Earnings Call Transcript - XNSE:ARVSMART 2026-11-06

Operator

Ladies and gentlemen, good day and welcome to the Irwin Smart Spaces Ltd. Q2 and H1-FI27 Post-Reserved Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal for an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Mr. Satya Prakash Mishra. Thank you, and over to you, sir.

Speaker 3

Thank you. Good afternoon, everyone, and thank you for joining us for the Q2H1 FY27 results conference call for Arvind Smart Spaces Limited. The financial results for the quarter and related presentations were uploaded to our website, as well as on the stock exchanges. Hope you had enough time to go through it. Before we begin, let me introduce the management team. Joining me today on the call is Mr. Kuleen Lalbhai, our chairman, Mr. Priyans Kapoor, our managing director and CEO. We also have Mr. Amir. Please note that anything said on this call that reflects outlook towards the future should be construed as a forward-looking statement and must be reviewed in conjunction with the risk that the company possesses. I would now like to hand over the call to Mr. Puleen Lalvai for his opening remarks. Thank you, Satya. Good afternoon, everyone. It's a pleasure to be here, and thank you for joining us for the call. Our performance in H1 FY27 has been encouraging, with bookings of 1,338 crores. This nearly covers 90% of full-year FY26 bookings within the first half of FY27, suggesting a great year ahead also in terms of bookings. This reflects the strength of our development portfolio, sustained customer demand, along with progress we have made in building a scalable sales engine and a robust business platform. The Indian economy continues to demonstrate remarkable resilience and structural strength, reinforcing its position as one of the most compelling growth markets globally. The Indian real estate sector has Amid an evolving global environment. Geopolitical uncertainties, particularly the developments in West Asia, volatility in crude oil prices, currency fluctuations, and inflationary pressures have created challenges for the broader economy and increased cost pressures across the construction value chain. However, the sector's underlying growth drivers remain firmly intact. Three structural forces continue to shape the long-term trajectory of Indian real estate. The first is urbanization, the second is formalization, supported by regulatory reforms, and the third is India's growing position as a global hub for talent, technology, and capital, with the expansion of GCCs. With this, the nature of residential demand also... quality, design, location, amenities, wellness, and the overall living experience. At Arwin Smart Spaces, we have consistently sought to anticipate these changes and evolve our business in line with the changing dynamics of the market. One of the defining strengths of our journey has been our willingness to adapt intelligently to emerging opportunities, whilst remaining anchored in our core values of quality, integrity, and customer centricity. Recognizing this transition early, we have proactively strengthened our capabilities and expanded our presence in the vertical residential segment. Over the medium term, we expect vertical developments to constitute the majority of our portfolio mix. Our focus remains firmly anchored in the mid to premium residential segment, which we believe represents one of the most compelling long-term opportunities in Indian real estate. Demand in this segment is increasingly driven by fundamental life stage transitions, including first home ownership, family formation, and lifestyle upgrades rather than speculative cycles alone. This provides a more sustainable foundation for long-term demand. In this evolving market, we believe the real differentiator will be the ability to consistently deliver superior customer experiences. Brand equity is not built merely through advertising and marketing investments. It is earned through Our net promoter scores, referral net bookings, and repeat customer engagement reinforce the strength. Digital marketing. Long-standing understanding of customer behavior and brand building expertise. to be the most transformative phase in the company's history. The cash flow generation. We have our presence in our focus geography, strengthening our vertical development capabilities, and delivering differentiated residential experiences. The opportunity before Indian real estate is significant. As we move forward, we remain committed to creating enduring value for our customers, employees, shareholders, and all other stakeholders. With that, I would like to now hand the call over to Priyansh, who will take you through our operational and financial performance in greater detail.

Priyansh Kapoor, CEO

Thank you. Thank you. During the quarter, we recorded bookings of over Rs.906 crores, which is more than double compared to Rs.432 crores in Q2 FY26. The strength of a brand and our ability to consistently deliver We will begin with the question and answer session.

Operator

Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Jainam Shao from Equator Securities Private Limited. Please go ahead.

Jainam Shah, Analyst — DB Securities Private Limited

Yeah, hi, sir. Thanks for the opportunity and congratulations on a really good set of numbers across P&L, even pre-sales and everything. Just starting with the 2H part, as we've already upgraded the guidance, what all launches we are targeting in which markets and what could be the size and what could be the timeline for the scene and anything we have launched in month of October?

