Ashiana Housing Limited (523716) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Ashiana Housing Limited Q2 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Binay Sarda from E&Y. Thank you, and over to you, sir.

Thank you, Ann. Welcome, everyone, and thanks for joining this Q2 FY '23 earnings call for Ashiana Housing Limited. The results and the investor presentation have been mailed to you, and it is also available on the stock exchange. In case if you do not have a copy of the same, please write to us, and we'll be happy to send it over to you. To take us through the results for this quarter and answer your questions, we have today with us Mr. Varun Gupta, Whole-Time Director of the company; and Mr. Vikash Dugar, the CFO. We'll be starting the call with a brief overview of the company's performance for this quarter, and then we'll follow it up with a Q&A session. I would like to remind you that everything said on this call that reflects any outlook for the future, which can be constituted as a forward-looking statement must be viewed in conjunction with uncertainties and risks that they face. These uncertainties and risks are included, but not limited to what we have mentioned in the prospectus filed with SEBI and subsequent annual reports, which you'll find on our website. With that said, I'll now hand over the call to Mr. Vikash Dugar. Over to you, sir.

Thank you, Binay. Hi, good afternoon, everyone. Hope all of you and your families are keeping healthy. I welcome you all to discuss the performance of the second quarter of FY '23 for Ashiana Housing. Thank you for joining us today. To start with, we launched our first premium homes project in Pune named Ashiana Malhar in Marunji and achieved 80 bookings till September '22. Phase 3 of Ashiana Anmol was also launched in the quarter and 106 booking were achieved in the quarter itself. Area book increased to 4.9 lakh square feet in second quarter vis-a-vis 3.34 lakh square feet in the first quarter. Value of area booked went up to INR 240.19 crores versus INR 152.14 crores in the first quarter. There was an improvement in realization price at INR 4,904 per square foot in the second quarter as compared to INR 4,557 per square foot in the first quarter of the financial year 2022-'23. This improvement was driven by both increasing prices across projects and change in mix towards higher-priced projects. We handed over 2.07 lakh square foot in second quarter, out of which 1.63 lakh square feet was delivered in Shubham Phase 3. This was against a delivery of 2.11 lakh square feet in the first quarter of the current financial year. Area constructed was at 4.38 lakh square feet in the second quarter via-a-vis 3.85 lakh square feet in the first quarter. Total revenue increased to INR 91.72 crores in the current quarter -- in the quarter gone by versus INR 81.22 crores in the first quarter. Total comprehensive income was recorded at negative INR 1.31 crore in second quarter FY '23 vis-a-vis positive INR 10.29 crores in quarter 1 FY '23. Preoperating cash flow was at negative INR 1.05 crores for Q2 FY '23. However, cash flow from operations for half year ended 30th September remained positive at INR 26.67 crores. On this note, I would like to conclude my remarks. We will now be happy to discuss any questions or suggestions that you may have. Thank you.

[Operator Instructions] The first question is from the line of [ Himanshu Upadhyay from O3 Capital ].

Congratulations on Ashiana Amarah. Very pleasant surprise. So my first question is on this Ashiana Amarah only, the Gurgaon launch. We have done 20% of sales in that project in the initial launch itself, okay. What will be our thoughts on next phases? Would we like to take more time? Or we think that right now the things are very good and everything and hence we'd like to launch another phase of similar size? So just give some thoughts on that, how are you thinking? And how are you planning on the project, just to understand your mindset.

Hi, Himanshu. Thank you. First, I would like to correct the name of the project, it's Amarah, so Ashiana Amarah. On the second note, we are evaluating as to what to do, okay? The market is very dynamic. So we are in the process of evaluating whether we should launch a phase right now, should we delay it. I think those deliberations are going on. We don't have a specific answer to that. As I said, my view is the market in Gurgaon should remain good for a while. And as have been evaluated, elaborating earlier also, it continues to be not having much supply in the group housing segment. And I don't see much of it coming because of the regulatory situation there with actively no new group housing licenses for a bit. So most supplied coming in either floors or plots. And therefore, I think the market should remain good for a while. So we'll take a call as we go along. I think we should -- typically, we have liked to launch phases with a gap of 6 to 9 months. And I hope we are able to sort of maintain that, yes.

