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Arvind Smartspaces Ltd
Earnings Call Analysis
Q3-2024 Analysis
Arvind Smartspaces Ltd
In their strategic expansion, the company has historically taken a cautious approach, limiting its focus on key areas before exploring new opportunities. Surat, for example, after much deliberation, emerged as a promising market, comparable in potential to Ahmedabad, with a similar demographic mix and brand evolution. The city's size and market dynamics, bolstered by developments like the bullet train project anticipated by 2026, position it not just as a Tier 2 city but as a significant extension of their existing markets like Ahmedabad or Mumbai.
The company maintains a balance between horizontal and vertical projects, with a strategic emphasis on owning high-margin projects horizontally. However, the management also highlighted the importance of vertical projects owned by the company, demonstrating the necessity of a diversified project portfolio for sustaining healthy returns and mitigating risks.
Real estate prices have seen an uptick across various markets, but the company has skillfully managed to keep margins stable amidst these changes. This pricing power has been backed by improved sales realizations, and the demand has remained strong and sustainable, often coming from buyers with genuine long-term interests rather than speculative investors.
The executive team highlighted their effective handling of cash flow and financials, underlining the importance of bank financing, as it emerges as a preferred and cheaper source of funding. This strategic financial oversight ensures the company doesn't stretch its liquidity thin by overinvesting in inventory, demonstrating a strong balance sheet and the acumen to navigate changing market environments.
The company has experienced significant inventory enlargement due to several new project launches and expansion phases. They are confident in selling off their inventory, projecting 30% growth in net sales year-on-year, aiming to sell a substantial part within the initial months post-launch. Additionally, the management forecasts a correlating growth in the books of accounts, expecting a 30-35% growth trajectory which is positioned as the medium-term target for revenue progression.
Amidst a dynamic financial landscape, the company provides guidance that EBITDA margins will reflect a gradual growth in their financial statements, matching the trajectory of net sales. They anticipate a stabilized growth in their books of accounts that aligns with the year-on-year sales increase of about 30-35%, although they caution that there could be variations due to project completions and launch timings.
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Ladies and gentlemen, good day, and welcome to Q3 9 Months FY '24 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. Thank you, and over to you, sir.
Thank you very much. Good afternoon, everyone, and thank you for joining us on the Q3 and 9 months FY '24 Results Conference Call of Arvind SmartSpaces Limited. We have with us today on the call Mr. Kamal Singal, Managing Director and CEO; Mr. Ankit Jain, CFO, Chief Financial Officer; Mr. Avinash Suresh, Chief Operating Officer; Mr. Prakash Makwana, Company Secretary; and Mr. Vikram Rajput, Head, Investor Relations.
Please note that a copy of the disclosure 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 could be construed as a forward-looking statement, must be reviewed in conjunction with the risks that the company faces.
I would like to now hand over the call to Mr. Kamal Singal for his opening remarks. Over to you, sir. Thank you.
Thank you, and a very good morning to all of you, and welcome to the operating information performance review for Arvind SmartSpaces ending third quarter of '23/'24. I will just begin by sharing my thought on the listed environment and items for the partner, and then we look forward to taking your questions and suggestions.
The macro economic tailwind winds are continuing. In the fiscal year '24, India is poised to achieved a growth rate of around 7%, continuing kind of [indiscernible] performance since the onset of the pandemic. Multiple report suggests that this growth trajectory will persist into financial year '25. Over the past decade, India has made significant investments in infrastructure resulting into a remarkable 3.34 fold increase in public sector expenditure. This inclusion of funds has not only bolstered the country's physical foundations but also has laid the groundwork for sustained economic growth. Include also in financial wellbeing, increased job creation, declining unemployment rates and advancement in education and health care metrics are all reflective of a concerted effort towards [indiscernible] prosperity.
The surge in the [indiscernible] units activity has emerged as a significant contributor to India's economic narrative. Real estate sales has [indiscernible] a decade high supported by a slurry of new property launches and corresponding uptick in sales across various [indiscernible] centers.
Despite price increases, the [indiscernible] ratios witnessed a marginal improvement in top 8 cities as income growth surpassed pricing growth and mortgage rates remained flat. Further, the demand buoyancy is being driven by end users, showcasing the underlying strength and stability of the housing cycle.
At Arvind SmartSpaces, we look forward to driving transformative growth in the residential real estate market. With consumer preferences evolving rapidly, we understand that staying relevant means continuously innovative.
Our abode goes beyond mere construction, it's about crafting sustainable living solutions, increasing technology and wellbeing features tailored to demand of the modern era.
So the robust customer-centric programs, strong brand expanding geographic footprint, annuity products and commitment to operational excellence, we are posed to capitalize our emerging [indiscernible] deliver value to the customers and stakeholders alike.
Coming to operational update for the quarter and the 9 months, I'm pleased to share some notable achievements. We have delivered a record high 9 months sales valued at INR 784 crores and direct sales 41% year-on-year growth, indicating strong consumer confidence and market demand.
In the third quarter of FY '24, our presales value continue to show positive momentum at INR 280 crores driven by successful launches of our premium projects such as Forest Trails, Sarjapur, Bengaluru. This is a premium villa development where we achieved sales of more than INR 150 crores in Q3, which is a little more than 30% of the launched inventory.
The successful launch of Forest Trails are [indiscernible] to follow the standard launch of Greatlands Phase 2 and Devanhalli and highlights the growing equity interest of the brand Arvind in our key markets of Bengaluru. Following the remarkable response to Phase 1 of Uplands 2 in Adroda Ahmedabad, we swiftly launched Phase 2, achieving sales worth INR 75 crores there. We are delighted to have a strong response to all our new launches over the last 7 quarters in several different micro markets.
