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Arvind Smartspaces Ltd
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Ladies and gentlemen, good day, and welcome to Arvind SmartSpaces Limited Q3 and 9 Months FY '23 Earnings Conference Call. We have with us today on the call, Mr. Kamal Singal, Managing Director and CEO; Mr. Ankit Jain, Chief Financial Officer; Mr. Avinash Suresh, Chief Operating Officer; Mr. Prakash Makwana, CS; and Mr. Vikram Rajput, Head-Investor Relations. Please note that a copy of disclosure is available on the lister section of the website of Arvind SmartSpaces Limited as well as on stock exchanges. Please do note that anything said on this call, which reflects the outlook towards the future, which could be constituted as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Kamal Singal. Thank you, and over to you, sir.
Thank you. Good afternoon. A very warm welcome to everyone present on this call. Thank you for joining us today to discuss the operating and financial performance of Arvind SmartSpaces Limited for the third quarter and 9 months ending December '22. I would like to begin by sharing my thoughts on real estate environment and broad highlights of the quarter. We can then look forward to taking your questions and suggestions.
As everyone is aware, the housing cycle has turned positive post-COVID, and we expect this residential demand to remain unabated. The residential real estate sector ending '22, ended '22 on a very high note as the sales in top 8, it sells to a 9-year high. Several reports have indicated that launches of [indiscernible] sales for the first time in the last 9 years, which was basically aided by robust demand and low inventory. Further, real estate prices across markets have appreciated generally in the range of 4% to 7% year-on-year. And this performance is noteworthy because of 225 basis point increase in repo rates, which we witnessed during this period.
While affordability metrics have subdued in the wake of rising mortgage rates and the home prices, it remains -- I mean, it still remains better than pre-COVID levels, and we believe that the situation is still comfortable given the long-term pent-up demand which exists in the market. The consolidation and corporatization of the real estate sector and the team thereof has played out as we have -- as was envisaged by us and many of the leading players.
This year, launches made a come back in a big way with several developers successfully launching fresh inventory, enabling greater price for customers. Many developers have experienced record quarterly sales, and we believe that listed real estate players like Arvind SmartSpaces with very strong balance sheet, diversifying geographical presence and an established brand will continue to outperform the overall market.
Coming to our quarterly performance, we have achieved significant operational milestones in Q3. It's been one of the best quarters in terms of both booking -- fresh bookings and collections. Q3 bookings grew by 58% year-on-year to INR 250 crores, and Q3 collection increased by 8% year-on-year to INR 167 crores. This highlights a strong operational cycle of new sales construction and delivery. Our robust sales machinery and brand equity is getting increase in our recognition across Ahmedabad, Bangalore with launches continuing to perform well in newer micro markets. We have put in concerted efforts to strengthen our Bangalore operations and are happy with the way Bangalore story is shaping up.
During the quarter, we launched Arvind Greatlands at Devanahalli, Bangalore, which received a phenomenal response with almost the entire launch inventory getting sold out within 10 hours of its launch. In the coming quarters, we are looking forward to launch Sarjapur and Greatlands Phase 2 in Bangalore, which will deepen our presence in this key region. We have added 7 acres to Doddaballapur Road project. The size of the project has increased to 34 acres now with a topline of around INR 315 crores. This project is under HDFC Platform 2. There is a potential opportunity to increase the size of this project significantly by 2x, subject to technical and other due diligence.
We are happy to share the acquisition of our 16th project in Ahmedabad. We commenced a large aggregation in South Ahmedabad of which 84 acres has been completed till late with an estimated topline of INR 150 crores, this would be wholly owned project by Arvind SmartSpaces. This location has emerged as one of the promising micro-markets for plotted development in Ahmedabad being home to a 7 large plotted Villas and Villament developments. The micro-market is in the close proximity to various industrial hubs such as Changodar and Bavla, there is a potential to increase the size of this project by 2 to 3x subject to technical due diligences.
Moving on from operational updates to the financial highlights. In 9 months, we reported a revenue of INR 163 crores, up 71% on a year-on-year basis, and EBITDA for the 9 months grew by 6% to INR 29 crores, PAT for 9 months grew 47% to INR 16 crores. In Q3, we reported a revenue of INR 53 crores, up 23% year-on-year basis, and EBITDA for Q3 stood at INR 9 crores and PAT at INR 4 crores. Our balance sheet position remains strong. Despite increased investment in business development activities, our net debt has decreased further to minus INR 34 crores on account of significant increase in internal accruals.
To sum up, the real estate sector continues to showcase buoyancy with all parameters, including sales, launches and price appreciating across the top cities in year '22. We have built a very strong sustainable foundation of the company with a meaningful focus on design and execution, efficient sales engine, rising brand salience and a healthy balance sheet. We remain committed to our growth initiatives and are geared to capitalize on consolidation and corporatization of the industry. In the coming years, we look forward to build on a business development -- on our business development intensity in our core markets of Bangalore and Ahmedabad, and will further add things in Pune and MMR markets to create a very long-term value for all our stakeholders.
Before I conclude, I would like to bring attention to the sector's wish list from the upcoming budget. We do expect a few things to be further initiated by the government through the budget. Our real estate sector, as you all know, contributes very, very significantly to the GDP of the economy. We would like to see budget 2023 provide more incentives to real estate sectors and make it easier for developers to excess capital, improve project viability and overall affordability.
Interventions by the government to regulate the rising input costs, especially the core materials would be a welcome move. It will decrease construction costs and enable developers to build homes more economically. Some of the incentives for first- and second-time homebuyers would also be welcome. And they are kind of long overdue because last several years, such extra incentives have not been provided, and it's always good to see such initiatives coming in.
On that note, I'll conclude my opening remarks and would like to ask the moderator to open the line for question and answers.
