Arihant Superstructures Limited (ARIHANTSUP) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Orion Superstructures Ltd. Q1FI27 earnings call. As a reminder, all participant lines will be in the listen-only mood and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then 0 on your touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Ms. Kunjal Agarwal from Marian Capital Markets Limited. Thank you and over to you, ma'am.

Thank you so much. Hello and good morning to everyone. On behalf of Aryan Capital Markets Limited, I thank you all for joining the quarter one FY27 earning conference call of Aryan Superstructure Limited. Today, from the management, we have with us Mr. Ashok Cherej. Chairman and Managing Director, and Mr. Udet Kasera, Chief Financial Officer of Company. So, without any further delay, I will hand over the call to management for the opening remarks. Hello, sir.

Yeah, good morning. So, good morning, everybody, and thank you for joining the earnings call. I will take you through some of the industry updates, followed by operational highlights. So, we see that the premium segment is looking forward for an uprise going forward also, given the net worth of individuals being increased. And when it comes to the larger premium segment, it is bandwidth between below 5 crore rupees, which is seeing still in good traction. We have already seen in the sector that things above 10, 15, 25, 30 crore rupees in the city of Mumbai are facing up and a little slowdown. But when it comes to anything which is below 5 crore, it is what is very much keen on expense by individuals. We have seen that the rising household incomes evolving. Business aspirations and growing confidence in the long term ownership has been the driving theme. In the over the last six months, overall market has started normalizing. Hence, the speed of the sales have been mediocre and not too much high. This has been the effect due to the geopolitical tensions, crude oil movements, the foreign currency movement, and also have been impacted by the real estate ventures and projects coming up in larger sizes. The sector scalability is still increasing overall, which also shows up that implementation is the core key, and that is where there is a shortage of manned resources and skill development right from the workers and the laborers at the site, as well as the monitoring engineering team, as well as the salespeople. And that becomes the key factor, and it may see that many of the projects would have been struggling to cope up with these factors to see that there is a complete closure of the project nicely. Though, in our case, I would be telling you about the number of project completions that happened in the last quarter and earlier also. The new coming to the, now coming to the MMR and Mumbai 3.0 market, which is the key market, which is still showing up great positive signs in terms of price rises, in terms of traction and sales, everything. I think. And over the last three years, the Namae Mumbai's market in Namae region has increased from 12 to 17%. That means areas like Thane and Kalyan are getting in heat or losing their market share, and Namae Mumbai is getting their market share due to the international airport and Atal Shethos and new infrastructure developments coming around, as well as the data centers and job creations by the GCCs happening up due to the participants in this region. Moving to the operational highlights of our strategy, we will continue to exhibit structural resilience as we enter the new physical year, though we have faced increased inputs due to the labor Shortages as well as the geopolitical reasons, but we have devised it out with the balance inventory to us and seen that our balance sheets will not be hit due to it. During the quarter, the company achieved a sales booking of 221 units, which is equivalent to 2.31 lakhs square feet, and that is up by 15% on area in terms of area, amounting to 173 crores, and again, value-wise, an increase of 15%. This demonstrates that underlying market demand cross our core territory. Our average selling price per square feet has also remained same at 7,500 rupees per square feet as in the last quarter of Q1. For this first quarter of Q1 F526, the average price unit which has been sold also has been stood at 78 lakhs per unit. We remain focused on gradually improving our average selling price due to the premium products contributing to the total sales value. Going forward also, it would largely increase up in a major fashion. With the completion of the project, which we tell that the business operations are getting completed, we received an occupancy certificate for Arian 5 ANA KA, Arian 6 ANA KA, Arian Tannant, Arian Taratya Phase 1, and that means that around – around 1495 units are… We have been completed and ready for offering up the position in the coming quarters and the days. And that tells that the operations are smooth and clear. The corrections are also for the quarter student, 161 crores registered and yearly growth of 28%. Our GDP has increased, GDP has increased, gross development value has increased from 6,000 crores to 14,000 crores in the last five years without any significant fund raise. That is, the only fundraise was 36 crore rupees of preferentials. And in spite of that, with the borrowings increasing, the GDV has increased to a larger size, which would contribute in a big way to the company's financials in the coming day. And as in short-term evaluation, all what we purchased out very much in time, the lands of world villas and town villas. And business development in Thane as well as in Shilpata that already has seen up an uprise of land prices going to almost 3x. That tells that the investments were very well in writing time and the scalability could be done due to those strategic decisions in spite of not fearing to increase the... That to the company, because the increase in debt versus to the GDP and the financials has been great alpha in the coming days. And we are happy to share that ASL is already transiting and emerging as a diversified developer rather than only pure residential server investments in any two assets. It's closing down for the second hotel also with Sunday at near IMAGICA. The earlier one which has been concluded is the five-star hotel at World Villas. The latest point for this would be that the land prices for this has been to an extent of contribution of 25-27 crores for the ITC hotel, and around 7-8 crores as contribution towards the second hotel, though it were captive because the lands were already done in the kitty of the company. The similar product with the same average room rent, with the same room rent, when it is there in the city, the land prices or the input cost for developing this hospitality sector goes to almost 5x. So here is the edge that... These hotels would do better and with the occupancy date in and around still picking up to 70 to 75% with the radicons at both the locations, we see that the hospitality in the three to four years would couple up more better in terms of leisure destinations and mice and wedding event destinations. To all the strategy initiatives, we wanted to hold pricing rather than chasing volumes at the expense of margin. We plan to deliver 2,500 units by the end of financial year 2020. We are confident that we will continue to gain market share basis on our superiority of product and investment in strengthening our grant. Now, I request Rigi to give the financial performance.