Similarly, our -- similarly to our 9 building bookings, collection for the 9 months -- sorry. Similar to our 9 months booking, collection for the 9 months period reached the highest levels in any given 9 months period. 9 months' collection stood at INR 661 crores or a significant increase of 60% over the same period last year.
Collections in the quarter increased by 16% year-on-year. at INR 194 crores. This performance in this [indiscernible] are ready to maintain a strong operating cycle, aligning our sales conception in the legal processes effectively.
I'm pleased to note, that our expansion initiatives have seen promising developments with a cumulative pipeline potential addition of around INR 4,150 crores for the current financial year.
Recently, we entered Surat with INR 1,100 crores horizontal multi-asset township project, expanding our presence in this third city in the state of Gujarat.The project is spent over 300 acres and signed under our JD model with 55% share approving to us. This strategy more underscores our pro active approach to growth and our focus on seeking opportunities in emerging markets. We also added a new horizontal [indiscernible] at Ahmedabad with a top line potential of INR 250 crores. This would be on an outright basis.
The quantum of JD in our portfolio is on the high side currently, and we look forward to an optimal mix of JVs and outright deals as we progress forward. Nevertheless, successful JVs across market showcase the confidence of land owners in Arvind brand, and this will allow us to build a strong sustainable pipeline going forward.
During the quarter, we achieved a financial closure on Fruits of Life in a year and give existing SBFC Capital on the project. It not only highlights the brand equity and execution capabilities of brand Arvind, but also the thriving nature of horizontal and certain projects and in Ahmedabad market.
The platform continues to progress well with the 3 projects already acquired interest under rate across Ahmedabad and Bengaluru. We look forward to acquire additional projects into this platform in our targeted markets in the coming quarters.
Now moving on to operational side. In 9 months, we reported a revenue of INR 224 crores, up 37% on a year-on-year basis, and EBITDA of -- EBITDA grew at 68% to INR 57 crores.
PAT for the 9 months 60% to INR 26 crores. In Q3, we reported a revenue of INR 84 crores, up 60% year-on-year basis, and EBITDA for Q3 grew by 60% as well to INR 21 crores. PAT for the quarter grew 121% to INR 9 crores.
Our balance sheet remained strong despite expanding operations. Net debt increased to negative INR 38 crores as on December 31, '23, from a net debt position of INR 141 crores as on September 30, 2023.
A crucial parameter in real estate reflecting the underlying business performance quite well is operating cash flows. And during the quarter, net operating cash flows amounted to INR 89 crores. Net operating cash flow during the 9 months stood at INR 360 crores. We estimate an unrealized operating cash flows exceeding INR 2,552 crores coming from the current pipeline of projects.
As you would have noticed in our presentation, we very recently, we launched our project development in Bangalore. It's called Arvind Orchards. We look forward to deliver a differentiated experience to our customers in our [indiscernible] one-of-its-kind objective work in development.
To conclude, we see a very significant opportunity for Indian [indiscernible] market. And Arvind SmartSpaces is even poised to capitalize on the same and sustain its path of profitable growth. As we approach the financial year end, the objective remains to end it on a very strong growth across operation in ceratin parameters.
On that note, I conclude my opening remarks, and I would like to ask the moderator to open the line for question and answers.
[Operator Instructions] The first question is from the line of Biplab from Antique Stock Broking.
Sir, my first question would be on the business development from excellent velocity. So this INR 40 billion -- around INR 40 billion GDV business development that you did till date in this financial year, when do you expect those projects to be launched? Can all of this could be launched in FY '25?
Yes, yes, of course. Yes. I mean a INR 40 crores worth of new projects has been added in the last 2 quarters. And for this year, we see the community number. And of course, this is planned to be launched in the coming year.
One portion of INR 600 crores have already been launched.
Yes. In fact, INR 600 crores out of this INR 4,000 plus crores is already launched. But in any case, rest assured, it would also be getting out within this coming financial year.
Okay. So there is a quick turnaround time. It doesn't take much from business development to launch?
Yes. So I mean it's a combination of medium size and very large-sized projects, projects which require environment clearance in budget which do not require environment clearances. But putting everything together, we see a very realistic possibility of anything of this getting launched during this financial year.
Okay. Okay. My second question is on the [indiscernible] 40 acres bad acquisition outside basis you did. I'm just trying to understand what would be the cost of the land that you have paid for that?
Mainly, the specifics about the cost, et cetera, is not shared. Maybe you can get it up with the team there to know to what extent it is given for us to share such data. Not share about it. But otherwise, this is a great project from the standpoint, from the standpoint of making quicker money and hitting the market very, very soon. In fact, we're hoping that we hit market with this project i mean in next few weeks itself. So in this financial year, possibly we should be starting to sell this product. So it's a very quick turnaround project. And then possibly, you can get in touch and we'll figure it out to what extent information can be shared.
And in typically, such [indiscernible] projects, you have -- supposed you have bought from them, okay, [indiscernible] that cost. But what would be the other cost? And how much -- what would the quantum of that cost, say, for this 40 this project, how much -- what would be the other cost? And what would be the quantum of that cost that needs to be incurred for this project?
So operating margins and EBITDA in these projects vary anywhere between 25% to as high as 35%, 40%, maybe average of a plotting project that we are currently executing will be more than 30%, 35%. And this way, it should be very similar to that, and that's how the costs are.
The next question is from the line of Rithvik Sheth from one of Financial Consultants.
Congratulations on excellent set of numbers. Sir...