Okay. And second was on Asana Malhar, okay, the Pune launch. So after a considerable period of time we launched the project, but -- and we had around 2 months, in what performance we can see, okay, on the PPD. So it seems we sold around 1/3 of the project launch, okay? So what, means what is your sense about that market? And means as we look at Gurgaon, it was a very splendid success, I would say. Here, it seems it is slightly slower than that. So because of market is slower there? Or do you think -- what is your assessment of this project?

So Himanshu, 2 things. I think, a, the market in Pune is a lot more competitive, lot more dynamic with lot more supply in the market in the first place. As I said in Gurgaon, the supply is constrained, so there is less competition from that perspective. So that definitely helped. But I think also to the context that we have done one project in the Gurgaon market in Ashiana Anmol in Sohna. We've been present in NCR for 50 years. People know us from our senior living developments or other developments in Bhiwadi. So overall, the reputation that we carry and the brands that we carry in Gurgaon is far superior to what we carry in Pune. So therefore, so in Pune also, even though we've not gotten the spectacular success in Ashiana Amarah, I'm sort of satisfied with what we have got. In our context of the market, I think we are fine. We will be able to, at this phase, sell off the phase before the phase. Our biggest aim is to ensure that we sell off the phase before the phase construction is closed, that we don't end up with sort of unsold built inventory. I think we have gotten enough over there that, that shouldn't be a challenge.

And one more thing. See, area under construction is around 4.79 million feet, okay? And the area booked is around 3.7 million square feet, okay? And there also Utsav Lavasa is there. But so clearly we have only a 1 million square feet of salable area under construction, okay? Are we satisfied with that number, let's say, if we want to have a 3 million square feet of target, okay? And how do you look at that figure? And what should be a sustainable numbers you would like to have? Means because…

Yes, so 2 things, Himanshu. First, I will tackle the question one, is what -- where is 1 million. So I'll just say that we are looking to launch another 1.5-odd million square foot in the second half of the financial year, of which Ashiana Amarah is one part, which has been launched. Ashiana Advik also is in that -- in the launch phase. Right now we don't see -- we're looking to launch a couple of phases of existing projects in Umang and Dwarka. And Ashiana Prakriti and Ekansh is also up there. So we will be adding to this. Definitely some of it will get reduced because they'll get handed over. But I think net additions will be more than the net reductions in the second half of this financial year. And then we will look to add more as you go along in the next year as well. We have projects lined up for launch. We'll have 4 projects lined up for launch in the next financial year as well out of the stock that we have already today and some phases of new projects will come in like we'll definitely want more phases of Ashiana Amarah to come in, more to come in of Malhar. So we will have a lot more launches coming in. That said, what I would say is that, as I said earlier, we are going to focus the company on return on equity and not necessarily top line. So I think a large part of now the focus of the company is not just getting volume, but is also getting price and margins and realization and we're focusing on improving the same. Like in Amarah the most pleasant thing wasn't just selling the entire volume out, the pleasant thing was achieving a price north of INR 6,000 a square foot on salable area. And I think that's what the company's focus will be as well. So I think we're looking to manage both. That said, right now we are on track for about 2 million to 2.5 million square foot. We're talking about INR 1,100 crores this year. I think we are on track to get to INR 1,100 crores of area booked this year. We need to keep ramping that up. And I think right now there is organization capacity in the market to ramp that up. I think the big challenge that we will face is getting new projects. Just land prices have become extremely high. Fortunately, we have 4 projects to launch in the next year, and we are on the lookout for more in figuring out how we can stitch together transactions that makes sense both for the landlord and for us.

Just a follow up. See, like we say that land is a raw material, we have a target inventory of 5 to 7x of current year execution plan, okay? So in terms of having an area under construction, okay, and salable area under construction, do we have any targets on those figures also? Or it would be always, means, the launches will be equivalent to what sales we are doing?

Roughly once you look at the salable area where turnaround time on average of what 24 to 30 months. And therefore, it's like I would say whatever we want to sell and we will need to have about 2 to 2.5x of that under total salable area. And that's what's going to drive that. I think that's. And with the view that we sell everything out when the phase closes and we develop during that execution. That's going to be how it's going to play out.

[Operator Instructions] The next question is from the line of [ Rohit from Marshmallow Capital ].

