Arvind Smartspaces Ltd

NSE:ARVSMART

Earnings Call Analysis

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Earnings Conference Call of Arvind SmartSpaces Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Amit Sharma from Adfactors PR. Thank you, and over to you, sir.

[Amit Sharma]

Thank you, Rhea. Good afternoon, everyone and thank you for joining us on the Q1 FY '25 Results Conference Call of Arvind SmartSpaces Limited. We have with us today on the call, Mr. Kamal Singal, Managing Director and CEO; Mr. Avinash Suresh, Chief Operating Officer; Mr. Mitanshu Shah, Chief Financial Officer; Mr. Prakash Makwana, Company Secretary; and Mr. [ Vikram Rajput ], Head, Investor Relations.

Please note that a copy of the disclosures is available on the Investors section of the website of Arvind SmartSpaces Limited as well as on the stock exchanges. Please do note that anything said on this call that reflects the outlook towards the future, which would be construed as a forward-looking statement must be reviewed in conjunction with the risk that the company possesses.

I would like to now hand over the call to Mr. Kamal Singal for his opening remarks. Over to you, sir. Thank you.

[Kamal Sham Singal, executive]

Thank you. Good afternoon to all of you. Thank you for joining us today to discuss operating and financial performance of Arvind SmartSpaces for the quarter ending 30 June '24. Our Indian economy continues to exhibit resilience and the government has revised full year growth targets for the year ending March '24 to 8.2%, which is truly impressive. Similarly, the [indiscernible] of India has also raised the real GDP forecast for the current year, which is 24%, 25% to 7.2% from earlier estimate of around 7%. This is on account of improved rural and urban demand buoyed by favorable monsoon forecast and uptake in services and government CapEx trust.

Recently presented during budget alliance with governments overreaching priorities of CapEx, fiscal consolidation and social welfare. Our clear focus on job [indiscernible] development and rescore the government's confidence in India sustained economic growth trajectory. The union based '24, '25 presents a visionary approach to urban development, aligning with the commitment to creating sustainable and [indiscernible]. The substantial allocation of INR 11 lakh crores for infrastructure and improvements in water supply and gas management in 100 large cities will enhance connectivity and urban amenities, which directly supports our projects aimed at deducting modern integrated communities.

The country is owning mega infrastructure projects encompassing transportation networks, highways, airports and metro networks are expected to support real estate growth and intend create new residential notes. These projects hold the potential to unlock new markets to establish a [ satellite ] cities and stimulate development in peripheral areas. We also welcomed the budget focus on simplifying FDA regulations and promoting rupee-based overseas investments. These measures are expected to attract increased another participation in the real estate sector, integrating market dynamics and offering new growth [indiscernible]. Moreover, the states with high stand duty has been encouraged to moderate with further reduction for properties such as regimen.

Both of these are likely to boost demand. While the impact of indexation is a mixed bag for an investor dependent from the holding period, this move is unlikely to impact the end users who sell their existing houses and reinvest in new homes. The residential market has continued to strengthen with demand reaching an 11-year high during H1 of '24, a notable shift towards premiumization has taken root in resignation market with higher prices whom of over INR 1 crore driving the market volumes. The mid- and high-end categories are expected to remain the primary drivers of Indian real estate market in the coming quarters.

Coming to the operational update for the quarter. We have started the year on a healthy note with progress in booking collections and business development setting a positive trajectory for the year ahead. Q1 '25 booking improved by 49% to INR 201 crores and collections improved by 21% to INR 248 crores. During the quarter, we added a combined top line of INR 410 crores on 2 of our existing projects, [ energy forestry ] and [indiscernible] will now be developed as highest project comprising a salability of around [ 3.2 lakh ]. Consequently, the top line potential of the credit has increased by INR 205 crores.

We also acquired an additional 40 vehicles of [indiscernible] 2 and 3, which will add with the INR 205 crores to the top line of the project. We are working on strong business development pipeline and looking forward to add new projects to our portfolio in the coming quarters. Now moving on from operational update to the financial highlights. Q1, we reported a revenue of around INR 75 crores, up 11% year-on-year basis. EBITDA for Q1 amounted to INR 8 crores and [ PAT ] at INR 5 crores.

Our balance sheet position remains very strong despite expanding operations. Net debt remained negative and decreased to a negative of INR 58 crores as on June '24, from a net debt position of around INR 41 crores as on March 31, '24. Our operations cycle remained very strong with a net operating cash flow of INR 97 crores during the quarter. We estimate an unrealized operating cash flow exceeding INR 744 crores coming from the current pipeline of projects.

As we continue to scale up our business, it becomes imperative that we retain our agility, which has been a huge contributor to our success. The company engaged an acquisition of 27 million square feet of projects with a yet-to-be launched portfolio of around [ 46 ] million. Managing this growth successfully will require us to think of each of the region and also newer upcoming regions like [indiscernible] as Indian P&L centers with the head office [indiscernible] the rolloff and integrator and mended the regions.

With this background, I would like to share a significant an additional restructuring exercise aimed at preparing the company for next stage of growth. [indiscernible] now be headed by our Chief Business Officer, who will drive the business for the region. [ Sharvil Sha ] has joined us recently as CBO, Chief Business Officer for the Western Region, [ Andaba and Surat ]. [ Mano Kirani ], who otherwise has been heading our sales function at national level will now be heading the [indiscernible]. While we are speaking on human capital, let me also introduce to all of you, [indiscernible], who is sitting here right now as our new CFO.