Priyansh Kapoor, CEO

Right, Jainam. So, Jainam, we had earlier guided for about six launches during the year, and we have already done two launches in H1, which was about 1,250 crores worth of inventory. So, in terms of the booking value that we are looking to launch with the four projects that are a work in progress is about 2,200 to 2,500 crores that we will be able to bring to the market. In terms of the split, we are looking at getting two projects in Mumbai in the second half.

Jainam Shah, Analyst — DB Securities Private Limited

You got it, sir. Just one thing, on the margin part, as we are guiding 22-25 odd percentage margin, but whatever we see in the P&L, it is always gross margin upwards of 70 odd percentage, a beta margin upwards of 40 odd percentage. Despite, you can say, no major revenue booking with a little completion on a quarter-on-quarter basis, large, you can say, revenue might be recognized going forward. So, any reason for, you can say, guiding this range, whereas our overall numbers have been very strong as compared to what we have been guiding consistently?

Priyansh Kapoor, CEO

So, Jainal, I think very good question, and we've been delivering consistently better margins than we have been guiding. However, I think when we give this margin, this is, I would say, what we form as a basis of our underwriting. A lot of price growth in the previous years has actually added a lot to the bottom line, and we've been very efficient with our cost control. So, that has reflected very well in our bottom line, but we try to guide in terms of what we are actually following for our new underwriting.

Jainam Shah, Analyst — DB Securities Private Limited

Got it, got it. And sir, on those launches that you have rolled up on 1-1, Mumbai, and Dubai, and the Robo, all these three will be largely in the fourth quarter or there will be something coming in the third quarter as well?

Priyansh Kapoor, CEO

So, we are working on getting some final stage approvals on the project. So, we are not currently sure whether we will be able to bring them to Q3. So, maybe I think towards the last month of the 43 or we will probably see them in Q4 in terms of our numbers.

Jainam Shah, Analyst — DB Securities Private Limited

Got it. So probably this year our pre-sales number would be somewhat of, you can say, 2x of the last year, a year to 2x of the last year. Going forward, how do we see growth on a higher base given the launch is heavier? Will it be stabilized in a year and then again grow or we would be continuing to see maybe 15, 20, 25% of growth for next 2 to 3 years from the base of let's say 26, 27 and then all the year?

Priyansh Kapoor, CEO

Long-term growth guidance for about 30% year on year, and I think this year is, I would, Thank you.

Jainam Shah, Analyst — DB Securities Private Limited

You got it. So, just last question from my side. We are doing good in terms of pre-sales, collection, launches, and P&L as well. On the BD part, to sustain this trajectory, what kind of steps and what kind of activities that we are doing to make sure that this approach trajectory continues. Along with that, there would be even some kind of initial outflow that you would be doing for the outline and for some kind of investment in the JVJDAs as well for the redevelopment as well. So, basically, how do we manage our two things, which is BD, as well as along with the, you can say, making sure that Valencia doesn't go stretched and to make sure that the growth happened at around this percentage of 30% that has been gained.

Priyansh Kapoor, CEO

So I think we are very, very conscious of capital discipline. So if you see one, I think we are looking at project portfolio mix, which is a mix of JDs as well as outright. So in the medium term, we want to maintain a 70-30 focus towards JD to outright projects and so the GDP that we add. So that brings capital. And when we are looking at sourcing, we have, like I said, we have actually created a good city model now. We have regional leadership. Reflecting in the... Thank you. 100 crore of stock, and this year in H1 we've already done something similar. So we feel quite confident that we should be able to get a guidance of about 4,000 to 5,000 crore in the current year. to replicate while maintaining capital.

Jainam Shah, Analyst — DB Securities Private Limited

You got it, sir. Just one follow-up on this. You already established a very good brand in, let's say, Ahmedabad. For Mumbai and Bangalore. Bangalore, of course, we have launched some of the projects in Mumbai. Our brand visibility might not be there. How do you, you can say, establish yourself for the two newer markets, given that there has already been a very large competition from a very large developers over there. So, how do you see yourself from, let's say, five years back till today in these two markets and probably five years going forward in these two particular markets?

