Arihant Superstructures Limited (506194) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Arihant Superstructures Limited Q4 and FY '24 Earnings Conference Call hosted by Ventura Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Tushar from Ventura Securities Limited. Thank you, and over to you, Tushar.

Thank you. Good day, ladies and gentlemen. On behalf of Ventura Securities Limited, I welcome you all to Arihant Superstructures Q4 and FY '24 Earnings Conference Call. The company is today represented by Mr. Parth Chhajer, Whole-Time Director; and Mr. Dhiraj Jopat, Chief Financial Officer. I would now like to hand over the call to Mr. Parth Chhajer his opening remarks. Thank you, and over to you, sir.

Yes. Good morning, everyone. Along with Dhiraj, we also have CMD, Mr. Ashok Chhajer, with us on the call. Yes. So good morning, and thank you all for taking time to join Arihant Superstructures Limited conference call for Q4 FY '24 to discuss the results and business updates. We have seen that the Indian real estate sector continues its momentum across major metro cities in India, and we are excited to be part of this journey and have a leading position in the MMR region. I guess most of you would have gone through the presentation, which is filed with the stock exchanges. So I'll just brief you all about the financial numbers for this quarter. In terms of the consolidated financials, the total consolidated revenue for Q4 FY '24 was INR 162 crores against INR 120 crores in Q3 FY '24, registering a growth of 35%. The total consolidated EBITDA for Q4 FY '24 stands at INR 36 crores as against INR 26 crores in Q3 FY '24, registering a 37% growth on a quarter-on-quarter basis. The EBITDA margin for Q4 FY '24 stands at 22.36% versus 21.94% in Q3 FY '24, registering a change of 42 basis points. The profit after tax for Q4 FY '24 stands at INR 22 crores against INR 16 crores in Q3 FY '24, registering a 40.9% growth on a quarter-on-quarter basis. The PAT margin for Q4 FY '24 stands at 13.55% against 13.02% in Q3 FY '24. When we compare the FY '24 figures to FY '23 figures, the growth is as follows: total consolidated revenue for FY '24 was INR 511 crores against INR 391 crores in FY '23, registering a growth of 30%. The total consolidated EBITDA for FY '24 stands at INR 114 crores as against INR 79.8 crores in FY '23, registering a growth of 43% on a year-on-year basis. The EBITDA margin for FY '24 stands at 22.37% versus 20.41% in FY '23, registering a change of 196 basis points. Profit after tax for FY '24 stands at INR 69 crores against INR 43 crores in FY '23, registering a growth of 62% on a year-on-year basis. The PAT margin for FY '24 stands at 13.54% against 10.89% in FY '23. Net worth of the company has increased from INR 245 crores in FY '23 to INR 323 crores in FY '24, registering a growth of 31%. Also when we -- now, we'll just talk about the key operating highlights for the quarter. In the quarter, the company achieved sales bookings of 759 units equivalent to 6.49 lakh square feet of area amounting to INR 404 crores. So this is one of the highest numbers that we have achieved in a particular quarter. Also, the average price in the quarter was INR 6,237 per square foot. So that indicates that the affordable mid-income and premium housing contribution has been there across the total sales. The collection for Q2 -- Q4 FY '24 stood at INR 129.5 crores. This financial year, we also achieved record sales bookings of 1,755 units equivalent to 15.49 lakh square feet of area, which was valued at INR 970 crores. We recorded total collections of INR 503 crores. In terms of distribution by value for the sales done, 30% of the sales happened in the affordable housing segment, 50% of the sales was part of the mid-income housing segment and 20% of the sales was part of the premium housing segment for this financial year. This financial year has also been a highlight for our business development activities. We have added approximately INR 2,435 crores of new business, which have received approvals and the launches for these projects are lined up in phase-wise manner in FY '25. So -- and just to speak something about the company and the market scenario. We have seen demand for residential homes increased in the quarter, and a price hike of up to 7% was achieved in the financial year across all the sites. And obviously, the infra projects, such as the Navi Mumbai Metro and ATAL-SETU were inaugurated in this financial year, which will see a good price in the markets going forward. Land prices have doubled in majority of the micro markets over the last 2 years. Also FY '25, we are expecting that the Navi Mumbai International Airport gets the Terminal 1 inaugurated by March 2025. We did a few new phase launches in FY '24 at Arihant Aspire and witnessed a tremendous response. We also launched Arihant Adarsh in the month of March, where we were able to sell 145 units till March, and the momentum is continuing as we speak. Detailed list of the projects to be launched have been laid out on Page 14 of the IR presentation, wherein we have indicated the tentative launches for the first half of FY '25. We have received commencement certificates for World Villas at Chowk, Arihant Avanti at Shilphata and Arihant 7 Anaika at Taloja in FY '24 and the sales of these projects would begin in FY '25. With the widest geographical spread and variety of products from 1 BHK to villas, we have positioned ourselves as one of the most unique developers in Navi Mumbai and MMR region with respect to the product mix, ticket sizes and the multiple geographies we cater to. With this, I will now open the floor for question and answers. Thank you.

