Arvind SmartSpaces Limited (ARVSMART) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Arvind SmartSpaces Limited Q3 and 9-Month FY '26 Post Results Earnings Conference Call. [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, Mark. Good afternoon, everyone, and thank you for joining us on the Q3 and 9-months FY '26 Results Conference Call of Arvind SmartSpaces Limited. Today on the call, we have with us Mr. Kulin Lalbhai, Chairman; Mr. Kamal Singal, Whole-Time Director, Strategy and Investments; Mr. Priyansh Kapoor, Managing Director and CEO; Mr. Amit Chamaria, Chief Financial Officer; and Mr. Vikram Rajput, Head, Business Development, MMR and Investor Relations. Please note that a copy of the disclosures 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 should be construed as a forward-looking statement and must be reviewed in conjunction with the risks that the company possesses. I would now like to hand over the call to Mr. Kulin Lalbhai for his opening remarks. Thank you and over to you, sir.

Thank you. Good afternoon and a very warm welcome to everyone present on this call. Thank you for joining us today to discuss the operating and financial performance of Arvind SmartSpaces for the quarter ended December 31, 2025. From a broader perspective, the residential real estate sector remains on a strong and well-balanced footing as we look ahead into 2026. Demand continues to be predominantly end-user driven supported by favorable structural factors such as urbanization, rising disposable incomes and lifestyle-led upgrades. Inventory levels across key markets remain healthy and new supply continues to be calibrated, reflecting a more disciplined and mature market environment. I'm pleased to share that the strategic initiatives we put into motion are now beginning to show tangible results. Over the past few quarters, our focus has been on strengthening the organization, enhancing our leadership depth, decentralizing execution and building sharper accountability at the city level. We are encouraged by the early benefit of these efforts reflected in improved execution momentum, a stronger project pipeline and increasing organizational readiness to scale. Importantly, we believe these initiatives will continue to deliver incremental benefits as we move forward. I would now like to address an important leadership transition at Arvind SmartSpaces. After successfully leading the company through a phase of significant growth and consolidation, Kamal bhai will be stepping down from his role as Managing Director and taking over a broader role in the group. For over 15 years, his name has been synonymous with this company. I remember the early days in 2008 when ASL was just a budding vision, which has now become one of the most exciting platforms in the real estate space under his able leadership. The defining moment was the pivotal demerger in 2015 when he steered ASL into becoming a stand-alone listed company with its own identity and purpose. It was a move that reshaped our future. By carrying forward the 128-year-old Lalbhai legacy of integrity, ASL has not only built projects but a pan-India brand anchored in trust, quality and value. From our roots in Ahmedabad to our growing presence in Bengaluru and MMR, Kamal bhai has scaled ASL with strategic clarity and deep personal commitment. While he steps away from his role of Managing Director, it is deeply reassuring that we will continue to benefit from his wisdom and guidance as Whole-time Director overseeing strategy and investments. He will also work on a broader group level mandate with the promoters. As we look ahead, I'm very excited to announce that Priyansh Kapoor will be taking over as our new Managing Director. With his proven execution capabilities, extensive experience and deep understanding of the real estate business; he will build on this strong foundation and will further scale the company to the next orbit in the coming years. In a short period of time, he has settled in wonderfully into our culture and has worked to bring a new momentum to our growth strategy. With this, I would now like to invite Kamal bhai to share a few thoughts on his journey at Arvind SmartSpaces and his perspective as we move to the next phase. Kamal bhai, over to you.

Thank you, Kulin bhai, and good afternoon, everyone. Sitting here today along with this team, it feels like just yesterday that we were sitting in a small room dreaming of what a real estate company born out of Arvind DNA could look like. It is with a heart full of memories and a deep sense of fulfillment that I step down as Managing Director. Reflecting on this 15 years' journey, it is deeply humbling to see how far we have come. What began as a modest extension of Arvind Limited gradually evolved into a distinct identity shaped by purpose, resilience and conviction. The demerger was not merely a structural decision. It was a defining leap that tested our results to ultimately validate -- that ultimately validated our belief that Lalbhai legacy of integrity could flourish into real estate sector. Watching ASL grow from those early foundations into a nationally respected platform has been the most fulfilling chapter of my professional life. As ASL is poised for a promising future, I look forward with enthusiasm to contribute at the Board level working closely with Kulin and Priyansh. As I transition into the role of Whole-time Director, Strategy and Investments, I do so with complete confidence and peace of mind knowing that ASL is in exceptional hands. Priyansh brings with him a sharp strategic insight, contemporary leadership and a clear vision for the future. In passing on this responsibility, I'm not merely handing over an organization, but entrusting a culture built on excellence, discipline and deeply held values. I'm certain that under his leadership, ASL will scale greater heights while remaining firmly anchored into the principles that define Arvind ethos. To the entire team, thank you for every brick that we've laid together. The legacy is in safe hands and I'm sure that the best is yet to come. Thank you and over to you, Priyansh.

