Arvind Smartspace's Expansion Plans | NDTV Profit
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00:00Hello and welcome to NDTV Profit, you're watching Earnings Edge and I'm your host
00:10Mihika Bhaiwe.
00:11Well, we have an interesting set of companies lined up for you in today's edition of Earnings
00:15Edge.
00:16And up first is a real estate company called Arvind Smart Spaces and joining me is Anushi
00:20Vakharia who will, you know, take a lead on this interview.
00:22And we're going to have a conversation with Mr. Kamal Singhal, who is the Managing Director
00:27and CEO at Arvind Smart Spaces.
00:29Good afternoon, Mr. Singhal.
00:34Well, up first, I want to start with, you know, margins have slipped to the 12 percent
00:38level versus the average 24 to 25 percent range.
00:41I want to understand what exactly went wrong here.
00:46Yeah, sure, good afternoon.
00:48Yeah, you're right. For the quarter, the margin looked low at 12 percent as compared to 24,
00:5225 percent that we've been historically reporting.
00:54But this is the quarter on quarter variation, the way the way accounting standard works
00:59in real estate is that you book top line against the inventory, which is completed
01:04from a construction standpoint and sold, et cetera.
01:07And the expenses obviously pertain to the current quarter in terms of the growth and
01:11everything else that is happening in the company.
01:13So the moment you book lower top line based on these accounting standards, the margins
01:17start looking lower.
01:19But for the year as a whole, we are confident and we are sure that we'll catch up with
01:23this and it will average out four quarters put together.
01:28Hi, Mr. Singhal, Anushi joining in here.
01:30Now, I want to understand more on your pre-sales and the collection guidance.
01:34You've continued to maintain a 30 to 40 percent guidance.
01:36And even if you look at the quarter's strong performance here, I want to understand going
01:40forward for FY25, do we see any kind of revision in this guidance or this is what we
01:45expect to continue for this year as well as the next year also going forward?
01:50Sure, yeah, pre-sales is one of the most important parameters when trashing real estate.
01:55And we've been doing a 30 to 40 percent in most important parameters operating
02:00operations wise. We are very sure that we should be able to achieve 30 odd percent
02:06growth once again this year.
02:07We did 1100 crores last year of fresh sales, pre-sales, and we should go to the
02:12extent of 30 odd percent this year as well.
02:14Yes, I got it, Mr. Singhal, 30 percent growth in your pre-sales.
02:17I also want to understand, you know, more on the unrecognized revenue of over 2,300
02:22crores. By when could we see this getting converted?
02:26So most of the projects that we're doing have a lifespan of anything between two to
02:31three years, four years maximum time.
02:33All this should enter within a period of three to four years from now into the books of
02:37account. Of course, it depends upon the launch trajectory or the sales trajectory.
02:41But on average speaking, three to four years is something that we should take to get all
02:46these numbers getting into the books of account.
02:48OK, so three to four years is the timeline that we should be watching out for.
02:52Now, coming to your project launches, I want to first understand what are the number of
02:57projects that we are expecting to launch in this financial year.
03:00And coming to your business development side, what's the total number that we are
03:04looking at? We've clocked in about 410 crore.
03:06Again, are we in line to achieve the 5000 crore mark that we are seeing for the whole
03:11FY25? Sure, about launches, we should look at anything between six to seven
03:17launches this year in the remaining part of the year, out of which three major launches
03:21are planned, which are new launches, greenfield launches in the city of Bangalore and
03:24Inderapur. And otherwise, as we discussed before, anything between 2300 crores to
03:302500 crores is the worth of inventory that we should be launching in the remaining part
03:34of this year. That's one.
03:36On the investment and the fresh pipeline side, yes, we did just about 400 crores this
03:40quarter. But then in any case, the entire pipeline creation is a little more oriented
03:46and skewed towards H2.
03:48And we are sure that we are on track to create 5000 plus crores of fresh inventory for the
03:53year as a whole in terms of fresh inventory.
03:56So 5000 crore and more of these are skewed towards the second half of the year.
04:00Understood. But how are we planning to deploy funds for this one?
04:04Can you expand more on that front?
04:07Sure, I mean, to create 5500 crore rupees of fresh inventory, we need to invest 800
04:14crores in totality.