Good morning, everyone. I will brief you about the financial performance of the quarter and the review. The consolidated operating revenue for Q1 FY27 stood at 132 crores, reflecting an increase of 9% YOY from Rs. 121 crores. The EBITDA stood at Rs. 28 crores and the EBITDA margin stood at 21%. The PAT for the quarter stood at Rs. 10 crores with a PAT margin of 7.4%. On the balance sheet, our net debt as on 38 June stands at Rs. 818 crores and the net worth stands at 460 crores. We remain focused and confident on reducing our debt next year onwards as some of our residential projects have started nearing completion. And these reductions will be partially offset by new looms which are being taken for building the annuity assets. With all these updates now, we are happy to take questions from the audience.

Thank you very much. We will now begin the question and answer session. 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 handsets 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 Aditya Banerjee, an individual investor. Please go ahead.

Hi, sir. Thank you for the opportunity. So, my first question is that the industry is seeing strong volume growth. How much of the current growth are you comfortable viewing as structural, and what are the underlying demand indicators they're monitoring to assess sustainability?

What we see for the next four quarters also, we see the similar behavior as we have seen it up in the past quarters, as this is the phase where internally the projects are shaping up at the initial phases, And hence, in spite of mixed views and reviews of the real estate sector across the industry, we feel that at our level, we'll be able to achieve a little higher than the past year numbers. And very, very exponential growth in terms of numbers will not be able to witness in this financial year. But it would not even deteriorate, and we have been able to manage and maintain our indirect expenses also in the tune of the same lines.

Okay, and the second question is that, as you know, this cost efficiency is initiated in the past, so could you quantify how much of the cost savings have already been captured, and what further cost per ton reduction is realistically achievable over the next 20 to 24 months?

The cost reduction is not possible as we are able to manage up our HR costs similar to the last year's cost. The construction expenditures already is on a rise due to the geopolitical features, but given the inventory in hand, we are able to see that those increasing costs of the total project versus to the inventory in hand can be equalized or can be nutrited also. So, and hence, there won't be any impact on the balance sheets of the company per se. As you already have seen that, today also, it is a mixed bag of projects which are new projects which have higher EBITDAs as well as old projects which have lower EBITDAs. So, that is why these next three to four quarters, when the older projects would phase out, Till that time, the average numbers would be on the similar line.