Can you talk a little louder, please? I mean we're not able to hear you clearly.
Yes. Is this better?
Yes, better. Significantly better yes.
Sorry. Yes. So firstly, you mentioned that you are planning to launch the west Ahmedabad project, which you acquired recently in Q4 FY '24 result today. Did I hear it right?
FY '25, we said. I mean when we talk about this INR 4,000 worth of projects, so what we said was this entire pipeline that we've acquired recently, which is totaling to INR 4,000 crores for this current year as a total. Everything of that will be launched in the coming financial year, which is 2024/'25.
And Laxmanpura, this 1 project out of it, which is not a very big project, but otherwise a profitable one will be launched within this financial year, hopefully. Within the current financial year ending March '24.
Okay. And sir, second question is on the HDFC platform. What is the total amount that we have deployed till date out of the INR 900 crores?
So we've committed in excess of INR 400 crores already. As of the platform, maybe the payments are a little less than that, more like a INR 300 crores, INR 350-odd crores. But commitment-wise, it has stopped halfway and we've deployed in that sense in excess of INR 400 crores.
Okay. Okay. Great. And sir, just one question. We have INR 4,000 crores of launches to be done in the next 4, 5 quarters. Sir, what kind of business development are we looking this year? Already, we have seen a very strong business development pipeline, the highest in the company's history. So Now what will FY '25 look like? And what -- would it be a similar number, around 5,000 -- INR 4,000, crores, INR 5,000 crores. I would like to pick your thoughts on that.
So maybe futuristic, but as you very rightly said and understood that you already [indiscernible] which is INR 4,000 crores in the first 9 months of this year. Now we would love and like and be happy with the number which is rounded up to something close to INR 5,000 crores for the year. And most of those projects which are in further discussions and pipeline generally, they are quite decent in size and hence, one or two happening will mean that we'll cross that number. So if we cross that, then do additional INR 1,000-odd crores within this financial year. But having said that, this trajectory of INR 4,000 crores to INR 5,000 crore something that we hope that will sustain in the coming years as well. It's not that this is an exceptional year, and that's why it is high. It is a trajectory that we want to maintain.
Okay. Okay. Sure. And this acquisition would be more or less funded by internal accruals, HDFC platform and debt if need arise to be, right?
That's Correct. So as you know, HDFC, there is a leftover still significant. Then entering [indiscernible] have been very strong, this can be accumulated more than INR 360-crores, which is one of the highest ever and [indiscernible] negative debt company as on December end. So hopefully, I mean very, very conservatively, we should be raising back to the extent of INR 300 crores to INR 400 crores. Even if it's INR 300 crore, it is a significant amount of money. So all in all, all the these 3 engines are alive and kicking, and we should be able to make use of this.
And on top of that, as of now, we are very, very heavy on JVs as a structure. And that is why a lot of money is still left to be deployed despite adding a very significant top line of around INR 4,000 crores for the current year. To that extent, apart from deployment of these 3 sources, we've got internal mix [indiscernible] together, including the platform and that and of course, into approvals, JVs are kind of complementing and supplementing the other efforts towards creating bigger pipeline.
Right, right. And sir, just one final question -- one clarification rather. The reported OCF of INR 360 crores in the quarter, that is for our company share, right, net to us?
Yes. So this quarter it was INR 90 crores. INR 89 crores would be more precise. This year's number is -- significant number for 9 months is INR 360 crores. And this is [indiscernible] and purely what has come to us already and the [indiscernible] is all ready to deploy [indiscernible] at all. But yes, this is purely our share approved to us and received by us.
The next question is from the line of Abhishek from YES Securities.
Just one question. Where do you find the [daily] regarding the entire MMR or say Pune or MMR cumulatively?
Also, if I had your question right, you're asking about BD efforts in Pune and MMR?
Yes, yes, absolutely.
Correct. So yes, I mean those efforts are on. We have evaluated a bunch of projects. A couple of them are looking quite promising. They are in advanced stages as of now. We are in [indiscernible] when it comes to adding a new geography, and that's how we are doing this time also.
Soon as you would recollect towards something that we started a few quarters back, and we continued that focus for a very long time and eventually we come up with a very, very large, [indiscernible] exciting project there. We hope that with the kind of efforts going into MMR market, something should materialize very soon.
In this, financial year or it should [indiscernible] next year?
So because -- I mean, this entry point that you're talking about and budget happening and [indiscernible] happening is binary in that nature. And hence, we can't see that this will happen. But I mean, this quarter or next quarter, thereabouts, things should happen.
Sure. Second question, one more, we just acquired small business unit in Ahmedabad. So any color whether you will go to a [indiscernible] initiative because of [indiscernible].
Yes. So this project is taken on an outright basis. We are not revolving platform in this. So whatever happens, the entire price lows and margin is [indiscernible] to us and [indiscernible] is not involved in this.
The next question is from the line of [indiscernible] from Sher Khan Limited.
Congratulations on your new business development deal for 9 months. Sir, we have been pending around INR 700 crores to INR 750 crores of SGFC platform money. So I believe some would have been utilized in Q3. Or if not, then how much has been outstanding. And sir, are we using more bank turn on leveraging our balance sheet and rather than not using SGFC [indiscernible]? If there is a possibility that SGFC platform money would be used for more larger transactions, especially in MMR region or -- so just your thought process on the usage of capital of your own and versus SGFC?