I'm confident that the company will benefit tremendously from the [indiscernible] expensive experience in finance. Looking forward, we believe that the overall residential market remains quite healthy given the cyclical low inventory levels and healthy affordability. At ASL, we believe that we reached an inflection point in the company's growth story, and we are all -- we are very well poised to operationally capitalize on the opportunities being thrown up by the sector. ASL has an asset-light business model with an optimum blend of [indiscernible] cycle horizontal projects and higher share of JDs, which enable faster project turnarounds, robust OCF generation in higher return ratios.

The other cash flows, platform funding and leveraging headroom provides significant scope for scalability in the medium to long term. From a financial year '25 perspective, the remainder of the year should witness a strong uptick in a rural performance with a robust launch this development pipeline for the coming quarters.

With this, I'll ask the moderator to open the floor for Q&A.

[Operator]

[Operator Instructions] The first question is from the line of Kunal Ochiramani from Kitara Capital.

[Kunal Ochiramani, analyst]

A good number of bookings and collections. Just wanted to know any update on Mumbai front? Second, how much percentage do you see the shift in asset class investments from real estate to other asset class given that indexation benefit is gone or how this industry will function from now on?

[Kamal Sham Singal, executive]

Sure. Thanks, Kunal. I think Mumbai, as we have been telling that the entire team, the BD team is busy bringing in something concrete very soon. As we speak, we are very close to kind of telling you something about something of a decent size in Mumbai even if the [indiscernible], is done, I think it's to be more appropriate that we announced the details only until the former JT sign, which is still to happen. But yes, it's secured that something is on our days when it comes to Mumbai as a market. So we're definitely going to be doing something there and sooner than later.

Coming to the second question about shift from real estate as an asset class to another as I think this discussion on indication, et cetera, et cetera, possibly is something which is quite a balanced thing, it has positive, it has negatives. And obviously, an [indiscernible] gets impacted only based on the holding period of an asset, 5, 6 years, it should not impact really for a person who invest a fresh. In any case, a very significant component of overall investment is based on sales of old house and then purchase of new houses to avoid taxes, et cetera, et cetera, from profits arising from the sales of old houses.

So in that context, I don't see any significant shift or negative coming out of this whole thing in the short and medium term. If at all, this will balance out. Commonsensically speaking, and generally, the sense that I get personally is that when a person invest in [indiscernible] for that matter for any other asset class, more in real estate being a medium to long-term investment, people are not really taking this call depending on whether the tax rates are x or y if that is not too much of an issue.

Now 5 to 6 years being neutral, maybe even the seventh year being very, very neutral. I think this is a marginal call, and it should not become a very, very significant catalyst in deciding whether or not to do [indiscernible]. That extent, I'm okay with this.

[Kunal Ochiramani, analyst]

Understood, sir. Sir, one more last question is that as when anybody sees the win SmartSpace as a company, we have visibility for next 3 years of pipeline and how much collections we get as you said, INR [ 2,700 ] crores of unrealized cash flow that company has, in a long-term perspective, say, 7 to 8 years, do you think the run rate of the company, and what cash flows company generating or booking is what company getting? Can you give a broader perspective? Will it be the same as last 3 years where or how will it be? Will it be 5% less growth? Or will it run at the same until FY '30? Objectively looking at the company, nobody gets a further of the company. So just wanted to understand how will next 6 to 10 years mean?

[Kamal Sham Singal, executive]

Sure, Kunal. So if you were to bifurcate your question to medium term and long term, we are right now in the middle of executing our investment cycle, which includes the raising of debt, which obviously is negative right now. Very, very strong cash inflows for the last 2 years, almost last year as last year and first quarter of this year, we've generated thereabouts of free cash flows being from by business into investments.

So it's a healthy sort of internal approval source as well. So internal approvals, [indiscernible] of debt, which is negative today to a very, very reasonable set and also the GST platform. This takes care of our 1 to 2 years of kind of appetite for investments in that sense. Going longer, we will rather look at the whole growth trajectory in terms of what have we achieved in the previous years and what do we want to do in the coming few years. We have been, growing in all our major parameters to the extent of 30%, 35%.

Most of the time, it is more than 30%, but if you were to put a range of, say, 25% to 35%, we should land somewhere there in the long term as well. So we are putting all the blocks in place to ensure from a capital point of view, from pipeline casing point of view, et cetera, et cetera, that this got our trajectory remains in the same way. And accordingly, we can expect that the company will continue to show operationally this kind of growth between 25%, 35% over the next few years.

[Operator]

The next question is from the line of Amit Srivastava from B&K Securities.

[Amit Srivastava, analyst]

My first question is in terms of recently in this quarter, we have done the [indiscernible]

[Kamal Sham Singal, executive]

I mean if you can speak a little louder, please? .

[Amit Srivastava, analyst]

So sir, just wanted first question was on a clarification on the NH 47 project, where we have done the private placement to land partners [indiscernible] see if you can give an idea that what was the deal as well as when we are going to launch this project in this quarter itself. So what would be the size of this project in first phase in that sense? And for product profile ticket size, if you can give the idea there.

[Kamal Sham Singal, executive]

Sure. So this project, which essentially is located at a village called [indiscernible] of the most ambitious projects that we've undertaken. This comprises almost in excess of 850-odd, which is 500 acres thereabouts. It is one of the most sustainable projects in our portfolio till date with a huge water body being created to have water collected during any season, et cetera, et cetera, which is sufficient for most of the residence and the landscaping and other requirements. This is based on a very, very deep hydrological study that we've carried out the first time in any of our projects, which takes care of the water balancing thing, how much water do we need, where can it come from, what is the runoff of water going from the land, et cetera, et cetera.

