Arvind SmartSpaces Limited (ARVSMART) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q3 9 Months FY '24 Earnings Conference Call of Arvind SmartSpaces Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Sharma from Adfactors. Thank you, and over to you, sir.

Thank you very much. Good afternoon, everyone, and thank you for joining us on the Q3 and 9 months FY '24 Results Conference Call of Arvind SmartSpaces Limited. We have with us today on the call Mr. Kamal Singal, Managing Director and CEO; Mr. Ankit Jain, CFO, Chief Financial Officer; Mr. Avinash Suresh, Chief Operating Officer; Mr. Prakash Makwana, Company Secretary; and Mr. Vikram Rajput, Head, Investor Relations. Please note that a copy of the disclosure is available on the Investors section of the website of Arvind SmartSpaces Limited as well as on the stock exchanges. Please do note that anything said on this call that reflects the outlook towards the future, which could be construed as a forward-looking statement, must be reviewed in conjunction with the risks that the company faces. I would like to now hand over the call to Mr. Kamal Singal for his opening remarks. Over to you, sir. Thank you.

Thank you, and a very good morning to all of you, and welcome to the operating and financial performance review for Arvind SmartSpaces ending third quarter of '23/'24. I will just begin by sharing my thoughts on real estate environment and broad highlights for the quarter, and then we look forward to taking your questions and suggestions. The macroeconomic tailwind winds are continuing. In the fiscal year '24, India is poised to achieve a growth rate of around 7%, continuing a trend of strong economic performance since the onset of the pandemic. Multiple reports suggest that this growth trajectory will persist into financial year '25. Over the past decade, India has made significant investments in infrastructure resulting into a remarkable 3.3 fold increase in public sector expenditure. This inclusion of funds has not only bolstered the country's physical foundations but also has laid the groundwork for sustained economic growth. Improved household financial well-being, increased job creation, declining unemployment rates and advancement in education and health care metrics are all reflective of a concerted effort towards fostering broad-based prosperity. The surge in residential real estate activity has emerged as a significant contributor to India's economic narrative. Real estate sales has hit a decadal high supported by a flurry of new property launches and corresponding uptick in sales across various urban centers. Despite price increases, the affordability ratios witnessed a marginal improvement in top 8 cities as income growth surpassed pricing growth and mortgage rates remained flat. Further, the demand buoyancy is being driven by end users, showcasing the underlying strength and stability of the housing cycle. At Arvind SmartSpaces, we look forward to driving transformative growth in the residential real estate market. With consumer preferences evolving rapidly, we understand that staying relevant means continuously innovative. Our approach goes beyond mere construction. It's about crafting sustainable living solutions, infused with technology and well-being features tailored to demand of the modern era. With a robust customer-centric programs, strong brand, expanding geographic footprint, innovative products and commitment to operational excellence, we are poised to capitalize on emerging opportunities and deliver value to the customers and stakeholders alike. Coming to operational update for the quarter and the 9 months, I'm pleased to share some notable achievements. We have delivered a record high 9 months sales value at INR 784 crores, an impressive 41% year-on-year growth, indicating strong consumer confidence and market demand. In the third quarter of FY '24, our presales value continued to show positive momentum at INR 280 crores, driven by successful launches of our premium projects such as Forest Trails in Sarjapur, Bengaluru. This is a premium villa development where we achieved sales of more than INR 150 crores in Q3, which is a little more than 30% of the launched inventory. The successful launch of Forest Trails in Sarjapur follows a stellar launch of Greatlands Phase 2 at Devanhalli and highlights the growing equity and trust of the brand Arvind in our key markets of Bengaluru. Following the remarkable response to Phase 1 of Uplands 2 in Adroda, Ahmedabad, we swiftly launched Phase 2, achieving a sales worth INR 75 crores there. We are delighted to have a strong response to all our new launches over the last several quarters in several different micro markets. Similarly, our -- similarly to our 9 million bookings, collections for the 9 months -- sorry, similar to our 9 months booking, collections for the 9 months period reached the highest levels in any given 9 months period. Nine months' collection stood at INR 661 crores, a significant increase of 60% over the same period last year. Collections for the quarter increased by 16% year-on-year at INR 194 crores. This performance underscores our ability to maintain a strong operating cycle, aligning our sales construction and delivery processes effectively. I'm pleased to note, that our expansion initiatives have seen promising developments with a cumulative topline potential addition of around INR 4,150 crores for the current financial year. Recently, we entered Surat with INR 1,100 crores horizontal multi-asset township project, expanding our presence in this third city in the state of Gujarat. The project is spread over 300 acres and signed under JD model with 55% share accruing to us. This strategic move underscores our proactive approach to growth and our focus on seizing opportunities in emerging markets. We also added a new horizontal project in West Ahmedabad with a topline potential of INR 250 crores. This would be on an outright basis. The quantum of JDs in our portfolio is on the higher side currently, and we look forward to an optimal mix of JDs and outright deals as we progress forward. Nevertheless, successful JDs across markets showcase the confidence of land owners in Arvind brand, and this will allow us to build a strong sustainable pipeline going forward. During the quarter, we achieved financial closure on Fruits of Life in a year and give exit to HDFC Capital on the project. It not only highlights the brand equity and execution capabilities of brand Arvind, but also the thriving nature of horizontal and plotting projects in the Ahmedabad market. The platform too continues to progress well with the 3 projects already acquired under it across Ahmedabad and Bengaluru. We look forward to acquire additional projects into this platform in our targeted markets in the coming quarters. Now moving on to operational side. In 9 months, we reported a revenue of INR 224 crores, up 37% on a year-on-year basis, and EBITDA of -- EBITDA grew at 68% to INR 57 crores. PAT for the 9 months grew 60% to INR 26 crores. In Q3, we reported a revenue of INR 84 crores, up 60% year-on-year basis, and EBITDA for Q3 grew by 60% as well to INR 21 crores. PAT for the quarter grew 121% to INR 9 crores. Our balance sheet position remained strong despite expanding operations. Net debt increased to negative INR 38 crores as on December 31, '23, from a net debt position of INR 141 crores as on September 30, 2023. A crucial parameter in real estate reflecting the underlying business performance quite well is operating cash flows. And during the quarter, net operating cash flows amounted to INR 89 crores. Net operating cash flow during the 9 months stood at INR 360 crores. We estimate an unrealized operating cash flows exceeding INR 2,552 crores coming from the current pipeline of projects. As you would have noticed in our presentation, we have very recently pre-launched our project at Doddaballapur in Bangalore. It's called Arvind Orchards. We look forward to delivering a differentiated experience to our customers in North Bengaluru through this one-of-its-kind orchard-themed plotting development. To conclude, we see a very significant opportunity for the Indian real estate market. And Arvind SmartSpaces is well poised to capitalize on the same and sustain its path of profitable growth. As we approach the financial year-end, the objective remains to end it on a very strong note across operational and financial parameters. On that note, I conclude my opening remarks, and I would like to ask the moderator to open the line for question and answers.