Sure. So the platform, we sized at around INR 900 crores total. Out of which, INR 600 crores comes from SGFC [indiscernible] deal which will be invested by us. And after this INR 900 total, we have deployed to the tune of around INR 400 crores already and INR 500-odd crores is still left to be deployed. Generally, it makes more sense for us to deploy this money in long-term projects and projects which are of -- a little decent and bigger sizes scale. For example, Laxmanpura is large in size. And hence, generally, we would prefer not to investment in Laxmanpura high level project there. But having said that, money is available. If a project is viable, there is no problem and there is no interest in investing platform money or otherwise. As we just discussed, all the 3 sources, internal approvals, platform money and the 3 are available.
At any given time in time, depending on the size of opportunity and the investments required, and that day that we get money cash flows that we have on hand, obviously, we would like to first exhaust in term of approvals because that's our own money without any incremental cost. And then the cheaper money and then the less cheaper and et cetera. So that hierarchy is always been followed. It has so happened that cash flows for the last few quarters have been strong in the last 3 quarters itself has given us in excess of INR 360 crores. To that extent, our leverages has not really begun. We are still negative on the overall net debt side.
Same time, this has also resulted in under utilization of the platform money on a cumulative basis. But having said that, it's just a matter of time and a few more quarters before we get into a positive side of trajectory on both the net debt and utilization of the fund money.
And my second question would be, sir, as you also said that INR 300 crores to INR 400 crores debt might be raised for the next year. So already, we are getting now bit larger size projects to JD. So leveraging the balance sheet to get better margins, is that the thought process versus JD projects but the mix would be lesser and outright would be higher?
And last would be on the margin front, like there is a little bit volatility in the margins. And is it because a plotted project has a lower revenue booking during the quarter and which had led the sequential dip in margins?
So i'll ask Ankit to [indiscernible] the margin front, where we respond to that [indiscernible].
So margin, if you look at on a year-on-year basis, for the quarter, it's the same, which is 24.7%. These are adjusted margin or the interest element. So we have given this information in the information update. So hence, our top line for the quarter is at 60% growth, and margin has [indiscernible] to 60%.
However, as a percentage of margin, these percentage of margin in financials do not reflect the current bookings because there is a lag in the accounting -- the way accounting happens. So this relates to many projects which have been delivered and this was launched a couple of years back, like for example, the quarter related to revenue recognition from uplands [indiscernible]. So the plotting projects booking we are looking at like a [indiscernible] 2.0 for Forest Trails, which is there in the current quarter, which is more of presale does not come into books of accounts of this [indiscernible].
Yes, right. I understand that. But because previous 3, 4 years launch, the project, which has hit revenue recognition during this quarter, the mix of the debt would be higher towards -- or lower towards this plotted development. And hence, there is a little bit sequential volatility? Because last quarter, there were margins were very good, so.
Yes, so last quarter, margins were higher. I mean it will vary on the revenue recognition project, which.
Saying that depending on which project we start getting into the goods of account, this volatility remains. But on average, the margins are [indiscernible] fairly consistent with this kind of [indiscernible] kind of EBITDA 11% to 12% of PAT.
In fact, last quarter was in my understanding a little bit of an aberration there, more profitable disproportionately profitable projects entered into the books of account and hence this higher margin.
This quarter, the current quarter and the community number in that sense is actually more representative of the profitability and the level of profitability that we expect at the moment cost on a steady-state basis.
And maybe just to add, your comment on plotting has a low margin, it is not a case that plotting is a low margin.
At least there's a revenue [indiscernible] higher margin. And the second part of your question related to more outright versus JDs, et cetera, et cetera. Yes, I mean, generally, we prefer to have a very, very optimal than balanced portfolio from this point of view, [indiscernible] point of view, but it has so happened that in the first 9 months of this year, we've done more of JDs and less of outright, right? But because that has also meant that we have no investable money left as of now for the pipeline that we've already tied up, it will alternatively be an orientation where we see more outright for this coming our way in the coming months from the money which is still left to be deployed.
The next question is from the line of Rakesh Padvani from Monarch AIF.
Sir, in the initial remarks, you mentioned you work on the operating margin of 50% to 55% for the horizontal products which [indiscernible]. Can you also give us what is the operating margin you work for the vertical projects?
So the [indiscernible] of the 2 will be 25% rather 25% and 30%. And I will say a long-term stabilized difference in operating margin will be to the 25%. So if we are hovering between 25% to 30% as overall margins, then vertical would be more like 25%, 22% and thereabouts. And holding them would be more like 30%, 35% or a little more in a few cases, selected cases and more like that. So -- and hence, the average of anything between 30% to 35%. You can assume that there's increase of around 5% between the 2 on average.
Sir, what will be the IRR minimum [indiscernible] with respect to the vertical or horizontal because if I look at horizontal, it should have more margin more IRR.
Yes, we have low IRRs generally because the cash flows are better. They are more front project, collection times are less, margins are healthy or decent or even better than vertical. So in that sense, all the 3 are adding up into one common understanding, which is higher IRRs. So definitely, yes.
Yes, sir, my question is that what will be the IRR that we will looking for -- in both the project in order to take a project. For example, you are working on the new land development, working [indiscernible] of a new land acquisition, what is the minimum IRR level, we will work otherwise we will reject the project for the horizontal or vertical, if you can talk about that?
So generally 25% IRRs are the other [indiscernible] spending. It's not returning [indiscernible]. But on an average, we know that it has to be 35 and thereabouts. We have certain projects than most of the projects which are a little better than that, but we are okay compromising a couple of percentage here and there.
As a minimum, average, it is around 25% for us.
Okay. Sir, and the project that has -- that were launched in the last 1 or 2 quarters, it applies 2.0 and 3.0 Fruits of Life, which got full booking a 90% above booking number in the first quarter only in the month of launch early. So that will have a higher IRR, 40%, 50% also.