Thank you, Kamal bhai. Good afternoon to everyone present on the call. Thank you to Kunil and Kamalji and the entire Board for the trust that you placed in me. Over the past 6 months as Whole-Time Director and CEO, I've had the opportunity to work closely with the Board and the leadership team and have gained deep understanding of the group's brand and legacy, the company's strength and the opportunities that are ahead of us. As I assume the new role, my focus continues to be on building a strong project pipeline, strengthening our execution capabilities so that we can delight our customers. I continue to remain committed to build a strong foundation laid by Kamalji and the team, driving sustainable and long-term growth for all stakeholders. Coming to the performance, I'm pleased to share that we have carried the momentum from the first half of the year into quarter 3. We have reported our highest ever 9-month bookings and collections in this year. 9-month bookings improved by 5% year-on-year to INR 938 crores. Sales momentum during the quarter remained healthy with bookings of INR 331 crores, a growth of 48% on a year-on-year basis. A notable highlight of this quarter was the continued traction in sustenance sales across several of our projects. This is in line with what we communicated during our last con call about our focus on driving sustenance performance. This reinforces our ability to maintain sales velocity well beyond the launch phase and reflects sustained customer confidence in our product, pricing and delivery capabilities. Sustenance sales are increasingly becoming a meaningful contributor to our overall bookings, which adds stability and predictability to our sales and our cash flows. We reported our highest ever 9-month collections in FY '26 amounting to INR 744 crores, up 2% on a year-on-year basis, reflecting strong cash conversion and disciplined follow-through on receivables. Quarterly collections were also the highest ever, which increased about 38% year-on-year to INR 317 crores. On the business development front, we continue to expand our portfolio in a calibrated and selective manner aligned with our focus on high quality micro markets and disciplined capital deployment. Our cumulative new business development top line potential for the year stands at approximately INR 2,510 crores, which includes 2 new projects in Bengaluru and 1 each in Ahmedabad and Vadodara. In Q3, we added a residential high-rise project in Vastrapur, Ahmedabad with a top line potential of INR 400 crores and sellable area of 3.6 lakh square feet. In quarter 3, we also added a premium residential high-rise project in Nallurahalli area of Whitefield in Bangalore with a top line potential of INR 550 crores and sellable area of 4.6 lakh square feet. Very recently in January 2026, we have added a premium residential high-rise project in Sarjapur, Bengaluru with a top line potential of INR 860 crores and sellable area of 6.8 lakh square feet. All these projects have augmented our vertical development portfolio. Our business development pipeline remains robust and we are actively evaluating multiple opportunities across our core markets of Gujarat, Bangalore and [indiscernible]. Now moving from operational updates to the financial highlights. In 9 months, we have reported revenue of INR 409 crores as against INR 550 crores in the last year. 9-month EBITDA stood at INR 100 crores as against INR 150 crores last year. And PAT amounted to INR 59 crores as against INR 97 crores last year. In Q3, we reported a revenue of INR 166 crores as against INR 210 crore last year while on sequential basis, it grew 16%. Q3 EBITDA stood at INR 44 crores as against INR 60 crore last year and an increase of 30% quarter-on-quarter. PAT for the quarter amounted to INR 29 crore against INR 50 crore last year and a growth of 38% quarter-on-quarter. Our balance sheet position remains very strong despite expanding operations with a net debt of INR 79 crores as on December 31, 2025. A crucial parameter in real estate reflects the underlying performance quite well is the operating cash flows. Operating cash flows during the quarter and 9-month period remained robust underscoring the strength of our business model, the quality of our project portfolio and execution. I would like to highlight the quarterly operating cash flows were the highest ever. Operating cash flows in Q3 amounted to INR 169 crores, a 128% year-on-year growth and for 9 months, it amounted to INR 321 crores, a 16% year-on-year growth. We estimate an unrealized operating cash flow exceeding INR 4,581 crores coming from the current pipeline of projects. This is expected to be realized over the next 4 to 5 years. Looking ahead, the residential real estate market remains on a strong and balanced footing. We are steering Arvind SmartSpaces towards an era of unprecedented scale yet our DNA remains uncompromisingly rooted in our high capital efficiency and robust cash flow generation. We will continue to deliver the Arvind experience to our customers while maintaining the financial discipline that creates long-term value to our shareholders. As we look towards the final quarter of FY '26, we look forward to launching our projects across our targeted markets and end the year on a strong note. Thank you. We can now open the floor for questions-and-answer session.

[Operator Instructions] The first question is from the line of Eesha from Axis Securities.

The first question would be can I just know what is the GDV of the launches in 9 months FY '26? And what is the kind of sales at launch proportion that we are seeing on these launches?