On the other side, it has some very, very exciting products, some very, very state-of-the-art villas, the best class to working on this, et cetera. So it's one of the most ambitious and I mean, personally speaking, very, very exciting project that we are taking over being such a large one, we thought we'll do some test marketing here through some of our bigger channel partners. We've done that, and we kind of sold INR 100-odd crore of inventory to figure out which class of -- I mean when you're speaking of 500 acres, it's better to get a sense of what is doing actually better on ground as compared to what our assumptions were.

And it can be done in a closer circuit with people who have been working with us for a very long time, and that's what we did. The test market that we did very, very good. In fact, most of the currency that we had assumed for the period turned out to be very, very right in the right direction. And if you have a 5%, 10% fine-tuning to be done in product mix, size, et cetera, that's what we are doing right now. So all the blocks are being put in place for the launch of this project in the coming quarters this quarter, and that's what it is. So very excited about this project. This test market has gone off very, very well, and we are fine-tuning everything, preparing everything, and this should be one of our biggest launch this year.

[Amit Srivastava, analyst]

What will be the side [indiscernible]?

[Kamal Sham Singal, executive]

So we'll launch may be INR 500-odd crores of inventory when we launched this in the market formally.

[Amit Srivastava, analyst]

Sir, second question is on the -- in terms of the Sarjapur project. After the in sales success in the project, the project is going slightly slower what it seems. Again, we have added incremental area into that project, which is more on a high rise. So if I can I just wanted to understand the thought process that key he demand of product profile is changing that we are going from the [indiscernible] the high rise. What is happening in that project that momentum is not picking up when the market of Bangalore is doing it so well?

[Kamal Sham Singal, executive]

Sure. So as you may rightly said, this project is not doing as yet as we've been doing in other projects in terms of same velocities. But having said that, it's a JD project. And the cash flow otherwise in totality for us as [indiscernible] very, very healthy. Construction is in full swing. The product in our understanding and the understanding of the customers who have bought into it, is absolutely great. I think as the project is taking shape and people are seeing what exactly is coming up and a few of the other things that are coming up in the project within the boundary of the project as well, is creating some sort of momentum now and it should only improve from here onwards.

That's one part of it. As such, there are healthy cash flows and construction funding, et cetera, et cetera, is not required from outside sources, and this is a self-sustaining project which always is our first target to achieve in any [indiscernible]. To that extent, we are quite satisfied in acting. But obviously, there is a scope to improve this. We have been doing far better in other products than what this product is doing. And hence, we are all the time [indiscernible], we're elevating days and needs to improve from where we are on this project and projects like this.

We are confident that once the story takes share is one of the final products in the region. And the way we price it, the way we can -- we are building it, it should be a bit ultimate. We've seen some of the projects which has been slow initially. But then when [indiscernible] clicking, they really do click. I mean, for the information of you have been -- I mean, tracking us for a long time. Upland, for example, we turn out to be one of the finest, one of the most profitable cash generating projects initially for the first couple of years was pretty slow to take off. But once it date, it really did well. So that is then we are happy.

Now in one of the portion of the land that comes under the JD, we have finally taken a call and that was the call we kept spending and that's why we didn't launch also this one phase. It's not a big one, maybe 2 to 3 acres of land part win 16, 17 acres overall project. We always thought that this location could be useful for assisted living kind of a project and product. We evaluated that in great detail. and taken a call that it will be appropriate for us to do an [ SI-led ] project there, high-rise project there primarily targeting this segment of assisted living et cetera.

So that's what we are doing. And this will be our first in [indiscernible] and we are busy right now designing this project, et cetera. So this is not any significant change in what we had thought otherwise. But yes, today is the day that we are taking a call that will go with the high-rise project in this remaining portion of the land in the same project.

[Amit Srivastava, analyst]

Just on addition to this, basically, in terms of the demand profile, have you seen any shift from the premium project, large project, the pillars consulting in any of the product which is like affordable or any [indiscernible] which is happening into the market? Or you get similar to the last year?

[Kamal Sham Singal, executive]

So no significant change. If it all affordable, I don't see much of action happening there, especially in the market like Bangalore. So it's all about higher mix and a little higher than higher mix. That is a segment. So INR 1 crore plus and maybe below INR 2 crore is the most important segment for us, because we are selling a lot of original projects in the form of clotting, et cetera. There, the sweet spot remains at 75 lakhs, [indiscernible] INR 1.2 crores, INR 1.3 crores that exactly remains the same. We have been selling very consistently throughout our portfolio.

In fact, there are a couple of launches which are [indiscernible] so the existing projects or otherwise. And broadly, the market is still doing very well. And hopefully, this remains the same way. There are no reason -- we don't see any shift happening there in the actions.

[Amit Srivastava, analyst]

Sir, last on our [ Surat ] project, sir, what is the status when we are thinking of launching that project?

[Kamal Sham Singal, executive]

So Surat is also -- I mean, it's under design, designs are almost getting finalized. Approval processes have started already the right earnings. So it's progressing. We are hoping that within this year, we'll be able to launch this project. Things are moving as a plan.

[Operator]

The next question is from the line of Shreyans Mehta from Equirus.

[Shreyans Mehta, analyst]

Congrats on a good set of numbers. So first question is on our launch pipeline. So if you could highlight key projects, which we are targeting to launch this year? And where are we as far as the approvals are concerned?

[Kamal Sham Singal, executive]

Sure. So mostly, we have Kalangar, which is one of the bigger that we set. We also talked about Surat already, which again is one of the biggest projects that gets launched this year. We have a comparatively big launch in Bangalore on [indiscernible], which is [indiscernible], so these 3 are the greenfield new big projects. Apart from that, there are quite a few new phases coming up of the existing projects, which includes great lens, outers, of lens 2 and 3. So all that put together is quite a busy schedule when it comes to new launches this year.