We will now begin the question-and-answer session. [Operator Instructions] We have a first question from the line of Amit Agarwal from [indiscernible] Wealth.
Congrats for a good set of numbers. My first question is primarily on the margins. What I'm noticing is the margins annually also, as you've shown in the presentation, has come off in FY '22 and supported in FY '23 also, it's around about 18% compared to higher margins that you got earlier. So any particular reason for decline in these margins? And can we take this as a regular margin going ahead? Or do you expect the margins to increase?
My question number two, is that while the sales value has definitely increased, what I noticed was the sales volume was only about 0.7 million square feet as against higher sales volume compared to earlier times. So just wondering any particular reason for volume to kind of come off a little bit, maybe quarter-on-quarter basis?
So I'll request Ankit who's our CFO, to take this question.
Amit, thank you for the question. With respect to margin, accounting margins are based on revenue recognition, as you all know, and not based on the bookings which we are doing the way we see our fresh bookings for a sales. So the revenue recognition for the current quarter and for the current year-to-date numbers are broadly concentrated towards 2 projects where one is a low-margin project, which is Aavishkaar and second is Oasis where we had a specific interest cost capitalization, which was coming in. And that is how you see in a 9-month number, overall, while EBITDA margin, EBITDA growth in absolute is only 6%. However, the PAT growth is reasonably in line with the topline.
Another reason for lower margin is the base has been set up for a next level, which is, say, INR 600 crores to INR 800 crores, INR 2,000 crores of the company. While the revenue recognition is happening for the 4-year old projects, which is coming in right now. So the base -- the expenditure, which is -- we are not able to -- as per accounting, we are not able to capitalize on the sales and promotion expenditure, which goes for revenue of around close to INR 600 crores to INR 800 crores, INR 2,000 crores of fresh bookings because you look at fresh booking is INR 250 crores, while the top line in financials is only INR 50 crores. So hence, the expenditure which is happening for a fresh booking that needs to be expensed as per accounting principles and hence, the margins become lower.
So essentially 2 reasons. I mean, how I read this is that one is a natural variation of profitability from project to project? And because accounting standard -- the sales booking the way it comes and enters into the books of account is a little inconsistent. On an average basis, the good news is that our margins are protected and we are fairly on track on that from quarter-to-quarter, season to season, it might vary, but I think we'll end up doing very, very similar averages as we have been doing in the past. That's one.
The other, obviously, the reason, as Ankit just explained is that in a growing company and in a hypergrowth kind of a phase where you are selling much more than what you are recording in the books of account, so long as this situation persists, then you are selling expenditures are basically disproportionate to the numbers of the top line that you're showing. You are spending on [indiscernible] to INR 800 crores level of sales, and you are booking only maybe less than half of that in the books of account.
And hence, margins look a little low. But once this cycle is stabilized and we have a little more reasonable base to compare numbers with, I'm sure this will get tapered out. Of course, there will be always some lag in these 2 numbers. But I think we are into a situation where the lag is little too much in terms of percentages it is little too skewed, and this should get adjusted over a period of time. So these 2 are the major reasons. We are not overly worried about the margins per se. In the medium to long term, I think we are fairly okay on the margins as we've been reporting in the past.
So can I -- on this point itself, can I assume that going forward when this situation normalizes, our margin should be around about 20% to 25% on a normalized basis. Can I assume that? Can we take that?
Yes, very comfortably between 20% to 25%. In fact, we keep analyzing these numbers for the fresh sales that we do. And if you were to draw that MIS for ourselves, I think we'll be very comfortable beyond 22%, 23% and more like 25%. And this 18% obviously, is a fluctuation that you see from quarter-to-quarter. But the range that you said is fairly comfortable as far as overall averages are concerned.
Okay. And the reason for the sales volume down to 0.7 million square feet?
So quarter-on-quarter, the growth is there, 14%. We had 0.64, in this quarter, we are at 0.73. And if you were to look at it from year-to-date point of view, it has gone from 2.08 million to 2.44, which is a 17% growth. So generally speaking, volumes have gone up by 14% and 17%, respectively, for the quarter and for year-to-date numbers.
Okay. And the average utilizations moved up. One last question. Average utilization has moved up. Is it because the change in mix, you're booking more from Bangalore rather than Ahmedabad, where pricing might be a bit lower. Is that correct?
So I will just put a note of question here on the average utilizations. The portfolio that we have currently is so very diverse, strong weakened homes, which are in the outskirts and comparatively very cheap. It doesn't mean that they are not profitable maybe in terms of percentage they might even be more profitable than the more expensive ones, but the diversity is so much that depending on what we sell during the quarter, the averages might change, especially because we've got a comparatively larger portfolio of horizontal projects, and horizontal projects we sell things between INR 6,000 to INR 30,000, for example, in Bangalore.
So this variability is natural. It doesn't indicate any specific trend of price utilization, et cetera. And we'll have to analyze project-wise and that kind of analysis needs to be done to understand the price movement. But generally, on an average basis, it's not -- it will not be very prudent to draw any conclusion. But for the sake of clarity, we have increased prices in most of the projects in the last couple of quarters and general increase has been in the region of double digits and thereabouts.
We have a next question from the line of Bajrang Kumar Bafna from Sunidhi Securities.
Congratulations for the great set of numbers in terms of presales and the collections. My first question pertains to the overall environment because of led, there are multiple reports which are budging on down that interest cost has gone up from 6.5% to 9% for the housing loans, and this could put pressure on the overall sales environment of the industry and multiple media reports are suggesting that some of the larger players are showing signs of slowdown in terms of their sales and collections.
So I know that Arvind is still an emerging company and has got a lot of opportunities to tap and the market size is very miniscule in the micro markets, where we are operating. So can you just share your analysis or your thought process on this movement of interest rates and the demand that we are witnessing going ahead. I don't want to hear Greatland because that's a success story, which we are aware. But broadly, in other projects, how are we seeing the demand environment panning out for us? That will be my first question, sir.