Yes. I mean on top of the recent JD projects, so the capital deployment is very less in any case, so we would have actually recovered a lot of money -- most of money that we had deployed on a net basis. So in these projects, IRRs are so high that they are not relevant to be discussed in that sense.
JD projects selling in 3, 4 months, 5 months, giving you a very hefty upfronted cash flows means IRRs are going to be very, very high, but that's because the way they are structured and need the same velocities simultaneously is good. So yes, I mean, the answer is yes.
Yes. Sir, now coming to the point of basis [indiscernible]. What we have seen in the past in the, like if I go before COVID, company had a more business from the horizontal. Slowly, gradually the portfolio has shifted -- shifting from horizontal to vertical. But if I look at FY '25 [indiscernible] also in the last few quarters, a company that we have done [indiscernible] more towards horizontal time, horizontal.
So just wanted to know land acquisition business development strategy for FY '25, where do you see like more lines [indiscernible] than horizontal or vertical?
Yes, it's a great question. As I said, more JDs have happened in the first 9 months and JD first tend to be a little more horizontal than being vertical. But because we have left quite a bit of money to be deployed in outright projects, as we just discussed a few minutes back, that will mean that more of [indiscernible] will start entering into the portfolio very soon as we continue and deploy more money.
But having said that, we have been quite happy and cautious about remaining originally horizontal historically in the last 3, 4 months and specifically post-COVID. In fact, we were the company who [indiscernible] this trend very early. And we saw benefits normally from the point of view of position allocation of capital but also from the point of view of mitigating and minimizing risk of our optimizing risk in the portfolio given the certainties we had during COVID and thereafter. So this strategy generally has paid off well. We don't see that we have penetrated deeper than what we should have been -- we should be doing. And hence, we see a lot of costing left in the markets that we are in. For example, even Surat, a great city of this size of Ahmedabad as big as Ahmedabad [indiscernible], et cetera, but there are very few horizontal developments which are of that great quality international standards, bringing a very different perspective to how and [indiscernible] development will look like, et cetera.
I mean given the kind of opportunities which are quite unpacked, a lot of [indiscernible] have appreciated this. we spotted the trend a little early and hence, our portfolio today looks heavier on horizontal.
Going forward also, we continue to see similar pressure on stimulus kind of focus on horizontal but having said you will see quite a bit of action happening on vertical as well as we go with the deployment of [indiscernible] deployed money that we have from all the 3 sources we discussed.
And somebody if you can give some numbers. if you go for a INR 4,000 crore JD value, what will be the 60% will be horizontal or 50% or 70%.
Any thoughts you have in the mind because what [indiscernible] early years because what is [indiscernible] such a land parcel, big, big land parcel. It will become basically [indiscernible] FY '26 getting makes big, big land parcel [indiscernible]. That is what I'm asking.
So today, we're optimizing. We've got both options. As we invest in the way we invested in the last few quarters, it doesn't mean that we have not got ideas and [indiscernible] for that matter. It's about deploying in the best alternative at that day, looking at the possibility of sales, velocity of sales, et cetera, et cetera. So to the extent, we are not overly worried about in that direction, we will go whether or not larger or this kind of parcel, will be available. In fact, it surprised ourselves already -- if I getting into large and larger horizontal arrangements in joint development agreements than what we were set out to do.
And as the brand builds for the -- as the recognition happens for that, it's already very strong in the market that we are. We are getting more and more opportunities in the market where land owners are approaching both for vertical and horizontal and development basis. And hence, this opportunity. In fact, when we talk about consolidation in the market, it essentially means that even if the market grows by 10%, the guys and the brands who are organized, et cetera, et cetera, they are growing by 25%. And that means a lot of land owners now instead of thinking of doing things themselves go through more through the brand route through an organized player route and getting into development indirectly. If that is happening, the trend of JDs are only going to increase and consolidate further.
To that extent, we are quite hopeful in the reuse to believe that these [indiscernible] inventory we keep coming. But having said that, to keep a little [indiscernible] in the game, there has to be optimum balance between JDs and our own projects so that or that we have, better ratios in terms of profitability, return on equity, et cetera, which also on skin, which is better, which means returning efforts had to be further optimized, and even in absolutes for the asset that we're putting as a portfolio are also healthy. So verticals, which are owned by us are equally important.
Our [indiscernible] almost 30%, 50% of the money that we have, maybe 60% of money goes into our own project and 30% to 40% money goes into JD. The 30%, 40% money going to JD means, they will create this fortunate amount of top line because they are more efficient on creating top line.
To that extent, it will be a little bit of a orientation towards top line being -- coming from JDs more. But from industrial standpoint, might be 60-40 in favor of vertical owned projects versus JD.
Sorry to interrupt, maybe request that you return to the question for a follow-up question. [Operator Instructions] And the next question is from the line of Harsh Pathak from B&K Securities.
Sir, I wanted to check. I mean we have been hearing that the major demand. I mean 70% of the demand in real estate space comes from the top 7 entities. But with regards to your recent [indiscernible] in Surat, that's maybe you can say a Tier 2 city. So how does this ForEx come in like our strategic growth map. I mean what's our thought process? Maybe I'm looking from a medium-term strategic growth point of view?
Sure. You're talking in the context of Surat, right?
Yes. I mean, Surat and in general are foray in our tier 2 cities, are we looking like for similar forays in other cities, Tier 2 cities as well or we consolidate in this market? Any color that you can give.
Sure. So we have historically been a conservative when it comes to geographical expansion in adding a new city.