Right. So Eesha, so far among the new launches that we have done, we did Everland, as you know, which was launched actually in quarter 2. So that was about INR 500 crores of inventory. And so far in 9 months, we have had about INR 450-odd crores of sales. So if you see we launched Everland and in 3 months, we have been able to sell 90% of the inventory in that project. Other than that, all our other launches are actually now lumped in this quarter 4. So what we are looking forward to is now launching our Baroda project. And we've also got approvals in quarter 4 -- in the month of January, we got approvals for Orchards Phase 2. So we are working on launching Baroda, Orchards Phase 2 and we are also at an advanced stage of approvals for our industrial project, which is coming up in Ahmedabad, and we continue to work on the Bangalore project. So so far, what we have launched actually in the first 9 months in terms of new project is Everland, which was INR 500 crores, but we are having a very strong pipeline now, which is going into quarter 4 right now. And for Baroda, we'll be launching about INR 400 crores of inventory. That is what we are looking at, which is the first phase of the INR 700 crores of total inventory in the project. For industrial, we will be getting approval for our first phase, which is targeted in this quarter, that is approximately INR 600 crores to INR 650 crores of inventory. So these are the 2 large inventories which are coming in. Other than this, we've already got approval for Orchards Phase 2, which is a smaller quantum of inventory and we are working on the 2 Bangalore projects.

So the total inventory that we'll be launching in quarter 4, if I'm not wrong, will be around INR 1,500 crores. Am I right?

That's correct.

And what is the kind of sales at launch that we're expecting for these projects going forward? Like 90% is something which is a euphoric distinct? Like what is the sustainable rate that we are seeing going forward?

See, generally, if you see all our guidance and all our project underwriting, we do that 30% to 40% in the launch, that is what we do. Fortunately, we've been selling lot more than that. But today, I would say I think we should look at what is the general underwriting norms in the market. That is about 40%, 50%. That is what, I would say, will be a fair way of assessing the absorption. And second, it will also vary by the type of asset class. So something like an industrial probably will be slightly lower, residential might be slightly better.

Correct. And my last question would be on sustenance sales run rate. What is the kind of run rate? Like we are seeing good sustenance sales for the past quarter that has gone by. So what is the kind of run rate that we're seeing? Are we looking at INR 300 crores, INR 350 crores going forward as well?

No. If you see last quarter, we did almost INR 280 crores, which came from sustenance, excluding the Everland spillover of the launch volume. So we are actually doing quite well on the sustenance number and I think going forward, we have a reasonable chance that we can maintain this INR 200 crore kind of guidance on the sustenance number. It's also a function of the amount of inventory we are able to replace and get in terms of launches. But I think this is almost a INR 200 crore kind of a number seems fair.

The next question is from the line of Shreyans Mehta from Equirus.

So just a follow-up on the previous question. So how should one look at the presales we had guided for closer to INR 1,600 crores and looking at INR 1,000-odd crores and assuming 70%, 80%. So it seems we'll easily surpass our guidance. On top of it, we'll be also having the sustenance sales. So a, how should one look at it? Second question is on the BD. BD we were closer to INR 5,000-odd crores guidance and right now we are at 50%. So how should one look at that? And in terms of outright deals, how should one look at BD? Will it be more towards JV, JDA or towards outright? These are the 2 questions from my side.

So on sales, we are maintaining our guidance, which, like you said, was about INR 1,600 crores, INR 1,700 crores largely because I said, we have different asset classes and we are also getting our industrial project, which is going to come in. So with our absorption ratio on residential and industrial expected to be slightly slow because of the longer lead time of conversion in that particular asset. So we expect -- we still want to maintain our guidance on sales right now. Coming to the BD, so we have done a GDV of about INR 2,510 crores and last time we mentioned that we are aiming for about close to about INR 3,500 crores to INR 4,000 crores in terms of our BD guidance. We remain on track. The pipeline is very, very healthy. But like we mentioned last time on BD, it's always binary. So we of course want to lock the right kind of deals. Today, we feel quite confident that we should be able to meet our guidance with the kind of project pipeline that we are seeing on the BD front. On your question on the mix of BD, last few acquisitions have been outright. That is primarily to balance the portfolio because we've been saying we'll do largely be 60%, 70% JD on our strategy. So currently, we were actually more and last few assets were quite lucrative. So the Bangalore projects that we have done, they are on an outright basis. But largely we expect to be in the same range of doing 60% to 70% of our GDV on BD on, I would say, a medium-term basis.

Sure. And one last question from my side. On the industry, we've been hearing a lot of noise that there's been some slowdown. Some of the participants have also lowered their guidance. So a, how should one look at industry? And secondly, Bangalore per se, we had planned a few launches, but in the remarks, you've not mentioned Bangalore. So is it because approval-related issues or is it because of some demand slowdown which you are seeing in Bangalore?

