Ashiana Housing Limited (523716) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Q2 FY '22 Results Conference Call of Ashiana Housing hosted by Emkay Global Services. With us today, we have Mr. Varun Gupta, Whole Time Director. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Prabhu Jain of Emkay Global Financial Services. Thank you, and over to you, sir.

Good evening, everyone. I would like to welcome the management and thank them for this opportunity. I shall now hand over the call to the management for the opening remarks. Over to you, sir.

Good afternoon, everyone. I hope you all are safe and in good health. Thank you for joining us to discuss performance of the second quarter of financial year '22 of Ashiana Housing. I extend a warm welcome to all of you. Area booked recorded in the second quarter was 4.51 lakh square feet as compared to 2.21 lakh square feet in Q2 of FY '21 and 1.51 lakh square foot in Q1 of FY '22. The second quarter area bookings were higher due to launches of phases in Ashiana Nirmay, Bhiwadi and Ashiana Dwarka, Jodhpur but I would also like to add that there is a general positive trend in the market and bookings were higher in general across projects and outlook remains bright in terms of quarterly bookings. We also handed over 1.45 lakh square feet in Q2 FY '22, out of which point -- only 0.08 lakh square feet was delivered in partnership firms. This was against a delivery of 1.1 lakh square foot in the Q2 of FY '21, out of which only 0.03 lakh square foot was delivered in partnership firms. Revenue recognized from completed projects in the second quarter was INR 45.6 crores as compared to INR 36.23 crores of second quarter of FY '21. Total comprehensive income in Q2 FY '22 was negative at INR 6.36 crores, vis-à-vis negative INR 1.74 crores in Q2 of FY '21. Total comprehensive income was negative INR 6.14 crores in the first quarter of financial year '22. However, pretax operating cash flows and modified the way we report it, before any land payments was positive at INR 28.18 crores for the second quarter versus a positive INR 29.60 crores as per the first quarter of this financial year. And however, the half yearly reported operating cash flows as per the Ind AS 7 stood at negative INR 121.64 crores, this was primarily due to land payments made as we picked up 2 outright projects, 1 in Gurgaon and 1 in Chennai in the half year. Equivalent area constructed was at 4.5 lakh square foot in the second quarter of financial year '22 as compared to 2.89 lakh square foot in the previous quarter and the same was 3.01 lakh square foot in Q2 FY '21. Execution momentum has picked up with this quarter, and we expect to further pick up pace in construction in the quarters coming up. Our construction commitments are in line with the delivery scheduled, and we hope to deliver our projects on schedule. On this note, I would like to conclude my remarks. We'll now be happy to discuss any questions or suggestions that you may have. We are open for questions.

[Operator Instructions] Our first question is from Himanshu Upadhyay of PGI Capital.

So 1 quick -- yes, so first question was, we said in our Q4 FY '21 call that we have reached a stage in Gurgaon where we can pull a product beyond senior living also. If we look at Chennai market, how far are we away from that state or situation where we can go beyond senior living? And what gives us a confidence that this is the right time that we want to look at beyond senior living. Just some of your thoughts and how do you come back -- come to that conclusion sir, it would be helpful, just.

I don't remember making the first comment in Gurgaon doing anything -- can -- we can do something other than senior living in the context that because we have never done senior living in Gurgaon in the first place. And in NCR, whatever senior living we have done as compared to regular housing is a far smaller proportion in Bhiwadi. We have done a lot more regular housing there in the first place. So the confidence of regular housing in NCR comes from doing a lot of regular housing work there, probably north of 5,000 flats all put together, if not more, in NCR in terms of senior living -- in terms of regular housing. So that's the context there. And in Gurgaon, we want to do regular housing, we see brand, we see positioning and capabilities. In Chennai, given the success and the pricing and the margins we are enjoying in senior living, we want to continue to focus on senior living. We have picked up 1 land already for 1 more senior living project at the end of the second quarter. And we are hopeful to close 1 more land transaction within the third quarter for another senior living project in Chennai. So in Chennai, our view on the depth of the senior living market and the competitive advantage we are enjoying, we would like to focus on senior living in Chennai at this point of time.

Okay. And even in Pune, would it be both...

In Pune, we are doing both. One project is for senior living and 1 project is for regular housing.