In the first almost 1 decade of our operations, we limited ourselves to Ahmedabad, Gandhinagar being a Twin City and Bangalore. And then we started thinking of city like Surat. In fact, we talked about Surat almost 1.5 year back when we thought that this could be potentially a great opportunity for us. Quite a few things have happened since then in Surat including the [indiscernible] coming in and other activities like bullet train becoming a reality very soon. Maybe by '26, we start seeing the train running through the city, et cetera.
We'll be surprised that Surat actually is bigger than most of us believe. It's almost as big as Ahmedabad is on many fronts, including the number of houses sold, the size of the market per capita income, our overall scale and size, businesses, et cetera, et cetera, including population. It's almost they're the same size.
So it's a very natural effect. It might not be a tier 2 strategy for us in that sense typically. But we see Surat as very [indiscernible] extension -- I mean in whatever way we look at it, it could be seen as an extension of Ahmedabad, 3-hour drive from here and very similar to human mix, personal mix, brand evolution, et cetera, almost the same size.
And it can also be seen as opportunity to Mumbai, for example. Once bullet is ready, 1.5 hours from Mumbai. So to that extent, it is perfectly into the strategy overall. And we spent enough and more understanding the city, understanding the markets, and we've taken more time than what would have anticipated to enter into the city because we wanted to make sure that we enter the size scale and then the city should have potential to go deeper as we go. It's not about doing an opporunistic 1 or 2 projects.
Once we enter, it has to be decent size and that was also [indiscernible] in this case. Other than that, we expect that in the medium term, Ahmedabad, Bangalore obviously our home markets with MMR is our [indiscernible] priority, so to say. We have taken time before we announced something concrete in Mumbai, but Pune already got going and we hope that we'll add or something there as well. So these 3 are going to be our medium-term focus.
And Surat can be seen more like an extension of either Ahmedabad or Mumbai whatever way you want to take it.
Sure. And any progress on the Mumbai market that you would want to highlight?
Mumbai, we are very intensely into the market at this point. We are not in a position to announce anything at this point in time, but the lens is becoming narrow and narrow. The focus is becoming narrower and narrower. Hopefully, in the coming quarters, we should be able to announce something there.
But now some more resources are already put. We are very, very closely monitoring and evaluating the market and specific opportunities. Hopefully, something should materialize soon.
Surat is a great addition. We are happy that finally we've broken into the market and once we reach there, and we have a strong set up there, I'm sure this will give us a great opportunity to go deeper in a market which is as important as Ahmedabad for us.
Right. And just one last question. So when we -- when we say this -- when we are nearing in our closure on the Mumbai market. So with India an outright purchase or a JD? I'm asking more from a cash flow management perspective.
It could be both, but the way we are seeing at this point in time, it's due to more like a JD entry where the initial fund deployment will be contained to a large extent, but we're open to both. We are evaluating both going with the sheer numbers and in the trend that I'm seeing from the option that we have evaluated off late. It's still that chances of a JD happening are higher than an outright happening.
The next question is from the line of Akshay Kothari from JHP Securities.
Sir, congratulations on a very good pipeline. And it was exciting to see Arvind Smartspaces pouring in Surat. Just had one question, so what is the nearest billage on Image 48 where we have when the Surat came.
This is still disclosed, but this is close to the circle called -- let me just figure it out. You can take the other question, and I'll come back to you on this within the name of.
Is it near [indiscernible]?
I think so. That's the first -- yes. It's very near [indiscernible]. Yes, correct. You are right.
Okay. So again, then follow-up on that based on the indicative top line of INR 1,100 crores and 13 million square feet generation per square feet would be around INR 850 per square feet, right?
[indiscernible] I guess INR 7,000 to INR 8,000 per square of realization in the land, yes.
After what -- okay. And this -- what would be the size of the plot?
That we have not figured out yet. It's at a very early stage of planning and designing, et cetera, et cetera. I think those details will emerge over a period time. We just got into an agreement and sometimes a deal, et cetera, et cetera, but we'll come back -- I mean we'll share some details when we are close to the launch, et cetera. Anyway, as per the regulatory requirements, [indiscernible] supposed to be [indiscernible] the project before it is approved. So, we'll wait for that information. Generally, we'll do what we keep doing at a place like Uplands [indiscernible], stuff like that [indiscernible].
And sir, just one last thing just to get your thoughts on this. Surat is generally very famous for textile and diamond market of lately. Now can you just -- inherent nature of these businesses, are that that people have so much of cash that their second business is generally becoming -- getting into real estate because generally, that is where money can be [indiscernible] into. So we being a company who doesn't indulge in all the activities. How do you see this market actually evolving? Because today, it's not there. In fact, the real estate players over there are the ones who actually are very much unorganized.
I get your point. So this year, basically saying that what and how to handle the cash financials, which might be a little more permanent in the city like Surat, which is predominantly a business. You're absolutely right.
This update -- challenge updates kind of additional aspect of the business existed in many cities that we did. For example, [indiscernible] itself to start with was very similar to that. And many people believe that to sell a INR 15 crores design Ahmedabad in the outskirts with the [indiscernible] might not be a great idea.
Our experience has been in a new market, the last 20% is neutral to this or rather in favor of paying more check, which actually remains untapped to a very large extent because everybody takes the other pillar of money, which would then mean that there is nobody who gives 100% check. And if you are one of them and if you are only person doing that, it's an opportunity. Maybe it's a little smaller, but for 1 player to have this kind of vast market and the share of that vast market, I think is big enough and deep enough for us to sustain and survive.