Great set of numbers. So curious, so it's -- I mean, we are quite clearly seeing good momentum. So the reason of the business is that we lock in the sales price today and we'll know the costs only down the line. So how do you think of commodity prices if they escalate or something like that in terms of the price that we have sold the projects today? I mean, the main ones like Malhar, Amarah et cetera?

So I have elaborated on this, Rohit. I think a lot of this is a function -- I think what really matters to us is margins, right, at the end of the day that we make, right? And I've elaborated this on this earlier transactions that we have done post 2015 generally, except for Malhar where margins are short, okay? Everywhere else, I think our margins are good. And whatever price increases we are doing more than sufficiently covers the construction cost estimates. So like Ashiana Amarah was underwritten at a much lower price point that we have sold at. And I think the increase that we have gotten will more than cover any further increase in commodity prices and what we had expected it to do. Malhar, as I said, is a thin-margin project, we don't have high kind of margins there. So those are hurting. Ashiana Anmol similarly the low-margin project, increasing prices is not covering sort of the increase in construction costs that we have seen over there. But that said, all sort of newer projects that we have launched, Ashiana Advik will be fine. We launched Ashiana Amantaran for this we are fine, Ashiana Sehar, Ashiana Aditya we are sort of fine. So and the pre-2015 deals, let's say, of Ashiana Tarang or Ashiana Dwarka, we still have a little bit of a challenge. So I think that's where -- how high we'll sort of put those things together. We have more projects to launch, which have been done post 2015, the 4 more projects. I think my view is, overall, that we are in a margin expansion zone on what we are booking today. So when these bookings get recorded for revenues in the company, our margins should have expanded from where we are today.

Perfect. So second question on Anmol in Gurgaon. So you mentioned that Gurgaon is doing well with limited supply. So in that context with the phase launch, it was quite a large phase launch and we sold 1/3 there. So how do you see -- I mean, in your view, is it something that's extremely satisfactory?

Yes. The traction on Ashiana Anmol is more than satisfactory. We're selling very well month-on-month. I think October sale also went well. And we are more than satisfied with the traction at Ashiana Anmol, yes.

Perfect. So you mentioned that, I mean, post '15 for 3, 4 years, we've -- we are looking to call some of the errors in decision [indiscernible] for 3, 4 years. And last 1, 2 years, you've been focusing on growing the organization, to scale it up to the next level. So just curious to know, so we know that you've focused a lot on sales, on improving sales and taking back to the -- organization to the next level. So what would be the next thing you think you should focus on over the next 3 to 5 years?

So I think one of the -- I think the big focus now would be, as the organization grows, is to preserve and perpetuate the culture of the organization. I think that has kept us in good stead before in terms of being ethical, being customer-centric, having a certain set of values in the organization, which drives the culture of the organization. I think perpetuating that and taking that further, as you grow in size and number of people and locations and diverse, I think that's going to be the key sort of focus of the organization. I think that's where I think we'll put a lot of energy behind as you've seen it here.

Fair enough. That was helpful. And last question from me. I guess, I mean it's probably not relevant for now, but just want to hear how you think about it. So you've expressed over the last few calls the focus on return on equity. So in that context, just curious how do you think of buybacks because that's a way to bring the equity and thereby has the return on equity as well. So just curious on how you think about it. Is that something that makes sense for a real estate company at all?

I've been trying to wrap my brain around it myself. Personally, it's one of those things which are a little bit more difficult to understand. So the buyback scenario of shares, we've not been able to wrap our head around it as to how it will work. I think that's the key aspect of it. There are some heavy transaction costs in India by way of tax, I believe, as well as compared to -- so we just want to -- also and evaluate whether deploying this capital into growing the business is a better opportunity than buying back the shares of the company. I think that's the ROE kind of a discussion that there is. So we have evaluated it. But right now we just -- we are trying to wrap our brains around all these things. It's not a continuous journey.

The next question is from the line of [ Harsh Beria ], a professional investor.

Congrats for the great sales numbers this quarter. I think I joined a little bit late in the call and I missed some announcement about Amarah project. So can you -- if you don't mind, can you repeat that?

Okay. I'll repeat the name also, Ashiana Amarah. So I think people have a little bit of a challenge pronouncing it. We'll be careful also next time, but this time it is Ashiana Amarah. We launched Phase 1 of 224 units and sold the entire Phase I this year itself -- or at launch itself, Harsh. So the next question was when do we plan to launch Phase 2. We are sort of evaluating when to launch Phase 2, we are not sure, whether you will try to wait, whether you will take some time. And generally we have a 6- to 9-month gap between phase launches. We are just evaluating what to do in this project. There you go.

