Ashiana Housing Limited (523716) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Ashiana Housing Limited Q4 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 Ernst & Young LLP. Thank you, and over to you, sir.

Thanks, Aman. Welcome, everyone, and thanks for joining this Q4 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 have not received the same, please write to us, and we'll be happy to send it over to you. To take us through the results of this quarter and answer your questions, we have today with us Mr. Varun Gupta, Whole-Time Director; and Mr. Vikash Dugar, CFO. We'll be starting the call with a brief overview of the company's performance of this quarter, and then we'll follow it up with Q&A session. I would like to remind you that everything said on this call that reflects any outlook for the future, which may 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. Good afternoon, everyone. I hope all of you and your families are keeping healthy. I welcome you to discuss the performance of the fourth quarter and year ended March 23 for Ashiana Housing. Thank you for joining us today. The year gone by was quite active in terms of new launches. We launched 5 greenfield projects and it new phases of existing business, totaling to the tune of 29.46 lakhs square foot. Second kid-centric projects was launched in Gurugram by Ashiana Amarah, the first phase of launch in October '22, comprising 224 units and was fully booked at launch. Phase 2 was launched in April 24 consisting of 224 units, saleable area 3.77 lakhs square foot, having a sales value of around INR 283 crores. All these 224 units were converted on 17th of April. Ashiana Prakriti got launched in Jamshedpur in March 23 with 162 units and sales value of INR 163 crores, entire Phase 1 sold at launch. Ashiana Advik, our third senior living project in Bhiwadi was launched in November 22. Ashiana Malhar in Pune was launched in August 22. And Ashiana Ekansh in Jaipur was also launched. We achieved INR 1,313.43 crores for financial year '23, which was our highest ever pre-sales. Area booked increased by 75% from 14.76 lakhs square foot in FY '22 to 25.86 lakh square foot in FY '23. Sales price improved to INR 5,080 for the current year versus INR 3,883 per square foot in FY '22, an increase of 31% year-on-year, driven by increasing prices across projects and changing mix towards higher-priced projects. In the last quarter of FY '23, 8.50 lakhs square foot of area was booked as compared to 9.03 lakhs square foot in the previous quarter. In Q4, bookings were driven by new launches in Ashiana Prakriti Jamshedpur and Ashiana Ekansh Jaipur, and sales in older projects like Ashiana Anmol Phase 3, Gurugram and Shubham Phase IV in Chennai. We handed over 10.51 lakhs square foot in FY '23. This was against a delivery of 8.86 lakh square foot in FY '22. Total revenue increased INR 425.19 crores in FY '23 versus INR 233.59 crores in FY '22, due to higher deliveries. Total comprehensive income was positive at INR 28.78 crores vis-a-vis negative INR 6.56 crores in FY '22. Total revenue reported for Q4 FY '23 was INR 116.94 crores, vis-a-vis INR 135.31 crores in the previous quarter. [ PCI ] also improved to INR 10.51 crores in Q4 FY '23 versus INR 9.29 crores in Q3 FY '23. Pretax operating cash flows were positive at INR 84.8 crores for FY '23 versus positive INR 165.05 crores in FY '22. Equivalent area constructive was 16.73 lakh square feet in FY '23 versus 16.20 lakh square feet in FY '22. Further, 2 new land parcels were acquired in Jaipur in FY '23. Ashiana Anantara in Villas Bhankrota with an approximate saleable area of 6.5 lakh square foot. And the Amaltas by Ashiana in Jagatpura with approximate saleable area of 4 lakh square foot. One new land was acquired in Manesar, Gurugram with an approximate salable area of 10.3 lakh square foot. Total potential salable area in these new land parcels should be around 21 lakh square foot. 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.

[Operator Instructions] The first question is from the line of Vivek Joshi from BP Capital LLP.

Yes. Congratulations, sir, for a very good set of numbers, especially on the booking front and all. So I mean I have two questions. One is that could you explain the -- how the expenses are booked? It's mainly an accounting question, like is it related to the deliveries made? Or is it like an ongoing thing on the complete cost that have been incurred during the year? And for deliveries, in your slide, you have given that in FY '24, you are going to be delivering around 26 lakh square feet. So is it reasonable to assume that given the realization rate, our booked revenue will be around over INR 1,000 crores for FY '24?