[Operator Instructions] Our first question comes from the line of Jojo Shaju from Alpha Invesco Research Services.

Sir, you have reported INR 970 crores presales for this year. But I believe most of the -- this is the total presales coming from the projects. But in most of those projects, we have only 60% economic interest. So out of this INR 970 crores, what would be the Arihant share of presales?

So this is spread across the entire company, so including the subsidiaries. So I mean, we don't account 60% separately when we record our sales. But to give you a ballpark figure, I think something around INR 600 crores or INR 650 crores will be from the subsidiary companies, which have performed in this financial year.

INR 650 crores from subsidiaries. Okay, sir. And sir, in the previous calls, you have guided for 30% presales growth for the next 2 financial years, so roughly presales of INR 1,300 crores and INR 1,650 crores for financial year FY '25 and '26. So are you still holding on to this guidance? Or how do you see the demand now?

No, we are confident of this guidance and our target for presales is INR 1,300 crores for FY '25. Obviously, this is a conservative number. There could be some surprises, but yes, we are holding on to our guidance for this year as well as the year going forward.

Okay. And sir, coming to your sales strategy, do you have your entire team in-house for the sales team? Or are you associated with any [ outside ] companies for your project sales?

Today, we have a sales team of approximately 285 members, and everything is managed in-house with respect to the presales, the sales and the post sales. So we don't have any tie-ups with any mandate companies as of date.

Our next question comes from the line of [ Rutul Shah ] from Anubhuti Advisors LLP.

Yes. Congrats for a great set of numbers for the FY '24. My question is with respect to the GDV that we have mentioned in our press release. So INR 8,800 crores is the number that is the GDV for the current project that are in pipeline. I just wanted to know whether this GDV is for the total projects or it is only for the share of Arihant, like we do [ GDSO ]. This INR 8,800 crores is for combined or only our share of that project?

No. So this GDV is, obviously, total of the projects that we're developing and whatever area we mentioned or let's say wherever we are JV like the Shilphata, Arihant Avanti or Arihant Aalishan, we mentioned area which is belonging to us for our revenue records. So we don't add the landowner portion in the presentations or in the projected revenues. So whatever incomes are to come are being showcased. Whatever incomes are to come to the company at the company levels -- the company and the subsidiaries, those are being showcased in the presentation.

So this INR 8,800 crores is purely of Arihant, right? And the total amount might be like INR 10,000 crores or INR 11,000 crores?

Maybe. I'm not concerned about the landowners' revenue potential.

Second question is with respect to the club membership that we have announced some time back. So just wanted to understand how the economics of this club would be there. So like what would be the legal form of that club? First. Second, when we would be selling the membership to the client, whether that money would be remained in the club itself, or it would be coming back to Arihant Superstructures as a reimbursement or something like that? If you can better clarify on the economics that how it will work? So we have initially given INR 250 crores as the CapEx. But is it the CapEx to be done by the company and we might get some reimbursement in the form of membership fee, how that economics will work?

