Ashiana Housing Limited (523716) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Ashiana Housing Limited Q1 FY '27 Earnings Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Ms. Kunjal Agarwal from Arihant Capital Markets. Thank you, and over to you, ma'am.

Hello, and good evening to everyone. On behalf of Arihant Capital Markets Limited, I thank you all for joining into Q1 FY '27 Earnings Conference Call of Ashiana Housing Limited. Today from the management, we have Mr. Varun Gupta, the Whole-Time Director; and Mr. Vikash Dugar, the CFO of the company. So without any further delay, I would hand over the call to the management for their opening remarks. Over to you, sir.

Thank you. Good evening, everyone, and a warm welcome to all of you for joining our earnings conference call for the first quarter of financial year 2027. The real estate sector entered FY '27 on a more moderated note after the strong momentum witnessed through FY '26. Residential demand across key markets softened somewhat during the quarter, weighed down by global economic uncertainties and a cautious wait-and-watch approach among some homebuyers. At the same time, developers continue to remain confident in the medium- to long-term outlook with new product launches holding firm and prices remaining resilient across most markets. Premiumization continued to be defining trend with increasingly gravitating towards larger, well-designed homes from established and financially disciplined developers, reinforcing the ongoing shift towards organized and branded players. The Senior Living Segment continued to remain relatively insulated from these broader demand fluctuations, supported by structural demographic-led growth drivers. Changing family structures, rising urbanization and a growing preference for community-based living among senior citizens continue to strengthen the long-term place for this segment. With organized supply still limited relative to the size of India's aging population, the opportunity for established players in this space remains significant and largely unaffected by short-term cyclicality in the broader housing market. I will now take you through our operating highlights for the quarter, followed by our financial performance. Starting with our operational performance for the quarter. The company recorded a booking value of INR 358 crores during the quarter gone by, with 3.6 lakh square feet of area sold across 234 units. While bookings moderated compared to the exceptionally strong preceding quarter, our collections remained healthy at INR 409 crores, registering a 6% year-on-year growth, reflecting sustained customer confidence and strong collection efficiency. Average realization also improved significantly to INR 9,923 per square foot, representing a 37% year-on-year increase, driven by a favorable product mix and continued pricing resilience across our portfolio. During the quarter, we made a significant investment towards our future growth pipeline through acquisition of 28.55 acres of land at Vadgaon Maval in Pune. This is the largest ever land acquisition undertaken by the company for a Senior Living project with an estimated saleable area of approximately 20 lakh square feet and a potential sales value of around INR 1,800 crores. On the execution front, we commenced handover for Phase 1 of Ashiana Nitara in Jaipur during the quarter, marking another important milestone in our project delivery. Overall, we continue to make meaningful progress across the three pillars of our long-term growth strategy by maintaining a diversified geographical presence, expanding our Senior Living portfolio, strengthening our development pipeline and progressing steady on project execution. Coming to the financial performance. Revenue from operations for the quarter stood at INR 107 crores compared to INR 293 crores in Q1 FY '26. Revenue recognition in Q1 FY '27 was primarily driven by handovers at Ashiana Nitara in Jaipur. Higher revenue in FY '26 was attributable to more deliveries. PAT for Q1 FY '27 was lower vis-a-vis Q4 of FY '26 due to lower deliveries. Importantly, our operating cash generation remained healthy during the quarter at INR 121 crores compared to INR 108 crores in same quarter last year. This reflects the strength of our collections, disciplined execution and efficient working capital management despite lower reported revenues. We also commenced the redemption of NCDs issued to ICICI Prudential Mutual Fund during the quarter, INR 31.25 crores, representing 25% of the original issue was redeemed. Overall, while the reported revenue for the quarter was impacted by timing of project handovers, the company continued to demonstrate healthy operating cash flow generation, maintained a disciplined approach towards capital allocation and strengthened its development pipeline, particularly in the Senior Living Segment. With this, I would like to open the floor for Q&A session.