Priyansh Kapoor, CEO

So, I think if you see Jainam, I think it's a very measured and thoughtful growth. So, if you see our Bangalore numbers, they see already when you talk about why I'm entering the market. Bangalore is contributing 50% of our sales for H1. And last year, Amdabh was about 70%, Bangalore was about 30%. So, even with the base expanding, there's a first thing Bangalore itself as a market has crossed more than 600. The corporate brand actually has acceptance all across. That gives us, I would say, good entry in each market. And then I think with the quality of the product selection that we are doing, and I would say our entire sales and distribution setup that now we have started to build, I think we are fairly confident that replicating this model, even in Mumbai, should not be as difficult, backed by, of course, a good quality product that we are looking Thank you so much.

Jainam Shah, Analyst — DB Securities Private Limited

This is all from us. All the best. Thank you.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. The next question is from the line of Amit Srivastava from 361 Capital Private Limited. Please go. Mr. Srivastava, I'm Yang Muthunan, and please speak forward.

Amit Srivastava, Analyst — 361 Capital Markets Private Limited

Yeah, am I audible?

Operator

Yes, sir.

Amit Srivastava, Analyst — 361 Capital Markets Private Limited

Yeah. Congratulations on the team for excellent performance on operational side. My first question is in terms

Jainam Shah, Analyst — DB Securities Private Limited

of the business mix, which is going to be there.

Amit Srivastava, Analyst — 361 Capital Markets Private Limited

In our last, this year, whatever the project we have signed in a BD that has come from the JDA. And now the volume wise mix is almost 78%. So structurally, you have given some indication that it should be 70-30. So can we expect that whatever the future we are looking at this year will come into the own projects? And second is given the current balance sheet strength, what is the kind of business development potential we have to generate even in the next year? On an overall basis, considering that net debt and the debt to equity as well as OCF generations.

Priyansh Kapoor, CEO

Right. Hi, Amit. Thank you. Where our debt equity still is actually 0.26% far below our stated comfort. So we have sufficient room available. I think supporting about 1,000 crores of land outflow every year, I think, is not very challenging with the mix of the operating cash flow that we are generating and also ability to take some debt over a period of time. So, and we are within that particular comfort range even if you see our H1 numbers.

Amit Srivastava, Analyst — 361 Capital Markets Private Limited

1,000 crores, you said that the investment, sir, for the deposit.

Priyansh Kapoor, CEO

That's correct.

Amit Srivastava, Analyst — 361 Capital Markets Private Limited

And second, when we are looking at in terms of the positioning of our products, like in Mumbai, we are coming out to projects which we are launching. So basically, when we go into that particular market, when we are going to launch this product, how we are positioning ourselves in terms of the brand in that particular market, in terms of the pricing, in terms of the product which we are going to launch. Like in Arvin Silva, we have got a very strong response in Bangalore. So what has worked in that project? And effectively, if we compare in our Sarjapur, how is our product pricing in that particular market, if you look at industry?

Priyansh Kapoor, CEO

Right. So if you see our Sarjapur project, we've actually sold it at about 12,600 pesos square feet, which is generally, I would say, considered to be on the premium end for that particular market. So when we come to Mumbai and when we are looking at our project there, the positioning of the customer segment that we are targeting I would say is the premium category. So we are not doing the super luxury, we are not doing, I would say, the affordable category. We are targeting what we call and define as the premium category homes. So essentially homes would be 2.5 to 2.5 crores. The quality of the location, one that we've added, and also the quality of the product, the design and the thoughtfulness that's gone into building amenities, which we believe will resonate with people when we bring it to the market. So that gives us confidence that what we actually did well in Silva, we can replicate, of course, the same strategy with a very different kind of product, keeping in the context of the Goliga market. So it gives us good confidence that we should be able to...

Amit Srivastava, Analyst — 361 Capital Markets Private Limited

Okay, and just one last case, if you look at in terms of the numbers, how would be the delivery in the next six months in terms of the booking, which is going to be delivered, and in terms of the construction spend for this particular next six months?

Priyansh Kapoor, CEO

From a construction spend perspective, you see we have been seeing a very rapid growth. So, largely, I think we've almost been doubling the pace at which we have been seeing our construction. Also, we have not been putting out very specific guidance on what we will be able to hand over immediately, but our construction spends have actually more than doubled over the previous year. So, that is something which we believe will start reflecting in the delivery.