Right. So on overall slowdown, I think we -- yes, when we are also looking at, I would say, secondary data, yes, we do believe I think the markets are not showing further euphoric growth from the base of the last financial year. Having said this, the market has really expanded in this last 4-, 5-year cycle. So at our base, the opportunity that we have in all the markets is still very, very huge even with stabilized market. And generally what we are also noticing that there is some amount of growth coming in terms of the value growth of the market while the volumes could be flattish, but the values are still growing. And the segment that we are focusing on, I think we feel fairly confident those segments are actually doing very, very well. So we are not seeing any worry with respect to the kind of portfolio and the markets we are in with respect to any slowdown of assets. Approvals in Bangalore, yes, we have actually been slower than expected. I think like you mentioned, there were some changes in the Bangalore regulatory environment and the processes are getting streamlined from a long-term basis with multiple municipal corporations and authorities getting created. We believe I think that will start showing long-term advantages in the way approvals will move. But in the short term, it has actually brought in some, I would say, unpredictability for us or a slight slowdown in terms of the pace of approvals. But now our understanding is a lot of these processes and the new way of working in Bangalore is stabilized and these GVAs are getting operational. So we expect to start seeing momentum now over the next coming months on the approval front as well.

So just to harp on it, so you feel Bannerghatta or any other Bangalore project could come into 4Q or probably we are looking at towards next year only?

So currently when we are actually looking at our launch guidance, we are considering that we should be able to bring 1 project from Bangalore to the market. So we're working in parallel on 2 approvals, as you know, in Bangalore. So we are hoping one of those will actually come to the market by the end of the current financial year.

The next question is from the line of Varun Julasaria from 360 One Capital.

Just wanted to check like earlier we were guiding for INR 2,500 crore to INR 3,000 crore of launch for this quarter. So I mean what is the reason for the number going down to INR 1,500 crores now?

Sorry, can you just repeat the question?

Earlier we were aiming for INR 2,500 crore to INR 3,000 crore of launches for this quarter. I mean now we are seeing INR 1,500 crores of launch for the fourth quarter.

Right. So we were actually aiming for about INR 2,500 crore for the year, you're right actually, and we have done only INR 500 crores. So it meant that we should have at least launched about INR 2,000 crore of inventory in the last quarter. So one reason, like I said, is in Bangalore out of the 2 projects that we were thinking that we will get in the current year, we are going to probably get one of those. That's our current best estimate on the approval front. Second, we had also mentioned earlier that the industrial project may come in parts and Baroda also we are launching in phases. So Baroda, we are doing Phase 1. We are expecting -- we are putting about INR 400 crores of inventory and industrial, we are getting approval for the first phase. Like I said, that is about INR 600 crores to INR 700 crores of total top line potential in the industrial while the total project of industrial is actually close to about INR 1,500 crores. So it's also a function of this phase-wise approvals, phase-wise strategy that we have taken on execution that the inventory quantum is slightly lower. Having said this, with the same inventory quantum, we are maintaining the sales guidance that we have actually given for the year.

So the launches, which you mentioned, we are very sure to launch this. I mean there's no risk for a spillover to next quarter, right?

I would say fairly confident. We're working on this, but regulatory approvals difficult to exactly pinpoint a date and we have almost about 2 months to go in the year. We hope we'll assume that will come in the year. But I would say whether you can be absolutely 100% confident on a regulatory approval on the exact date, slightly difficult. But we are, I would say, reasonably confident that one of these projects in Bangalore is in the current year. Baroda, industrial, we see the risk is very low because Baroda we've already got the approval. It's now in our hands to -- our prelaunch activities are on and we are actually looking at launching in the current quarter. Orchard Phase 2 in Bangalore, like I said, we secured the approval already. So I think the only uncertainty remains on the 2 projects in Bangalore, out of which most likely we will get one of those in the current year.

Okay. And for next year, sir, what is the kind of launch?

So next year, we will be discussing that guidance probably in our next call, what are we looking at. But I think largely with the BD momentum being quite strong, we are quite confident we'll be looking at a strong pipeline of launches in the next year as well.

Okay. And sir, anything on the redevelopment opportunities that we were exploring? Have we come across anything that we probably at active stage of I mean consideration?

So you're talking specifically Mumbai?

Yes, Mumbai.

So Mumbai, our pipeline remains quite strong and includes redevelopment projects and we mentioned some projects were at very, very advanced stage and we are again seeing good momentum. Taking slightly longer because again multiple stakeholders that we have to deal with in terms of locking in. But the quality of the assets and the kind of pipeline we have built, we are very excited about it. So Mumbai, our pipeline of projects has really moved quite well over the last few months, gives us confidence that we should be looking at some decent amount of closures over the next 2, 3 years.

Okay. And sir, on the BD, which we have done for the year, is there any other like land payment or CapEx which is pending for the BD, which we have already concluded?

