Arihant Superstructures (NSE:ARIHANTSUP) Q1 2027 Earnings Call

0:01 Ladies and gentlemen, good day, and welcome to Arihant Superstructures Limited Q1 FY 'twenty seven Earnings Call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Ms. Kunjal Agarwal from Marine Capital Markets Limited. Thank you, and over to you, ma'am. Thank you so much. Hello, and good morning to everyone. On behalf of Aryan Capital Markets Limited, I thank you all for joining the quarter one FY 'twenty seven earnings conference call of Arihant Superstructures Limited.

0:49 Today, from the management, we have with us Mr. Ashok Charej, Chairman and Managing Director and Mr. Udit Kasela, Chief Financial Officer of company. So without any further delay, I will hand over the call to management for the opening remarks. Hello, sir. Yes, good morning. So good morning, everybody, and thank you for joining the earnings call. I will take you through some of the industry updates followed by operational highlights.

1:34 So we see that the premium segment is looking forward for an appraise going forward also, given the net worth of individuals being increased. And when it comes to the larger premium segment, it is bandwidth between below INR 5 crore rupees, which is seeing still a good traction. We have already seen in the sector that things above INR 10 crores, 15 INR 25 crores, 30 crores in the city of Mumbai are facing up and little slowdown. But when it comes to anything which is below INR 5 crores is what is very much keen on spends by individuals.

2:20 We have seen that the rising household incomes evolving business aspirations and growing confidence in the long term ownership has been the driving theme. In the over the last six months, overall market has started normalizing. Hence, the speed of the sales have been mediocre and not too much high in spite this has been the effect due to the geopolitical tensions, crude oil movements, the foreign currency movement and also have been impacted by the real estate ventures and projects coming up in larger sizes. Sector scalability is still increasing overall, which also shows up that implementation is the core key and that is where there is a shortage of man resources at skill development right from the workers at the labor at the site as well as the monitoring engineering team as well as the salespeople.

3:27 And that becomes a key factor and it may see that many of the projects would have been struggling to cope up with these factors to see that there is a complete closure of the project nicely. Though in our case, I would be telling you about the number of project completions happened up in the last quarter and earlier also. The new coming to the now coming to the MMR and Mumbai 3.0 market, which is the key market which is still showing up great positive signs in terms of price rises, in terms of traction and sales everything. And over the last three years, Nai Mumbai's market in MMR region has increased from 12% to 17%. That means areas like Thane and Kalyan are getting in heat or getting in losing their market share and Nammam is getting their market share due to the international airport and Atal Setu and new infrastructure developments coming around as well as the data centers and job creations by the GCCs happening up due to the participants in this region.

4:44 Moving to the operational highlights of our strategy, we will continue to exhibit structural resilience as we enter the new fiscal year, though we have faced increased inputs due to the labor shortages as well as the geopolitical reasons, but we have revised it out with the balance inventory to us and seeing that our balance sheets will not be hit due to it. During the quarter, the company achieved a sales booking of two twenty one units, which is equivalent to 2.31 lakh square feet and that is up by 15 on year on year year year in terms of area amounting to INR 173 crores and again in value wise an increase of 15%. This demonstrates that underlying market demand across our core territory.

5:34 Our average selling price per square feet has also remained same at 7,500 per square feet as in the last quarter of Q1 for this first quarter of Q1 FY twenty twenty six. The average price unit which has been sold also has been stood at INR78 lakhs per unit. We remain focused on gradually improving our average selling price due to the premium products contributing to the total sales value. Going forward also, it would largely increase up in a major fashion. With the completion of the project, which we tell that the business operations are getting completed, we received occupancy certificate for Arihant 5 Anika, Arihant 6 Anika, Arihant Ananta, Arihant Adhant Adhantya Phase 1 and that means that around fourteen ninety five units have been completed and ready for offering of the position in the coming quarters and the days. And that says that the operations are smooth and clear. The collections are also for the quarter stood at INR 161 crores registered and yearly growth of 28%.