Sure, Bajrang. So I mean, we are very optimistic. We've seen some amazing numbers and performances not only by us, but also by several of our industry peers. And what we've also seen is that the depth and the breadth of this rally or this momentum has been absolutely great, unparalleled.
In fact, in my experience, last one, more than a decade, we haven't seen a cycle like this with such great depth. One great thing about this cycle has been that it is primarily driven by end consumption. Investors are broadly out of the market. Investors has been the large investors who could potentially buy a 50 apartment block or 100 apartment block. Those are not the kind of guys who are buying all through this period.
What we see is the first home buyers, the second home buyers, which are dominating this entire momentum. And when that happens, it is comparatively more sustainable, and that's what we see and that's how we see this. Now obviously, every great run will have some sort of a tapering which will come and which will go. And we are also seeing maybe small signs of things not happening with that kind of a madness that we were seeing in the last few quarters. But in our understanding, it is a great momentum still. It is still very, very sustainable.
Whatever we have been launching, we've had some 3 or 4 launches in the last few quarters. And in fact, 2 very recently, and both of them have just flown off the shelf. Some very, very great response. End of the day, markets and the cycles are one part of it. The second part will always remain that there is a baseline demand, which is there for the industry. And then what matters is your product, what matters is your location, what matters is you're offering, what matters is your pricing, what matters is your brand, et cetera, et cetera, et cetera, and execution track record, so to say.
So I think, I mean, within this, what we have been talking for the last few quarters is that there is a clear shift in favor of organized players in the industry, and that consolidation is playing out. So I think we had this kind of a conversation in one of the previous calls where we said that even if the market was to slow down, the shift in itself, if the 100 becomes only 105 as a total pie, which otherwise was hoped to be 120, for example, which is a great reduction in the momentum, but still within the 105 pie a good percentage or quantum of volumes is shifting from unorganized players to organized players, the corporate players. That trend is very, very clearly visible. That trend is very -- it has played out, as I said in the opening remarks.
And we are very confident that even that bit of the churn or the reshifting of or the realignment of supplies is good enough for players like us who are very, very small, so to say, in the micro markets and the broader markets that we are operating in and with a very strong brand and execution track record, et cetera. So we are not overly worried. We are not too aggressive about anything. We are taking every step one at a time. Every micro market is being treated very, very specifically in the way it should be treated.
And hence, even if the cycles were to or to be a little on the lower side, we are not overly worried. But of course, you can do all these things right, your pricing, your costing, your execution, et cetera, et cetera. So I mean, so far, so good. Things are looking pretty sustainable. And we are confident that the kind of capabilities we are investing in, we are building the last few quarters, I think we're in the right direction. And it's time for us to build the pipeline rather, worry today shouldn't be how fast and how good we can sell.
I think worry for this company is how fast we can create the pipeline. And our energies are focused on building that pipeline first and then taking a bit challenge of sales. By the way, sales not been a great challenge in any case. But we are, in any case, investing upfront in our sales engine to various ways. So not overly worried really.
Okay. Got it. And sir, if we try to see the numbers, INR 250 crores presales, if you remove Greatland then the base number is just closer to INR 60 crores only. So how are we seeing moving into Q4 and the next financial year the kind of pipeline that we created, including Sarjapur and Doddaballapur and Greatland 2, which is going to come and eventually the Ahmedabad. So can we expect this year to end, let's say, closer to INR 800 crores plus going by the run rate of last 3 quarters and maybe somewhat 25%, 30% kind of growth in next financial year, maybe closer to INR 1,000 crores plus presales. So just if you could highlight with some broader pipeline numbers will be really helpful, sir.
Good. That's a very, very good point that you raised, Bajrang. As you very well said that there is an orientation in the numbers and one project has taken lion of share. But with the project portfolio getting diversified gradually for this company with a small base to start with a couple of years back, I think we are getting fairly diversified in terms of contributions coming from various geographies, various projects, various product categories, et cetera. And that is truly getting played out now.
We've got luxury, we've got mid price, we've got horizontal, we've got large villas, we've got small villas, we've got large plots, we've got golf, we've got non-golf -- within this, there are dynamics which are getting played out. And the good news is that it's all getting balanced out.
For example, last year as a whole, we sold around INR 600 crores of fresh sales. And this year, by the end of this 9 months, we have done more than 550, maybe 558, to be more precise, in my understanding. So all in all, it is a good momentum. Sustainable sale has to play its own role. But at the same time, it is important for us to keep launching 1 or 2 projects every quarter for the period as a whole going forward. And this number has to go up substantially. So in a growing cycle, contribution of new launches has to keep going up. That's what we are seeing now.
This year has panned out like that. And if you were to -- if you were able to launch a couple of more projects in the next 1 or 2 quarters, the same trend is expected to be sort of witnessed even further. So all in all, within these variabilities, sustainable and this will make sense together, and we should be able to record a healthy growth. We have been telling that our idea and our track record is to grow by 25% to 30% year-on-year. That's what we have been achieving.
The 9 months are showing the same trend, if you really see, and we are hoping that very similar trend should be there for all of us to see when we end the year in general sense. And that's what the trajectory is, and that's what we are trying to achieve.
Okay. Good to know that. Sir, any other big pipeline that you could sound apart from that, what has been disclosed in where you are targeting maybe in Bangalore or Ahmedabad apart from the Sarjapur and the new, this 84 acres that you acquired in South Ahmedabad. So any big pipeline to move into a broader trajectory going ahead?