Okay, the next question is that, given pre-sales of 1731 million versus recorded revenue of 1316 million, what is the expected timeline for converting the current pre-sales into the recognized revenue?

See, it's a general behavior that for an ongoing project, we are into percentage completion method, hence all the pre-sales which happen, it takes around 90 days on an average for them to get into the mode of revenue recognition. So, we can put up a cycle of 90 days as an average for every pre-sales happening to contribute to the revenue. So, that is the time taken by an individual in terms of owner's contribution, agreement, registration, NOCs, and etc.

Okay. Okay, sir. Sir, I have only one last question. That given the current environment, are you seeing attractive opportunities for new and acquisitions or are higher land and construction costs making you more selective?

Going forward for this financial year, we don't have any program for new capital investment for the business development, as there is a good handsome size of projects in hand when it is 14,000 crores. Given the scalability possible at our end, it still is a cycle of six to seven years to complete up this 14,000 crores. Hence, any development which would be asset-light may be what we would look into it, but largely we will focus on implementation of this project and not any new acquisition of the businesses or new projects.

Okay, thank you so much.

Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on the telephone telephone. The next question is from the line of Advika Gupta, an individual investor. Please go ahead.

Hello. Are you from Advika?

Yes.

Thank you so much for giving me the opportunity to have you. My first question would be that QQ13 sales increase of 10% BioWire to 173.1 crores, but unit sold about 221. How much of this growth came from price increases in premium products versus general volume growth? What is the average reputation for this quest? Yes, sir.

Will you be able to repeat the question?

Yes, sir. Can you hear me now? Hello.

Yes.

Yes, sir. So, my question was, QOQ1 increases in 315% biowire to 173.1kos, but units sold were only 221kos. So, I didn't want to know how much of the growth changed from thrives and creases and premium projects versus genuine volume growth. What were the average realizations per square foot and average ticket size by segment?

Thank you. The next question is from the line of Shilpa from SS Investments. Please go ahead.

My Audible?

Yeah, your Audible. We'll try to do it. It's a little cracking. No problem. We'll try to do it. Please come.

So, as per your presentation, it shows that currently 41% of the project mix comprises of luxury. So, in the next two years, where can we expect this number to reach?

We still will have a mixed bag of it, and going forward, we can say that we would aspire to have 40-45% as premium segment, and around 30-35% as middle income group segment, and 20% as affordable housing. So we will not leave affordable housing. We will still continue to do it.

Okay, understood. So, my next question is, are there any plans to diversify the geographic presence because dependence on a single region may create a risk for the business?

No, because when we talk about single region, though it is MMR, MMR and Mumbai 3.0 is already a very large envelope. It is double the size of the city of Mumbai. For the sake of new geographical diversification with new cities, there is no plans for it in that way. We are able to consume and utilize our capital and resources in this area, and with the more secure, safe, and better prospects for the projects undertaken.

Okay, and what are the factors that are differentiating MMR from other key markets like NCR, Bangalore, and Pune?

Well, today also Mumbai happens to be the core center where the state of Maharashtra is spending the highest in terms of bringing up job creations, and hence the demand is robust. There is supply also, there is competition, but then that tells that this is the core market, and when we compare it to Pune or Bangalore, it is like the Mumbai 3.0 just started off and yet not achieved its saturation peak, whereas the city of Pune and Bangalore already have reached to, or NCR has reached to their peak of saturation. In terms of supply, demand, Okay, I got it.

So, the next question is, how do you see the delivery cycle moving here onwards?

Well, from start to completion, today, average project takes around four years of time in reality and practicality. Some of them may be at three years, some of them may be at five years, depending upon the size of the project. Good thing is that the core focus would be that we do not pile up with any ready stock inventory and keep on selling all our stocks in time.

Okay. And the last question from my side is, like, the average realization was 7,769 rupees per square feet in FY26 versus 6,080 rupees in FY25. So where can we see this number moving in next two to three years? And what would be the factors that would be driving our average realization?