Congrats for the sales in the Phase 1 itself. And remember, like a couple of years back, we kind of had the same situation in one of the projects where we sold at, like at launch all the inventory. And you guys have mentioned that this might not always be the best strategy because there can be inflation issues over the construction lifecycle of a project and you want to keep some inventory available at the time of delivery itself because you can get higher prices. Has there been a change in the thought process about that?

No. So I don't think that was completely true. So let me put this way, even before we said, yes, inflation is a risk that one should be careful. And that was the other question that came in today. So one way to mitigate inflation risk is, if you launch and you're not able to do construction, that's a big concern, okay? And in one of our projects in Ashiana Amantaran Phase 2, particularly construction started late because of the sequence of work. And as compared to Ashiana Daksh, which was also sold out very well or Ashiana Aditya, which was sold out very well. Construction costs and rates were much lower because we started on work and the time lines were much shorter for cost to catch it up on and you use that time to do work. So I think what -- and that part remains absolutely clear that what we don't want to do is launch, sell and then sit on it and not build. I think then we expose ourselves to sort of different types of cost risks at a whole different level altogether. And I just also tackled that question earlier when -- so I'll keep it short now, you can have the transcript earlier. But my view is that overall price increases that we have already got in and that we expect to receive in the future phases or future stock to sell, will lead to margin expansion and should cover the cost of construction. And I see overall margins from what we are selling this year, which will get reported from revenues. In general, overall to be better than earlier, except as I said, Ashiana Malhar and Ashiana Anmol are places where margins are going to be constrained and challenging.

Okay. Makes sense. I was looking at the delivery schedule slide of Ashiana, and I see that both the Jamshedpur projects are supposed to have customer delivery in FY '23 itself. Is the construction on track? And are we expected to book the revenues in FY '23 itself for the Jamshedpur projects?

Well, Ashiana Aditya Phase 1 in Ashiana Sehar, which is, yes, it is on track, and we should be able to book revenues. Unless and until, sometimes we have these -- what happens for us to do have deliveries, we have to get occupancy certificate and lots of permission from the government, including a fire [indiscernible] permission, a completion certificate, occupancy. These things can go, 2, 3 months there is not something -- which is something we can control and it can spill over to another quarter, and we keep correcting for those in some projects that might have happened. But I'm pretty sure that share Ashiana Sehar and Ashiana Aditya Phase 1 we should be able to deliver this year.

Okay. So the construction-wise it will be delivered and there can be some delays in the final approvals from the government, which is beyond the control of the company anyway.

Yes. So but we can't hand over and book revenues without those approvals in place, right? So but that said, I think we should get those, yes.

Makes sense. And one small suggestion. I heard a discussion about buybacks. The next thing you're considering a buyback maybe do it at the same time when you guys are buying shares in 2020 March or April because that would have been much more value-accretive for everyone.

Fair enough. Thank you for that suggestion, I guess. So one thing that I get from you is for the buyback to be efficient for the company, the share prices, deliveries, the lower the share price, the better it would be to execute a buyback on. And I will just repeat, I still haven't wrapped my head around this completion, yes. Something become a wily to evaluate and learn from others and get some advice, if that's the right way to put it.

Yes. Just a small follow-up on that. Like if you have a tender-based thought process, then it makes sense to do it at a fair price. But if you are planning to do a buyback in open market route, maybe it makes a lot of sense when we are below book value.

Okay. Fair enough advise third. Thank you for that advice.

The next question is from the line of [ Ankur Jain ], an individual investor.

So a few quarters back, there was this term sheet we be signed on the land in, I think, Noida or Greater Noida for a senior living project. So I just wanted to know what's the progress on that. And if not that land, or as a company, are you still looking for some senior living projects in that area?

No, we -- that term sheet fell through, Ankur, and we are not evaluating Noida, Greater Noida at this moment of time for senior living, as we find the market frothy in terms of land prices and challenging regulatorily. So we have decided not to evaluate further right now.

Okay. And any other city apart from, for senior living apart from Bhiwadi, Pune and Chennai? Are you scouting for any other city?