6:56 Our GDP has increased GDP has increased gross development value has increased from INR 6,000 crore to INR 14,000 crore in the last five years without any significant fund raise. That is the only fund raise was INR 36 crore of credentials. And in spite of that, the borrowings increasing, the GDV has increased to a larger size, which would contribute in a big way to the company's financials in the coming day. And as in short term evaluation, all what we purchased out very much in time, the lands of ball villas and town villas and business development in Sanne as well as in Shilpata that already has seen up an uprise of land prices going to almost 3x that tells that the investments very, very well in right in time and the scalability could be done due to those strategic decisions in spite of not appearing to increase the debt to the company because the debt increasing debt versus to the GDV and the financials has been great alpha in the coming days.

8:13 And we are too happy to share that ASL is already transacting and emerging as a diversified developer rather than only pure residential, our investments in any two assets is closing down for the second hotel also with Sunday at near IIM Agita, where the earlier one which has been concluded is the five star hotel at World Villas. The greatest point for this would be that the line prices for this has been to an extent of contribution of INR25 crores, INR27 crores for World Villas and for the ITC hotel and around INR7 crores to INR8 crores as a contribution towards the second hotel, though it were captive because the lands are already done in the kitty of the company.

9:07 And the similar product with the same average room rent when it is there in the city, the land prices or the input cost for developing these hospitality sector goes to almost 5x. So here is the edge that these hotels would do better and with the occupancy rate in and around still picking up to 70% to 75% with the additions at both the locations, we see that the hospitality industry to four years would couple up more better in terms of leisure destinations and mice and wedding event destinations. So all the strategy initiatives, we wanted to hold pricing rather than chasing volumes at the expense of margin. We plan to deliver 2,500 units by the end of financial year 2027.

10:04 We are confident that we will continue to gain market share based on our superiority of product and investment in strengthening our brand. Now, I request Udi Ji to give the financial performance. Good morning, everyone. I will brief you about the financial performance of the quarter and the review. The consolidated operating revenue for Q1 FY 'twenty seven stood at INR132 crores, reflecting an increase of 9% Y o Y from INR121 crores. The EBITDA stood at 28 crores and the EBITDA margin stood at 21%. The PAT for the quarter stood at INR 10 crores with a PAT margin of 7.4%. On the balance sheet, our net debt as on June 30 stands at INR $8.18 crores and the net worth stands at INR $4.60 crores.

10:53 We remain focused and confident on reducing our debt next year onwards as some of our residential projects have started nearing completion. And these reductions will be partially offset by new loans, which are being taken for building the annuity assets. With all these updates now, we are happy to take questions from the you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

11:42 The first question is from the line of Adi, an individual investor. Please go ahead. Oh, yeah. Hi, sir. Thank you for the opportunity. So my first question is that the industry is seeing strong volume growth. How much of the current growth are you comfortable viewing as structural? And what are the underlying demand indicators of monitoring to assess sustainability? What we see for the next four quarters also, we see the similar behavior as we have seen it up in the past quarters. As this is the phase where internally the the projects are shaping up at the initial spaces.

12:28 And hence, in spite of mixed views and reviews of the real estate sector across the industry, We feel that at our level, we'll be able to achieve a little higher than the past year numbers and very, very exponential growth in terms of numbers will not be able to witness in this financial year, but it would not even deteriorate. And we have been able to manage and maintain our indirect expenses also in the tune of the same lines. Okay. Understood. Sir, my second question is that as you've missed cost efficiency initiatives in the past. So could you quantify how much of the cost savings have already been captured?

13:22 And what further cost per tonne reduction is realistically achievable over the next twenty two, twenty four months? The cost reduction is not possible as we are able to manage up our HR costs similar to the last year's cost. The construction expenditures already is on a rise due to the geopolitical features, but given the inventory in hand, we are able to see that those increase in cost of the total project with versus to the inventory in hand can be equalized or we can be neutral also. And hence, won't be any impact on the balance sheets of the company per se.