[Operator Instructions] The first question is from the line of Rohan Joshi, an individual investor.

So my question was on the line that the quarter 1 bookings suggest a back-ended year versus the full year target. So I just wanted to know that which specific launches are expected to drive the bookings in H2? And like what gives the confidence in hitting the FY '27 guidance that you have given in the previous con calls given this soft start?

Vikash, why don't you take it?

Yes. So you're right that the quarter 1 has been relatively softer, but we have got launches lined up. And, there are a couple of launches lined up in Q4 that we have in the present year.

Okay. Sir.

I will just come in, sorry. In July, we took out an operational update. So in July, we had a great launch of a project called Ashiana Oma. So as of 31st July, our full year sales had reached to about INR 859-odd crores, if I were to say. So if you look at the July month was better than actually the entire first quarter. So I would say in the first half itself, exit September 30, we should somewhere be between INR 1,050 crores and INR 1,100 crores of sales. So run rate will be maintained from there on. And in the second half of the year, the big launch that is lined up is Ashiana Aaroham's Phase 3 in Gurgaon. That will be critical in taking us through to the guidance. So that will be in either Q3 or Q4 of this year.

Okay. Got it, sir. And sir, my second question was regarding the presales growth that we will have. So presales grew very well last year as we have seen. So what is the sustainable presales trajectory from here onwards for the next three to five years?

So on that front, we are not as looking for sustained presales growth in the near term. I think what we are planning is what do we do in the long-term thing. So we might have actually a little bit of dip in presales this year or the next and then, let's say, let's get back to a certain number in '28, '29 or '29, '30. A little bit of that is being driven by a little lack of inventory to sell coming up in Gurgaon and Jaipur and Diwali, some of our key markets in the regular housing space. This is primarily happening because the company is shifting more and more capital towards the Senior Living space, where we see a much longer, deeper opportunity. So I think like in the Senior Living space, we are looking for about 25% CAGR to be maintained over the long term, though at a low base, we had started about INR 100 crores five years ago and presales of about INR 570 crores last year in Senior Living. And we are looking to really, really actually expand that even at a faster CAGR than that. So for a couple of years, you may not have very large presales growth or that, but we are comfortable with that because we are seeing margin expansion and ROE is now, as we had guided earlier, we are looking to get to at least 15% ROE. We can see 15% ROE sustaining going forward and with an increasing capital base because we don't intend to dividend out most significant amounts of capital. Dividends will remain the way we are growing a little bit. So I think the company's focus would be on maintaining that ROE trajectory doesn't fall below 15% and sustains above 15% year-on-year every year with a little bit of fluctuation here or there in the presales or topline and stuff like that. So that there is compounding of the net worth happens over a long period of time. I think that's the intent. So I just thought I'll put that out there. That said, I think Senior Living, as I articulated, we expect to see strong momentum in Senior Living sales going forward.

[Operator Instructions] The next question is from the line of Rohit from iThought PMS.

I'm sorry, I just joined when you were answering your question, Varun. So I'm sorry if I missed it. So when you were giving the update on the July month, that was for presales. Is that correct?

Yes.

So then just following on from there. So this year, you are confident of holding on to that INR 2,500 crores kind of presales for FY '27. Is that correct? Because I think you said there could be a dip in the near term.

I think INR 2,200 crores is what we are confident of holding it this year. At this moment in time, it looks good. We should exit H1 at about 1,100, as I indicated, between INR 1,050 crores, INR 1,100 crores, given that we hit 860 by July. So INR 850.

Right, right. Okay. That's good to hear. And sorry, just one, two small things. So one was on this Bangalore CPs that we were looking at. Anything further on that? We haven't heard any update. So I just wanted to check.

So there has been progress, Rohit, on the CPs being resolved in Bangalore. I'm hoping that we should have the final definitive documentation signed off sooner than later. So there has been progress there. And we have actually put a team deployed two people there on team who are gearing up to make things ready to get the project launch going. So I'm quite confident that South Bangalore should happen soon.