So as I said, the whole -- I mean, energies are focused towards acquiring new projects, extending the pipeline. I think it will be better for us to announce and declare the complete details once they are absolutely firmed up. We definitely are at advanced stages of a few things, both in Ahmedabad and Bangalore, and these are reasonably sized and scaled things. And we'll definitely come back to you at the earliest possible time. We've added at least 1 project in Ahmedabad in the last quarter, some 84-odd acres of plotting development. It's a small one. But good thing about this project is that it can be scaled up very drastically. It can be 2 to 3x where it is today, and that's what we are doing right now.
So we're not in a hurry to launch this. We'll take a little more time to consolidate the overall area per se and then launch the project. But similar projects and even built-up projects in Bangalore, we are all looking at all these possibilities. And very soon, we should be able to come back to you and tell more concrete information on what we are building.
We have a next question from the line of [indiscernible] from Antique stock Broking Limited.
Good afternoon, sir. And congratulations on a good set of numbers. Truly commendable. And my first question is on your platform with HDFC, that platform of INR 900 crores until the third quarter, how much has been deployed? And by when the entire INR 900 crores you expect to deploy?
So I mean, as you know, there were 2 platforms. One was already deployed, and that investment is now up and running. Greatland is the project, the first one. So that's over.
Our Platform 2, as you said, INR 900 crores. Out of this INR 900 crores across our 4 projects, we've already committed INR 300 crores. From this INR 300 crores, maybe actual outflow because we always get payment terms, et cetera, linked to the project that we acquire, INR 150 crores and more than, a little more than that has already been paid in terms of cash flows. And that basically means a little less than or INR 800 crores of topline is already kind of locked in.
So this is where we are. This quarter should be a good quarter in terms of further deployment of the platform money. We have the same fine microscopic view of every project that we take, both in terms of its viability, it's affordability and its margin profile. And hopefully, we should be able to ramp up the deployment in the coming months.
But as we speak, INR 300 crores committed already, which gives a little less than INR 800 crores of topline and INR 150 crores outflow has already happened.
Okay. And which are these 4 projects?
So this is in Platform 2, its Fruits of Life, Doddaballapur project and South Ahmedabad project.
Okay. So these 3 together, 4 projects?
So basically, if you really see, Greatland was basically Platform 1. Fruits of Life and Doddaballapur are the 2 additional projects which have so far seen action on Platform 2. So we can actually visit ourselves to these 2 for the time being, which adds up to INR 300 crores. And a little less than INR 800 crores of topline. So 2 projects are already done under the platform 2.
Okay. Okay. Okay. And South Ahmedabad is also on platform 2?
South Ahmedabad right now is Arvind's own project. We -- I mean we will have to take a final view on whether or not it should be falling on the platform. That's always an opting opportunity. But depending upon various other dynamics, we can decide on that. And we have flexibility on that to a certain extent.
But yes, project is already frozen, and we have started doing things on that and progress on that. But we'll see whether we should be putting that into the platform or not. But 2 of them, Fruits of Life and Doddaballapur are already put on the platform and disbursements have happened.
Okay, sir. Okay. My second question is on your projects, upcoming projects, Sarjapur and Doddaballapur and North Bangalore, et cetera. Just trying to understand at what stages are these projects? And by when we expect these projects to be launched, some ballpark timeline, if you could give us, sir?
So Sarjapur, obviously, all efforts are there to launch within this quarter before we end the financial year, and that gives a lift to a lot of other things as well. Although it's a little tight, but right now, we are all putting more efforts to launch it within this quarter. Let's see, hopefully, it happens. If it doesn't happen, maybe we are a couple of weeks here and there. That's about it. We're at the very last stages of approvals. Our plans are all there, and we are waiting for the second stage of approval of the project.
And obviously, then we'll be left with the RERA approval. And if that happens and that starts as a process in the first week of February, by -- before end of February, we get our RERA approval and then we launch. That's how the bar chart shows us at this point in time. But obviously, it can go a little here and there.
The rest of the projects, one is North Bangalore and Doddaballapura. This is happening in phases. We are about to launch Phase 2 of Greatlands at this point in time. It is just about to get approval for Phase 2, maybe within 1 day or 2. And then it goes into RERA, and then we launch this.
So with this, the Phase 1 and Phase 2 of Greatlands are over, and then we take up the next project. Because it's very similar vicinity, unless we launch Phase 2 of GreatLand, there is no point in launching this one. But anyway, this phase is also under various stages of approvals, and I think it should take around 2 to 3 months from now to get the approvals done.
So best case scenario is that in first quarter, this project should be launched.
So we have Sarjapur in the fourth quarter, we expect. And Doddaballapur -- sorry, the Greatland Phase 2 in the first quarter of FY '23. These are the upcoming launches.
Greatland [indiscernible] will happen in fourth quarter for sure.
Okay. And Doddaballapur and North Bangalore in first quarter. Is that correct, sir?
Correct. Correct. Correct. Broadly yes. Broadly, yes.
My third question is on -- see, I have been noticing that most of these projects are either plotted development or kind of dealer kind of projects, horizontal projects predominantly. And sir, is there any -- I mean is it what is happening in the market that demand for these kind of projects are more than the vertical or you are just focusing on the horizontal kind of plotted development or villa kind of projects, and maybe latter we will touch the mass housing. So I'm just trying to understand this product, you're choosing this kind of product. What is the reason behind it? Is it a [indiscernible] decision? Or you just happen to get this kind of projects that has better potential in plotted or villas? So just trying to understand what is your strategy on this -- regarding product?
Yes, I understand your question. So the answer is that we don't have any specific prefers to either of the 2. I mean we are -- we have been doing quite a few vertical projects, which are anything between 12 floors to 22 floors, and that remains one of the most important product segment for us.
Although post COVID, it has so happened that there has been a very strong preference, consumer preference towards horizontal, and people started investing in such projects much more significantly and heavily as compared to what was happening before that.