Amit Srivastava, Analyst — 361 Capital Markets Private Limited

Okay. Any numbers you want to give, sir, for the construction is better.

Priyansh Kapoor, CEO

From a construction front perspective, we are on track as per our plan and doubling compared to what we were doing over previous years.

Amit Srivastava, Analyst — 361 Capital Markets Private Limited

Sure, I'll get into it. Thank you very much and happy Diwali 213.

Operator

Thank you. The next question is from the line of Harsh Fathak from Modila Looswal Financial Services Limited. Please go ahead.

Harsh Pathak, Analyst — Motilal Oswal Financial Services

Yeah, hi, Kulina and Priyant. Congratulations for the very strong performance for the quarter. My first question is on the operational thing that we have improved. So, this quarter we have seen along with very strong new launches. Even the students have revived. So what improvisations have we taken at operating level to revive this?

Priyansh Kapoor, CEO

We got these two launches coming in which, in fact, we managed the process quite efficiently. Both the launches, both these projects, if you see, are actually less than one year old acquisition. One was about seven, eight months ago, the other one about nine, ten months ago. So one, I think, the way we ran our process in terms of... Thank you. So I think the organization, we said that we...

Harsh Pathak, Analyst — Motilal Oswal Financial Services

This year's crore target we have revised upwards to 2,600 to 2,700 crores. Can we expect the medium-term target of maybe around 5,000 crores hitting by maybe FY20 in something like that? Are we on the right track too?

Priyansh Kapoor, CEO

I believe I think we can continue to grow at about 30% even on this particular base. So something like a 5,000 crore, I think, is something which we can actually reach in the medium term. So we are fairly on track to build our organization to that particular scale.

Harsh Pathak, Analyst — Motilal Oswal Financial Services

Understood. When I see the estimated operation, there is 12,000 crores of inventory that we are carrying. So this year pre-sales is moving closer to 8,000 crores mark. So what is the inventory that the company is willing to maintain so that with our growth expirations, we'll be able to comfortably meet our pre-sales target. So what is the step up in the BD required to maintain that kind of a comfort on the sales visibility? So this year of the current rent rate of 4,000 to 5,000 crores of BD that we are targeting, how much should this increase to maybe in the next two to three years?

Priyansh Kapoor, CEO

So I think generally, if you see, I think for a company at that stage, the BD that we are actually doing has to be definitely much higher than the replacement rate. So, if we are... Looking at about 26, 2700, theoretically, any inventory that we were actually adding more than that gives us a chance to continue with the growth rate. But because we are looking at, I would say, growth being higher in the first few years, and this year is a reflection of that, we needed to do some extra BD, and hence we are looking at that 4,000 to 5,000 crore of build-out. I think a 12,000 crore number probably does not give a very, very clear picture from the monetization perspective because many of these are actually fairly large projects, like we have said in the past also, which are going to be developed over multiple phases. The good takeaway from that is the distribution of the inventory. Now, if you see our portfolio, we have almost 25 to 40% actually in each of the three markets that we are operating in, so it gives us a diversity. But our sense is, I think we need to continue to add at least 4,000 to 5,000 crore every year to be able to maintain growth consistency in the medium term. I think, and for that, I think probably after a few years, we'll see how do we need to reset this kind of a number.

Harsh Pathak, Analyst — Motilal Oswal Financial Services

And my next question is on the MMR move that we are going to make in H2O. So on the pricing front, since we are going to launch our first project here, how do we see pricing versus the micro markets that we are going to launch? Are we going to do some competitive pricing or are we looking to launch at the market rate? How are we thinking around that?

Priyansh Kapoor, CEO

So I think we will be in the range. We want to, of course, I think, we believe we can get some premium because of the brand and the kind of product and positioning that we have gone for. But I think at the same time, I think we want to be competitive. So we will, when we are actually very close to the day of the launch, we generally have a process where we will do our assessment on the price and the feedback that's coming in from partners. But we will want to be competitive to ensure that we are accepted well in the market. But more than only pricing, I think it's a combination of the quality of the offering overall. That's what I believe the customers in Mumbai will value the most. So we are working on getting that absolutely right.