Yes. thank you for your question. So the year in which we give the deliveries, that year only we booked the revenues and following the matching principle, the book -- the costs are also booked in the same year. So both revenue and costs are booked at the time of deliveries or in other words, at the time of position being given on the project. And as far as revenue for FY '24 is concerned, again, the pricing for each of these projects will have to be seen as to what exactly is the price and then we'll be in a position to exactly see as to what revenue we'll reduce.

Anything on the average one. The average is about INR 4,000, so like...

Yes. So for all these projects, we list out the value of area book separately, okay? It is provided in the sheet -- in this -- in our operation snapshot as to what the value of area book is of all these projects. If you take from there, you can total it and get a sense of where we are going.

It's on Slide 12.

Okay. I just want to know if I'm approximately in the right benchmark. I'll do the exact math, but...

Yes. You can do the math. I think you'd be a little -- we also haven't done the full math, we will also do a full math next time when we give this sense. But the thing is, as it wouldn't be right because the average is also getting skewed from what is getting booked at a higher rate in the last financial year. And the deliveries that are happening in FY '24 have been bookings which have done much earlier than that, right? So the average would not be the right context here to date. So I would rather do the math because with sale prices, you can really vary a lot now than our project earlier.

Yes, yes, yes. Got it. Got it. They would be 2 years back. Got it. Got it.

Yes. And earlier, we used to operate in a tight range, okay? So proximation is better now. We have projects ranging at INR 3,000 square foot and going up to like Amarah Phase 2, I think, closed at INR 7,700 square foot, which -- so the variation in price points now has also become very large for us. I think we should just keep that in context.

Okay. And is it okay to ask another question or I'll wait in the queue, as you please, like.

You can go ahead. I think, there is -- you can go ahead. One more question, please.

Yes. Okay. So another thing I wanted to know that now that we have booked like 25 lakh square foot and around 1,300 value. Is this the run rate we are looking to do because you would have your launches and all early planned in the coming financial year? Or is this going to vary a lot like? Is this a new normal or it was an exceptional year, like?

No. So in this year, we are expecting a INR 1,500 crores sales value push, Okay? So we are looking to grow this number. That said, I think quarterly variations, like last year, also if you see, a bulk of it came in 2 quarters -- in the last 2 quarters. So I think we will continue to have quarterly variations as we go along. So we might -- we'll have a couple of great quarters and a couple of small quarters, depending on how projects and sales launches are planned in those quarters. But this year, we are expecting a INR 1,500 crores.

[Operator Instructions] The next question is from the line of Himanshu Upadhyay from o3 PMS.

Yes. Congrats, Varun, and the whole team of Ashiana on good set of numbers and meeting the targets which you settled for yourself in the beginning of the year. So great to see the good times for the company. And I also visited the Chennai project this year -- this quarter. And it was impressive, the senior living project, what we saw and what we hear from people there. My first question is, can you give an idea of this HSIIDC land deal? Has it been consummated? And what I understand from reading the document, it seems that it will -- the final payment can happen in '24, okay? So is it a long gestation deal? And -- what is the -- believe we can only launch project in FY '25 or '26. Some idea on that, what is happening there.

Himanshu, sir, we have paid 25% of the [indiscernible], okay? We are waiting to now execute what they call a formal agreement to sell. For the execution of formal agreement to sell, we have up till 12 months to make the remaining payment and thereafter, we can go for flat approvals and stuff like that. Now we are also -- there is a process of -- for us to carry out our design, and unfortunately, at Ashiana or fortunately at Ashiana, we take a lot of time to design because design is our winning edge. So time consumption in design is little high, but it also leads to a good product. So we're going to use a substantial part of this time to get a design ready and some approvals like environmental approvals, we can move without even paying the full amount, we'll be using that time. Anyways, we would have expected a 12-to-18-month time frame of launch since we did the deal. So we were not expecting the launch of the project in FY '24, no matter what the payment terms are, we would like to launch this project in FY '25.

Okay. Okay. And one more thing. You gave a target of INR 1,500 crores of sales, okay, for let's say FY '24. We did a 2.6 million square feet of sales in FY '23, and we have -- so do you think that we'll be focusing more on the sales or remains the area wise? Or do you think the realization itself will take us to our desired target of higher 20% sales growth, what we are expecting?