04:17We have three sources of funds which are lined up and kind of closed.
04:21Internal accruals have been very strong last couple of years.
04:24In fact, we've made more than 800 crores of free cash flows from the operation itself.
04:29And that trend continues. So that becomes one of the important sources to fund 800 crores
04:32of total investment in the next few quarters.
04:36The balance sheet is absolutely debt free.
04:38In fact, we have a negative debt of around 50-60 crores on a net basis at this point in
04:43time. We can easily raise debt to the extent of 300 crores to 400 crores within the
04:49conservative limits of leveraging, so to say.
04:52So that's another. And we are working on that.
04:54By the end of this year, we'll see some reasonable debt start showing in the balance
05:00sheet. And the third source, of course, is the HDFC platform, which is in operation.
05:04This is the second platform with HDFC we are doing, which is worth 900 crores, out of
05:08which almost like 500-600 crores is still left to be permitted and deployed.
05:13So these three sources put together puts us in a position that 800 crores should not be a
05:17problem in terms of investing into the fresh pipeline for the year.
05:22A little bit increase on the debt side, but within the optimum range.
05:25Mr. Singhal, I also wanted to get more color from you in terms of the pricing growth and
05:30the inventory trends the company is seeing.
05:33So pricing has been pretty stable, healthy.
05:37We saw a decent kind of increase in prices last year, and that meant that despite
05:44increasing cost, the margins were intact.
05:47We see prices remaining very stable in this current year as well.
05:51Commodity prices and the cost is quite stable for the last few quarters already.
05:55In that sense, we are fairly OK on the margin side and price side as well.
06:01So we are expected to be remaining pretty stable from here onwards.
06:05All right. And now, if I want to shift focus to the kind of projects that we have, of
06:10course, we divided into the horizontal and the vertical part.
06:13But I want to understand why the majority of it has been on the horizontal past.
06:17If we see the last year trend as well, is this going to continue in FY25 as well?
06:22And can you give us a breakdown on the mix that we are aiming for between the two sides?
06:27And what are the what is the differentiating factors here in terms of IRRs, the cash flow
06:31conversion and all that?
06:33Can you expand more on this space?
06:35Sure. We have been a little heavy.
06:37I mean, of course, we are heavy on the horizontal side, post-COVID specifically, and we've
06:41launched quite a few benchmark projects, if I may say so, in the city of Ahmedabad and
06:46also in Bangalore in horizontal space.
06:48We have been traditionally doing quite a bit of vertical work, apartments, etc., in
06:53Bangalore. But Ahmedabad has generally been horizontal.
06:57Post-COVID, there was a specific opportunity and there was a clear preference that
07:01customers showed in terms of having weekend homes, recreational homes and properties
07:07which are a little bit in outskirts, but which gives you a little more space to live and
07:11enjoy. So that was an opportunity we worked on and it has paid off very well in terms
07:16of returns, cash flows, IRRs.
07:19They are significantly better than our vertical product, which is construction heavy and
07:23construction funding heavy.
07:24To that extent, the company has created a very, very special niche for itself, for both
07:30in the city of Ahmedabad and Bangalore, and we'll continue to do that.
07:32So that's one stand we've done up over the last few years and we'll continue to build on
07:36that strength. But having said that, vertical is as important as horizontal.
07:43Coming quarters, two or three quarters, we'll see a lot of investments actually going into
07:47vertical projects.
07:48Bangalore will see quite a bit of action on that front and we are aiming to get almost 50
07:53percent of the planned turnover coming from or the fresh pipeline coming from vertical
07:58projects, mainly targeted in the city of Bangalore going forward.
08:03All right, so Bangalore is what we are aiming forward, but are we looking for any
08:07addition of other geographies as well, because our core focus has remained on three of the
08:12markets that you spoke about, but any new cities that we are targeting or we are going
08:16to expand in the continuous pace as we move forward?
08:20I'm sure, yeah, we are right now almost 50-50 on the long term basis between Ahmedabad and
08:25Bangalore. These two markets have always been our strengths and this is where we are
08:29operating. But going forward, medium term and short term, we definitely want to enter
08:34reasonably into the city of MMR in Pune put together.