14:12 As you already have seen that today also it is a mixed bag of projects, which are new projects, which have higher EBITDA as well as old projects, which has lower EBITDA. So that is why this next three to four quarters even the older projects would be out. Till this time, the numbers would be on the similar line. Okay. Okay. I understand. And my the next question is that given presales of $1,731,000,000 versus a reported revenue of $1,360,000,000. What is the expected time line for converting the current presales into the recognized revenue?

15:02 See, it's a general behavior that for an ongoing project, we are into percentage completion method. Hence, all the presales which happened, it takes around ninety days on an average for them to get into the mode of revenue recognition. So we can put up a cycle of ninety days as an average for every pre sales happening to contribute to the revenue. So that is the time taken by an individual in terms of owners contribution agreement, registration and no season etcetera. Sir. Sir, I have only one last question. That given the current environment, are you seeing attractive opportunities, please, for a new and acquisitions or our higher land and construction cost making new core selective?

16:02 Going forward for this financial year, we don't have any program for new capital investments for the business development as there is a good handsome size of projects in hand when it is INR14000 crores. And given the scalability possible at our end, it still is a cycle of six to seven years to complete up this INR 14,000 crores. Hence, any development which would be asset light, maybe what we would look into it, but largely we will focus on implementation of this project and not any new acquisition of the businesses or new projects. Okay. Okay, sir. Thank you so much.

16:51 Thank you. And gentlemen, as a reminder, if you wish to ask a question, please press star and one on your telephone telephone. The next question is from the line of, an individual investor. Please go ahead. Hello. Hi.. Yes. Hi. Thank you so much for giving me a. My first question would be that q q one three sales increase of same percent by o y to $1.78.1 crores, but unit sold for 221. How much is the growth came from price increases in premium products versus genuine volume growth? What's the average utilization per square?

17:41 Yes, sir? Will you... Arih, would you be able to repeat the question? Yes, sir. Can you hear me now? Hello? Yes. Yes, sir. So my question was, q o q one increase has increased 15% Y o Y, two hundred seventy three point one per rupees, but units sold were only 221. So I do want to know how much of the growth came from price increases and premium projects versus genuine volume growth. What would be average utilization per square foot and average ticket size by segment? Why is it? Sorry to interrupt, Abhita. Can you please read my question?

18:30 You should press star and one to join the question. Thank you. The next question is from the line of Shilpa from SS Investments. Please go ahead. Am I audible? Yeah. You're audible. We'll try to do it up. It's a little cracking. No problem. We'll try to do it up. Please come. Okay. So as per your presentation, it shows that currently 41% of the project project mix comprises of luxury. So in the next two years, where can we expect this number to reach? We still will have a mixed bag of it. And going forward, we can say that we would aspire to have 40%, 45% as a premium segment and around 30%, 35% as middle income group segment and 20% as affordable housing. So we'll not leave affordable housing. We'll still continue to do it up.

19:32 Okay. Understood. So my next question is, are there any plans to diversify the geographic presence because dependence on a single region may create a risk for the business? No. Because as... When we talk about single region, though it is MMR, MMR and Mumbai 3 Point o is already a very large envelope. It is double the size of the city of Mumbai. For the sake of new geographical diversification with new cities, there is no plans for it in that way. We are able to consume and utilize our capital and resources in this area. And with the more secured, cheap and better prospects for the projects undertaken.

20:29 Okay. And what are the factors that are differentiating MMR from other key markets like NCR, Bangalore and Pune? Well, today also Mumbai happens to be the call center where the state of Maharashtra is spending the highest in terms of bringing up job creations and hence the demand is robust. There is supply also, there is competition, but then that tells that this is a core market. And when we compare it to One or Bangalore, it is like the Mumbai 3.0 is just started off and has yet not achieved its saturation peak in terms of whereas the city of Pune and Bangalore already have reached to or MCR has reached to their peak of saturation in terms of supply, demand.