[Operator Instructions] The first question is from the line of Biplab from Antique Stockbroking.

Sir, my first question would be on the business development from excellent velocity. So this INR 40 billion -- around INR 40 billion GDV business development that you did till date in this financial year, when do you expect these projects to be launched? Can all of this could be launched in FY '25?

Yes, yes, of course. Yes. I mean a INR 4,000 crores worth of new projects have been added in the last few quarters. And for this year, this is cumulative number. And of course, this is planned to be launched in the coming year.

And one portion of INR 600 crores have already been launched.

Yes. In fact, INR 600 crores out of this INR 4,000-plus crores is already launched. But in any case, rest of it should also be getting launched within this coming financial year.

Okay. So there is a quick turnaround time. It doesn't take much from business development to launch?

Yes. So I mean it's a combination of medium size and very large-sized projects, projects which require environment clearance and projects which do not require environment clearances. But putting everything together, we see a very realistic possibility of everything of this getting launched within this financial year.

Okay. Okay. My second question is on the Ahmedabad 40 acres that acquisition outright basis you did. I'm just trying to understand what would be the cost of the land that you have paid for that?

Normally, the specifics about the cost, et cetera, is not shared. Maybe you can get in touch with the team here to know to what extent it is prudent for us to share such data, I'm not share about it. But otherwise, this is a great product from the standpoint, from the standpoint of making quicker money and hitting the market very, very soon. In fact, we're hoping that we hit market with this project, I mean, in next few weeks itself. So within this financial year, possibly we should be starting to sell this product. So it's a very quick turnaround project. And the rest, possibly you can get in touch and we'll figure it out to what extent information can be shared.

And in typically, such projects, you have -- suppose you have bought the land, okay, we keep aside that cost. But what would be the other cost? And how much -- what would the quantum of that cost, say, for this 40 acres project? How much -- what would be the other cost? And what would be the quantum of that cost that needs to be incurred for this project?

So operating margins and EBITDAs in these projects vary anywhere between 25% to as high as 35%, 40%, maybe average of a plotting project that we are currently executing will be more than 30%, 35%. And this project should be very similar to that, and that's how the costs are.

The next question is from the line of [ Ritwik Sheth from One Up Financial Consultants ].

Congratulations on excellent set of numbers. Sir...

Ritwik, can you talk a little louder, please? I mean we're not able to hear you clearly.

Yes. Is this better?

Yes, better. Significantly better, yes.

Sorry. Yes. So firstly, you mentioned that you are planning to launch the West Ahmedabad project, which you acquired recently in Q4 FY '24 itself. Did I hear it right?

FY '25, we said. I mean when we talked about this INR 4,000 worth of projects, so what we said was this entire pipeline that we've acquired recently, which is totaling to INR 4,000 crores for this current year as a total, everything of that will be launched in the coming financial year, which is 2024-'25. And Lakshmanpura, this one project out of it, which is not a very big project, but otherwise a profitable one, will be launched within this financial year, hopefully. Within the current financial year ending March '24.

Got it. Okay. And sir, second question is on the HDFC platform. What is the total amount that we have deployed till date out of the INR 900 crores?

So we've committed in excess of INR 400 crores already from the platform, maybe the payments are a little less than that, more like a INR 300 crores, INR 350-odd crores. But commitment-wise, it has crossed halfway and we've deployed in that sense in excess of INR 400 crores.

Okay. Okay. Great. And sir, just one question. We have INR 4,000 crores of launches to be done in the next 4, 5 quarters. Sir, what kind of business development are we looking this year? Already, we have seen a very strong business development pipeline, the highest in the company's history. What will FY '25 look like? And what -- would it be a similar number, around INR 4,000 crores, INR 5,000 crores? I would like to pick your thoughts on that.