So a combination of both, Himanshu. So some places we pushed for higher sale prices like in Gurugram and Ashiana Amarah Phase 2. We launched the Phase 2, which we'll disclosed was also at a much higher sale value, I think 224 units this time, and INR 7,700 average per square foot pricing as compared to INR 6,100 in Phase 1 in Amarah. So in Amarah, we're looking at that. But in some other projects, in Jaipur, we expect volume push as well. So there would be different flavors in different locations. So in a combination of the two when we look at it.

And are you back to the peak margins what we used to do in terms of gross margins in the projects what we are selling. So we stated that 30% gross margin had come down to 24%, 25%, are we -- in the incremental sales what we are doing, can we expect the gross margins to be back to the historical highs, what we were doing?

Yes. So 30% is probably average of what we would like to be. And we would expect 30% gross margins on a blended basis across the projects. That said, the older projects like Ashiana Anmol, even at current price points will not make those kind of margins. But all the -- any project that we have signed off on after 2015. I think we'll be able to maintain 30% gross margin or more. Like we launched 5 projects last year, Ashiana Advik, Ashiana Amarah, Ashiana Prakriti, Ashiana Ekansh and Ashiana Malhar. Malhar is an older deal that we had done 2017, not sure, but 2017 as well there and first deal in Pune where our margins are a little compromised, they are not in the 30% of close back but rest of the projects are -- in JV projects, we are also okay with 27%, 28%, 29%, and we get those in the JV projects and the own projects will be north of 30%. So -- and across these 5 projects, I think blended average will be more than 30% across all the 5 projects.

[Operator Instructions] The next question is from the line of [ Pravin Agrawal ] as an individual investor.

Yes. Quick question. So I just wanted to understand when we underwrite the project. So what is the internal IRR which we look at? And what is the time? So from essentially, if you take a parcel of land and we do 3, 4 phases, how much time does it take from the first land was purchased and I see that typically, we complete 8 to 10 quarters, 1 phase. But typically, how much time does it take a parcel of land to completely consume it? And what is the internal IRR which we target on a land when you purchase that?

So [ Pravin ], a couple of things. First, from a time cycle, I think the project takes about 12 to 18 months to get off the ground before -- after purchase, it takes time for approvals, it takes time to get the side ready from a salability perspective, get our sales office and all that going and are designed ready. So about 12 to 18 months to launch the project, sometimes even extending up to 2 years. And from there on, a project takes about 5 to 7 years to be fully consumed, depending on the size of the project and the number of phases that we have. And now coming back from an IRR perspective, we are -- we don't really do IRR calculations. We don't run very complex excel sheets to do IRR calculations, we have very thumb rule mathematics. And in thumb rule of mathematics at the company level, we look for a -- we are not looking for a 15% return on equity at the portfolio company level, including uninvested capital at any point in time. So -- and it becomes very difficult to calculate project level IRR by allocating over stuff like that. So -- and we have a threshold that we want to make a 30% GP margin on the project, and we run our sort of absolute profits that -- on a -- what we get in the project and look at a multiple on our investments in there -- so that's the kind of thumb rule we do, and we expect to make 15% ROEs, 15%-plus ROEs in the company.

That's good to hear. So -- and on the 15% ROE basis, we know that last few years worked up. But at what point in going forward, do we think that we'll start doing those 15% ROE? I mean given what we have booked in 2023, these are -- will that all yield to as and when these get executed and get booked into our financials. Will they all yield 15% ROE on our equity capital?

Yes, that's the expectation that we should be able to do that. So we also track what we call economic ROE in the company as to see deliveries can be very delayed how the company is looking and how that is translating in our -- we have metric for economic ROE calculations. And our expectations are that the economic ROE should start crossing the 15% threshold from FY '23, '24. '22, '23, we've hit double digits in our economic ROE calculations. At '23, '24, that should start flowing better. So the margins -- and earlier question, I think was around margins by Himanshu. And as margins have improved and the sales volume has improved, the value has improved. I think we are looking at good times ahead right now.

That's great to hear. So my last question is on the new line parcel, which you are -- or the cities which you are looking to acquire or do projects? And any color on the land which we're looking to buy?