21:29 Okay. Okay, sir. Got it. So the next question is how do you see delivery, like, the delivery cycle moving here onwards? Well, from start to completion today, average project takes around four years of time in reality and practicality. Some of them maybe at three years, some of them are at five years depending upon the size of the project. Good thing is that we are the core focus would be that we do not pile up with any ready stock inventory and keep on selling all our stock in time. Okay. And last question from my side is like the average realization was 7,769 per square feet in FY twenty six versus INR 6,080 in FY twenty five. So where can we see this number moving in the next two to three years? And what would be the factors that would be driving our average realization?

22:41 Given the whole portfolio with us in our size, if any new addition is firstly of premium segment, then the rate of average would increase or else it will be something around 10% addition to the current ones with the given mix of products which we are operating today. Okay. Okay. Understood. Thank you so much for answering, sir, and all the best for the future. Thank you. Welcome. Thank you. Press star and one on your touch tone telephone.

23:27 Reminder, anyone who wishes to ask a question may press star and one on the touch tone telephone. The next question is from the line of Shiv, an individual investor. Please go ahead. Yes. Thanks for the opportunity. I wanted to understand, in the last five years, EBITDA margin has moved in the range of 21% to 23%. What would be the, you know, trajectory going forward? Where would you expect it to go? Given the changes that are happening in the business, I think you have a hospitality segment as well. So where do you see it moving from? Both the business have to be related separately because both have different pattern of understanding.

24:15 Even the real estate sector of sale product of residential and construction build construction sale, the EBITDA margins will gradually move up up to 30%, 35%. Something around 30%, 35% would be the EBITDA margins once Town Villas and Villa projects contribute largely. Okay. And what about the Hospitality segment? Where would you like to see that? Well, that would be in the first two years of phase is an investment period. So it will be capital allocation to these products.

25:00 And we said that an average core city product of an hotel takes up payback by around twelve percent twelve years to fifteen years. Here, the projections are to get a payback of period something around eight to nine years as the initial capital cost for the lands are less. And it would in terms of value, the hospitality sector would contribute, say, third or fourth year from now to an average of INR 50 crore of pad per year. So that is the annuity income or in model where INR 50 crore plus would be the contribution from both the hotels.

25:56 Okay. And if the early '20s kind of EBITDA margin goes up by 10 percentage points, that would mean that it's down with us and all the Villa projects that you have, margins will be significantly higher than your existing portfolio. Is that correct? Because it has to be closer to 40%, maybe I think or even more than that. Can be also depending because it's a rising market. What we see from the current trends, this much is at least achievable. And as you tell that, yes, it can be further up also. So time would or the going period of time, when the time the project gets shaped up towards and completion, that will trend up the that will say the trend what's going to happen after that period, which means something around 12 after twelve months.

26:53 Okay. And where do you see given that I think you're not looking at further acquisition of new projects. I think you're going to sustain the existing projects and take them forward is what you are that's what I understood. Yes. So does do you see debt to equity coming down in the last couple of years? Though the issuance are there, years. Yes, we tell that, yes, there is a plan for it, the debt to equity ratio will gradually come down because once the projects can mature, the equity gets on the reserves and capital reserves that are adding up to every quarter to quarter or year to year basis. And we see that if the cash flows are in an higher flow for the project of Arihantadvika, Vashi, which is nearing completion.

27:47 That is where we see that the utilization of funds would be for repaying of the debt to a larger level. And if that happens up in this one year, yes, the debt to equity ratio will go down. I'll also... Depends on the sales velocity. Yes. Further, with the increase in debt, the net debt to equity ratio has also gone up last couple of years. I think the ROCE has come down, Right? Last couple of years, the ROCE is down based on your own presentation. So that maybe there's some linkage to there. Right? So I think as as you... Do do you see the ROCE going back into the twenties? And then you... You know, because that's where it used to be till two years back. Yes, yes, yes. See, when we talk about the projects in hand, the return on capital on a complete project basis, as you see, it's quite higher and it is on an increasing pattern trajectory.

28:46 It is not on a downward trajectory. And when we see that in affordable also, we are able to make up a 10% margin where we see where we hear it around in the conversations and in the sector that affordable people are not able to make money. But with respect to our efficiency, we are still able to make some money in the affordable also. Okay. And of the current capital employed, how much is into residential projects and the rest in hospitality and other sectors? Out of 70% What percentage of capital employed would be there in 90% to 10%. On the contrary, maybe 90% to 93% today is in residential and 7% is in hospitality till now.