So Vastrapur is one land I think, but we can give you the details offline if you want, what is the exact. So Vastrapur is a land which we have already some payments that we need to continue to make. So that is 1 project. But other than that, I think -- otherwise, I think Vikram can share the details offline with you. There's nothing very significant I would say.

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

Congratulations for good set of numbers, sir. Sir, my question is like what is the percentage marketing cost compared to the bookings?

So your question is on marketing and the marketing cost as a percentage of the total top line, right?

Yes, yes.

So generally as a thumb rule -- while there could be quarter-on-quarter project level variation, but as a thumb rule, pure marketing cost will be close to about 1% to 1.5%. Including brokerage, typically what we might be incurring on our portfolio might be closer to about 3.5% to 4%. So marketing and support activities, everything added, about 3.5% to 4% is what we must be spending.

And sir, would it be possible for you to give the number like what would be the percentage of digital bookings?

We can come back to you offline on this, Amit. We don't have the exact number. But digital is something that has been moving up now as a share of our booking value. But I would still say channel partners that remains the most significant part of our business in general.

And sir, last question from my side. Sir, in Mumbai like especially in Maharashtra, any leadership changes like you must have done? Any new appointments?

You're saying from our own internal team perspective?

Yes, yes.

So Mumbai, we continue to strengthen our team as we are now getting a strong pipeline of projects that we are working on with these various term sheets and various discussions, which are very active. So we continue to strengthen our team on all fronts, whether it is sales, marketing, execution, legal, all fronts. So we are in process of actually scaling up and adding more and more members. So that's something which is happening on a very regular and ongoing basis. And now the urgency, like you said, is of course much higher because we are seeing a strong traction on the pipeline of projects.

Amit, Kamal here. On team building, maybe we can put a little special focus here and it's a great question to ask at this point in time. The way the team looks today as compared to how it used to look maybe 1 month back and then 2 months back and then 3 months back, I think this is 1 area where Priyansh has really taken off and we have gotten some very, very senior levels and some very talented people across functions in the business. And this is one change which is very, very visible in the organization. So this is one area where a lot of effort, a lot of focus of all of us have gone into. Priyansh has had a very, very special kind of effort on this that he has put in. Even Kulin bhai has been -- this is 1 agenda that he has been personally driving and team building, adding newer people, making the team future ready, which is imminent as such, is happening on ground and it's very clearly visible on ground.

[Operator Instructions] The next question is from the line of Ritwik Sheth from One Up Fin.

Sir, a couple of questions. Sir, firstly, what is the update on the Karjat project?

Okay. So Ritwik, that's a project -- you're talking about the Mumbai-Khopoli project that's there. So that's a project where we are working on our approvals right now. So we are actually looking at getting the approvals in the next few months. Most likely it's a launch that will come in the next financial year. But our approvals are moving very well now. Our process readiness, prereadiness, I think all that is on track. So expecting to launch that project in the next financial year.

Okay. And Surat would also be in FY '27?

So Surat, actually, it is -- we have given an update. It is status quo as the last update we gave. So we don't see, I would say, a launch at least in the next couple of quarters. And we are talking to a partner there, we should hopefully have greater clarity by the next quarter. And if you recall last call, we had mentioned that because Surat was going slow, that was the reason why we added Vadodra because we wanted to really play the Ahmedabad plus 1 opportunity in the Gujarat market. So Baroda, we were able to add in record time. We've been able to turn around approvals very, very quickly. So we believe I think at least we've got a good project from an immediate replacement perspective and next couple of quarters I think we should be able to give more clarity on how we are going about with this.

Got it. Got it. And sir, if we look at one of your slides where you mentioned the total operating cash flow and there is an inventory of -- upcoming inventory of about INR 10,000 crores, which the projects we have acquired over the last couple of years. So what would be an internal timeline to launch these projects? Would 3 years would be a reasonable internal timeline to launch these projects? So what is our internal estimates for that?

So you're talking about the projects and the entire inventory that we have actually listed, right?

Yes, yes, the upcoming yet to be launched inventory.

So most of these projects, they are work in progress and some of these are very, very large projects. So there is a possibility some of the phases of these projects will come in over the next 1, 1.5 year. But largely when we are looking at that kind of inventory, we are looking at monetizing most of these assets over the next 4 to 5 years from a launch, selling and construction perspective. So that is the duration we are looking at. Launch depending on, I would say, because some of these -- this is still quite Ahmedabad heavy from an inventory perspective. So launch may be also a function of the kind of opportunity where we see. But over, I would say, 18 months we will expect most of this inventory to start coming into the market.

Okay. So basically, FY '27 and '28 -- that's what?

Yes, that's the timeline. But like I said, for large projects it could be in phases.

Sure. Got it. And just 1 clarification. You mentioned 4 projects we plan to launch in Q4. What would be the GDV of these 4 projects if all were launched?