We had supported this trend a little early, and that's why a very significant portion of our overall investments went into horizontal projects in the last 4 to 6 quarters. And that has led us very, very decent kind of dividends. So it was an opportunity, and we realized it. We quickly cashed on it. We sourced land pretty quickly, got it ready for conversion and sales, et cetera. And that's how things panned out.
But it doesn't mean that vertical is less important to us. I think eventually, when the dust settles and everything else settles, we will have equal proportion of horizontal and verticals coming. Right now, we are looking very aggressively at verticals once again. We have been doing that all through in any case, but it so happened that horizontals are making much more sense in terms of margins and in other parameters. And hence, we got a little more oriented towards that. But all in all, in the long term, in the medium term, we should be doing both in almost equal proportion when it comes to the product mix part of it.
And by the way, within horizontal and vertical, we have various subsegments. We are also kind of balancing the portfolio on those sectors. For example, within horizontal, we've got small plotting, big plotting, farm houses, golf-centric plotting. In villas, you've got small villas, which is costing around INR 1 crore. We've got villas, which are much more expensive than that.
In fact, Sarjapura will be something in between where a villa should cost a little less than INR 2 crores to INR 2.5 crores and thereabouts. So basically an alternative to vertical house of 3 to 4 VST houses something like INR 1.5 crores, INR 1.75 crores in Bangalore today. And that's what we will offer in the form of a villa where you own your sky, you own your arch, et cetera, and offer a very, very important, very good value for the consumer.
So within these 2 broad categories also, we are diversifying. They're already very diversified. But all in all, we'll have a very healthy mix of both these vertical and horizontal products.
We have a next question from the line of Rithvik Sheth from Mana Financials.
I just had one question, what is the expected initial investment in the pipeline over the next 1 year on the 5 projects that we have mentioned in the slide?
You are talking about the overall investment or only in this 5?
No. Only in this 5, the initial investment which you have mentioned on the pipeline.
Just give me a second. I'll just -- Ankit, if you can just take this one. Just give me a second.
Sure.
Overall, we do not give project-specific outlay per se. But however, if we were to add total commitment, as Kamal Bhai mentioned, which is nothing but Greatlands and the Fruits of Life, Doddaballapur, South Ahmedabad project. So all in all, put together, including the potential which we aspire to, it comes to around INR 500 crores of investment.
Okay, okay. And what would be the ideal timeframe for us to launch these projects? Because I believe that if we add up the -- what we are expecting at Doddaballapur and South Ahmedabad, which you have mentioned 2, 3x potential from already that we have acquired, what would be the ideal timeframe for these to get launched for FY '24 and be a reasonable estimate for us to launch all these projects?
Yes. So Doddaballapur, for example, is just like Greatlands where we have again some 27 acres. We have moved up to 34 acres. It's a reasonable size to get launched and probably might get launched in 3 to 6 months of time.
I think broadly speaking, all these 4 to 5 projects should be getting launched with a reasonable inventory, opening inventory getting opened up for sales within next 3 to 6 months' time. So whatever we are reading right now across all these 4, 5 projects, everything should be hitting the market in the next 3 to 6 months' time. Some of -- I mean, a couple of them could come earlier also. But broadly speaking, this is the time. And on average basis, 4 to 5 months. But from the range point of view, 3 to 6 months, everything should be hitting the market.
We have our next question from the line of Kirti Jain from Canara HSBC. Since there is no response, we'll move on to the next question from the line of Akshay Kothari from Envision Capital.
Just wanted to understand on a blended basis, what would be our payment structure -- payment milestone which we would be receiving?
On the customers, you are saying? Or the sales that we do?
Yes.
Okay. I mean, obviously, this is very clearly dependent upon the kind of project and the product we sell. Our typical plotting project will have a payment terms of around 15 months. Our typical villa project will have something like 30 months, 25 to 30 months. And a typical apartment project, a high-rise apartment, which might range from INR 14 crores to [indiscernible], will have a payment 36 months to [indiscernible]. That's a broad range depending on the product.
Sorry for the disturbance. Please go ahead.
So could I -- did I answer your question?
Yes, that answers my question. So generally depends on the development, right?
Yes, correct.
So I actually came across some of the unorganized players. What we are actually doing is offering, SIPs in Ahmedabad region only, they are offering some INR 7,000, INR 8,000 SIP. And they are transferring ownership of over a period of 5 years in the plotted segment.
So in the plotted segment, you mentioned is only 15 months.
On the higher side, yes. yes.
Okay. Okay. That's...
But I'm sure, I mean, SIP in a plotting scheme plan is a product where you don't need to have very long, long payment terms. And generally, we haven't faced any problem realizing our money within this 15-month period, and that's what we've been doing more and over again.
In fact, the bankers are able to take care of our -- the payment side schedule, which we have offered to the customer, and we are honoring those commitments.
Yes, even banks are now funding very comfortably. There was a time a few years back that the banks wanted a much more stringent norms on releasing payments if it was to be bank-funded property, essentially the plot. But now banks are also pretty -- I mean, I think almost all the banks are fairly flexible. They accepted very well, and this product has a category. And they are very comfortable disbursing the entire money between 12 and 13 and 14 months. And that's why we say 15 is on the outer side, and we're very comfortable on this.
We have a question from the line of Kirti Jain from Canara HSBC.
My question, sir, is with regard to the land addition CapEx for next 1 year. What is the target which you have kept in the mind in terms of the land addition CapEx?
So as we just discussed, we have INR 900 crores of platform, out of which around INR 300 crores is committed. In fact, the actual cash outflow is only INR 150 crores. But assuming that INR 300 crores will go in the projects that we've already committed, we are left with INR 600 crores of additional cash flow from the platform itself.