So a little futuristic, but as you very rightly said and understood that you already clocked in excess of INR 4,000 crores in the first 9 months of this year. Now we would love and like and be happy with the number which is rounded up to something close to INR 5,000 crores for the year. And most of those projects which are in further discussions and pipeline, generally, they are quite decent in size and hence, one or two happenings will mean that we'll cross that number. So hopefully, we cross that and do additional INR 1,000-odd crores within this financial year. But having said that, this trajectory of INR 4,000 crores to INR 5,000 crore is something that we hope that will sustain in the coming years as well. It's not that this is an exceptional year, and that's why it is high. It is a trajectory that we want to maintain.

Okay. Okay. Sure. And this acquisition would be more or less funded by internal accruals, HDFC platform and debt if need arise to be, right?

Correct. Correct. So as you know, HDFC, there is leftover still significant. Then internal accruals have been very strong. This year, we have accumulated more than INR 360-odd crores, which is one of the highest ever. And company is still negative debt company as on December end. So hopefully, I mean very, very conservatively, we should be raising back to the extent of INR 300 crores to INR 400 crores. Even if it's INR 300 crore, it is a significant amount of money. So all in all, all these 3 engines are alive and kicking, and we should be able to make use of this. And on top of that, as of now, we are very, very heavy on JDs as a structure. And that is why a lot of money is still left to be deployed despite adding a very significant topline of around INR 4,000 crores for the current year. To that extent, apart from deployment of these 3 sources, which are internal and external both put together, including the platform and debt and, of course, internal accruals. JDs are kind of complementing and supplementing the other efforts towards creating bigger pipeline.

Right, right. And sir, just one final question -- one clarification rather. The reported OCF of INR 360 crores in the quarter, that is for our company share, right, net to us?

Yes, yes. So this quarter number is INR 90 crores, INR 89 crores to be more precise. This year's number is -- cumulative number for 9 months is INR 360 crores. And this is purely and purely what has come to us already. And either it is already to deployed or it's gone into any repayment at all. But yes, this is purely our share accrued to us and received by us.

The next question is from the line of Abhishek from YES Securities.

Just one question. Where do we stand on BD regarding [indiscernible] or say Pune or MMR cumulatively?

So if I heard your question right, you're asking about BD efforts in Pune and MMR?

Yes, yes, absolutely.

Correct. So yes, I mean those efforts are on. We have evaluated a bunch of projects. A couple of them are looking quite promising. They are in advanced stages as of now. We are a little conservative when it comes to adding a new geography, and that's how we are doing this time also. Surat, as you would recollect, was something that we started a few quarters back, and we continued that focus for a very long time and eventually we've come up with a very, very large, very good exciting project there. We hope that with the kind of efforts going into MMR market, something should materialize very soon.

Within this financial year or it should spill over to next year?

So because -- I mean, this is an entry point that you're talking about and project happening and not happening is a little binary in that nature. And hence, we can't say that this will happen. But I mean, this quarter or next quarter, thereabouts, things should happen.

Sure. Second -- sir, one more. See, we just acquired a small project in Ahmedabad. So any color whether it will go to HDFC platform or we will execute it because it's an outright...

Yes. So this project is taken on an outright basis. We are not involving platform in this. So whatever happens, the entire cash flows and margins, et cetera, accrue to us, and platform is not involved in this.

The next question is from the line of Ronald Siyoni from Sharekhan Limited.

Congratulations on your new business development deal for 9 months. Sir, we have been spending around INR 700 crores to INR 750 crores of HDFC platform money. So I believe some would have been utilized in Q3. Or if not, then how much has been outstanding? And sir, are we using more of bank on leveraging our balance sheet and rather than not using HDFC money? Or if there is a possibility that HDFC platform money would be used for more larger transactions, especially in MMR region. So just your thought process on the usage of capital of your own and versus HDFC?

Sure. So the platform is sized at around INR 900 crores total, out of which INR 600 crores comes from HDFC and INR 300 crores is to be invested by us. And out of this INR 900 crores total, we have deployed to the tune of around INR 400 crores already and INR 500-odd crores is still left to be deployed. Generally, it makes more sense for us to deploy this money in little long-term projects and projects which are of a little decent and bigger size and scale. For example, Lakshmanpura is not that size. And hence, generally, we would prefer not to investment in a Lakshmanpura kind of a project there. But having said that, money is available. If a project is viable, there is no problem and there is no hindrance to investing platform money or otherwise. As we just discussed, all the 3 sources, internal accruals, platform money and debt, all the 3 are available. At any given point in time, depending on the size of opportunity and the investments required, and that day, that week, that month's cash flows that we have on hand, obviously, we would like to first exhaust internal accruals because that's our own money without any incremental cost, and then the cheaper money and then the less cheaper money, et cetera. So that hierarchy is always followed. It has so happened that cash flows for the last few quarters have been strong. The last 3 quarters itself has given us in excess of INR 360 crores. To that extent, our leveraging has not really begun. We are still negative on the overall net debt side. At the same time, this has also resulted in underutilization of the platform money on a cumulative basis. But having said that, it's just a matter of time and a few more quarters before we get into a positive side of trajectory on both the net debt and utilization of the fund money.