Well, Ashok Chhajer here. The clubs and gymkhana is an asset to the company on an annuity-based income from the club. So it is an asset building exercise, where generally, what we have seen is like gymkhanas are never built by an individual in the city of Mumbai, the Bombay Gymkhana, the MCA Gymkhana, the [ Wellington ] Gymkhana are all which were managed and built by some trust. And hence, the membership and the format was often body incorporate and the membership is to rely with the individual entity of a trust. Here, the property is of company, and it provides living standard and living platform of lifestyle. So the income and expenditure, all lies with Arihant Superstructures Limited as club and gymkhana is not into any separate entity. So all the income would be of the company and all the expenses towards asset building would be of the company, which would have in its own valuation in the days to come as an asset. The format of membership is of -- for a period of what schemes right now are for life membership. And the business plan is there for its monthly inflow and outflows. So yes, the membership fees would be and part of income like an income in any other project.

So basically, just wanted to know, sir, if we are selling a membership at say INR 10 lakh. So that INR 10 lakh would somehow be, like a reimbursement from the INR 250 crores or that will remain in that different estimates that we are [Technical Difficulty]?

You can tell it is in reimbursement to the investments. So word reimbursement is not the right word, it is an income to the investments.

Okay. Got it. [Technical Difficulty]

[Technical Difficulty] gymkhana, the cost is around INR 125 crores to INR 150 crores of gymkhana. It is not INR 250 crores of investment. The company's total investment would be to a tune of budget at INR 150 crores.

Got it. And sir, when we are saying that the member -- so we are giving lifetime membership to the client. So typically, it is -- normally it happens that when there is a club and there is a member -- lifetime member added to that club, they are also a kind of owner to that entity for which they are buying the membership for...

That is what I told you. It is not a trust. They are not the members, they are not the owners. Here, the ownership, 100% lies with the company only. We can get back to you from our sales team details about it. And going forward about the strategies of each in individual nitty gritties of sales, et cetera. We can focus on the company's numbers and performance. [Foreign Language] They are providing you lifestyle opportunities where there are going to be income. It's so simple as that.

[Operator Instructions] Our next question comes from the line of Amey Gawde, an individual investor.

Yes. Can you just explain us how the joint development and joint venture partnership are structured and operationalized by the company?

See, whenever a land has been brought by a landowner and where the company does not -- or the entity does not pays for land, that is called a joint development where the landowner gets either in the form of area or in form of revenue sharing. We, as a company, whatever joint development we have entered are in terms of areas. We have yet not entered into any revenue sharing. Joint venture is where 2 people come into an entity at the inception of the project and infuse capital and buy the land. So that is what the subsidiaries joint ventures are there, where the 2 groups came in, they put in capital to buy the lands. So the lands are owned by the entity which is a joint venture entity. Our subsidiaries can be termed as joint ventures. A few of the projects like Arihant Aalishan, Arihant Aloki, Arihant Avanti, are 3 which are joint development where company has not paid for land payments. But in lieu of it, it is sharing with the buildable area.

Our next question comes from the line of Vidisha Shetty, an individual investor.

My question is, sir, what is the company's strategy related to the land acquisition and the joint ventures?

We are open to both. Wherever we find out that the CapEx towards buying of land is less, we buy the lands. Wherever we find out developed and matured markets, we do redevelopments, we do joint ventures that we don't pay for the lands. So we are open to it. And going forward as on -- as today, we see that a mix of 75% plus are where we own the land as an owner of 100% and 20% to 25% of the projects are into asset-light model, which is called as joint developments. So the business development, which is being looked again at 20% to 25% of cater this year also and where the company's acreage of land from 200 acres would be the -- would be reaching up to 300 acres. So we see that given any opportunity which gives EBITDAs and which gives the profitability and where we are confident of executing and selling the project, we'll go forward with it.

Our next question comes from [ Hemang Dagli ] from Monarch Group.

Congratulations on a very strong set of numbers from Arihant team. Sir, 2 questions. One is the strong revenue growth and guidance going forward is quite encouraging. Can you elaborate further on what will be the key factors that would lead to this 25%, 30% growth that you have guided? We do understand that you are one out of leading players in MMR and Navi Mumbai region and the government focuses there. Along with that, what is our strategy to track the market going forward? That is number one. The second is on the EBITDA margin. Now would you like to guide some ballpark number on the EBITDA margin going forward? We have seen a good improvement in EBITDA margin from 21.43% to 22.37% and I do understand that we have moved from affordable housing to mid income to high income and that percentage has changed. Would you further help us to understand how would FY '25 look on the percentage terms in all the key segments?