The other thing is when it comes to buying a house, it's like something that you like then you stress yourself. If you don't like anyway, there are many reasons not to buy that. We feel that wherever we delivered a great product, for example, a [indiscernible] irrespective of value that were there at unit price levels, once people like it to manage check is not that we can issue. Banks are funding. That means that even business will want to have a little because size of the balance sheet these days, the overall environment is changing, overall orientation is changing, and investing in house doesn't mean that you could take the entire liquidity out of the system of your business. It broadly comes from bank if you so need it. And that is the cheaper source of money in many cases.
I'll give you one example. If you're buying a 10 crore house, you get 2 option. One is to take that money from your business out even if it is cash, but the cost of the capital direct or indirect cash and otherwise has to be much more than what you could have otherwise managed through a bank.
So even for a businessman who has a lot of cash and who keeps a lot of cash deployed in his business is always short of cash. That's how business is run. And then to get into an asset which is appreciating, an asset you also enjoy is actually better despite having cash to take that money from the cheapest source which is housing loan and then deploy a INR 10 crores or INR 15 crores. So all these combinations make a lot more sense.
We haven't seen the kind of problem which looks like or appears to be from a periphery, and we've been able to sell quite a bit of these products at a very hefty pace. And of course, Bangalore and those kind markets don't have been selling at all.
And [indiscernible] already in multiple projects, multiple sizing, schemes, et cetera, et cetera. So that is very hopeful and very reasonable to believe that, I mean, this is one aspect that we need to be careful about. But having said, if the right product is delivered, right product is planned and right segment is created, this should be a problem [indiscernible].
The next question is from the line of Rishikesh from Robo Capital.
So my first question is that we have an ongoing unsold projects worth of around INR 1,300 crores if I have to see the operating cash flow table that you have presented in your presentation. So I would like to know what to kind of expected sales velocity do we see here now?
In the ongoing [indiscernible] policy?
Yes.
So from the sales mix point of view, we see a trend of 1/3, 2/3 coming from sustaining and new branches. Broadly, this is what we thought could be doing this year and this is what we should be doing next year. And so does that answer your question? Or you have some other part of the question?
No. So I wanted to mix this up with also the 4,000 crore JD that you are planning for FY '25. So like what kind of velocity do we see for both of them, if you could provide it separately like for years of velocity that you see for unsold 1s or ongoing project and the ones that you will be launching FY '25?
So the par one of the question, let me answer. So part one of the question is we set to the completed and ongoing projects. It has increased significantly during this quarter, and it has valued [indiscernible] INR 40 million-odd crores or so mainly because of the few launches, which we had, so we had done broader scale launch with approximate change value of INR 550 crores. Out of which, only INR 150 crores is sold. [indiscernible] INR 400 crores was our budget added into the inventory of ongoing project. That is one.
And number two, the phase II launch of uplands 2.0 for which we have launched close to around INR 325 crores of inventory. And out of which, INR 75 crores is sold. So the balance INR 250-odd crores which added to the ongoing project inventory. So that's why you see an increase in the ongoing inventory number.
Okay. And this INR 1,400 crores and like how many years are you expecting to sell it off?
[indiscernible] basically. How much we are going to sell out of this 1,400 crores in what timeframe?
So specifically, I mean between the project at this point in time that we could say that in a couple of years' time, 2 to 3 years' time, everything on a nominal bases is getting 3 rated. So last year, we sold 800 total. This year, we are hoping that we'll grow by 30% on set sales and next year also we grow by 30%. That's the base Arvind that we are keeping.
I mean you know that number, if that's how we're going in totality and if 1 part of that is supposed to be coming from [indiscernible], I think having patent it from that point of view. And that way, it's very easy to [indiscernible] that number in that sense. So you can just stop the overall sales number first, which is starting from 800 in this year and the next year. And then assuming that 35% comes from sustaining of that, I think that's a better way to look at it rather seeing how and to what extent and what quantum will be sold from the [ INR 1,400 crores ] that we have right now. So that is [indiscernible].
Finance also is an evolving number. We launched something today, Laxmanpura. Maybe a couple of months is the launch phase and they are 3 centers into the sustaining category in that sense, I mean, immediately after the first major launch.
So we'll say that 1/3 should come from sustaining on an ongoing basis and overall number of sales you know how to predict time and [indiscernible].
Got your point. Also, just one last question. How do you see the revenue and EBITDA margins from a P&L accounting perspective for FY '25 and FY '26?
So [indiscernible] sales is something that you know how they are feeling, I mean they are feeling how is happening, and books are obviously delayed by 2 to 3 years from [indiscernible]. That's how our trajectory is.
Generally, we do [indiscernible] legitimate gap. The trajectory of growth that you see in your [indiscernible] sales should be also [indiscernible with the trajectory of growth in the books of accounts. So if we say that we have been sort of consistently growing to the extent of 30%, 35% on net sales year-on-year, that should be the stabilized growth appearing in the books of accounts.
So one way to look at it could be that you just assume that similar growth shall be visible in the books of account, which is more like 35%, 30%.
But one major disclosure or disclaimer in this is that it can really vary. On a comparatively smaller base of number of projects, et cetera, for the company like ours, it can vary from period-to-period because of that 1 giga point when you formally say that this project is slow and this project is completed, also [indiscernible], et cetera, et cetera. Because of this one stop point, which is one [indiscernible] to be passed 1 day, 1 minute, this can vary.
But on average, I mean, long term, medium term, the growth trajectory will catch up [indiscernible] in both top line cash versus [indiscernible].