We are evaluating, we are evaluating. So we are in the process of selecting which where to go. So we are evaluating Mumbai, Bangalore and Hyderabad. But it's very nascent. So it's hard -- it will be hard to comment where we're going. But demographically, we want to be in the west and the south, I think for senior living that just makes sense from a population demographic perspective.

Okay. So you said this -- I mean, it is still in the nascent stage, but can -- I mean, any location which can be locked in, can we expect something in the next financial year? Or can it spill over to even after that?

No. Probably we will get a deal in the next financial year and the launch will be after that, for sure. But I don't think we'll even get even to a term sheet stage before the next financial year. I think we're just early in the evaluation stage of what to do, where to do.

The next question is from the line of V.P. Rajesh from Banyan Capital Advisors.

Congratulations, Varun and Vikash. So first question was just on the launch of Amarah. Are you seeing the return of real estate investors back into the market in Gurgaon or in other parts of the country where we are doing projects?

I don't have data. We try to comment on this. Yes, Vikash-ji also is shaking his head whether it's investors or end users. Our sales team is telling us that it's end users, but this kind of traction at launch tells me that investors are back. That's my thought.

Yes, that was sort of my guess as well because that's what I'm hearing in Gurgaon, that investors are back. So that's what I was wondering about. Okay. And then the second question is on the pretax cash flow being negative this quarter. Anything you want to call out on that because you were obviously, had a robust cash flow in the first quarter?

Yes. So the reason for negative operating cash flow this quarter, is that although there was some improvement in collection, but that was more than offset by higher construction costs, which was due to execution commitments and all. Plus we had certain expenditure on marketing, sales and marketing side as well due to a couple of prelaunches. The kind of expenses that we incur typically during prelaunch, like Ashiana Malhar, Ashiana Amarah. And Pune again is altogether as such a new market. So we had certain costs incurred out there. So that was the reason, no other reason as such.

So I think -- yes, also basically V.P., I think the first quarter was -- the second quarter was an aberration overall because constructed area went up by like -- by about 12%, 13% from the first quarter. It also -- the collections decreased a tad bit from the first quarter because the sales got more back-ended to the end of the second quarter and now the -- and more to the third quarter. And to put these sales together, we had to do a lot, some marketing expenses, some -- even construction, getting a sales office ready, a show flat ready. A lot of those things got loaded and cash flow to those are postponed. So it's a little bit of a quarterly aberration in my view.

Got it. And then on the ROE side, I think you were targeting approximately 10% this year. So are we on track for that for financial year '23?

So yes, on a reported basis, I honestly don't know, V.P., again slippages of delivery 2, 3 months here there can move things around a little bit. And internally, we don't track on a reported basis, we have an economic basis for tracking. Economic basis, ROE should definitely cross the double-digit threshold this year. I don't think that's a challenge. I think aspirationally we are looking to get to 15% and over. That does remain a little bit of a challenge on an economic basis. But I think if we had -- if we concentrate our focus and energy that we have done, the way we'll find a way to get that. And the good news has been the improvement in ROE has been on track. I would say.

Right, right. No, that's wonderful to know. And then lastly, you spoke about INR 1,100 crores of top line -- or not top line but sales this year. So any early guidance for next year with more launches planned, et cetera?

No, not yet. We don't have a guidance for next year. I think we're still working on the same to get there. But again, I think the focus, as I repeated earlier, is going to be ROE. So I might be even happier with a little lower number than this year as long as we are able to improve margins by improving prices. I think -- so I think we are going to focus on margin expansion as well, I think, going forward.

I think in terms of the projects, the increasing contribution coming from geographies like Gurugram and Pune, I think the mix also will keep contributing towards a higher realization. So both of them. And very well supported due to the tailwinds that we clearly see in the sector. So these geographies contributing and plus a continuous opportunity to harden the prices across projects across geographies in general, also.

No, actually, Vikash, that was my next question, that your realization seems to be moving up nicely every quarter. So is that now a structural change because we'll be doing more projects in Gurugram and Pune?

Yes, it is. It's certainly a structural change because in the larger scheme of things from a long-term perspective, we are kind of looking at increasing our presence in geographies like Gurugram, Pune, which are -- which are certainly higher realization markets as compared to our historical averages because -- and even if you see in general, we see the prices moving north, like most of the geographies, if you see, maybe with here and there exception of maybe premium homes in Bhiwadi wherein still they are at 4,000 level. But talking in general, whether senior living project or geographies of Jaipur, Gurugram, Pune -- Gurugram, Pune clearly above 5,000. And in fact, Gurugram more than 6,000 now. But Jaipur also in general we see crossing 4,000. And in markets of Chennai also, in senior living projects we see north of 4,000. So it's quite secular if you talk about the price increases.