[Shreyans Mehta, analyst]

Sure. And sir, any sense, I mean, would it be skewed towards the second half or we'll see it phasing out evenly throughout the year?

[Kamal Sham Singal, executive]

No. I mean I think this year, again, is a year which is generally skewed towards second half and the way we acquired the way we started approval, et cetera, et cetera. Most other action will start happening and hitting the ground from second half of this year onwards.

[Shreyans Mehta, analyst]

Sure, sure, sure. Sir, second question is on our BD. We've been indicating closer to INR 5,000-odd crores plus of BD. And so just wanted a sense where are we on that? So as you highlighted, Mumbai is one. So in case if you could assign a number and how much Mumbai could be in terms of BD? And how are we placed in terms of that achieving that INR 5,000-odd crores?

[Kamal Sham Singal, executive]

So INR 5,500 crores, we are absolutely -- I mean, at this point, confident that we should be able to achieve. There are reasons to believe that there should be a number which is not out of our reach at all. We are -- we should be almost there. [indiscernible] for the year is not something that you worrying about and all the blocks are in place for that. And Mumbai will be part of that. And definitely, 1 or 2 projects should come our way very soon. But [indiscernible] grows absolutely no worries on that on this part.

[Shreyans Mehta, analyst]

Sure, sure. Sir, 2 last questions. One, in terms of the GSE platform, the second platform. So how much have we been utilized till now? And how much is pending?

[Kamal Sham Singal, executive]

Well, if you do margins they are existing right now, Mitanshu, if you could just set up those numbers, please, for me.

[Mitanshu Shah, executive]

Yes, yes. So we've utilized around INR 70-odd crores and outstanding is INR 30-odd crores of the total platform of [indiscernible]

[Kamal Sham Singal, executive]

So right now, the draw is quite low. But in terms of commitment in the existing pipeline is very healthy, more like a INR 300 crores, but I'd rather suggest that after the call offline, if you could connect with the team, to get a properly [ affected ] by [indiscernible] numbers on this because outstanding is one issue, which is a dynamic number.

Invested commitment is another number, which is for the projects which have already frozen and commitments taken. But full payments have not been released depending on the payment terms, et cetera. And the third is something which is still underutilized. So we'll give you a proper breakup of all these 3 components, offline, and you can connect with Vikram or Mitanshu after this call.

[Shreyans Mehta, analyst]

Sure. Perfect. I'll do that, sure. And sir, lastly, on the P&L side, I understand it's a quarterly phenomenon, but this quarter, especially on the margin front, it's on a lower side. So are we confident of maintaining that throughout the full year? Or are there any one-off during this quarter?

[Kamal Sham Singal, executive]

So great point. Obviously, this quarter is low on margins and profitability in terms of EBITDA margins, PAT margins, et cetera. Now the answer to that is twofold. One is that it's a quarter where the booking values as compared to what the budget was is quite low, just about INR 70 crores, INR 80 crores and most of the costs are periodical costs. I mean we are paying for growth, we are paying for the [indiscernible] for all the launches, et cetera, et cetera.

And the way accounting standard works is that respect what you booked as top line, which is a function of what you deliver. The current expenses on the entire pipeline, including the new launches, et cetera, comes within the same amount of period. So the moment you say you booked less than what you should have idly done or [indiscernible] proportion to what you should have done, the margins come under pressure. But the other side is that for the year as a whole, once we catch up on the top booking, we should get given out.

There are no worries or [indiscernible] things which have happened to the margins per se. And for the year as a whole, for example, [indiscernible] has to get into the books of account. This should happen in this quarter, for example. The numbers now certainly increase. So this variability will remain, but generally, we are on track on margins person no worries on that.

[Operator]

The next question is from the line of Dhananjay Mishra from Sunidhi Securities & Finance Limited.

[Dhananjay Mishra, analyst]

Yes. So our iteration on very excellent booking and collections and realized operating performance. So my question is that, I mean, out of unsold inventory, we have close to INR 600 crores to INR 2 million crore revenue [indiscernible]. So in terms of launches, we have said that [indiscernible] in Q2 and just about what about the launch pipeline you had in the next 8 months. So what could be the overall sales booking target for FY '25 like?

[Kamal Sham Singal, executive]

So yes, I mean, as you rightly pointed out, we are not a land banking company. So we will always continue to get lands and is possible and go to the market, hit the market and start selling it and liquidate the thoughts at [indiscernible] as possible, free cash flows or invest further. So that's what we would be in the last 3, 4 years. And we sell really fast. We don't keep a lot of land with us et cetera, et cetera.

So to that extent, the unsold inventory values are low, and we rely heavily on the fresh launch. This has been happening for the last 2 years in any case, and that's how the business model is evolving. Of course, as we mature as the pipeline goes bigger and bigger, to some extent, this might change. But broadly speaking, if we're not land banking, then it's about fresh launches, [indiscernible] of fresh pipeline et cetera, et cetera, which will remain important in our portfolio. This year, we think that if you were to book fresh x amount of money, 2/3 of that should come from fresh launches and 1/3 of the total sales should come from and that's what we are doing, and that is on track in that sense.

[Dhananjay Mishra, analyst]

So in that case, will you be able to achieve INR 1,400 crore kind of number against last year?

[Kamal Sham Singal, executive]

Yes. Yes. So yes, yes. I mean we had some INR 1,100 crores of sales last year and growing by 30% mean INR 14 crores, INR 15 crores, which is the number. And we are on track for sure, the kind of launches which are there. The pipeline of launches and also the sustaining theme and sustaining sales projects which are on hand, I think this number is -- we are on track to those at this point. .