Given the whole portfolio with us in our size, if any new addition is firstly of premium segment, then the rate of averages would increase, or else it would be something around 10% addition to the current ones with the given mix of products which we are operating today.

Okay, okay. Understood. Thank you so much for answering, sir, and all the best for the future.

Thank you. Welcome.

Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on their touchstone telephone. Reminder, anyone who wishes to ask a question may press star and one on their touchstone telephone. The next question is from the line of Shiv and individual investor. Please go ahead.

Yes, thanks for the opportunity. I wanted to understand, in the last five years, EBITDA margin has moved in the range of 21 to 23 percent. What would be the trajectory going forward? Where would you expect it to go? Given the changes that are happening in the business, I think you have a hospitality segment as well. Where do you see it moving?

Both the businesses have to be evaluated separately because both have different pattern of understanding. Given the real estate sector of sell product of residential and construct and build, construct and sell, the EBITDA margins would gradually move up around up to 30-35%. And something around 30-35% would be the EBITDA margins, once town villas and the villa projects contribute largely.

And what about the hospitality segment, where would you like to see that?

Well, that would be in the first two years of phase is an investment period, so it would be capital allocation to these products, and as envisaged that an average core city product of an hotel takes up payback by around 12 years to 15 years. Here, the projections are to get in payback of a period of something around eight to nine years as the initial capital costs for the lands are less. And it would, in terms of value, the hospitality sector would contribute, say, third or fourth year from now to an average of 50 crore rupees of pad per year. That is the NIT income or in a model where 50 crore plus would be the contribution from both the hotels.

Okay. And, you know, if the early 20s kind of EBITDA margin goes up by 10 percentage points, that would mean that the town villas and all the villa projects that you have, margins will be significantly higher than your existing portfolio. Is that correct? Because it has to be closer to 40% maybe, I think, or even more than that.

Can be also, depending because it's in rising market. What we see from the current trends, this much is at least achievable. And as you tell that, yes, it can be further up also. So time would, or the going period of time, say, When the time the project gets shaped up towards completion, that will see the trend of what's going to happen after that period, which means something after 12 months.

Okay. And where do you see, given that I think you're not looking at further acquisition of new projects, I think you're going to sustain the existing projects and take them forward is what you are. That's what I understood. So, do you see debt-to-equity coming down in the last couple of years?

No, the intentions are there. Yeah, though we tell that, yes, there is a plan for it, the debt-to-equity ratio will gradually come down because once the projects can mature, the equity gets on, the reserves and capital reserves get on, adding up to every quarter-to-quarter or year-to-year basis. And we see that if the cash flows are in a higher flow for the project of Arien Tadvika Bashi, which is nearing completion, that is where we see that the utilization of funds would be for repaying of the debt to a larger level. If that happens up in this one year, yes, the debt-to-equity ratio will go down. Okay. And, you know, along with the...

Yes. You know, further, with the increase in debt... The net debt to equity ratio has also gone up the last couple of years. I think the ROC has come down. The last couple of years, the ROC is down, based on your own presentation. So that may be some linkage to there, right? So I think as you, do you see the ROC going back into the 20s? Because that's where it used to be.

You see, when we talk about the projects in hand, the return on capital on a complete project basis, as you see, it's quite higher, and it is on an increasing trajectory. It is not on a downward trajectory. And when we see that in affordable also, we are able to make up a 10% margin where we see... And in the sector, that affordable people are not able to make money. But with respect to our efficiency, we are still able to make some money in the affordable also.

Okay. And of the current capital employed, how much is into residential projects and the rest in hospitality and other sectors? What percentage of capital employed would be there?

90 to 10%. On longer contrary, maybe 90 to 93% today is in residential, and 7% is in hospitality till now.

Okay, 7%. So the total capital employed. I have to take it forward, I think.

That would increase?

Yeah.