And my second question would be, sir, as you also said that INR 300 crores to INR 400 crores debt might be raised for the next year. So already, we are getting big larger size projects to JDs. So leveraging the balance sheet to get better margins, is that the thought process versus JD projects would be there but the mix would be lesser and outright would be higher? And last would be on the margin front, like there is a little bit volatility in the margin size. And is it because a plotted project has a lower revenue booking during the quarter and which had led to sequential dip in margins?

So I'll ask Ankit to respond on the margin front. Yes, Ankit will you please respond to that first, and then I'll take it?

Sure. So margin, if you look at on a year-on-year basis, for the quarter, is the same, which is 24.7%. These are adjusted margins for the interest element. So we have given this information in the information update. So hence, our top line for the quarter is 60% growth and margins are equivalent to 60% growth. However, as a percentage of margin, these percentage of margin in financials do not reflect the current bookings because there is a lag in the accounting -- the way accounting happens. So this relates to many projects which have been delivered and which were launched a couple of years back, like for example, the quarter relates to revenue recognition from Uplands and Oasis. So the plotting projects booking which we are looking at like Uplands 2.0 maybe a Forest Trails, which is there in the current quarter, which is more of presale, does not come into books of accounts. Hope this clarifies.

Yes, right. I understand that. But because previous 3, 4 years launch, the project, which has hit revenue recognition during this quarter, the mix of that would be higher towards -- or lower towards this plotted developments and hence, there is a little bit sequential volatility. Because last quarter, the margins were very good.

Yes, last quarter, margins were higher. Again, it will vary on the revenue recognition projects, which...

Saying that depending on which projects are getting into the books of account, this volatility remains. But on an average, the margins otherwise are fairly consistent to the extent of around 25% of EBITDA, 11% to 12% of PAT. In fact, last quarter was, in my understanding, a little bit of an aberration, where more profitable -- disproportionately profitable projects entered into the books of account and hence this higher margin. This quarter, the current quarter, and the cumulative number in that sense is actually more representative of the profitability and the level of profitability that we expect in the normal course on a steady-state basis.

And maybe just to add, your comment on plotting has a low margin, it is not a case that plotting is a low margin...

Actually, it's the other way round. Plotting is actually a little higher margin. And the second part of your question related to more outright versus JDs, et cetera, et cetera, yes, I mean, generally, we prefer to have a very optimal balanced portfolio from this point of view, structuring point of view, but it has so happened that in the first 9 months of this year, we've done more of JDs and less of outright. But because that has also meant that we have more investable money left as of now for the topline that we've already tied up, it will automatically be an orientation where we'll see more outright projects coming our way in the coming months from the money which is still left to be deployed.

The next question is from the line of Rakesh Wadhwani from Monarch AIF.

Sir, in the initial remarks, you mentioned you work on the operating margin of 30% to 35% for the horizontal products -- projects. Can you also give us what is the operating margin we work for the vertical projects?

So weighted average of the 2 will be 25% rather 25% to 30%. And I will say a long-term stabilized difference in operating margin will be to the extent of 5%. So if we are hovering anything between 25% to 30% as overall margins, then vertical would be more like 25%, 22% and thereabouts. And horizontal will be more like 30%, 35% or a little more in a few cases, selected cases and more like that. So -- and hence, the average of anything between 25% to 30%. You can assume that there's a difference of around 5% between the 2 on an average.

Okay. Sir, what will be the IRR we will be minimum looking with respect to the vertical or horizontal because if I look at horizontal, it should have more margin -- more IRR.

Yes, horizontal has more IRRs generally because the cash flows are better. They are more front loaded, collection times are less, margins are healthy or decent or even better than vertical. So in that sense, all the 3 are adding up into one common understanding, which is higher IRRs. So definitely, yes.

No, sir, my question is that what will be the IRR that we will be looking for -- in both the projects in order to take a project. For example, you are working on a new land development now or working -- thinking of a new land acquisition, what is the minimum IRR level, we will work, otherwise we will reject the project for the horizontal or vertical, if you can talk about that?

So generally, 25% IRRs are broader understanding. It's not written in cast, but on an average, we know that it has to be 25% and thereabouts. We have certain projects, rather most of the projects which are a little better than that, but we are okay compromising a couple of percentage here and there. As a minimum, average, it is around 25% for us.

Okay. And the projects that have -- that were launched in the last 1 or 2 quarters, like Uplands 2.0 and 3.0, Fruits of Life, which got full booking or 90% above booking in the first quarter only in the month of launch only. So that will have a higher IRR of 40%, 50% also.

Yes. I mean on top of that these are JD projects, so the capital deployment is very less in any case, so we would have actually recovered a lot of money -- most of money that we would had deployed on a net basis. So in these projects, IRRs are so high that they are not relevant to be discussed in that sense. JD projects selling in 3, 4 months, 5 months, giving you very hefty upfronted cash flows, means IRRs are going to be very, very high, but that's because the way they are structured and it's the same velocities simultaneously is good. So yes, I mean, the answer is yes.

Yes. Sir, now coming to the point of business development. What we have seen in the past in the -- like if I go before COVID, company had a more business from the horizontal. Slowly, gradually, the portfolio has shifted -- is shifting from horizontal to vertical. But if I look at the FY '25 launches also in the last few quarters, the company, that we have done the land acquisition, moved towards horizontal. So just wanted to know land acquisition or business development strategy for FY '25? Where do you see like more land parcels will be added, whether in horizontal or vertical?