No, that's good. And lastly, what's the competitive intensity in Pune? Because everybody seems to be announcing projects there.

It is very high intensity, V.P., in premium homes.

In premium homes, but senior living.

So senior living will be -- we feel that it will be a little different ballgame in the sense that there we have got more stickiness as far as the brand is concerned. And the customer segment is a little different in terms of decision-making, in terms of their aspiration for our kind of brand and the kind of location that we go look at. So there we feel that the competitive intensity will be less vis-a-vis the premium housing.

But we are doing both types of projects over there, correct?

We plan to. So we have a premium housing launched, V.P. And we are in the process of launching the senior living project in a place called Varale near Taluka, sort of close to Pune, but on the way to Bombay.

Right. But what I'm trying to understand is that going forward as a part of our strategic direction, we will do both types of projects in the Pune area, right?

Yes, yes, yes.

The next question is from the line of [ Amit Sharma from M3 Investments ].

My question is on land prices. I think land prices were running a bit faster than historical averages, and you just alluded that it continues. So on a thumb rule basis, because you believe it's an up-cycle, what's the thumb rule for land prices that you would want to continue because on the realization you believe you'll be able to cover it up?

Yes. So the thing is we don't want to be very aggressive on underwriting land prices as the sale prices will improve. I have a view on a bull market that the bull market is there, but I have been wrong on many things many times. So the question on the land price is that we will look for places where it makes sense on the current sales price that we see in that market. And then if it goes up, great, if it goes down, not so good. But there is still some more protection than if you -- it has to go down from the current sales price and not from the expected future increased sales price. I think -- so the real challenge is how do we get land with a reasonable set of assumptions, from by being aggressive on the assumption land prices will totally make sense today. I think it's -- how do -- what do we do that with a reasonable set of assumptions we are able to find deals which are win-win both for the landlord and for Ashiana. And I think that will require a place to find pockets where we believe as -- because we are Ashiana and the brand we have and the development we'll do and the kind of development we'll do, we'll be able to fetch a higher price than the market in general. And so it's not a call on whether the market will run up or not. It's a call where we believe we can create a lot of value. I think that's the focus area in finding parcels. So senior living is one way. We believe senior living has less competitive intensity so we can find better value, some places where we have better brand or in Jaipur let's say we can take a call in certain locations, we'll be able to sell better here. And that is the important perspective that we have.

Sure. Sure. And just a related one. So is there any modeling you would have done that maybe 20% or 30% as a raw material of land is good enough for you? Or does it vary region by region?

Say that again, please.

So based on the current realization, if you believe that the land is maybe costing to 20% or 30% of your total realization value, you would go ahead. Is it based on some financial modeling or historical averages or it will be location to location in terms of your…

It's location to location, it's deal to deal. And based on a certain set of assumptions, we don't go into historical averages and we say we can sell at this price, this is what our cost of construction and others will be, if you give this, let's say, share of revenues to the landlord we'll be set with this, is this margin workable or not, and in those -- and when we are calculating this, are our assumptions on construction cost, marketing cost, overheads and our sales price are reasonably conservative or not.

But the common thumb rule is that we try to look at a GP margin at a standard 30% number across markets. So across markets, the realization price and the land price might vary. But 30% is a kind of benchmark that you look at while underwriting the projects.

All right. And one last question. See, land prices in a region or in a city will move in mass. So do we -- is it that we go further away from the perimeters of the city wherein we can find a better realization? Is that one of the thought process? Or you believe within the city also there might be projects which are -- I mean, what could be the reason that one parcel would be cheaper than maybe next to? Where can we find this arbitrage?

It's, the arbitrage is found in places where others are not willing to go.

I think you create some -- you create value in terms of open spaces, in terms of quality of product we are able to provide, timely completion and all those kind of, lifelong facilities management, those kind of benefits that we provide and we are able to command a good pricing from the customer.

The next question is from the line of Rohan Advant from Multi-Act.