[indiscernible]
And yes, the other relevant factor in that as of now we speak there is in excess of INR 2,000 crores worth of sales, which has only happened where the money is coming, going, development happening. So underlying value which is actual sales but not yet reported or entered into books of account worth INR 2,000 crores as we speak, that's how you could take that. That is also one important handle for you to work on this number to predict what could happen in the future or at least next 2 to 3 years by when these projects are getting on [indiscernible].
The next question is from the line of Rishith Shah from Nuvama.
Thanks for the opportunity but my question has been answered.
It's already answered. Okay. Okay.
The next question is from the line of Amit Jain, an individual investor.
I have a couple of questions. So first question is, at the time of launch, what percentage of inventory do we [indiscernible]?
So if I understand your question right, you are saying what percentage of our inventory pool in the time of launch? Is that the question?
[indiscernible] launch to 6 months, what percentage do you want to sell off?
Okay. Fair enough. So I mean, we would always have it to sell in the first but maybe more like a month 1, 1.5 month, 2 months. At least 30%, 35% thereabouts. Because once we do that, we know that project is broadly in autopilot mode when it comes to moneys required to execute. 35% is a very, very good number. And then you know that basically, you don't need most of our money for your construction. Your requirement goes to almost 0 if not exactly 0. That's how most of our projects are doing. As we see, most of the projects are breaking even on the construction side in creating positive cash flow thereafter.
So 30%, 35% is first milestone that we need to achieve and that generally we tend to achieve sooner than 6 months. After the initial launch within maybe 1 to 2 months or 3 months of launch, thereafter is a sustainable pace. Some an agreement with [indiscernible] company, something like 2%, 1%, 3% every month and thereabouts depending on industry. We also [indiscernible] and for the reason which are [indiscernible] have been selling much more than the numbers that we just discussed in many of the projects we had sold in the recent past. But as management, as business people, we are happy selling 1 crore and thereabouts in the initial bust.
[indiscernible].
Sorry to interrupt, Amit your voice is not audible.
[indiscernible].
Not really. Not really.
No. Sir, not audible.
Hello?
Yes, sir, now it's audible.
[indiscernible].
It is breaking, sir. We can't...
No, not audible. Maybe have to come back again.
The next question is from the line of Rakesh Padwani from Monarch AIF.
One last question from my side. How are you finding the line prices or the JD agreement shaping up in the future because now what we have seen in the last few quarters or last 1 or 2 years, the demand for real estate is very strong, that has led to line price increases on the share guide asking that the JV partners are higher. So how are you seeing, are you impacted from the same thing? And how are you trying to manage that?
So in general, yes, line prices have moved up across markets across geographies and outright deals are more expensive. That's the trend. But the good news is that the price hikes have broadly been taken care by the improved realizations and hence, margins, if it all, has got into very little pressure at this point in time. But having said, then have become more expensive and hence, absolute values in the cost have gone up for the end product. But still, the demand and the sustainability of demand is quite widespread, and most of the wins being bought by people who are not big investors buying from speculation. These are long-term investments or long-term connection sort of purposes that the buyers are buying by inventory purposes. It's not big worry, and it's quite sustainable. What is the other question you had?
No, that is regarding that how are you negotiating with the on JD partners for that like they are [indiscernible].
The JD, especially in the larger land parcel is quite subjective. People are looking at much more dependable, corporate, governed and interest were the people to partner with. The competition actually is more than what we would have anticipated. And that basically is a function of traffic cause versus the brand and the reliability, et cetera, et cetera. They're finding a good deal. In fact, it's more of rechanging rather than opposite coming our way because we to create value, we have to create the destination and these are long-term commitments. And generally, these are LTVs long-term value creation projects. So it's about us understanding the potential with land more.
And valuation generally is not that big a concern. Outright deals are a more difficult because their price sensitivity there is high for both the parties until the valuations have gone up on our outright deals.
The last question is from the line of Deepak Purswani from [indiscernible] Investment.
Sir, just wanted to understand, in terms of the launch pipeline for the next year, since we have mentioned, we have an inventory, we launched the extent of 4,100 crores, just wanted to get a sense, especially related to the 2 projects in terms of the approval process. One is [indiscernible] which is recently launched. I mean how should we look in terms of the approval for that project? And second, is the Ahmedabad one, which is a [indiscernible]?
So great question. Both -- these are very large projects. And of course, approval processes are even longer than the [indiscernible] medium size project over small size project. To that extent, in the coming year, we'll be a little heavy on these launches in the second half of the year. And we are hoping that both these products should be hitting the market in the real sense in the second half. And hence, in fact, first 2 quarters comparatively will be a little lighter on launches and will be significantly heavier on a client basis in the second half. And both this will hit the market in the second half.
Okay, and also if you can also share in terms of economic interest and [indiscernible] numbers at the current venture. For example, last year we did 800 [indiscernible] looking at the trajectory, we make lossof INR 1,100-odd crores points offers. So can you please show what would be our economic interest in this field?
We do our economic interest project-wise each of our projects. We have already put in one of the seating investor education or economic interest in the rest of the business.
Yes. But just reminder, I mean the EBITDA numbers in the margin numbers that we report. This is after all other interest being taken care land or share of land, JD/JV shares, et cetera, et cetera. So whatever we report it for a standpoint on the project margin standpoint, et cetera, all are the numbers which are post SME interests.
Thank you. As that was the last question, I would now like to hand the conference over to management for closing comments.
Thanks a lot everybody for participating in this earning of Arvind SmartSpaces, and thanks again for your continued support on this. 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'll connect with you offline and clarify and give further information as may be required. Looking forward to interacting with you all of you in the coming quarters. Thanks a lot.
Thank you. On behalf of Arvind SmartSpace Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.