[Dhananjay Mishra, analyst]

In terms of STC platform utilization, can you repeat the numbers, how much we have already [indiscernible]

[Kamal Sham Singal, executive]

Will separate these numbers to all of you off-line, fine-tuning between these 3, 4 categories that I just talked about a little while back. But we will give you those numbers off-line.

[Dhananjay Mishra, analyst]

Okay. But I mean, this year because of we have kind of INR 5,000 crores you are going to create, I think there will be substantial portion to be [indiscernible] if we add 2,3 project from [ SBI ] right?

[Kamal Sham Singal, executive]

Yes, very right. As you said very rightly, there are 3 sources. One is the internal approvals. We -- for example, in the first quarter, we [indiscernible] INR 100-odd crores although this year is a construction maybe year because we are doing a lot of construction on the projects that we launched last year, which gave us very, very early cash flows and the inflows were very healthy on that account. But this year is also a year where not only launches are heavy like the last year, it's also about doing a lot of transaction for the sales that we did last year. So that's one. .

But in energy, there will be healthy cash flows coming still. Second is the GST platform. And because the company is zeroed at negative at INR 50-plus crores, possibly we can lease to the extent of INR 0 crore to INR 400 crores easily. Well within the contributing limits and significantly below debt equity of one, et cetera, et cetera. So these 3 give us almost in the region of [ INR 7 crores, INR 10 ] crores to be invested for the year. [indiscernible] within this year, which is exactly the target should give us a INR 5,000 or INR 5,500 crores of top line. Assuming that all of that or broadly, most of that is going to be outright basis projects. On top of that, there is always a possibility to get into 2 JVs, and that should improve this ratio further.

But conservatively speaking, with an investment plan of this size, to achieve a top line of INR 500 crores to INR 550 crores is looking pretty decent and achievable.

[Dhananjay Mishra, analyst]

And lastly, in the Mumbai market, as you indicated, so what is -- what will be the major post really JDA or some society development?

[Kamal Sham Singal, executive]

So we are generally exploring all the 3 options. Being a new market, we obviously prefer to remain asset light there. So general preference will go towards society development, development or JDA, et cetera. But otherwise, in terms of exploring auctions, we are open to all the 3, which is society redevelopment, JDs and outright purchase.

[Operator]

The next question is from the line of [indiscernible] from [indiscernible].

[Unknown Analyst]

Congratulations on a consistent performance since the last few years. Sir, most of the questions have been answered. My question is related to ROC and ROE of the company. Since we have been mentioning that P&L is not the correct metric to measure the profitability. How does one look at the ROC and ROE of our company where the capital employed is about INR 500 crores as of March. And we are generating healthy cash flow. But since -- because of the P&L accounting standards, it is difficult to look at ROC and ROE. So directionally, if you can guide us how to look at these 2 numbers, then it can be helpful for us.

[Kamal Sham Singal, executive]

Sure. I mean I think you only hit the nail on the head when you said the real estate industry ROC, ROE, et cetera, are a bit delayed to catch up on the actual business performance because of the accounting standard. We report what we did 3 years back in terms of sales and profitability while the real business is happening on a on-time basis, which is today, yesterday and the last quarter. So that's how it works. In that context, all of you are well aware that our current performance in terms of what is happening to the pipeline, what is getting added to that, what is the fresh sales, how the cash generation, things happening what is the operating level of efficiency happening, et cetera, et cetera, is more important, generally speaking then the profit and loss are paring the books of account as we see them for a respective quarter.

So that's when we -- all of us are well aware of that. But having said that, I think this quarter, our ROC, if I can beat the chart right, is to the send of [indiscernible] to be more precise, which is also one of the highest in the industry. Mitanshu, would like to say something about this?

[Mitanshu Shah, executive]

So basically, if you look at -- I mean this should not be looked at quarter-on-quarter, there should be a large look at companies which have done more sustainable business over the last half a decade or so. And if we put in fanbases there vis-a-vis the competition. I mean, we have been up from the chart actually with between 15% to 20% of ROCs actually in some and we'll continue this performance going.

[Kamal Sham Singal, executive]

So currently, ROC of 15% to 20% is the rail that we are talking about here, I mean more like 15, 16, 17 and thereabouts. But yes, of course, you can vary between 15%, 20%. This is what we read from the past and the current situation that we are talking about, of course, future goals a little even. But yes, this is where we are on this. But you rightly said, there are other parameters which are even more involved than ROC first as a stand-alone number for our industry.

[Unknown Analyst]

Right. Sir, and one more question on the NH 47 project. We have mentioned in the presentation that we have done about INR 95 crores private placement to a channel partner. So this will be sold by the channel partner or this will be sold by us? How does this [indiscernible]

[Kamal Sham Singal, executive]

So this is channel. I mean when we see [indiscernible] private placement, this is something that we have been doing consistently for some very large projects. So if the present size is too big, if you are supposed to sell ultimate 3,000 to 4,000 kind of units in a project, then you want to do [indiscernible] units of pilot run. And that you do only through a limited set of people who work with you consistently.

Now based on the actual bookings done by the people. This is not sold to the partners per se. This is booking done by your close network partners, they go out, and they don't say that this is a launch per se because we are not selling this to the public in general sense. We don't want to take the field out of the whole thing in that sense but still want to test market through, say, 400, 500 people or personal that generally are interested in through these partners.