Okay. And we have completions of nearly 3 million square feet in next 6 quarters, okay? And a significant -- and this is, I am taking the slide number, I think, 15, okay, where the time line expected customer handover day time, I'm taking up. And a significant proportion of the product was sold in 2018 and '19, okay? What impact is -- are we going to see on margins? Because at the fag end what we generally see is high-value items like wires, switches, phosphates, et cetera get fitted okay. And a significant price rise are happening in these products. Are we able to increase the price for the remaining inventory significantly? Or do you think to a certain extent, the expected margins may get hit in these projects?

Okay. So wherever projects have already been sold completely, there is nothing we can do, let's say, in a project like Ashiana Aditya, where we sold everything at launch, there is no remaining inventory to cover up costs. So there will be some margin compressions. But I don't expect significant impact in, let's say, Aditya Phase 1 as compared to Aditya Phase 2, where we sold and then not only finishing costs but also material costs for construction also went up. Some of that will happen. But on the regular -- on the other stock where we have part to sell, we sold some units and some units are yet to be sold. We have had price increases across the board, excluding regular housing projects in Bhiwadi, senior living in Bhiwadi has also seen price increase and substantial price increases in that, which you've seen in our average realization for this quarter again, going up substantially to 3,678. And we expect to keep increasing prices right now. So I am more than hopeful that price increases will be higher than input cost increases going forward. But some of it will depend on project to project. At this stage, it will be and when it was sold, how much we can cover.

Okay. Varun, next question would be -- so if we see the projects under construction or ongoing projects, the salable area is new -- it's 4.3 million square feet, and we have already sold 3 million, okay. So if we want to reach another, let's say, regularly 2 million to 2.5 million square feet, are we having the amount of new launches over the next 18 to 20 months that we can start reaching the 2 million square feet type of sales in the next financial year or around that period? Or how are you looking at it? And yes related to that, 1 more question, the 2 land parcels, which we have bought Gurgaon and Mahindra World City, how much time will it take for launch in those sites? Or how long are lengthy the process of getting approvals, so these 2 final questions.

Yes, sure. They are interlinked, Himanshu. So that's what -- so for the launches, the pipe is being built. We also put out an information today to the markets for 1 more JV that we have signed off in Jaipur for about a little over 9 lakh square foot. We have signed up a lot of projects, approvals for a lot of projects have been applied for some are in the application stage. So from an 18- to 24-month period that you're talking about, right now, the visibility seems good to have enough launches to maintain a run rate of 2 million square foot. Jaipur is the only place where we need a little bit more work in Jamshedpur, both places, so Jaipur we announced a deal today. Jamshedpur, we are working on transactions. So we will be putting out some transactions where we'll get approvals. Approvals are typically about a 12- to 15-month window from the date of the transaction.

And 1 small question. See, in this Mahindra World City project, okay, we are doing a senior living project, okay. And it's a large project, nearly 1 million square feet of saleable area. So the -- does the agreement have that we can do only senior living or it is an open agreement, but we have decided that the product is senior living, which we want to do, the agreement...

The agreement is strict the Phase 1 to be senior living and up to 3 years. I think we got 2 or 3 years from the date of agreement will only be senior living. But we intend to do only senior living. So it's a little irrelevant according to us right now. The intent is to do senior living. Himanshu, with that, I would request that you get back in queue if there are more questions and please to people.

The next question is from Rohit Balakrishnan of iThought PMS.

So sir, my question was also similar in line to the previous participants. So if I look at your completely -- like completed stock and the inventory there, it's hardly anything 3 lakh square feet. And also the ongoing inventory we have pretty much -- I mean, you sold 2/3, only 1/3 is remaining. So while we have like Gurgaon there and a couple of more that you recently launched. So just want to understand, given the approval cycle and given the long lead times, I mean we -- our previous peak was 2 million square feet in terms of sales. I really would want to sort of grow beyond that in this cycle right? So I mean I just want to understand how are you thinking about launches? Do you think in the next 6 months, 12 months? I know it's a bit of a -- there are no time lines around this, but just wanted to understand we are coming to a point where existing inventories is getting finished. So just wanted your thoughts so that we can get to beyond 2 million square feet kind of sales in this upcycle in the next few years.