Harsh Pathak, Analyst — Motilal Oswal Financial Services

And my last question, if I may, you know, since we have... We are ramping up our growth really well. So, what would be the ideal milestone at which we will be starting to think of a fourth market, maybe, you know, any other region? What is the milestone that you are thinking of on this trend?

Priyansh Kapoor, CEO

I would say we have not created an absolute specific number in our mind that this is a number after which we go to the fourth market. I think it's a question of overall the maturity of the organization, how deep we are able to establish in all the markets that we are. Currently, I believe that I think another three years we should be deep enough in Bangalore and Mumbai as well. These are self-operating. Maybe that would be the right time for us to potentially evaluate. which is just beyond, which can be managed from these cities, maybe like in the case of Ahmedabad, we manage Baroda from here. So, something of that sort can happen earlier, but otherwise, I think adding a new market, we will probably take a call after another 2-3 years.

Harsh Pathak, Analyst — Motilal Oswal Financial Services

Understood. Thanks a lot for taking my questions. We are channeled festive greetings to the entire team. Thank you. Thank you. Same to you.

Operator

Thank you. The next question is from the line of Pankaj Sajdeva from Avis Capital Limited. Please go ahead.

Pankaj Sajdeva, Analyst — Axis Capital

Yeah, good afternoon. Congratulations on the great set of numbers to the entire team, and thank you for the opportunity provided to me. I have two very quick questions. The rest all got answered. One is our inventories have expanded to almost like 2,700 odd crores. So, if you can just give us a little more color on what is the breakup of this inventory in terms of early-stage land banks and the construction side. That's one. And the second question I have is, what is the sustainable margin profile we are actually expecting in, say, H2 of FI27? And if you can give us some guidance on FI28 also, H1 was almost like 42 or 75, if I remember correctly.

Amir, Other

Thank you for your question. I believe in the first question, you're talking about the inventory that you see on our balance sheet, which is about 2700 crores. Is that correct?

Pankaj Sajdeva, Analyst — Axis Capital

That's right, sir.

Amir, Other

Yeah. So that inventory is a combination of all of the projects that we're carrying on our books. J.D.-oriented with very little outright, so most of this inventory that we see, A very small portion of that is corresponding to the land payments that have been made. A large portion is also corresponding to the construction and the overhead spend on those projects. A number of these projects are close to completion, so that's why you see the number accordingly. If you refer to the page where we give details of our project portfolio, there you would see that a number of these projects are coming to a closure, so that's corresponding to the number of the 2700 crores. Thank you.

Operator

Thank you. The next question is from the line of Surinder Singh from MyEquityShoppa, Private Limited. Please go ahead.

Surinder Singh Thind, Analyst — MyEquityShoppa Private Limited

Hi, sir. Good afternoon. I have two questions. One is, I like your overall thinking how you are aligning business for bigger size with time. The question is about our overall thinking and ground guardrails we have created by which we ensure that the timelines we promise to hand over the projects to our clients, they are done in the most optimized manner. So, if you can give a couple of examples which will help me to understand it, it will be really great.

Priyansh Kapoor, CEO

Sir, you did not get the question. Are you using the timelines that we promise to our customers for the projects?

Surinder Singh Thind, Analyst — MyEquityShoppa Private Limited

We are handing over the projects, right? So in real estate, usually we see that there is a lot of delay because of X, Y, Z regions beyond us, right, due to external factors. So I'm just wondering our management of our company, what kind of overall thinking they have and the kind of ground level guardrails they have put in place by which we get early indicators and we can do course correction around it.

Priyansh Kapoor, CEO

I think this is a very relevant question and I think this is finally the core of the business that what we promise I'll be able to deliver on time and actually other promise quality to the customers who actually put that fixed. So I think this is something which we are very, very focused on. Like I said, one thing that we actually monitor very, very closely is what is our cost of construction outflow that are going in and we review this by projects, we look at this by every region. So we are monitoring. And we have a very strong operations team which is driving this on a day-to-day basis, not even week-to-week, because this is absolutely something which needs to be monitored on a day-to-day level. And there is governance at senior levels to ensure there is enough intervention, enough tracking to ensure that we are... Thank you.