So one, we did the HSIIDC transaction in Gurgaon in March. Gurgaon is something we were looking for more work. And I think that seems to be fitting in. And other than that, there are 2 active negotiations going on, and then we'll start looking for more in -- so 2 active negotiations in -- one in Jaipur and one elsewhere. But that's about it at this point of time. But that's enough to keep refilling the pipe, right? Last year, we ended up effectively doing 20 lakh square foot of deals between HSIIDC and 2 in Jaipur. And right now, we are also in active discussions for 2 projects, which together will be another 20-lakh square foot. So we seem to be okay as a replacement stock. I think on aggression to get more and more stock, we are just waiting for prices to be a little bit more conducive. Otherwise, we have to keep hunting for value rates.

One last question before I hand it over. So is now Gurgaon an integral part of our strategy, like we are -- historically, we are very strong in Jaipur, Bhiwadi kind of areas. So is it -- would it be fair to assume that going forward for the next foreseeable future, Gurgaon will play more and more important role in the overall scheme of things.

Absolutely. Gurgaon is going to play a very key role for the company going forward. It drove, I think, 40% of the value of area booked for the company last year, volumes were not as much pricing was higher. It is going to be an integral part of strategy. I think that and senior living are going to be the integral aspect of it.

The next question is from the line of Ankit Gupta from Bamboo Capital.

Yes. Congratulations for the great performance during FY '23. If you can -- in our Amarah project, you talked about the new bookings being done at a rate of INR 7,700 per square feet compared to -- in Phase 2 compared to Phase 1 pricing of around INR 6,100 per square feet. So if you can talk about what is driving this increase in realization? Is it the demand in the specific markets. Now also if you can talk about the pricing across the rest of key geographies like Jaipur, Bhiwadi and Jamshedpur.

Okay. So yes, most of our projects are now getting priced in the INR 4,000 to INR 6,000 bracket. There are some less than that as well, like Jodhpur would be less than INR 4,000, Bhiwadi general housing would be less than 4,000. But now Bhiwadi senior living is INR 4500-odd, and Pune would be INR 5,000 plus and INR 6,000 plus also in senior living expectations there. So different markets have different price points. I think even in Jamshedpur, we crossed the INR 5,000 benchmark in the last launch that we had. So I think we are operating in the INR 4,000 to INR 6,000 bracket across most of the projects. In Gurgaon, I think, one -- in Phase 1, our brand was not as well established as I would say. So as when we sold, got some things going, our brand got better established, we got more traction. And then Phase 2 prices improve for us. But the market also has gone up really high in Gurgaon and I think more than the demand, it's a lack of supply in Gurgaon. Very few group housing projects have been launched in Gurgaon. Most launches in Gurgaon have been around floors. And that lack of supply is helping prices go up.

Sure. And what about how are you seeing traction in pricing across other geographies -- key geographies like Jaipur and Bhiwadi.

As I said prices are ranging between INR 4,000 to INR 6,000 prices across the board have gone up. And prices and margins, we are comfortable with prices and margins at a portfolio level. There will be a few projects which are still concerning, but that I think probably will always be the case.

Sure. And my second question was on our [ BD pipeline ]. And you see that land prices have become a bit -- have gone up quite a bit. So is it that the demand across the sector has gone up significantly that developers are bidding the prices up. So like what is the reason for such a -- something that...

I have alluded to this before that the price increase in land has been driven mostly by plotted development. And as plotted developments as like in Gurgaon, they have [Technical Difficulty] prices have come off, plotted developments are not getting licenses anymore. We see demand for land is reduced. We were able to get a good deal, I believe, in HSIIDC land price because it was only a group housing plot on auction. And therefore, there were not that many bidders for group housing for that plot, and we were able to get value. I don't see a lot of demand for group housing land yet still in the system, but land has alternative users like plotting, and that has made it up. I think they have started correcting now. I think plot prices are either plateaued or started falling a little bit in a few markets. I think they were fundamentally off the charge.

Sure. And in -- with our increasing focus on Gurgaon, which is relatively...

Ankit, can I request you for the last question, please. Because we have a little bit of a long queue after this. So just last question, this one, please.

Just last question from my end. So how do you see our realizations over the next 2, 3 years from we ended this year with around INR 5,000 per square -- INR 5,080 per square feet, maybe our increasing focus on Gurgaon as well as other cities. So how do you think realization can be over the next 2, 3 years?