Yes, it's a great question. As I said, more JDs have happened in the first 9 months and JDs first tend to be a little more horizontal than being vertical. But because we are left with quite a bit of money to be deployed in outright projects, as we just discussed a few minutes back, that will mean that more of horizontal will start entering into the portfolio very soon as we continue and deploy more money. But having said that, we have been quite happy and conscious about remaining a little more horizontal historically in the last 3, 4 months and specifically post-COVID. In fact, we were the company who spotted this trend very early. And we saw benefits not only from the point of view of efficient allocation of capital but also from the point of view of mitigating and minimizing risk or rather optimizing risk in the portfolio given the uncertainties we had during COVID and thereafter. So this strategy generally has paid off well. We don't see that we have penetrated deeper than what we should have been -- we should be doing. And hence, we see a lot of scope still left in the markets that we are in. For example, even Surat, a great city of the size of Ahmedabad, as big as Ahmedabad is et cetera, et cetera, but there are very few horizontal developments which are of that great quality, international standards, bringing a very different perspective to how horizontal development will look like, et cetera. I mean these are the kind of opportunities which are quite untapped. A lot of real estate developers have appreciated this. We spotted this trend a little early and hence, our portfolio today looks heavier on horizontal. Going forward also, we will continue to keep similar pressure -- similar kind of focus on horizontal. But having said you will see quite a bit of action happening on vertical as well as we go ahead with the deployment of the under-deployed money that we have from all the 3 sources we discussed.

Kamalji, if you can give some numbers, like if we go for a INR 4,000 crore GDV value, what will be, like 60% will be horizontal or 30% or 70%? Any thoughts you have in the mind because what I view -- you said you are early -- because what is my doubt is that to get such a land parcel, big, big land parcel, it will become difficult, not maybe in FY '25, FY '26 getting big, big land parcel will be difficult. That is why I'm asking.

So today, we're optimizing. We've got both options. As we invest in the way we invested in the last few quarters, it doesn't mean that we have not got ideas and opportunities in vertical for that matter. It's about deploying in the best alternative at that day, looking at the possibility of sales, velocity of sales, et cetera, et cetera. So to the extent, we are not overly worried about in that direction we will go, whether or not larger or this kind of parcel will be available. In fact, we have surprised ourselves already by getting into large and larger horizontal arrangements and joint development agreements than what we were set out to be. And as the brand builds further, as the recognition happens further, it's already very strong in the markets that we are. We are getting more and more opportunities in the market where land owners are approaching both for vertical and horizontal on joint development basis. And hence, this opportunity -- in fact, when we talk about consolidation in the market, it essentially means that even if the market grows by 10%, the guys and the brands who are organized, et cetera, et cetera, they are growing by 25%. And that means a lot of land owners now instead of thinking of doing things themselves, want to go through the brand route through an organized player route and getting into development indirectly. If that is happening, the trend of JDs are only going to increase and consolidate further. To that extent, we are quite hopeful and there are reasons to believe that these deals and these kind of deals will keep coming. But having said that, to keep a little fatter skin in the game, there has to be optimum balance between JDs and our own projects so that not only that we have better ratios in terms of profitability, return on equity, et cetera, we should also skin which is fatter, which means return on effort has to be further optimized, and even in absolutes for the effort that we're putting as a portfolio are also healthy. So verticals, which are owned by us are equally important. Our idea is to invest almost 50% of the money that we have, maybe 60% of the money goes into our own project and 30% to 40% money goes into JDs. But 30%, 40% money going to JD means, they will create disproportionate amount of topline because they are more efficient on creating topline. To that extent, there will be a little bit of an orientation towards topline being -- coming from JDs more. But from investment standpoint, it might be 60-40 in favor of vertical-owned projects versus JD.

Sorry to interrupt, maybe request that you return to the question for a follow-up question. [Operator Instructions] And the next question is from the line of Harsh Pathak from B&K Securities.

Sir, I wanted to check. I mean we have been hearing that the major demand, I mean 70% of the demand in real estate space comes from the top 7-8 cities. But with regards to your recent foray in Surat, that's maybe you can say a Tier 2 city. So how does this foray come in like our strategic growth map? I mean what's our thought process? Maybe I'm looking from a medium-term strategic growth point of view?

Sure. You're talking in the context of Surat, right?

Yes. I mean, Surat and in general our foray in our tier 2 cities, are we looking like foray -- similar forays in other cities, Tier 2 cities as well or will consolidate in this market? Any color that you can give.

Sure. So we have historically been a little conservative when it comes to geographical expansion and adding a new city. In the first almost 1 decade of our operations, we limited ourselves to Ahmedabad, Gandhinagar being a Twin City and Bangalore. And then we started thinking of city like Surat. In fact, we talked about Surat almost 1.5 year back when we thought that this could be potentially a great opportunity for us. Quite a few things have happened since then in Surat, including the [ Bourse ] is coming in and other activities like bullet train becoming a reality very soon. Maybe by '26, we start seeing the train running through the city, et cetera. You'll be surprised that Surat actually is bigger than most of us believe. It's almost as big as Ahmedabad is on many fronts, including the number of houses sold, the size of the market, per capita income, overall scale and size, businesses, et cetera, et cetera, including population. It's almost there. They're the same size. So it's a very natural fit. It might not be a tier 2 strategy for us in that sense typically. But we see Surat as very natural extension, I mean in whatever way we look at it. It could be seen as an extension of Ahmedabad, just a 3-hour drive from here and very similar consumer mix, customer mix, brand recognition, et cetera, almost the same size. And it can also be seen as a twin city to Mumbai, for example. Once bullet is ready, it's about 1.5 hours from Mumbai. So to that extent, it fits perfectly into the strategy overall. And we spent enough and more time understanding the city, understanding the markets, and we've taken more time than what would have ourselves anticipated to enter into the city because we wanted to make sure that we enter with size, scale and then the city should have potential to go deeper as we go forward. It's not about doing an opportunistic 1 or 2 projects. Once we enter, it has to be decent size and that box also gets checked in this case. Other than that, we have said that in the medium term, Ahmedabad, Bangalore, obviously our home markets, then MMR is our third priority, so to say. We have taken time before we announced something concrete in Mumbai, but Pune, we have already got going and we hope that we'll add something there as well. So these 3 are going to be our medium-term focus. And Surat can be seen more like an extension of either Ahmedabad or Mumbai whatever way you want to take it.