On top of that, we should also have around INR 200 crores to INR 300 crores of [indiscernible] and internal approvals. So all in all, INR 600 crores plus INR 200 crores and add a couple of hundred crores from internal tools, et cetera, I think we are looking at something like INR 800 crores to INR 1,000 crores of CapEx, over and above what is already committed.
Okay. Sir, have we identified projects sir. Are we closer to sign up?
Of course, it's the process, and it needs a long pipeline. We're aggressively working on that. The whole focus of the company is to build that pipeline. We are pretty, I mean, aggressive on that and the pipeline is under obviously expansion.
We should be able to invest this kind of money in the coming months for sure.
Because what we have seen, sir, the additions of the new projects are broadly in line with the sales. We haven't seen any nonlinear project additions. So that's why my question came, sir. Are we already facing any challenges in new land acquisition or any legal headaches? Or what are the challenges you are facing, sir?
So you are right that the gap between the fresh sales and new additions has to go up. And that's what is required, and that's what we are busy doing these days. You will see some action happening in next couple of months, 3 months' time. And we are very confident that we will have a very visible gap getting created between the 2 very soon.
So that's where we are today. There are no specific challenges to mention, but I think we come from a position that we have a little finer microscope through which every project has to go through. We don't want to add projects just to add topline. We have to have a very rational mix of projects, which makes sense in terms of not only topline, but also bottom line.
It can be a healthy mix of JD, JVs and outright. We are doing all the 3. But having said that, last 3 to 4 months and 6 months of hard work is now are becoming quite evident in terms of some of the results and visibility that we have internally for the pipeline that we are trying to build, and we should be able to start showing the reasons and component of this pipeline very soon, and you'll see this delta coming in.
We have a next question from the line of Faisal Hawa from H.G Hawa and Company.
So sir, would I be making the right statement that the villas construction and development, we would be hiring the highest ROCE and ROE? And are we definitely focused on improving our ROE in the year '23, '24 because ROE and ROCE has always been the bugbear of most real estate companies, and there are very few which are able to even post ROCE or ROE, which is in the late teens.
So if there is focus on this area and our equity with HDFC, has this been like a focus area or an area of discussion with them before they include equity in our company.
So I'll take this up. See, villas per se, villas development are very profitable as compared to a high rise, typical high rise. So naturally, the return portion is already, they can get off with the disproportionate return as compared to a vertical high rise.
Secondly, the capital employed portion. So with the platform coming into our portfolio, the return on equity has already been optimized to a great extent because finally, the deployment of capital from our side is very, very minimal from an equity stake point of view.
So I think with the kind of product mix and the structuring that we are doing over and over again, and the kind of focus we have on low equity, so to say, I think on ROE, we should be fairly comfortable and well rather be leading most of the peers on that. That's what we are aiming, and I think we are healthier out there on this parameter.
Having said that, we also are aware of the fact that while increasing ROE through joint development basis where your capital deployment is thinner comparatively. We don't want to get into a situation where we do a lot of volume and in the process, add a lot of contingent liabilities to execute and take up those kind of volumes in terms of construction, et cetera, and not adding corresponding proportionate and rational and logical bottom line for yourself. So we definitely would like to balance the 2 in a way that not only ROE gets optimized, which is the top priority for us and which is a top preference for us, and that's what we have been doing.
But at the same time, we are also mindful of the fact that we are not taking undue risk, which are hidden risk in a situation where ROE has become too high. But then the contingent liabilities, as reset of execution are disproportionately high. So on a balance side, we will do both. And of course, we should be being pretty good on ROE front, and we have been doing that by the way in the past as well.
So would you be able to give a number to the ROE for the year '23, '24? And as far as Ahmedabad is concerned, do you see any kind of an early signal like this being like Bangalore, which was like 1.5 decades back with the Gift City coming back, coming into the play, and there's been talk of even the Ahmedabad hosting on the [indiscernible]. This could be like a big change, a game changer for our company. And that's one.
And sir, can you give a number to what our present value of land bank would be?
So first, I mean, just to take 3 different questions that you raised. One about Ahmedabad market. But of course, Ahmedabad has seen a great action, and there are triggers like Gift City. Gift City has been there for several years and rather for a very, very long time. But I think it's at that inflection point now where things are happening on ground and a lot of developers have now started showing interest and there is some genuine absorption of our space, which has happened. And obviously, this is boosting the overall market.
And there are new industries with tech, et cetera, which is coming in that area and setting up shops there. So this is great in terms of the real estate as a sector. There is definitely a little speculative, but nevertheless, it's not unfounded. There is a new boost, which is always talked about in Ahmedabad, which is potential hosting of Olympic. So I mean, of course, this is becoming one of those talking points in the real estate sector, which is boosting the market a lot. And I hope that this momentum continues and things happen on that front.
Right now, of course, there is an element of speculation out there. But generally speaking, Ahmedabad, has a market is very, very robust. Demand has been fairly consistent. Market is showing depth and consumers have shown that they are willing to invest. They're willing to spend money in real estate -- on real estate as compared to any other asset class, and that preference is pretty strong.
So we see Ahmedabad shaping up pretty well. We can't say that it will be as great as big as Bangalore. Of course, Bangalore had several very, very powerful engines, including IT, et cetera, et cetera. Maybe Ahmedabad doesn't have it of those proportions. But directionally speaking, yes, Ahmedabad seems to be getting into a trajectory, which is very different from what it used to be in the last 5 to 10 years.
I'll take up the other question. So per se, a typical ROE is computed basis the P&L return. But in real estate, unfortunately, the P&L may not reflect the rhythm on the ground. And hence, we -- internally, we track more on an MIS basis or more on a presales basis rather than simply tracking only on our financial numbers. So we are already in double digit, so to say.
And definitely, we are going to improve it as we move along because the focus on the new BD is more on profitability? Just beside it is not just, as Kamal Bhai mentioned, just adding a topline and volume numbers, that is not the target. The target is to improve the profitability.