So close to about INR 1,500 crores, INR 1,600 crores of GDV because like I said, we are launching part of the industrial and part of the Baroda project. So about INR 1,500 crores to INR 1,600 crores from these 4 projects that we are bringing in. And Orchard is also a phase. So when I'm saying 4, it includes Orchard Phase 2 which is [indiscernible].

So each would be approximately INR 400-odd crores of GDV.

Orchard Phase 2 is close to about INR 100 crores. So it's not a very large phase.

Okay. And Baroda, you said is INR 450 crores.

Baroda is close to about INR 400 crores, INR 450-odd crores in that range, that is the size of the first phase that we have.

And the industrial park is?

Industrial will be between INR 600 crores to INR 650 crores of inventory. That is what we are getting approval for in the first phase.

The next question is from the line of Harsh Pathak from Emkay Global.

So my first question is on your project mix. So when I see your Slide 24, even ex of MMR when your projects are getting added in Gujarat and Bangalore market, your mix has moved. Your horizontal mix used to be 80%, that has now moved to around close to 70%. So even ex of MMR, how are we thinking of this project mix over the medium term if you can please highlight some of your strategy?

Right, right. So overall from a medium-term 4- to 5-year guidance, what we've been saying that vertical will be 60% to 70% of our portfolio. So gradually the shift that you're noticing in the portfolio for horizontal is coming down. This shift is something that you will structurally see over the next 3, 4 years. So something which is part of our strategy. And of course as Mumbai comes in as a part of the portfolio, it will automatically be able to also augment the more vertical development considering the booking value of single projects are very large.

Right. Understood. And even your share of luxury segment has moved up. I think it earlier used to be around 10%. Now it's slowly and gradually moving up. So what are the dynamics you are seeing on ground and how do you intend to pivot your portfolio across segments?

So Harsh, I can tell you we are -- we will still say that we are not focused on luxury as a segment too much. So when we define our customer segment, we focus on, what I would say, from mid-income to the higher income segment the most. So that is how we have defined our strategy. So mid- to higher income portfolio, I think so that gives us enough flexibility and enough market size to play with. So currently we are not focused, I would say, on what we traditionally would want to define luxury as a market.

Understood. And sir, final question from my side, INR 4,000 crores of BD that you highlighted for this fiscal so does that include any incremental projects from the MMR market or that could be over and above this?

So in terms of pipeline, we have pipeline actually in all the 3 cities that we work in and we are quite hopeful that as we are currently at INR 25 crores and as we are looking at adding further INR 1,000 crores to INR 1,500 crores in the current year, we are quite hopeful that Mumbai will contribute, but it's a function of which of those deals that are in the pipeline is able to be fructified first. But I would say the basis of the pipeline today gives us confidence that Mumbai should be contributing to the GDV in this year.

The next question is from the line of Dhananjay Mishra from Sunidhi Securities.

So congrats on adding on BD side high rise and that is also on outright basis. So we have done significantly in this quarter. My question is that as you said that the quarterly sustenance sales would be about INR 200 crores and now we are targeting close to INR 1,500 crore GDV to be launched in Q4. So if I assume 30% or 35%, so can we do close to INR 500 crore presales in Q4 or if everything goes on that?

Yes. So like I said, I think if you see today we have done about INR 938 crores. To be close to our guidance, what we need to do close to about INR 700 crores, INR 750-odd crores is what we have to do in the current quarter. With the inventory and the absorption ratios we are talking about and with sustenance, I think we are largely in that particular range. So it's a function of which launches come in, what exact date we get the approval. But largely I think if you see the math, that is where it is adding to right now.

And next year, how do you see launches? It will be more in the H2 driven launches or we will see fairly distributed in H1 as well as H2?

So if you look at the next year, see whatever BD we are doing in the current year and also the past projects that we've logged, we are actually quite sure that we are building a very decent pipeline for launches in the coming financial year. Slightly difficult to be able to predict the exact quarter at this particular stage where we would be doing the launches. But our guidance of saying we will continue to grow our presales at about 25% to 30%. With the kind of BD we are doing, we remain quite confident that is something which is quite achievable for us. So that is what we'll be looking at. We are hoping that eventually we will be able to go away completely from the quarter level vagaries. But in my own understanding, it's been something which has been slightly tough in the real estate business. I think the only way is building enough options by getting right kind of land acquisition in multiple markets, which is what we are currently focused on. So we feel quite good about the next year when we look at the presales opportunity for us.

So can we expect 30% growth on FY '26 presale figures given our pipeline?

So Dhananjay, I think like we say we've guided for the next 3, 4 years that this is the kind of run rate we want to maintain over the next 4 years, about 25% to 30% and next year also we are looking at that. Having said this, like I said, approval is the only ambiguity that you factor in. But today, we feel quite confident that this kind of growth rate is something that we can maintain.

In terms of total investment, what is the -- I mean till now I think in the presentation we can see INR 265 crores for the land provision. So what will be total capital investment for this financial year?