Okay. This is in South Bangalore, got it. I just wanted to check where you are in Bangalore. I just.

This is on Kanakapura Road.

Right, I forgot. I think I remember the listing that you had posted when you had acquired this, when you had given this notification. So sorry, one more question, Varun, was, so I mean, if we were to look at the presentation where you give quarterly delivery, of course, it can change here and there a bit. But it seems that, I mean, you said 15% ROE. I think we were 15% ROE last year also or just about there.

Yes.

So, I think based on what you are saying and what, I mean, given the margins can significantly increase from here, given the projects that we have for delivery, they must have very good margins going forward because of the realization growth and in general operating leverage. So, I mean, is it not fair that we will probably cross 20% ROE this year on a reported basis?

Yes, that is fair. So when I say 15%, the goal of the company is to make 15% ROE the floor ROE on a long-term basis. So, we have had years higher than that. So the first was to get to 15%, but the strategic objective is to make that the floor, and figure out how do we do that.

Sure. No, that's a very well taken point given the fact that it's a very cyclical industry. If you are able to do it, then I think it will be a phenomenal achievement. Varun, I understand and I think we have spoken on this in the past few con calls that you are not so much driven by the...

Please go ahead.

So sorry, I was saying that, I understand your point that you're not so much fixated by the presales growth, at least in the near term. But even if you were to sort of, let's say, one, two years, you are not going to grow because we don't have that much inventory.

There is one more connection here. Yes, I'm not sure if it is, yes, sorry. Or can someone from check if there is any other connection on the line, please? Go ahead.

Yes. So, I was just saying that while I understand your point on not going to presales immediately and we will not have the inventory. But how do we sort of, in the quest of trying to balance that 15% ROE aspiration and also grow because ultimately, that is what all of us also want as a company. So how do we balance that? I'm not saying that we should, I mean, of course, we don't have land, we probably get land in the next one, two years and subsequently launch. But just to understand from your perspective, let's say, three, four years out, how do we sort of ready ourselves to grow from this 2,200, 2,300 presales that we will sort of be at given the inventory position, how do we go from that level to the next level whenever that happens, let's say, three, four years? So, any thoughts on that?

Yes. So, Rohit, two things. If our capital base is not reducing, if you're not dividending out our capital or doing buybacks, which we don't intend to do, and we are looking to increase our capital base. There is no way ROEs can sustain without earnings growth, right? That's sheer mathematics. For ROE to sustain, we will have to have long-term earnings growth. So, from a long-term perspective, we do want to get to, let's say, in the medium term, maybe INR 3,000 crores, INR 4,000 crores of presales we'll need to hit. All I was saying was, momentarily for some quarters of challenge we could go through if that sustained momentum will take to get there. And I think the strategy of the company is, okay, let's invest more and more in Senior Living because we see that as a structural business. So the change is, and second, less cyclical because it's a structural change because of the change in the demographics. It's less cyclical because it's less competitive with less supply on the table as of zone. And we have a sort of a significant advantage of being a pioneer there and having our sort of brand placed in everything. So the long-term earnings growth and also presales growth is going to be driven by how Senior Living does. And right now, it's a small base, but as we increase the Senior Living piece and the pie and when that increases, when it becomes a larger part of the business, it will just keep driving the growth of the business is where we are coming from. So let's say, a '29 '30 financial year target is actually to look at INR 1,500 crores of presales from Senior Living itself. And once that kicks in, I think Senior Living and then presales growth will happen. So, we are looking at a couple of quarters of maybe not as much top line growth. And through those quarters, I think, though, we will continue to have reported earnings doing well. We'll continue to have reported ROEs doing well. We will continue to generate positive cash and deploy into Senior Living. So, we have already deployed into five projects right now 51 lakh square foot odd, which we have in the future pipe, the Bangalore one coming up. We are in active discussions for a few more. I think maybe get to a first place would be to get to about INR 10,000 crores of GDV and Senior Living. Once we have that, I think then we can see just Senior Living driving the momentum of the company going forward. I think that's the basic key. So I think we will need to INR 3,000 crores, INR 4,000 crores of GDV of presales, probably closer to INR 4,000 crores in the medium term to be able to sustain those ROEs, and instead of just saying that instead of a straight line path that there is, there's maybe a little bit of a dip for a couple of years, and we can live with that and pick that up. I think that's the basic thing.