08:38This is one additional region that we are targeting.
08:40We did one project in Pune, which has done well, and we've learned how that market
08:45dynamics work, how the regulatory environment works, the business environment works, etc.
08:50Having wetted our feet, now we are in a position to invest further in the city of Pune and
08:54MMR. And you will start seeing some actions happening in the remaining part of this year
08:59between these two markets of Pune and Mumbai, along with, of course, Bangalore and
09:04Ahmedabad, which are our current markets.
09:06Got it, Mr. Singha. You know, the company also has several projects under approval as
09:11well as under planning right now.
09:13Could you maybe give us details on certain key projects that have made significant
09:19progresses and maybe you could see benefits coming in the next two, three years?
09:23Sure. Apart from the existing large ones, which are plans, which are some very large
09:29development form of origin and developments in Ahmedabad and Bangalore, we have three
09:33very major projects lined up for this year launch.
09:38One is a project at National Highway 47 Ahmedabad, which will be in excess of 500
09:42acres. This is one of the very special projects for us in terms of size, scale and
09:47offering. This should be launched this year.
09:50Apart from that, this year should see us, our presence in Surat as well.
09:56This will be our first project in Surat, more than 250 or 300 acres of project is being
10:01planned there. Land deal is already concluded.
10:05Right now, the project is under approval and designing, etc.
10:08We should see that project also getting launched this year.
10:11Apart from that, one large vertical project in Bangalore is also lined up to be launched
10:16in the next couple of months. It's situated at Banargata Road in Bangalore, South
10:21Bangalore. So these three are the major ones lined up imminently, next three to four
10:26months time from now.
10:27Mr. Singhal, I want to come back to the second project that you mentioned about the
10:30Surat one. Are we expecting it to be launched in the Q2, Q3 onwards?
10:37That is the first phase that I'm talking about.
10:39Or is it going to be the later part?
10:41So, reasonably speaking, we should see that getting launched around Q3 of this year.
10:47Q3 of this year. And what is the size, if we are to see, of this project?
10:53This project should be in excess of 1,000 crores of top line.
10:56Absolutely.
10:58Mr. Singhal, I also wanted to maybe get more perspective on the project
11:03classifications. Obviously, residential, 98% of the project classification.
11:08Commercial is on a very minute size. Do you see this growing ahead or is the focus
11:13going to be in residential?
11:16So the focus of the company is clearly on residential. It's going to be remaining the
11:19same. We are a residential focused company historically, and this is how we are
11:25planning it to be. The commercial side of it, the small component that you see is more
11:30like an adjacency to a residential project and nothing else.
11:33So clearly, we are investing in residential and this is what the strategy is for the
11:36near to medium term.
11:38Got it. And Mr. Singhal, before we let you go, one last question. Within the residential
11:43space, you know, you have different sectors, especially the mid-market, affordable and
11:47luxury. Is there a certain kind of strategy or a targeted mix going forward?
11:53I couldn't hear this properly. If you could repeat the question, please.
11:55Yes. You know, within the residential, you know, you have subclassifications like
11:59luxury, mid-market and affordable.
12:01Is there a targeted mix that the company is aiming at for the near to medium term?
12:06Sure, sure. In terms of affordability, we are broadly present in mid, upper-mid and
12:10luxury segments. We are almost not there in affordable.
12:15Affordable is something that we clearly are not focusing at this point in time.
12:19But, you know, even the market is taking more of upper-mid and luxury segments for
12:25the last few quarters. In fact, this is where most of the action is happening.
12:29In fact, the overall proportion of sales in terms of number of units sold in the entire
12:33country or at least in the eight major cities of the country, you see a clear trend of mid
12:39and upper-mid segments doing pretty well.
12:42This is our focus. This is our most important segment.
12:45And this is what we strive to grow in.
12:48Yes. Well, thank you, Mr. Singhal, for joining us.
12:50And we wish you all the best for your future endeavors.
12:52Thank you. Yes. Well, viewers, on that note, it's time to slip into a short break.
12:56But you stay tuned. Lots more lined up on the other side as we'll be joined by Dilip
13:00Panjwani, who's the chief financial officer at Vari Renewable Technologies to decode their
13:04quarter gone by.