Sure. And any progress on the Mumbai market that you would want to highlight?

Mumbai, we are very intensely into the market at this point. We are not in a position to announce anything at this point in time, but the lens is becoming narrow and narrow, the focus is becoming narrower and narrower. Hopefully, in the coming quarters, we should be able to announce something there. But enough and more resources are already put. We are very, very closely monitoring and evaluating the market and specific opportunities. Hopefully, something should materialize soon. Surat is a great addition. We are happy that finally we've broken into the market. And once we reach there and we have a strong set up there, I'm sure this will give us a great opportunity to go deeper in a market which is as important as Ahmedabad for us.

Right. And just one last question. So when we -- when you say this when we are nearing closure on the Mumbai market, so will it be an outright purchase or a JD? I'm asking more from a cash flow management perspective.

It could be both, but the way we are seeing at this point in time, it's looking more like a JD entry, where the initial fund deployment will be contained to a large extent, but we're open to both. We are evaluating both. I mean going with the sheer numbers and the trend that I'm seeing from the option that we have evaluated off late, it seems that chances of a JD happening are higher than an outright happening.

The next question is from the line of Akshay Kothari from JHP Securities.

Sir, congratulations on a very good pipeline. And it was exciting to see Arvind SmartSpaces foraying in Surat. Just had one question, so what is the nearest village on NH 48 where we have done this Surat thing?

This is still not disclosed, but this is close to the circle called -- let me just figure it out. You can take the other question, and I'll come back to you on this with the name of...

Is it near Kamrej?

I think so. That's the first -- yes. It's very near Kamrej, yes, correct. You are right.

Okay. So again, then following up on that, based on the indicative topline of INR 1,100 crores and 13 million square feet generation, per square feet would be around INR 850 per square feet, right?

So it will be more like a INR 7,000 to INR 8,000 per square of realization on the land, yes.

Okay. And this -- what would be the size of the plot?

That we have not figured out yet. It's at a very early stage of planning and designing, et cetera, et cetera. I think those details will emerge over a period of time. We just got into an agreement and finalized deal, et cetera, et cetera, but we'll come back -- I mean we'll share such details when we are close to the launch, et cetera. Anyway, as per the regulatory requirements, RERA, et cetera, we aren't supposed to be -- getting anything on the project before it is approved. So, we'll wait for that information. But generally, we'll do what we keep doing at a place like Uplands in Adroda or stuff like that or a mix of both.

And sir, just one last thing just to get your thoughts on this. Surat is generally very famous for textiles and diamond market of lately. Now the thing is inherent nature of these businesses, are that, that people have so much of cash that their second business is generally becoming -- getting into real estate because generally, that is where money can be parked into. So we being a company who doesn't indulge in all the activities, and how do you see this market actually evolving? Because today, it's not there. In fact, the real estate players over there are the ones who actually are very much unorganized.

I get your point. So basically, you're saying that what and how to handle the cash financials, which might be a little more prevalent in the city like Surat, which is predominantly a business. You're absolutely right. This challenge or this kind of additional aspect of the business existed in many cities that we did. For example, Ahmedabad itself to start with was very similar to that. And generally, people believe that to sell a INR 15 crores villa in Ahmedabad in the outskirts with [indiscernible] check, might not be a great idea. Our experience has been in any new market, the last 20% is neutral to this or rather in favor of paying more check, which actually remains untapped to a very large extent because everybody takes the other color of money, which then means that there is nobody who gives 100% check. And if you are one of them and if you are only person doing that, it's an opportunity. Maybe it's a little smaller, but for 1 player to have this kind of vast market and the share of that vast market, I think is big enough and deep enough for us to sustain and survive. The other thing is when it comes to buying a house, it's like something that you like then you stress yourself. If you don't like, anyway there are many reasons not to buy that. We feel that wherever we delivered a great product, for example, Uplands, irrespective of the value that were there at unit price levels, once people like it, to manage check is not that big an issue. Banks are funding. That means that even businessmen want to have a little bigger size of their balance sheet these days. The overall environment is changing, overall orientation is changing, and investing in house doesn't mean that you could take the entire liquidity out of the system of your business. It broadly comes from bank if you so need it. And that is the cheapest source of money in any cases. I'll give you one example. If you're buying a INR 10 crore house, you've got 2 options. One is to take that money from your business out even if it is cash, but the cost of that capital direct or indirect cash or otherwise has to be much more than what you could have otherwise managed through a bank. So even for a businessman who has a lot of cash and who keeps a lot of cash deployed in his business, he is always short of cash. That's how businesses work. And then to get into an asset which is appreciating, an asset he wants enjoy, it's actually better despite having cash to take that money from the cheapest source which is housing loan and then deploy it, irrespective whether it is INR 10 crores or INR 15 crores. So all these combinations make a lot of sense. We haven't faced the kind of problem which looks like or appears to be from a periphery, and we've been able to sell quite a bit of these products at a very hefty pace. And of course, Bangalore and those kind markets don't have been this issue at all. In Ahmedabad, we've cracked this already in multiple projects, multiple sizing, schemes, et cetera, et cetera. So very hopeful and very reasonable to believe that, I mean, this is one aspect that we need to be careful about. But having said, if the right product is delivered, right product is planned and right excitement is created, there shouldn't be a problem selling it.