So Dhananjay, when we talked about the BD pipeline, there are quite a few projects which are actually either JD or many of the projects which are outright. So the number on capital for a quarter basis could just significantly shift basis the nature of the deal. We had committed last time that over the medium term, we are looking at investing about INR 700 crores INR 1000-odd crores. So that number is something that we are continuously monitoring and this is the kind of BD investment that we are going to see over the next few quarters from our end. If the outright mix is slightly more in the current year, then you might actually see a larger outflow in the current quarter. Otherwise, those outflows will come in the next 2 or 3 quarters.

The next question is from the line of Ronald Siyoni from ICICI Securities.

Congratulations on strong collections and sustenance sales. So firstly, sir, on these 4 projects which we have done like 3 were outright. So if you can shed some light what kind of EBITDA margins and land cost structures were there in these projects. So these new business developments, how it compares with the older ones, say, over the last trailing 1 year which we have been doing. So the new project acquisitions are at what kind of return ratios or margin profile they would be having?

Our average margin that we target is about -- EBITDA margin is between the range of 22% to 25% because the projects that we have done are -- what we have done recently are on outright basis so the margin might be slightly more than 25%. But I would say at the portfolio level still because we have JD projects also in the pipeline so I would say considering that, average of 22% to 25% will probably be more appropriate because some of these individual deals will probably be higher basis the amount of investments going in. So these outright projects might be slightly higher, but we have a JD pipeline so we'll come back to that average of 22% to 25%. On an IRR basis also, we are actually looking at similar returns. So we continue to clock 25% IRR, which is what we were also seeing for our historical deals. So we continue to maintain the same. So with the outright projects, probably the margin is slightly more, but IRR terms similar. That's what we are currently looking at.

Okay. Great, sir. And on this cash flow front, what we have noticed is there was one launch during 9 months and still your collections velocity has improved, your construction velocity has improved over the trailing 2 quarters. So is there some structurally you have done in terms of execution improvement or efficiency that has changed or if you can shed some light on your execution capability scale?

Another good question and we've actually been focusing a lot, like Kamal bhai also mentioned, we've been focusing a lot on strengthening teams. So over the last few quarters, and we mentioned in the last call, we had a new CEO coming on board. So the amount of energy coming in from a lot of new team members who have started coming in, augmenting, bringing all the efforts. So execution is one area where we are putting in a lot of extra efforts. So the amount of effort going in in terms of scaling up our COC spend, ensuring that we are able to construct faster and that of course improves the collections and cash flow from the customers as well. Second thing which also helped the collections is also that the proportion of our sustenance sales has been slightly higher and sustenance typically allows you more billing opportunity because, as you know, the project would have been launched in the past and the billing percentages are higher. So that has also helped us actually in terms of our collection mix. So both execution and sustenance sales where we are focused on capabilities is helping drive better collections and better operating cash flows.

Okay. And lastly, sir, on the leverage part, like we have taken about INR 110 crores or INR 100 crores loan drawdowns to pay for the outright purchases. So now what kind of -- do we have any particular guidance in terms of the leverage parameter that we would not surpass that parameters in terms of net debt to EBITDA or net debt to equity, something of that sort. So leverage would not go beyond this point?

Right. So Ronald, on the debt equity front, while today we are actually still very low so we are not seeing any worry or any concern on that front. We are at 0.13. And when we have internally drawn up our plans, we are quite clear that we want to keep this debt equity below 1:1. So that is what we want to be operating below at. Having said this, that even when you're looking at the pipeline, our sense is I think we probably will not get close to this mark for a reasonable time at this particular time because the mix of JD projects and outright still continues in favor of JD at least in terms of the future pipeline.

The next question is from the line of Akshay Shetty from Mirae Asset Sharekhan.

My question is regarding the new labor codes. So do you expect the implementation of new labor code is expected to have any impact on the cost of profitability going forward?

Amit, I request Amit to take this.

Thank you, Akshay, for the question. So right now, as you know, the labor codes got implemented from November onwards. So we have done an assessment on our side and we have taken a provision of INR 2.59 crores in our numbers for quarter ending December. And we continue to monitor this space and implement the guidelines as they crystallize even further. The impact of this on our P&L is about 1.5% for the quarter and the numbers are what we discussed earlier INR 2.59 crores for this present quarter.

The last question is a follow-up question from Amit Agicha from HG Hawa.

Sir, my question is that with this IT slowdown as well as overall the stock market not doing well so do we have a plan B as to how we will conduct the selling for our under construction projects? And generally we have seen that real estate recessions last for many years. So will we then at that moment be amenable to cut prices, but yet keep on selling or we will wait for the prices to come to our levels?