Rohit, absolutely. We want to go beyond 2 million square foot. So 2 things on that. One part of the pipe is also -- some of the projects have phases, which are launched, which are approved. Let's say, Ashiana Anmol in Gurgaon. We have launched Phase 2 about 2.8 lakh square foot during this quarter, okay? So some projects, Ashiana Nirmay Phase 5, it's a very small piece, but that might get launched soon. We have Ashiana Umang Phase 6. These are launched that approvals are in, we will launch them. So they will not have any concerns in getting launches going up, which are sort of on the annual that we are thinking now that with stock. So as and when in a particular project, certain phases are nearing completion of selling our stock, we'll go ahead and launch newer phases to add to supply. The other bit is getting approvals for fresh projects and getting them in the pipe as well. And that lot of active work is going on at this point of time to get more and more projects in the pipe, Gurgaon, Pune, Chennai where we have closed transactions, Jaipur we have closed another transaction. So -- and approvals are in process for a couple of other projects. So there is sort of intense focus right now to build a pipe to take maximum advantage of the up cycle that is coming in at this point in time. So you will have probably in the next 24 months, we will have announcements continuously on deals for new projects and announcements for launches of fresh projects as well as and when we get approvals. Though I think the new -- complete new project launches will happen next financial year onwards. I don't see the approvals coming in for completely new projects within this financial year.

Understood. Understood. Got it. And just as a -- so in this financial year, '22, can we get -- can we sort of get back to pre-COVID in terms of sales, in terms of square feet levels? Or that seem difficult because we had a tough quarter, the previous quarter, Q1.

In this financial year?

Yes, in this financial year FY '22.

In this financial year, getting to pre-COVID levels would be a little difficult. Next financial year those will definitely be around it.

[Operator Instructions] The next question is from V.P. Rajesh of Banyan Capital.

Hi, Varun. Good to speak with you again. And congratulations on all the land deals. I just wanted to understand how many more term sheets you have out there in your various markets? And if you can talk about that a bit?

V.P., we have 2 active term sheets right now. So we've closed 4 transactions during the year, and we have 2 active term sheets at this point of time, 1 in Chennai and 1 in Jamshedpur. And we are active in looking for both projects in Jaipur.

Great. And are you seeing the land prices getting out of that? Or are you still finding them to be reasonable. Just I wanted to hear your commentary on that.

V.P., fortunately, the 4 transactions we have closed the land prices haven't been out of whack. The only place where I see land prices going out of whack is Jaipur. So therefore, it's been a little bit challenging to find transactions there. But we are looking there also to find -- to look for land parcels. But outside of Jaipur, I don't see land prices going out of whack anywhere else at this moment in time.

Okay. And in Bhiwadi, you said the pricing has not gone up. So any comments as to when do you think you will be able to increase the pricing there or that market is still soft if you will?

So according to us, I think we are on the edge of increasing prices in Bhiwadi as because as prices continue to increase in Gurgaon, that will flow in into Gurgaon what has happened as land prices have gone up significantly, particularly plot prices, apartment prices have not gone up yet. We expect apartment prices to follow land prices and once apartment prices go up in Gurgaon, I think Bhiwadi will follow next according to us as per our perspective. But in Bhiwadi, senior living, which is becoming a bigger and bigger part of the portfolio there, we are moving -- we moved a large part of the land bank towards senior living in Ashiana town, the GAMMA project is going to be senior living project. We have increased prices in senior living, and we continue to see possibility to increase prices in senior living in Bhiwadi.

Right. And you said that next year, the launches will be higher compared -- or you will exceed 20 lakh kind of number next year. Do you think that will start to happen in the first quarter itself? Or do you think it will be more back ended next year?

We expect things to happen in the first quarter itself, V.P. But with approval, it's difficult to say where they are. But the way things are moving right now, I would expect that we start launching a quarter -- a project for quarter, hopefully.

Right. And my last question, if I may. Just on the Pune market, how are you seeing that developing for us? Do you think it will be a senior living or always both or I'm just curious how you see that market for us.

Pune?

Yes, Pune.

Pune, is too early to say V.P., where we'll; place -- let's do both projects there and see what the response is to see what happened. But my first gut says that's a market where we can do both quite well.

[Operator Instructions] Ladies and gentlemen, as there are no further questions from the participants, I will now hand the conference over to management for closing remarks.

We would like to thank all of you for being on this call. Thank you for taking out the time and asking the questions that you do. If you were unable to take any questions, please feel free to write to us directly or reach out to us directly. And with that, we would like to conclude this call. A lot of the materials we have spoken about is posted on our website, and you can also e-mail your queries for any further clarification. Thank you once again for taking the time to join us on this point of time. Thank you.

Thank you, sir. Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us and you may now disconnect your lines.