Surinder Singh Thind, Analyst — MyEquityShoppa Private Limited

Okay. And the second question, sir, the kind of accounting this particular sector has to follow. It is difficult to measure the performance of the business even on yearly basis because the net profits or the overall top line is driven by that accounting rule, which makes it very lumpy. So I'm just wondering that what kind of early indicators you use to judge that? The capital is, invested capital is going to earn the right kind of return for us in, say, a block of three years or five years.

Priyansh Kapoor, CEO

Right. So I think you're right, actually, accounting is because of the project completion method may not give you the right picture immediately. But if you see, I think, a combination of various parameters, in particular the OCF that you look at, actually that... Our current year numbers, we are almost at about 30% of our collections are going towards OCEA. It's a good indication over the medium term of the margin profile, how your projects will operate. So if your construction outflows are on track and your collections are on track and you're generating this kind of an OCEA, it's actually indicative of the kind of profile of business you're operating at, and which is for us currently as per our plans.

Surinder Singh Thind, Analyst — MyEquityShoppa Private Limited

Okay, sir. I was, in particular, looking for an alternative for, say, return on equity, which usually we see for the efficiency of our overall business, right? So, do you have any thinking around that return on equity? How do we measure at your level?

Priyansh Kapoor, CEO

So, I think return on equity is something, again, if you were to look at purely accounting, then actually this, again, brings the same problem of the project completion method. So, that's why we have some of these. There are parameters which can give us a real-time performance of the project before the accounting revenue actually hits. And one, like I said, is cash flow. Other than that, of course, we have quite a few internal parameters, how we look at our own asset management, which gives us those early signs, whether an individual project is actually behaving well. And finally, from an accounting perspective, it's actually a combination of various projects which actually reflect the performance. So, our own early science and monitoring gives us that particular clarity.

Speaker 3

Just adding one thing here, that the holy grail from an internal capital allocation in this business is the IRR hurdle rate which we have for our business. So, in all our projects, we typically always have a 25% IRR hurdle. If we keep deploying capital at that kind of hurdle rate. Finally, it will lead to very strong OCF generation. Ideally, the ROSI, underlying ROSI should also be close to that number, but because of the full completion method, it doesn't become visible in the financial numbers, but that is how we deploy capital. If we keep deploying capital at 25%, then at scale, the ROSI will also be close to that.

Surinder Singh Thind, Analyst — MyEquityShoppa Private Limited

Okay, sir. That really helps. Thanks a lot and wish you all happy deposit and all the best.

Priyansh Kapoor, CEO

Thank you. Same to you.

Operator

Thank you. The next question is from the line of Deepak Purswani from Swan Investments. Please go ahead.

Deepak Purswani, Analyst — Swan Investment

Yeah. Thank you for the opportunity. I wanted to check it out on the strategy bar. See, if I were to look into the urban growth journey, I mean, from March 22 to it. 25, our pre-sale grew at a faster pace, and then there was some moderation. Now, we are again accelerating in terms of the growth, but just wanted to check it out in this journey. Right now, we are in the middle of the cycle versus the previous when there was an earlier cycle. So, for this growth, we have to do incrementally business development at a faster pace. So just wanted to get the things. What are the guardrails we are maintaining so that profitability is intact, especially when we are looking into this growth journey?

Priyansh Kapoor, CEO

Right. Hi, RIPAQ. So, RIPAQ, I think, one, I think, if I were to pick up from what Kulen also mentioned, so we have a very clear, defined framework for approving any new deal that comes in, and IRR off. Like you mentioned, is something which is sacrosigned when we look at any individual deals that we are approving. So in this growth journey, we are quite conscious that the quality of the deals that comes in on any of the financial parameters, that cannot be diluted. So all the new deals that we are adding are keeping that particular lens in mind. Overall, from a capital discipline perspective, to reiterate, like I said, we are still heavy on the capital life side, so it ensures that at an institution level, we are not getting into a very heavy uploated balance sheet. So I think that is something also we are quite conscious about. And coming to your point on cycle, I think you're right, actually, maybe... We could be on the more advanced side of the relative cycle now, but the growth rate that we are putting in mind and keeping the three cities that we are entering, I think we have a sufficient room to grow that we can continue to grow at a healthy rate that we have been guiding for without, I would say, doing any of the super ambitious or I would say these which are diluting are penal in any way. So there is enough room to be able to add good quality land. Good quality deals for the growth aspiration that we are setting up for our medium term the next 3-4 years.