So that's what we have done. This is essentially to validate the product, the size, the price and the interest. That's what we did. And it turns out that most of the boxes that we wanted to check have been checked through this. [indiscernible]This is actual sales done to end consumers. But the partners are very selective. Partners are a limited set. And the world has not gone out really in that sense to all the consumers and customers for this project in a limited way in that sense.

[Unknown Analyst]

So this is like an exclusive kind of...

[Kamal Sham Singal, executive]

Absolutely, but sold to the end consumers advances received that kind of a situation that we [indiscernible]. We know that as much the customers have been booked I mean all formalities are done, money received, checks received and those personal are customers already. As far as they are concerned, as far as our systems are concerned, this is already sold and a specific names and everything has been recorded as biased. It's proper sales in actions from a process point of view. .

[Unknown Analyst]

Okay. Got it. And sir, just what would be the ticket size like the starting ticket size in NH 47? And how many units would there be over the INR 1,500 crores?

[Kamal Sham Singal, executive]

Generally, we'll disclose this during the launch. But it has several products. There are low-end products in terms of pricing. The entire project is absolutely premium and luxury and stuff like that, but there are small products available. Those smaller products will be more like 50, 60 lakh onwards. So these are very small things within the port that we're talking about, and there will be premium, there'll be ultra-premium.

For example, the [indiscernible] which will be called [indiscernible] on the edge of a huge leg that debt creating so those could be absorbent expensive. But yes, when it comes to the smallest one, possibly 50 lakhs, 60 lakhs, 70 lakhs, there about to start with.

[Unknown Analyst]

Got it. And sir, just one last question. The launch guidance for INR 2,500 crores in current fiscal year, right?

[Kamal Sham Singal, executive]

Yes, correct. Yes.

[Operator]

The next question is from the line of [ Krish ] from Anand Rathi.

[Unknown Analyst]

First of all, congratulations good set of number this quarter on operations side. I mean, I understand P&L tends to be lumpy. Sir, my question was with respect to the organizational restructuring that you spoke about in your opening remarks and I'll try and understand this a little better, I mean, in terms of how the decision making work? Because I mean, as I understand realist, I mean, it's more about capital allocation, right. So now you have 2 CBOs, one for South and one for West and -- I mean it's not a problem with us as of [indiscernible] very, very clear and we have means to kind of augment our resources even further. But ultimately, eventually, there will be a push. pull from both the CEOs get give them or locate them the maximum possible number, right, because they would want to deliver as much as possible in their regions.

So how is the decision-making work? I mean, if you get to have similar sort of opportunities in terms of card terms of thresholds, would you predefine what would go to South and what would go to rest or I mean that will be done on a case-to-case basis. And also, I mean, when I look at our management profile, [indiscernible] as Head of Business Development, which is the profile. So how are the BD having got I mean, these be sourced by [indiscernible] team or [indiscernible]

[Kamal Sham Singal, executive]

Sure. I mean, a great question. Obviously, when you are dividing the business into different geographical regions, there will be competition between the region at least for the resource, which is the most case run out of all, which is money. That's what happens in any day. So even before we did this reorganization at the senior management level, essentially, the regions are working in any case, and there were people and teams working, respectively, for their respective regions. So there was a team, there always has been a team which is active in Bangalore, there has always been a team proactive in Nanda. And obviously, we'll focus team working on [indiscernible] for a longish time now. So to that extent, this competition always has been existing. It's only that we are putting a little bit more clarity into the whole organization structure aimed at mainly to be more responsive [indiscernible] decision making. And at the same time, the most critical ones, the end-end selection, the finalization of our project, irrespective of the region, et cetera.

That call is taken centrally. The regions will pitch the pitch, they explain and we do everything but the end of the day, the final call happens at head office. This is one area where our lens is possibly much more finer than the average industry lens that is normally applied. God has been kind in properly sole systems and process are working where every single project of our still need has hit the market has sold well and there are no stuck ups, et cetera, et cetera. I think this is a very conscious effort apart fully being lucky. But that's possibly one thing that we will continue to do it. Head office will remain absolutely involved, and they will take the final owners call and kind of responsibility for doing or not doing a project.

But region, obviously, for healthy reasons, should compete and they will continue to compete. You also said specifically about the organizational structure. I think this [indiscernible] is something which is, again, a metric structure, which you see in most of the companies, where while business heads for the region are responsible for P&L et cetera, but they have to compete for resources. And there is a head office team, which works to scrutinize everything, every [indiscernible] and finally taking a go. So sort of remains at the helm of everything when it comes to taking the final call from head office. So nothing changes in the ground.

[Unknown Analyst]

And sir, second question was on [indiscernible]. We have spent some time now. I mean as I see it, we've delivered some inventory in [indiscernible] this quarter which are completed one cycle in terms of scouting for a land parcel acquiring, getting the project up and running and delivery. So that one cycle is already done with possible share, your thoughts on Pune now in terms of our learnings and how do you see this market will scale up in the future? Because the one cycle and the pilot project is almost there, you're going to get some full learnings from.

[Kamal Sham Singal, executive]

Sure. So we see Maharashtra as a market, which for us means on in Mumbai, NMR, so to say. And as you very rightly said, we have kind of rated our feet in this market through Pune project, a small 120-odd apartment, INR 100-plus crore of top line potential, et cetera, et cetera. So that's done really. Project has come out very nice. We are happy about what we've achieved in terms of quality, et cetera, et cetera. And it has obviously given us a lot of insights into the regulatory environment, the cost environment, the operating environment, et cetera. .

And this gives us confidence that we can now take a next step. If you are treating Pune, Mumbai as one market, I think we are very close to taking the next step in terms of investing bigger and getting a portfolio which is meaningful for us. We have been a little slow in that sense in any original market so. And that's what the strategy has been that we need to [indiscernible]. We really need to understand advances deeper and deeper before we invest anything substantial. But I think we've crossed the bridge in this market. And in the coming quarters, you will see a decent kind of action in stuff has been there.