What was your first one?

What will be the key factors that will be to a strong revenue growth?

Yes. So we have -- the company had a total unsold inventory of -- from the ongoing projects at the start of the year at 1/4/23 at INR 6,500 crores. And in this financial year -- last financial year, we have added up INR 2,300 crores as new projects. So what we see numbers are from the ongoing projects, that is from the INR 6,500 crores platter. The INR 2,300 crore new projects, that is: Arihant Villas at Chowk; Arihant Avanti, a larger project at Shilphata; Arihant 7 Anaika at Taloja; Arihant Adarsh at Taloja; new phases of Arihant Aloki at Karjat; new phases of Arihant Aspire at Palaspe; and new phase Arihant Anmol at Badlapur. So 7 projects, we have got the commencement certificate in the last days of March and April and which would be seeing up launches in -- on month-on-month basis in this financial year. So in addition to the ongoing projects, which has contributed to the sales number of INR 970 crores of the year ended '24, for the year ended '25, there would be an infusion of sales from these numbers. And hence, we find it out very much confident that given this humungous size of new projects being coming into the market and the launch, we would be able to do up -- this is -- the ongoing concern of 30% growth. With respect to EBITDAs, the older projects, which already had started off in the year '10 to '12, that today had an EBITDA of around 10% to 12%, 13%. After the ATAL-SETU and MTHL link, we find that there would be a little spurt into it. The new projects we work with an EBITDA of 30% to 35%. Blended, we are today getting at 22%, which would inch up year-on-year basis as you are seeing it from the last 3 years. So the major of the projects which have been acquired -- and which are in acquisition now, we eye for an EBITDA of around 30% plus, which would mean a PAT of something around 20% less. And with respect to the mix, we have been having all the category of product lines. So out of the total INR 8,800 crores in terms of value terms, not in terms of square feet, almost 35% of the value of the sales are in the affordable housing, which means INR 50 lakhs and below flat size and 35% of the total sales value is from a mid-income group, which means from INR 50 lakhs to INR 1.5 crores to INR 2 crores. And 30% is from the premium segment, which is above INR 1.5 crores to INR 3.5 crores. So we have a presence in each of the 3 segments equally, in terms of middle income group, luxury as well as affordable. In terms of square feet, the ratios are different. And we have a spread of 17 projects to cater to these INR 8,800 crores of sales to be done, which will get revenue recognition in the coming 5 years -- an average of 5 years of time. And this derisks ourselves being spread out and having market share across the MMR, right from Thane up to Panvel.

Right, right. Sir, one more question, if I can ask. On the cash flows front -- on the operations side, you see cash flows getting generated -- a healthy cash flow being generated this year, FY '25, which will help us to acquire land and things like that?

Majorly, the acquisition of -- majorly, free cash flows would get utilized in the sales projects as a projection of bigger size. The -- though the cash flows also has increased up in every -- year-on-year basis. And we see that, that would also -- we would be seeing the same type of 30% growth in terms of collections also, but the project sizes would consume the free cash flows also or the increased cash flows. There may be 10% of cash flows -- of the total cash flows, which can be utilized for land payments. This land acquisitions or business development will have to source funds for itself. And we have great opportunities in this region. We are able to -- Arihant being the leading developer -- the marquee developer, has the best business development proposals on the tables, on the office. And we are able to still acquire with the resources and with the generation of funds which you can do on the project acquisition basis.

Our next question comes from the line of Manan Shah from Moneybee.

I was not able to reconcile the presales numbers what we have been reported quarterly basis and versus what has been reported on an annual basis. Because in H1, we reported around INR 466 crores of presales. And in Q3, we reported around INR 250 crores of presales. And if you are saying on an annual basis, you reported INR 970 crores and that does not add up for the Q4 number of INR 404 crores?

Yes. So we have also factored in the cancellations, which have happened in Q4, Q3, and there's been -- the numbers of INR 970 crores are net after the cancellations recorded till 31st March. So that is why...

And that would mean that there have been cancellations of almost INR 150 crores? This is purely based on what has been reported on a quarterly basis.

Yes, yes. We have cancellations of between 10% to 15% across all the sites generally. And that is a general trend in the high-volume sales markets and high-volume businesses also, across all the developers.