself is going from a very, very strong finance and structured systems-oriented background from Marico as our CFO. So we have been building teams in a very, very big way. And of course, [indiscernible] behind the curve on building -- we just mess it up everything. We would rather be a little ahead of timing and invest more and invest less on this.

Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Kamal Singal for closing comments. Please go ahead, sir.

Great. So -- good, it's been great having time spent with all you guys and thank you very much for sparing your valuable time. Last few quarters have been great. Momentum has been great. We see extra tailwinds coming our way because of the industry is evolving, consolidation happening, generally doing better. Buyers more in trying to buy more and buy bigger. Market is even significantly by end consumption, the element of investment for the investors including -- is significantly less, that means less upsell downs and more stable and sustainable kind of growth. Prices haven't really gone up for real estate. Affordability that is best. So I mean, we believe that India is poised for a very, very strong next few years. When we come to real estate, there is no bubble like [ Ave Grande ] happening in India. Most of the [indiscernible] are very well-capitalized, at least the kind of people that we deal with. And hence, it's a very stable market when it comes to both the demand side and the supply side. So we take this as a great opportunity. We think that we have all the building blocks in place. We are very aggressively right now focused on building our pipeline. And of course, we'll be investing upfront and heavily in technology in our systems and processing, which are obviously even in the most evolving industry as we believe it and we'll keep spending our revenue structures, which are also [indiscernible]. All in all, we're looking forward to a great and exciting year going ahead. And I think many of our peers will be feeling the same way, and they will also be able to kind of show the kind of numbers and results that one would expect from this after a comparatively longer cycle of not something that we -- very significant growth rate in the past. So all in all, great, and in the end, thanks a lot, everybody, for joining us, and I look forward to meeting all of you. Thanks a lot.

Thank you, Mr. Singal and members of the management team. Ladies and gentlemen, on behalf of Arvind SmartSpaces Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.