[Operator Instructions] The next question is from the line of Chetan Thakkar from M3 Investment Private Limited.

Sir, just a question on the ROE. I think earlier we were highlighting a 20% plus ROE. And today, you've commented that long run, it remains 15%. So what has changed between those two assumptions?

Chetan, maybe I'm wrong, but whatever I remember, we have been talking about getting to 15% for the longest time, and we hit 15% last year in reported earnings. Maybe I'll go back and check the transcripts if I've said otherwise. But that said, as was on the current call, previous question, I think this year, we will hit 20% ROE, and we should hit 20% ROEs for a few more years given the plan that we have in place. I think that is something that we can do. But as I said, 15% ROE has been the long-term goal, that's the minimum rate that sort of compound that going forward. That's been the intent.

Sir, structurally, how should we look at the ROEs when we build it up from a project to the ROE perspective? So how does the project margin change for you more longer run, not just for a year or two. But how does the project margin change for you, which gets you to 15%?

I think if we are able to achieve about a 30% gross margin. Okay. Vikash, why don't you take this up?

If you want to continue or else, I'll join in.

So as we generally target about a 30% gross profit margin at the project level, about 18% PBT margin, about a 12% SG&A and 18% PBT margin and 13.5% PAT. If we are able to sustain that whenever whichever you are, I think overall, generally, our ROEs should translate into the teens. And if we are able to improve the margin profile further from here, then that takes us about 20%. That's the general sort of view for me.

And levers to improve the margin, would it be more pricing power given the brand and given how we are placed in the Senior Citizen market, that would be one key lever? Or are there any other levers as well there?

So square foot pricing power is definitely a key lever in Senior Living that enjoy pricing power in Senior Living. And what we are also intending to do in Senior Living is increase our product profile into a little bit more higher-end segment. So if you see our pricing has been increasing on a ticket size basis. Also, we are going up to more premiumized products. As Vikash ji had mentioned in his opening, premiumization remains the same. So as we premiumize our products and enter higher sort of category of products, there also margin should improve.

If I may just add to that, Varun ji, I think the other factor is the operating leverage fully playing out in the long run because if we are talking about the Senior Living, which is relatively more resilient towards cyclical fluctuations. So that attains a critical mass, something like INR 1,500 crores of presales that you talked about, the kind of operating leverage which will flow through will also give a sustained kind of impact on the margins in the long run and the ROEs as well.

The next question is from the line of Ankit Shah from White Equity Investment Advisors.

Sir, apart from Bangalore, any other business development near closure, particularly in Jaipur, Gurgaon, if you can share something.

On the business development front, we have active conversations going on in Jamshedpur, something in Chennai, something in Bombay, Pune, in NCR. I think we should get something done in a small thing in Jamshedpur, hopefully sooner than later. And that in Bangalore, things are in advanced stages of discussion, but they are still in discussions. I don't think we'll have any announcements in the coming quarter, but hopefully, in the third quarter of this year, we should announce those transactions as well.

The next question is from the line of Aditya Banerjee, an individual investor.

So I have a few questions on the side of the revenue quality. So my first question is like what's the underlying run rate for bookings? Is Q1 FY '27, INR 358 crores closer to steady state? Or is the big launch due later in FY '27 to normalize the number?

So Aditya, one thing numbers in the deliveries are not driven by launches. So when you're talking about quarters, that's depending on handing over and that's driven on OC. For this year, I think we give a delivery schedule and a revenue schedule that's in slide...

He is talking about presales, he's talking about launches.

Are you talking about presales when you said INR 50 crores for the quarter or you talking about revenue in the financial statement?