By the way, one very important point and it could be relevant to everybody present here, a INR 1,000 crore investment can give you a topline of INR 10,000 crores, INR 5,000 crores or INR 3,000 crores. But what is equally important is what is the bottom line that each of these numbers can give us. INR 3,000 crores can give almost the same or better bottom line than a INR 5,000 crores or even INR 8,000 crores to INR 10,000 crores.
So what we always -- when we do, for example, horizontal. And if the mix of horizontal improves or increases comparatively because of the market dynamics, preferences in the medium term, it basically means that you might actually end up earning more EBITDA, et cetera, and the margin, et cetera, on INR 3,000 crores that you would have otherwise INR 5,000 crores.
In fact, this Q, you could see in our numbers already that we've invested almost like INR 300 crores, which is giving a topline of just about INR 900 crores, INR 800 crores. But I think we are very confident that this INR 800 crores, INR 900 crores of topline will give us much more in terms of bottom line EBITDA, PAT, et cetera, as compared to what we would have done in a vertical strategy, if you were to invest this INR 300 crores coincidentally into our vertical product mix, although it doesn't mean that we are undermining vertical, again,to keep saying the same thing over and over again.
But if we have a very sharp focus on ROE and margins, et cetera, product which plays a lot of role, and that's where your agility, your flexibility, your adoption, your spotting of early trends, et cetera, are very relevant. And we intend to keep doing that repeatedly and hence improve our returns, et cetera.
To answer your last question on land bank, we do not bank on any lands. As you can see in the presentation, everything which has been acquired or which is in the definitive stage has already been disclosed and part of yet to be launched items.
So the idea is to acquire land, not for creating a land bank. Its idea is to hit the market the fastest possible manner, the quickest in the earliest possible manner. That is why whatever we have purchased, pretty much everything is either on the verge of getting launched or it is already launched and hit the market and sold or sold well already.
So I mean for us, it's about converting land into finished goods at the earliest possible time profitably, and that's how you were to scale up. There are no land banks per se in the company. Everything is pretty much on track, either launched or on the verge of getting launched.
Mr. Faisal Hawa, does that answer your question?
Thanks a lot for answering my question so well.
We have a next question from the line of Rahil Shah, an individual investor.
Just wanted to ask about your view on the cash flows and the launches like in general, over the next 1 to 3 years, are we expecting to have a lot on our books, adding new project launches? Or are we going to continue working on the current ones mentioned in the presentation? And what was the -- second part is what was the land area in this quarter? Just if I missed earlier.
When it comes to launches, of course, we'll keep launching newer and newer projects. I mean just a month back, we just calculated that in the new projects, we would be investing anythng between INR 800 crores to INR 1,000 crores in the next 12-odd months. And if the average investment size is something like INR 100 crores at a location that will mean that we should be launching 8 to 10 projects in a year in the next 4 quarters. So that's where we are on the new launches.
Of course, that can be further boosted by getting into joint developments where the capital requirements are competitively smaller. So that answers the first part of the question. What was the other question?
Second is the quarterly volume numbers, I think that is there in the presentation slide, you can go through Slide #12, which explains that there is close to 730,000 square feet, which has been sold during the quarter.
We have our next question from the line of [indiscernible] Antique Stock Broking.
So I have 2 small questions. One is you have -- you are doing very well in Ahmedabad and have spread their footprints in Bangalore too, I think, there's 13 or 14 projects altogether in Bangalore so far. And just trying to understand this in 9 month FY '23, what would be the share of Bangalore and Ahmedabad. And going forward, how do you see these 2 markets contributing the sales booking?
So I mean I think in the medium term, we would rather be looking at something like 40%, 40% each from Ahmedabad and Bangalore, and 20% in the initial periods from MMR and Pune market. Of course, these are new markets, and we are trying to get a foothold there.
But there is a team in place and there are energies being devoted out there for Pune and MMR, and we should be able to start few things there in the coming months. But generally speaking, medium to long term, it is supposed to be 40%, 40%, 20% broadly speaking.
And as we speak now for the 9-month period, it is 58% share is from Bangalore and remaining broadly is from Ahmedabad.
So Bangalore is contributing more?
Yes.
Sorry, sir, 58%.
60% thereabouts. 58% to be more precise is coming from Bangalore. And the rest broadly is coming from Ahmedabad barring some very small numbers coming from Pune.
So Bangalore is contributing significantly now?
Currently, yes. But generally, you could say that we are basically operating at 50-50 right now. In the long term, this ratio will be more like 40%, 40% and 20%, 40% each from Bangalore and Ahmedabad, and 20-odd percent from MMR in the medium term. MMR possibly once we get a foothold, and we are comfortable out there, maybe it can increase further, but in the medium term, that's how it should be.
Sir, which part of MMR you are looking at? Because my understanding if it is 20% and that to Pune and MMR. So MMR footprint will be small. That means it will be some -- in terms of stopping potential, it only some INR 2,000. It would be more of a INR 200 crores. So which part of MMR are you targeting or would be looking at?
So obviously, we will be -- I mean, Pune apart we will be -- MMR be in the suburbs. It will be more like a Thane markets like that, more like a [indiscernible] those kind of macro markets. So if you were to just sum it up in the sense of pricing, maybe we'll be more comfortable operating in markets, which are more like INR 15,000 to INR 20,000. And we are not really very focused on something like a INR 50,000 to INR 1 lakh market. So we're very clear that we want to do in Mumbai, MMR, et cetera, what we do in Bangalore, although the scales are different in terms of price absorption.