Deepak Purswani, Analyst — Swan Investment

I mean, just continuing on this part, see, I mean, from the cost escalation point of view, there has been a very sharp cost escalation, especially in the last six months due to geopolitical. But if I were to look from the mid-cycle point of view, the price rise in most of the micro market would be very limited. So, in this context, what would be a key strategy in terms of underwriting the project that profitability is intact, if you can share perspective on that?

Priyansh Kapoor, CEO

I think very good question. So one, I think one principle we've been following in particular for our underwriting of our projects, especially in this cycle, we are not reliant on too much of price increases. So that is something that we are conscious about. So we assume and we actually underwrite this is the price which we feel confident on today. So we are not really dependent on price increase to be able to manage our P&L. On the cost side, we've in fact, probably in fact started provisioning for more on inflation as well as on contingency. In the last one, one and a half years. So as a result, even... Thank you.

Deepak Purswani, Analyst — Swan Investment

And finally, just continuing on this policy, incrementally, when we are accelerating our growth, more and more has to be on the vertical development side, right? Our portfolio has to take more towards the vertical development side. In this context, what are the key changes internally we are trying to make so that our execution cycle could improve, especially on the vertical project development side?

Priyansh Kapoor, CEO

Hello, you're absolutely right. So if we are looking at this growth, and we've also said that over a period of time, we will, while today our portfolio is 6535 horizontal, we will eventually want to reverse it over the next four years to have 65 towards vertical over the next four years. Keeping in mind, I think we are already trending, and when we started working on our organization build, I think this was something which we were quite focused on. And last one, one and a half year, the quality of the teams and the people who come from background who understand this particular space. I've been a key tenant, plus I think all our internal processes, the way we look at design, the kind of partners we work with. I think that is reflected in that particular strategy, even the kind of partners we're working with. Thank you for making.

Deepak Purswani, Analyst — Swan Investment

Thank you, and all the best, and wish you a happy Diwali to do it.

Priyansh Kapoor, CEO

Thank you. Same to you.

Operator

Thank you. The next question is from the line of Jainam Shah from Iguira Securities Private Limited. Please go ahead.

Priyansh Kapoor, CEO

Yeah, I didn't get to that.

Jainam Shah, Analyst — DB Securities Private Limited

Yeah, hi. Thanks for the opportunity again. So, just one thing. If you see our trajectory over the last 4-5 years, excluding this particular year, our particular quarter of the year has always been influenced by a significant launch of a particular project in that particular quarter of the year. Our utility sustenance sales after that launch will have been eventually very limited. Whereas we see this particular year, the sustenance sales in the 1Q as well as in the 2Q, excluding the Bangor and Andhavad launch, it has been good in the big range overall. And of course, for any real estate company, sustenance is also something that can drive the growth for the company over the longer period of time. How do we see changing our perspective from launch lead, pre-sales, to a sustenance lead, pre-sales over next, even the digital soon?

Priyansh Kapoor, CEO

I think this has been a very key focus of our login, of build, and the... If you recall last year, I think around quarter four, we started saying we want to start clocking about 200 crores from our sustenance sales in every quarter, and if you see our H1, we've already done about 745 crores from sustenance. So, we have had a substantial shift, so where we are actually now getting almost to 300 crores of water from sustenance alone, and as we bring many of these new launches, I think our ability and even having the right I think both are actually moving well in tandem. So we feel confident that sustenance will be a meaningful part of our portfolio and I think this is gradually taking shape. I think it's going to be visible more and more after we do some more launches in all the three markets that we are currently operating in.

Jainam Shah, Analyst — DB Securities Private Limited

Thank you so much, and wish you a happy birthday. Thank you.

Priyansh Kapoor, CEO

Thank you. Wish you a happy birthday.

Operator

Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Piyanj Kapoor for closing comments.

Priyansh Kapoor, CEO

Thank you for today's earnings call and your continued interest in Arvind Smart Spaces. I hope we have been able to address most of your questions today. Agar, if there is anything we may have missed or if you may require any further information, please feel free to reach out to our investor relations team. We will be happy to assist you. Thank you once again for your time and continued support. We look forward to interacting with you all once again in the next quarter. Thank you. Wish you all a very happy Diwali.

Operator

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