So we will have, I think, of either price bracket and a lot of the portfolio will define that. I think Jaipur will continue to operate in the INR 4,000 to INR 5,500 -- INR 4,000 to INR 6,000 kind of a price range. Gurgaon will now, I think, be closer to INR 7,500 to INR 8,500 square foot price range, depending on the new projects we take up, where we take up. Senior living, I think we are crossing the INR 5,000 threshold across the board getting closer to INR 6,000 -- so there are different things, Bhiwadi and Jodhpur general housing continue to feel pressure. So a lot of our price points will also now depend on the mix of projects that are sold in a particular period.

The next question is from the line of Anuj Sharma from M3 Investment.

Yes. Congratulations. I don't know if this was discussed but at the sake of repeating it. If we exclude the project mix, then what was the pricing improvement on a like-for-like basis in FY '23?

It's very hard to say on a like-to-like basis. I think because the project has got completed and you have launched a new project in that -- it becomes very difficult. So we don't do like-to-like tracking because they're different across different projects, and they have different weights and different years. So taking our weighted average becomes a problem. If a project is selling a few units this year because it has less talk. Its weight might be less in this particular area or higher area. So it becomes very problematic to look at that. So we look at a portfolio basis. But I think, as I said, INR 4,000 are new normal. So normal earlier was, I think, INR 3,300, INR 3,400 square foot to operate on like a base case scenario. I think that base case scenario has shifted to INR 4,000 per square. So maybe that's the way to look at it. Like maybe a 15%, 20% shift over a 24-month period is probably an ideal way to say where our base is.

Okay. Okay. Got that. And just an extension. So going forward, even if I take a 20% from INR 3,300 to INR 4,000, 10% to 15% is something which we can look on like-on-like basis across portfolio? And which other markets where you think you can push through pricing little easily in your whole portfolio?

So I would not comment on how much price increase we look at year-on-year. If you had asked me this at the beginning of the year -- last year, I wouldn't have said the kind of increase we saw over the last 2 years, unfortunately, I'm not able to give a call on that. That said, confidence on pricing in Gurgaon, Jaipur and senior living is -- and Jamshedpur are generally the highest as of now. So -- okay. And I see that to continue.

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

Congratulations, Varun. Just a few quick questions. One, on the realization that you were just talking about. Our increase in realization has been much lower than the general inflation over the last 10 years. So are you consciously trying to push the realization up by getting into the target which have higher price points or not maybe and you are just going to see how it should...

I think, V.P.,I think 10 years of inflation has been captured or 7 years of inflation has been captured right now. If I really inflate prices from, let's say, 2010 perspective in markets we are in, we would be hardly at inflation yet. So I think there is -- on that basis, there is room, but you never know if 2010 is a good baseline number to take. But there was a lot of catching up to do in real estate prices in general because there were no increases for a few years. And there is still some catching up to do in some markets.

Got you. And my second question is on the ROE side. So it's nice to see that you are moving up the guidance to 15%. But just curious what has been the ROE for this year if you had already done the numbers on the -- not on the reported P&L, but the economic value that you track.

Yes. Rajesh, Vikash, here. So we have been improving our ROE year-on-year. So this year, in FY '23, we have crossed the double-digit numbers. Although directionally, the target is to achieve a 15% kind of a number about which Varun spoke a while back. But this year, we have certainly improved, and we are in double-digits now.

Next question is from the line of Shivan as an Individual Investor.

Sir, I just heard your guidance, will it be INR 1,500 crores for FY '24, right?

Yes, yes.

Okay. And what kind of -- can you give us an estimate of what kind of PAT percentage can we expect? Like just as an idea.

So this INR 1,500 crore is not a revenue number. This is the presales number, value of area booked.

Yes, yes. That I understand. Like how much of the PAT percentage usually we target like if you are doing the presales of INR 1,500 crores. So...

So we are targeting a 30% GP. We target about, let's say, 4% to 4.5% of sales and marketing expenses. And the overheads are a fixed overhead number. It's not a percentage number, there is operating leverage. Those are reported. So let's say, if I exclude depreciation and finance from that or in that, last year, that cost INR 67 crores.

6% to 7%.

Okay. So about INR 70 crores. So last year, that cost overall was about was INR 65 crores, INR 70 crores according to us. So that's the number. So you can -- once the -- from the P&L, you can base the actual overheads and run that number.... Yes. So on the overhead number, you run the actual overhead number.

We can't hear you clearly, again, the voice is cracking.

Can you hear me now?

No. Just give me minute. I will quickly reconnect you. [Operator Instructions]