So what sells in Bangalore for INR 1.5 crores, maybe it is INR 2.5 crores in Mumbai. And that's why the pricing from -- on a carpet area basis, what is INR 10,000 to INR 11,000 in Bangalore could be INR 15,000 to INR 20,000 in Mumbai. So that's how we would rather prioritize and focus on above INR 15,000 to INR 20,000 on a carpet area basis is the segment that we're targeting.
And I just mentioned to you the kind of macro markets that we are focusing on.
And when it comes to sort of Bangalore business development -- so we have been seeing upsell, like everybody is selling, which is good for the real estate sector. And it looks like logically, the expectation of the land on our -- or your JDs partner should go up, which means valuation of land should go up. So are we seeing -- because everybody is selling, everybody would have cash flow -- net cash flow or free cash flow bad back and they want to deploy it to grow further. So in terms of business development, do you see any kind of valuation rising?
Can you speak louder, please?
Sir, in this current up cycle, do you see valuation expectation, valuation or the expectation from that landowners going up significantly compared to, say, 2, 3 years ago? And yes, so that is the question. So how easy or difficult...
I understand your question. So of course, I mean, in a good cycle, in a cycle where everybody knows that the markets are doing great and there are players who are wanting to expand. Actually, landlords also are aware of the situation, and they will expect more. And hence, it should mean land getting a little more expensive.
But that has always been the case. I mean one might say that this is happening more right now, but the situation is always like that. I mean, for example, in a market like Ahmedabad, landlords are pretty rich. They are not desperate. They are not in a hurry to sell, and they are many people in general sense. And hence, they've got tremendous amount of holding power. And that's why, I mean, trading apart, they will -- they would always like to optimize their returns and sell when they feel it's good to sell for them. So that's always been the case.
I think -- this is there a branded player or a corporate player can do better in a land deal, which are very high value dependability of the buyer, the credibility of the buyer and the capability of the buyer in terms of actually closing the deal within the time frame with the kind of cash flows and strength of balance sheet are equally important to the buyers. Buyers on one hand, want more price, but they are also smarter now in terms of understanding who can close the deal and who might not be able to close the deal, who could come up and honor the promises and who could not. And hence, there is a tilt and a twist in favor of corporate organized players there, and that's an opportunity actually we see.
Similar is the case with deals on JD basis. People know that a player who has a track record has a much more kind of possibility of performing as per expectations of both the partners and hence, better deals are actually going to branded players and corporate players. To that extent, despite competition in general sales heating up and prices in general sense heating up. But when it comes to competitive advantages and disadvantages, I think corporate and regular, I mean, and the formula is players still stand a great chance of getting some very variable projects and options out there.
So basically, in terms of supply, in terms of doing a deal and in terms of supply as well as demand in terms of selling the product and in terms of acquiring the projects, the consolidation happening in both spaces, both in...
Absolutely. Absolutely, yes.
No, that's understood, sir. And my final question is on the -- what percentage -- because your products are -- currently, products are predominantly into horizontal products. So what percentage of your sales booking overall, say, last 1 year or 9 months or so, what would have availed home loans?
Home loans as a percentage of overall sales, pretty high, right? It will depend on, again, project price. So all the high rises will have at least 70%, 80% will be home loans batch.
I mean this is a data which is not off and available. I mean it's not readily available with us right now. But as Ankit said, in a vertical project, it says 70% to 80% in most of the projects. And in our horizontal basis, maybe the ratios will be more like a 30%, 1/3 of the total things that we are selling. But we can come back to you with a bit more precise data.
I'm just trying to -- no, that's fine. I'm just trying to ascertain the kind of buyers, what kind of buyers are this -- those predominantly who buy this plotted development and villas. So my guess is right, the home loan share would be percentage of people who avail home loan in those kind of products will be less, that is [indiscernible].
Yes, comparatively, yes, you are right.
We have our last question from the line of Akshay Kothari from Envision Capital Services.
Sir, pardon me for my ignorance, but I'm a little bit new to this industry. So I just wanted to know whether the plotting development, which we do, is it on the agricultural land and then we convert it to NA?
No, no, no. We would convert the land first, then the plans are getting approved. And then you will start selling. So it's the other way around, actually. And by plotting, you mean, basically, we mean some very, very high quality, high class, world-class infrastructure with concrete roads and payment, et cetera, et cetera, with some very, very beautifully planned and laid out large club houses of 40,000, 50,000, 60,000 square feet, and even 1 lakh square feet in a couple of cases. So these are very, very amenitized and very high and specified projects and infrastructure that you're taking about.
But land is to be converted first, approved subsequently and then sold.
Okay. So because we are at a natural disadvantage because apart from the brand name, which Arvind is pulling because other smaller players generally all domiciled in a particular state and who are that farmer registration, we would be at an advantage, right?
I mean in [indiscernible], yes. But a great development which has happened in the last 1.5 years, 2 years in Bangalore is that this is no more required. As a company, we can buy land directly from the farmers, develop and sell. So this restriction is there. So in one of the largest and the biggest potential market for us, which is Bangalore, this hindrance is already removed.
And when it comes to Ahmedabad, we have device mechanisms and systems where we contract lands, wherein the aggregators take responsibility of buying the land, converting and then under an agreement, selling to us for development.
So of course, there is a circuitous route when it comes to Ahmedabad,but still doable. And we've been doing it for very, very large tracks of land parcels over and over again. And in Bangalore, fortunately, this hindrance is not existing now.
I would now like to hand the conference over to Mr. Kamal Singal for closing comments. Over to you, sir.
Thank you. On behalf of the management, thank you, everybody, for participating in the earnings call of Arvind SmartSpaces and for your continued support. I hope we have been able to address most of your queries.
However, if we have missed out on any of your questions, kindly reach out to Vikram, and he will connect with you offline. Looking forward to interacting with everyone in the next quarter soon. Thank you. Thanks a lot for your participation. Thank you.
Thank you. On behalf of Arvind SmartSpaces Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.