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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.

Arvind Smartspace's Expansion Plans | NDTV Profit

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