Yeah, it will increase. Today, the capital deployed for the hospitality sector is something around 35-40 crore rupees, and going forward on every quarter basis, the total investment for these two projects is to a tune of 350 crores, and with the club, around 500 crores. So, 500 crores is a total investment program for the entertainment and hospitality business. So, for three years, the company will deploy 500 cores of capital by debt or by internal resources for these projects. Right, right.

Well, thanks. Those were my questions. You can carry on. Thank you.

Once it happens and when it starts, then these assets value almost triple up the… When the operations are in flow and we are tied up with the best of the operators, we see no chance of the operations not getting positive and as such there is a no-compete market. So, we are the only ones when it comes to this size of hotel in the region of Lunawala and Karjat and Mumbai. So, we still have a good edge position.

Great. Well, all the best to you. Thanks.

Thank you. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and 1 on the touchstone telephone. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and 1 on the touchstone telephone. The next question is from the line of Ajvika Gupta, an individual investor. Please go ahead.

Sahin, good afternoon, sir. I hope I'm not a good one.

Yes.

Yes, sir. So, my question was, Q21 is 3.3 to 3.5% ROI. So, why didn't suddenly keep on 1 in today? But units totaled were only 2.21. I just wanted to know how much of the growth came from price increases and program project versus general volume growth. What were the average organizations of square foot and average ticket size by segment?

Average ticket size, today we already have mentioned that it is something around 78 lakhs, and the projections and the numbers which we have, our average ticket size goes to something around 95 lakhs to 1 croc. So, average ticket size will increase at a flag end site.

Okay, sir. My next question with me, what is the level of debt you are comfortable carrying through current growth cycle? And is there any intention to materially increase leverage to accelerate project art tradition?

Can you repeat the question? Can you, can you, because though your voice is there in terms of sound volume, but it's cracking a little, maybe some technical error, but please continue, we'll be able to grab your question.

Sir, the question was, Sir, what is the level of debt you are comfortable carrying through the current growth cycle, and is there any intention to materially increase leverage to accelerate progress additionally?

See, when we talk about our total debt today, we know that the asset values which we have can comfortably absorb debt continuity for even 10 years from now, which means that for the next 10 years, even if the debt remains same and interest is secured, still the projects are all viable, the feasibility does not go off. So that means that to the asset value as well as the project feasibility, the debt is on a very lower side. But when it comes to equity, equity would increase upon gradual basis by the existing capital reserves, by adding on capital and reserves in the coming time also. And any fundraising program will change all the ratios and numbers.

My next question is, do you view the current margin compression as largely candidly, or are the promise of newer projects structurally lower than the projects that are currently being delivered?

Well, as you see on project-to-project basis, the older projects and affordable housing projects, which are below 5,000, there the total margins are on a single digit, and that is something to a tune of 9% to 10%. The middle-income group projects like Aryan Talishan, etc. gives up a margin to 15%. Pat margins, and 12 to 13 percent margin for the Alishan projects include similarly, and the premium projects would give up a margin of around 20 percent, as the habitats would rise to 36 percent, 30 percent and above. So... It's a blended one, and hence the blended margins also, we have seen up and mark up up to 13-14% also in the previous years. It has lowered down this quarter to 9% also, but with an average, we feel that we are comfortable and we will be able to give up and pad margins even higher than 20% over a runoff two years from now.

Thank you.

Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on the touchroom telephone. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on the touchroom telephone. Ladies and gentlemen, that was the last question. I would now like to hand the comments over to the management for closing comments.

Thank you, everyone, for joining today's call and spending your valuable time with us.

And we welcome you to a preview of all our projects with a physical round. Please, we would also make up a program for visits collectively and give you an invite for it. And on a group or individual level, if somebody is interested, please let us know. That would give you a more better preview of the company and its prospects and the positioning of the company in the Mumbai 3.0 region. Thank you, everybody.

Thank you. On behalf of Arian Superstructures Limited, that concludes this time conference. Thank you for joining us, and you may now disconnect your line.