29:37 Okay. 7% So the total capital requirement as we take it forward, I think, because that will increase going forward? Yes, it will increase. Today, the capital deployed for the hospitality sector is something around INR 35 crores, 40 crores. And going forward on every quarter basis, the total investments for these two projects is to a tune of INR 100 crores and with the club around INR 500 crores. So INR 500 crores is a total investment program for the entertainment and hospitality business. So, for three years, the company will deploy INR500 crores of capital by debt or by internal resources for these projects.

30:26 Right. Those were my questions. You can carry on. Thank you. Once it happens, then when you start, then these assets value almost triple up when the operations are in queue and we are tied up with the best of the operators. And then we will see no chance of the operations not getting positive. And as such, there is a no compete market. So we are the only ones when it comes to this size of hotel in the region of Lunawala and Karjeet and Mumbai. So we still have a good edge position. Great. Well, all the best to you. Thanks. Thank you. Thank The next question is from the line of, individual investor. Please go ahead.

31:33 Hi. Good afternoon, sir. I'm with a moderate amount. Yes. Yes, sir. So my question was, q q one three thousand three hundred and percent ROI. 272.1. But units sold only 221. I just wanted to know how much of the growth came from price increases and to drill this project versus general volume growth. What were the average utilization per square foot and average ticket size by segment? Average ticket size today, we already have mentioned that it is something around INR78 lakhs and the projections and the numbers which we have, our average ticket size goes to something around INR95 to 95 lakhs to 1 crore. So, average ticket size will increase at an flagging site.

32:27 Okay, sir. My next question would be, what is the level of debt you are comfortable carrying through the current growth cycle? And is it any intention to materially increase leverage to accelerate project addition? Can you repeat the question? I can, because though your voice is there in terms of sound volume, but it's cracking a little, maybe some technical error. But please continue, we'll be able to grab your question. Yes, hi, Prajith. The question was, sir, what is the level of debt you are comfortable carrying through the current growth cycle? And is there any intention to materially increase leverage to accelerate project additions?

33:17 See, when we talk about our total debt today, we know that the asset values which we have can comfortably absorb debt continuity for even ten years from now, which means that for the next ten years, even if the debt remains same and interest is secured, still the projects are all viable, their feasibility does not goes off. So that does that means that the debt to the asset value as well as the project feasibility, the debt is on a very lower side. But when it comes to equity, equity would increase upon gradual basis by the existing capital reserves, by adding on capital and reserves in the coming time also.

34:09 And any fundraising program will change any all the ratios and numbers. Understood, sir. My next question is, sir. Like, do you view the current margin compression as largely temporary? Or are these numbers of your projects structurally lower than the projects that are currently being delivered? Well, as you see on project to project basis, the older projects and affordable housing projects, which are below 5,000, there the total margins are on a single digit. And that is something to a tune of 9% to 10%. The middle income group projects like Arihant, Alishan, etcetera, gives up a margin to 15%, cash margins and 12 to 13 margin for the Alishan projects include similarly.

35:05 And the premium projects would give up a margin of around 20% as the EBITDAs would rise to 36%, 30% and above. So it's a blended one. And hence, the blended margins also we have seen up and markup up to 13%, 14% also in the previous years. It has lowered down this quarter to 9% also. But within average, we feel that we are comfortable and we will be able to give up in that margins even higher than 20% over a run of two years from now.

35:58 Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on touch tone telephone. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on the touch tone telephone. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments. What what happens? Thank you everyone for joining today's call and spending your valuable time with us. And we welcome you to a preview of all our projects at within physical round. Please we would also make up and program for visits collectively and give you an invite for it. And on group or individual level, if somebody is interested, please let us know. That would give you a more better preview of the company and its prospects and the positioning of the company in the Mumbai 3.0 region.

37:11 Thank you, everybody. Thank you. On behalf of Arihant Superstructures Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.