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

So my first question is that we have an ongoing unsold projects worth of around INR 1,400 crores if I have to see the operating cash flow table that you have presented in your presentation. So I would like to know what to kind of expected sales velocity do we see here now?

In the ongoing unsold projects you are saying?

Yes.

So generally, from the sales mix point of view, we see a trend of 1/3, 2/3 coming from sustenance and new launches. Broadly, this is what we possibly could be doing this year and this is what we should be doing next year. And so does that answer your question? Or you have some other part of the question to be answered?

No, sir, I wanted to mix this up with also the INR 4,000 crore GDV that we are planning for FY '25. So like what kind of velocity do we see for both of them, if you could provide us separately, like for years of velocity that you see for unsold ones ongoing project and the ones that you will be launching in FY '25?

So the part one of the question, let me answer. So part one of the question is with respect to the completed and ongoing projects, it has increased significantly during this quarter. And it has, as you rightly pointed out, it has reached to close to INR 1,400-odd crores mainly because of the few launches which we had. So we had one Forest Trails launch with approximate sale value of INR 550 crores, out of which, only INR 150 crores is sold. So hence, INR 400 crores has got added into the inventory of ongoing project. That is one. And number two is the Phase 2 launch of Uplands 2.0, for which we have launched close to around INR 325 crores of inventory, and out of which, INR 75 crores is sold. So the balance INR 250-odd crores gets added to the ongoing project inventory. So that's why you see an increase in the ongoing inventory number.

Okay. And this INR 1,400 crores, like how many years are you expecting to sell it off?

This comes into our sustenance basically.

How much we are going to sell out of this INR 1,400 crores in what timeframe?

Sustenance, I mean difficult to predict at this point in time, but we could see that in a couple of years' time, 2 to 3 years' time, everything should be on an ongoing basis getting liquidated. So last year, we sold 800 total. This year, we are hoping that we'll grow by 30% on sales and next year also we grow by 30%. That's the base target that we are keeping. I mean you know that number is -- if that's how we're going in totality and if 1/3 of that is supposed to be coming from sustenance, I think I'll rather look at it from that point of view. And that way, it's very easy to crunch that number in that sense. So you can just plot the overall sales number first, which is starting from 800 in this year and the next year. And then assuming that 30%, 35% comes from sustenance of that, I think that's a better way to look at it rather seeing how and to what extent and what quantum will be sold from the INR 1,400 crores, INR 1,500 crores that we have right now. To that extent, you could analyze because sustenance also is an evolving number. We launched something today, Lakshmanpura. Maybe a couple of months, it's the launch phase and thereafter it enters into the sustenance category in that sense, I mean, immediately after the first major launch. So we'll say that 1/3 should come from sustenance on an ongoing basis and overall number of sales you know how to predict and work.

Got your point. Also, just one last question. How do you see the revenue and EBITDA margins from a P&L accounting perspective for FY '25 and FY '26?

So I mean MIS sales is something that you know how they are appearing and how it is happening. And books are obviously delayed by 2 to 3 years on an average. That's how our trajectory is. Generally, within a legitimate gap, the trajectory of growth that you see in your fresh sales should be also dovetailed with the trajectory of growth in the books of accounts. So if we say that we have been sort of consistently growing to the extent of 30%, 35% on net sales year-on-year, that should be the stabilized growth appearing in the books of accounts. So one way to look at it could be that you just assume that similar growth shall be visible in the books of account as well, which is more like 25%, 30%. But one major disclosure or disclaimer in this is that it can really vary. On a comparatively smaller base of number of projects, et cetera, for the company like ours, it can vary from period-to-period because of that one trigger point when you formally say that this project is closed and this project is completed, [ OC ], et cetera, et cetera. Because of this one stop point, which is one button to be pressed, 1 day, 1 minute, this can vary. But on average, I mean, long term, medium term, the growth trajectory will catch up with each other in both topline cash versus what enters into books of accounts.

And we have INR 2,000 crores of...

And yes, the other relevant factor in that is that as of now we speak there is in excess of INR 2,000 crores worth of sales, which has only happened where the money is coming, going, development happening. So unrecognized revenue, which is actual sales but not yet reported or entered into books of account, is worth INR 2,000 crores as we speak, that's how you could take that. That is also one important handle for you to work on this number to predict what could happen in the books of account. And at least next 2 to 3 years, by when these projects are getting completed in any case.

The next question is from the line of Rishith Shah from Nuvama.

Thanks for the opportunity but my question has been answered.