And Pune and Mumbai put together, it should become meaningful in our portal in the next 1 or 2 years as we be speaking, even in the last call, we discussed that long term, we want to see at least medium term, rather, we want to see a 40-40-20 split. 40 South, 40 West in outer coming from Pune [ MR ]. And the long term can change and evolve even further. But today, we are saying that in medium term, it should be 40, 40, 20 or thereabouts between these 3 markets.

[Unknown Analyst]

Sure. And one last question, if I may get your permission for [indiscernible] spent some INR 60-odd crores or an acquisition. I mean fair volume this would be for the additional area that we've acquired at [indiscernible] and up down to 3.0, the 4 interest rate these are payments for the old acquisitions?

[Kamal Sham Singal, executive]

So the INR 65 will comprise of several things actually. As you very rightly said, this additional INR 42 crores is one of the major components, but there are other additions as well, which have happened during this quarter, we would have advance a little more on other acquisitions. But yes, this is one of the major ones, the 42-acre addition, which has come about. .

[Operator]

The next question is from the line of [ Asha Shah ] from [ Axos Securities ].

[Unknown Analyst]

I think most of my questions are answered. I just wanted to understand for your Mumbai project portfolio. Do we see the upcoming launches in the Central Mumbai area? Or are we seeing the outcomes of Mumbai as well, which would be the [ Hanway ] area where the new airports are launching?

[Kamal Sham Singal, executive]

So I think in the last few calls, we made quite apparent that we are not trying to target to start with last any which is [indiscernible]. So we're not really targeting Central Mumbai at all. We'll rather be focused on a 15,000, 20,000, 25,000 kind of peripheral market. That's what our focus has been. And we think that this is a market where the pie is big and we could really differentiate ourselves and create that value that we have hired to do. That is one part of it. The other part is going even further into the periphery and do something horizon.

Mumbai has a huge potential and retirement and aspirations and capabilities and willingness to buy [ Horizon ] for a weekend, for leisure, for recreation, those kind of things. And I think very glossy underserved in a market like this with so much of money being there. So these are clearly 2 focus areas: outscores for weekends and [indiscernible] 15,000 to 25,000 kind of markets, more like Mulan areas around it, et cetera, et cetera, [indiscernible], those kind of things. But definitely not focused on Central Mumbai ultra expense [indiscernible] kind of [indiscernible] products.

[Unknown Analyst]

Okay. So -- it will be land ownership, right? The weakened projects that you're talking about, that would be land ownership or those will also be in the JV redevelopment DM likes?

[Kamal Sham Singal, executive]

So we're open to all. I mean we are open to GDS we just discussed a little while back [indiscernible] are quite okay. Redevelopment is quite okay. [indiscernible] we are not talking about [indiscernible] here. We're talking only about private society development. And JDs, remain relevant. Asset light is one of our important part of financial strategy. So will prefer JD society developments a little more than outright purchase in Mumbai, which is a little more capital heavy on land purchases. But nevertheless, we are open to all the 3, and we work on all the [ key tag ].

[Unknown Analyst]

Okay. So we'll see a similar kind of margins for these projects as well, right?

[Kamal Sham Singal, executive]

Yes, of course. I mean margin-wise, I mean, we know that horizontal margins are a little different from the buildup margins, right. Of course, then the capital intensity also goes down and up accordingly. The product mix has its own dynamics is pretty understandably that. So then we are targeting similar margins in each of the respective categories for this market as well as we keep doing it for Bangalore, for example, new verticals, we have horizontal, we have outright so between these 4, 5 blocks, the message is clearly understandable in terms of where the margin should be, and that's what exactly is something that we are targeting for the market of Mumbai.

[Unknown Analyst]

Okay. And the last thing is for our future project mix, like, say, for example, 4, 5 years down the line, what are the kind of launches? Do we see more towards Mumbai and Pune market? Or will the same ratio continue more towards the [indiscernible] Bangalore and a little bit towards the Pune, Mumbai market?

[Kamal Sham Singal, executive]

So right now, we are more like 50-50 between [ Andaba ] and Bangalore. I mean, sometimes [indiscernible] be 60 and Bangalore will be 40, sometimes will be the other way around. We've just started doing a few things in Mumbai and in Pune and Mumbai should just start now. But as I just said a little while back, medium terms, we are targeting a broad categorization of 40%, 40%, 20%, 40% each coming from Bangalore. 20% thereabouts coming from Mumbai, Mumbai, Pune together.

[Operator]

The next question is from the line of [ Amit Chan ], Usan Retail Investor.

[Unknown Analyst]

Just a couple of questions. So first, currently, we have 15 projects which are ongoing, 14 more are to be launched, plus we will do some BD this year, 6% to 7%. So that effectively becomes 37, 40 odd projects. How many projects can be handled at a time? How -- what capability like?

[Kamal Sham Singal, executive]

So I mean we'll rather lead the capability and capacity in terms of number of handling projects more like then in how much do we invest in building these capacities and teams. We have been consistent about investing upfront in our teams and human capital. We are ahead of our time. So if we want to sell INR 14 crores, INR 15 crores this year, we know what it means in terms of the pipeline required, the BD effort, the launch effort, the sales effort and the execution effect, et cetera, and accordingly build. So today, possibly, we will rather be repaying ourselves for a INR 2,000 crores sales and other things falling in line accordingly, et cetera, et cetera.