My question is to Varun. Varun, you spoke about return on equity and that you want to get to double digits. But you said you're not looking at reported return on equity because I understand it's really -- there's a lot of noise in that. You said you look at the economic return on equity. Can you just share how you calculate that? And how -- what do you use as the numerator and denominator to beat that?

Our denominator is the equity of the company, the book network, yes, okay? It's difficult to adjust. And for numerator, we have a way to calculate economic profit which is based on how much area we sold, how much area we constructed, what our cost of construction is coming, what our sale price is correct. So we estimate volumes based on that and margins based on that and calculated economic profit. We have a whole system of doing this. So we have a little bit more regular MIS on it.

Okay. And that would be based on what you are selling this year and not what is a reflection of what you actually sold 2, 3 years back, and that is the real…

It could be either way, it's a reflection of what we are selling this year and what we are constructing this year. So if we have sold this year and not constructed it, we look at it when we actually build it out. Not exactly delivery, but we have an equivalent are constructed. So if you sell this year and we don't build anything, I'm not going to capture all the volumes to aim this year.

So the idea is that the sales and construction, both of them have to move in tandem. We can't be in a situation wherein you construct and are unable to sell or you're kind of in a scenario wherein you get the orders just like in a factory or you get sales and you don't construct. So both of them have to more or less move hand in hand. So we have a way to estimate this by -- choosing the both 2 things together.

The next question is from the line of V.P. Rajesh from Banyan Capital Advisors.

Yes. Just couple of follow-ups. So I noticed that your JV project pipeline seems to be drying up. So any particular trend underlying that? Or is it just people are finding easier to sell their land or you are shying away from doing the deals. If you can just comment on that?

No, most new transactions, so since COVID we have done 7 transactions, V.P., and of those 7 transactions 4 have been pure play revenue share JVs, whether it's Ashiana Ekansh, whether it's in Jaipur, the other projects, whether it's in Ashiana Malhar in Pune, Ashiana [ Amodh ] in Pune. They have been revenue share transactions. And even the 2, 3 that we have bought outright, 2 in Chennai and 1 in Gurgaon, the 1 in Gurgaon and 1 in Chennai has been bought on the IFC platform. So effectively, it's not like we are putting -- we are buying 100% and putting in complete equity and on that. And the third project which is Nemmeli is structured in a profit share, and it's along with Arihant group, and we've bought the land together. So sort of we have a local partner there as well. So we haven't actually gone ahead and bought completely outright as 100% equity contribution of Ashiana in any of these transactions actually.

So maybe I misunderstood the line, but if you look at your quarterly sales trend slide, the area sold or for that particular for the joint venture line is 0. So that's why I was wondering what's going on.

Yes, because those joint ventures are profit share joint ventures, actually most transactions have moved to revenue share structure. So now we're doing preferably revenue share joint ventures, and that's why the movement. And in revenue share joint ventures an entire top line gets captured into our P&L.

Got it. Got it. And then the other question was that given all the land bank you have, and some of them is obviously not usable. So what is the realistic inventory we have, for how many years do we have the land inventory?

Yes. So when we look at it, we ideally want to reduce the land inventory to as slick a cycle as we wish, right? If you want then you -- and you want -- and one way you want a little bit more because it gives you a little bit of room to do work. As of now, I think we have about 5 to 7 years of work at the current pace that we have. We have 1.4 crore in future projects, which basically means the land available for future development, which might be a little bit more dicey or not so stuck and those -- or a little too early in this stage. If I exclude that, we have 1.4 crore and we have about 10 lakhs to 15 lakhs to sell between ready projects and ongoing post. We have 1 crore and 12 million square foot. So at about 2.5, maybe 2, 2.5 where we are at right now, we're running at about -- yes, we're running at about 5 to 6x the pace. So as in this 2, 2.5 million square foot a year ramps up, which probably it would as we look at more return, how to get the return on equity. So I said we look at margins as well. This number might need to increase as we go now.

Right. So if you bake in the growth from the current run rate, then is it fair to say that you will be probably somewhere in the 3- to 4-year inventory?

Yes, somewhere close to 4 years, between 4 and 5 is where I would say where we would be. Hopefully close it 4.

Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments.

We would like to thank all of you for being on this call and being so patient, and with all the questions and answers. If we 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 the call. A lot of the material 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 call.

Thank you. Ladies and gentlemen, on behalf of Ashiana Housing Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.