Amit, this is a very good macro question. Today, when you look at our position, I think we are slightly, I would say, in a very unique position because one, we are diversified across 3 markets as a company. So we are looking at Gujarat, we are looking at Mumbai, we are looking at in Bangalore. So one, we have a market diversification. Second, in assets also, we are doing again multiple assets so we are doing vertical as well as we are doing plotted. So in the customer segment, the kind of job and the background that these customers will come from for different asset classes are actually probably, I would say, getting their income from different sources. So one, this gives us natural hedge. Our JD strategy also puts, I would say, less pressure on us to worry about cash flows too much if at all, there was a very tight situation. And also most importantly, having said this, our scale when we are -- with our brand when we are actually going to any market, the response that we are getting is still very, very strong. So while these questions have been in and around with AI coming in, what is going to happen? But when we are actually going to the market and testing our product acceptance and customers' willingness to buy with us, I think we are still getting a very, very strong response. And all the 3 markets that we sit actually are -- that we are looking at are very, very large. And considering there I think the share that we might be talking about for the next 2, 3 years, as a share of these markets still will be a very small percentage. So I think with a good brand, with a good pedigree, having strong execution and design skills, we feel I think we are reasonably protected on this particular front.

I'd like to just add to this. If you just step back and look at Arvind SmartSpaces as a strategy over a decade plus and which continues to be our guiding force moving forward is that we are very, very focused on selling first home ownership and land ownership to the middle class. And I think this is a very structural story in India. It is underpinned by various macro forces. One being the financialization of our economy where EMI as a tool for homeownership is so fundamental. There's so much of India that still doesn't -- people still don't own their first home. So with this focused INR 1 crore to INR 2 crore ticket size product, I think this market is not really a volatile stock market linked. It is a very structural homeownership, financialization backed middle-class lifestyle upgrade story. And we will ensure that that is the core of this company and that's a very robust multidecadal story in our view.

But my question still remains that if there is a drying up of incomes overall, will the company's strategy be to just complete a project, sell it out totally and move on even if it means cutting prices a bit? Because if I buy a stock or a company like Arvind SmartSpaces, I'm buying it for 3, 4 years outlook. So I need to know as to what strategy the company will take place in view of different probabilities. I understand all the points that you have made and they are very valid and good arguments, but they are more with the past in mind whereas the future looks like a lot of the old structures of employment may be broken.

No. So we have always, as you know, been a very cash flow focused company. We believe in velocity. Our mantra is velocity. We are not the variety to bank land and wait for market and prices to inch up. That has never been the DNA of this company. It has always been IRR and cash flow. So if you are in any cycle, we will always look to having velocity of cash flow over looking at banking and just protecting value of the land bank. That is not the way we think.

That was exactly the answer I was looking for. And second, sir, is there -- even though it's overall a commodity space, but we have a strong corporate logo. Is there any other way that we could differentiate the product in terms of marketing strategy or something which there is some to and fro within the company about?

See we as a group, we have come -- our roots have come from being a product company. The reason we also felt there is a space for us in this real estate business beyond trust, integrity and connect with the brand is that in whichever business we have been in, we are obsessed on product. And therefore, even if you look at our tagline in real estate or our positioning, it's around design, design to inspire. We believe your home and the spaces you live in really opens up your minds and releases the right sort of energy thought process. So design is something which we believe is a space which is very unique, which we want to operate in. And the other is customer obsession. We've been in the consumer business also in our other group companies. So for us being a very obsessed NPS-focused, customer-focused thought process, again I feel this is a white space in real estate. It's one of the most important products a person buys. And the experience of real estate still is not best-in-class in our country. There is a lot more we can do to improve the experience of buying a home and owning a home. So I think design and customer obsession are the 2 spaces which underpin our entire way of operation and our world view. And we hope as we progress in this business, we keep redefining excellence even for ourselves on these 2 dimensions.

And do you see PropTech helping us really selling these spaces easily or do you see any kind of like other verticals like co-living or adult living -- senior living or even for example student living coming through or we adopting those models to sell our properties?

See, I think many models are going to evolve as the market matures. We want to remain core to what we do. One of the things this company has done very well is focus. So we will continue to focus on the structural areas we are in. But if your question is around technology, I think there is no business in India today, which does not have to reinvent itself using technology. The technology we are using to manage our projects and velocity, I feel we are working on some amazing new age approaches on how we look at project management. I think there are technologies around construction, even the whole online digital sales as a percentage of turnover, I think Arvind SmartSpaces remains one of the leaders in our entire digital lead generation management, that skill set we've borrowed from our other businesses. We are also very, very clear that AI is going to play a role in various use cases in real estate. We have started projects on that as well. So I think as a group, we gravitate to technology pretty easily and well. It's been a strength and we are bringing that in this business as well.

Thank you. That was the last question. As there are no further questions, I'll now hand the conference over to Sir Priyansh for the closing comments.

Thank you, everyone, for participating in this earnings call of Arvind SmartSpaces. 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 will connect with you offline and clarify and give further information as may be required. Looking forward to interacting with all of you in the coming quarter. Thanks for your time.

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