It's already answered. Okay. Okay.

The next question is from the line of Amit Jain, an individual investor.

I have a couple of questions. So first question is, at the time of launch, what percentage of inventory do we ideally...

So if I've understood your question right, you are saying what percentage of our inventory pool at the time of launch? Is that the question?

Launch to 6 months of time, launch to 6 months, what percentage do you ideally want to sell off?

Okay. Fair enough. So I mean, internally, we would always target to sell in the first burst itself, maybe more like a month, 1.5 month, 2 months, at least 30%, 35% thereabouts. Because once we do that, we know that project is broadly in autopilot mode when it comes to money required to execute. 35% is a very, very good number. And then you know that basically, you don't need much of our money for your construction. Your requirement goes to almost 0 if not exactly 0. That's how most of our projects are doing. As we speak, most of the projects are breaking even on the construction side and creating positive cash flows thereafter. So 30%, 35% is first milestone that we need to achieve and that generally we tend to achieve sooner than 6 months. After the initial launch within maybe 1 to 2 months or 3 months of launch, thereafter it's a sustenance phase. And every month, you then tend to start selling something like 2%, 1%, 3% every month and thereabouts depending on velocities. We confidently and for the reason which are identifiable, have been selling much more than the numbers that we just discussed, in many of the projects, we had sold in the recent past. But as management, as business people, we are happy selling 1/3 and thereabouts in the initial bust.

[indiscernible].

Sorry to interrupt, Amit, your voice is not audible.

Is it better now?

Not really. Not really.

No. Sir, not audible.

Hello?

Yes, sir, now it's audible.

[indiscernible].

Again, it is breaking, sir. We can't...

No, not audible. Maybe you'll have to come back again.

The next question is from the line of Rakesh Wadhwani from Monarch AIF.

One last question from my side. How are you finding the land prices or the JD agreement shaping up in the future because now what we have seen in the last few quarters or last 1 or 2 years, the demand for real estate is very strong, that has led to land price increases or the share that is asking that the JD partners are higher. So how are you seeing, are you witnessing the same thing? And how are you trying to manage that?

So in general, yes, land prices have moved up across markets, across geographies and outright deals are more expensive. That's the trend. But the good news is that the price hikes have broadly been taken care by the improved realizations, and hence, margins, if it all, have got into very little pressure at this point in time. But having said, land prices have become more expensive and hence, absolute values in the cost have gone up for the end product. But still, the demand and the sustainability of demand is quite widespread, and most of the inventory is being bought by people who are not big investors buying from speculation. These are long-term investments or long-term consumption sort of purposes that the buyers are buying the inventory. It's not big worry, and it's quite sustainable. What is the other question you had?

No, that is regarding that how are you negotiating with the JD partners for that like they are...

Yes, JD, especially in the larger land parcel is quite subjective. People are looking at much more dependable, corporate, governed and trustworthy people to partner with. There, the competition actually is less than what we would have anticipated. And that basically is a function of track record versus the brand and the reliability, et cetera, et cetera. They're finding a good deal. In fact, it's more of we choosing rather than opportunities coming our way because we have to create value, we have to create the destination and these are long-term commitments. And generally, these are LTVCs, long-term value-creation projects. So there, it's about us understanding the potential on the land more. And valuation generally is not that big a concern. Outright deals are a little more difficult because their price sensitivity there is high for both the parties and generally the valuations have gone up on our outright deals.

The last question is from the line of [ Deepak Purswani from Svan Investments ].

Sir, just wanted to understand, in terms of the launch pipeline for the next year, since we have mentioned, we have an inventory that we launched to the extent of INR 4,100 crores, just wanted to get a sense, especially related to the 2 projects in terms of the approval process. One is NH 48 Surat, which is recently launched. I mean how should we look in terms of the approval for that project? And second, is Ahmedabad one, which is NH 48...

Sure. So great question. Both these are very large projects. And of course, approval processes are a little longer than vanilla medium-sized project or a small-sized project. To that extent, in the coming year, we'll be a little heavy on these launches in the second half of the year. And we are hoping that both these products should be hitting the market in the real sense in the second half. And hence, in fact, first 2 quarters comparatively will be a little lighter on launches and will be significantly heavier on a client basis in the second half. And both these should hit the market in the second half.

Okay. And sir, in terms of -- also if you can also share in terms of economic interest and the previous numbers at the current juncture. For example, last year, we did INR 800-odd crores, and this year, we're looking at the trajectory, we may close at INR 1,100-odd crores. So can you please share what would be our economic interest in these figures?

We do share our economic interest project-wise against each of our projects. We have already put in, in one of the sheets in investor presentation our economic interest. You may refer to the same.

Yes. But just a reminder, I mean these EBITDA numbers and the margin numbers that we report, this is after all other interest being taken care, landlord's share of land, JD/JV shares, et cetera, et cetera. So whatever is reported from a MIS standpoint or the project margin standpoint, et cetera, all the numbers which are post external interests.

As that was the last question, I would now like to hand the conference over to management for closing comments.

Thanks a lot everybody for participating in this earning call of Arvind SmartSpaces, and thanks again for your continued support on this. I hope we have been able to address most of your queries. However, if there is anything missed out on any of your questions, kindly reach out to Vikram, and he'll connect with you offline and clarify and give further information as may be required. Looking forward to interacting with you, all of you in the coming quarters. Thanks a lot. Thanks for your time.

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