So we've been investing upfront. You would have seen quite a few changes with [indiscernible] in our industry coming from [indiscernible] and pedigree. You would have seen [indiscernible] 3, 4 years back. So the whole team is being created keeping at least 3 years ahead from where we are today and that's how we invest. And that's what can be seen even from the numbers, if you were to see, for example, where the current rig number of sales that we are saying, I mean, what is the growth there? And you will see that this basically has been taking it in terms of creating those capacities and capabilities in this. So we are investing upfront, a very clear focus area.

We know that it's not only about acquiring [indiscernible] about executing them. We have a fantastic execution record till date, but it doesn't give us any comfort to say that because we've done it in the past, the same can be done in future. A INR 1,000 crore execution is orbital different from INR 2,000 or INR 2,000 orbital different from 5,000. And each of these orbits require a very different kind of response to the environment and the challenges that it poses, especially for execution and that's what we absolutely recognize building team is the most important management KRA, and we are busy doing it. We're investing upfront, and we'll continue to do that.

[Unknown Analyst]

Got it. Sir, my second question is very project specific. So I was going through the slide and in slide, I could see that a few of the projects which have been completed for some time now, they are still unsold like Avista around 22% of the inventories and sold, [indiscernible] 57%. So what's our learning out of this? And how are we planning to sell off this whatever inventory we have and what are the time lines?

[Kamal Sham Singal, executive]

So there will be -- I mean, there will be a few projects. I mean the entire inventory to sell in our portfolio is not more than some INR 600-odd crores left to be sold. And this little held up inventory will be maybe 10% of that value, maybe INR 60 crores, INR 70 crores in the entire system, putting all these projects in one block. [indiscernible] percentages look high, but the values specifically are not very alarming. But having said that, we need to liquidate. I mean there's no point in blocking this cash unnecessarily.

But in a business like real estate, if there's a project which holds inventory for some little extra time, that's the reality of the situation. And putting as management, we obviously want to get rid of such inventive, we're taking steps to do that. In the overall context, and the proportion of the stock up inventory, I think there is reasons to believe that it's quite reasonable well within our control. And whatever is this left, I think we should be carrying this off.

[Operator]

The last question for today is from the line of Akshay Kothari from JHP.

[Akshay Kothari, analyst]

My question is more concerned with the strategy. So generally, real estate work in cycles and if we don't diversify, but there are certain companies who have actually diversified and made it more of a structural sort of things like annuity-based businesses. So if I take an example of [indiscernible], it goes more in depth rather than going in depth. So just wanted to know, since in [indiscernible], we have a considerable standing and good need. Are we looking to move for commercial projects, malls, sort of projects wherein the annuity is much more structural rather than cyclical?

[Kamal Sham Singal, executive]

Sure. So it's a great question, especially from an investor standpoint, energy-based portfolio does give a little more stability and visibility. But we have been consistently sort of discussing the fact that this company -- our company remains very clearly focused on residential market, at least in the short, medium and longer term at this point.

This has many reasons, and it's a very thought-through kind of strategy of the season. This has a lot to do with the cash cycles, the funds availability, the turnaround times and the expectation of growth and expectation of reinvestments from monies coming into the business from what we earn from the previous projects. Given the life cycle that we are in, given the situation that we are in, given the escalation that we have in terms of growth and creating value for the shareholders, et cetera, et cetera, I think it's prudent to for us to utilize the scale resource, which is funds or the money, the most optimal way. We think that at this stage at least, it's important to generate cash.

It's important to invest faster and we invest the same money at an IRR more like 20%, only 5% rather than trying to have short-term cash flows, it will be significantly less in a yield-based business. So while this importance of field-based asset class is [ actonutely ] understood, it has its own merits. But I think our company will remain focused at least in the medium term on creating value by investing in products and projects which are more cash flow oriented, which gives us faster cash and can be invested and same can be invested at higher IRR than a yield-based business.

Of course, this is a strategy, and this is trajectory you've taken for day and for some few years going forward. But we'll keep evaluating it. At this point, it's very clear that we'll remain focused on residential by himself and liquidating stuff at the early as possible once we acquire any rights or land, et cetera, et cetera. And I mean, annuity-based things are not a parity at this point but we will appreciate the fact that, that also is an important category.

[Akshay Kothari, analyst]

Because after a point when you lead certain scale, then this actually helps because currently, we are saying that there are times when unsold inventories will stay as [indiscernible] for a lot of period of time. At that point of time, this will act as a cash flow question and help us to grow, that's what my concern was. And secondly, sir, are we looking something around loan and also [indiscernible] because I think [indiscernible] coming and also over, there are some plans make plans for -- by the undervalue corporation?

[Kamal Sham Singal, executive]

Yes. So if you were to look at [indiscernible] wider area, you already have quite a bit of presence. I mean wider 20-kilometer radius or thereabouts. I think we are already there in a very, very strong way [indiscernible] and even calendars very far from this area. Directionally, this is the same in any case, a very strong [indiscernible] this area and also in that sense [indiscernible] local a little too far. I mean, it's further away from also in the direction that the city is taking not there. But the [indiscernible] to go to local then [indiscernible], which is NH 47 is on the way.

[Operator]

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Kamal Singal for closing comments.

[Kamal Sham Singal, executive]

Thanks a lot, everybody, for participating in this earnings call of Arvind SmartSpaces. And thanks again for your continued support. I hope we have been able to address most of your queries. However, if there is anything missed out on any of your questions, kindly reach out to Vikram, and he will connect with you offline and clarify to give further information as may be required. Looking forward to interacting with you once again in the coming quarters. Thanks a lot for your time.

[Operator]

On behalf of Arvind SmartSpaces Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.