...Welcome to the Q1 FY22 earnings call of Ashiana Housing Limited. Please note that this webinar is being recorded, and the transcript of the same will be made available-
This meeting is being recorded.
The results and investor presentation have been mailed to you, and it is also available on the stock exchange. In case anyone does not have a copy of the same, please write to us, and we'll be happy to send it over to you. Before we begin, I would like to remind you that our discussion today might contain forward-looking statements. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinion only at the date of this presentation. Please keep in mind that we are not obligating ourselves to revise and publicly release the results of any revision to these forward-looking statements in light of the new information or future events.
To take us through the results of this quarter and answer your questions, we have today with us Mr. Varun Gupta, Whole Time Director of the company, and Mr. Vikash Dugar, the CFO. Mr. Vikash will make his opening remarks, and then we'll move on to the Q&A. During the course of the discussion, all investors will be in the listen-only mode, and there will be an opportunity to ask questions once the initial comments conclude. With that said, I'll hand over the call to Mr. Vikash Dugar. Over to you, sir.
Thank you, Vinay. Good afternoon, everyone. Hope you all are safe and in good health. Thank you for joining us to discuss performance of the first quarter of FY 2022 of Ashiana Housing. I extend a warm welcome to all of you. Area booked recorded in Q1 FY 2022 was 1.51 lakh sq ft as compared to 0.81 lakh sq ft in Q1 FY 2021. The Q1 FY 2022 witnessed launch of phase 3 Ashiana Tarang, Bhiwadi, phase 4 Ashiana Tarang, Bhiwadi, and phase 4 Ashiana Dwarka, Jodhpur. The sales were at 8.3 lakh sq ft in the previous quarter. The higher sales in Q4 FY 2021 were attributable to launch of Ashiana Aditya, phase 2 in Jamshedpur and phase 5 of Ashiana Umang, Jaipur.
We handed over 0.81 lakh sq ft in Q1 FY 2022, out of which 0.16 lakh sq ft was delivered in partnerships. This was against a delivery of 0.85 lakh sq ft in Q1 FY 2021. Revenue recognized from completed projects in Q1 FY 2022 was at INR 24.47 crore, vis-à-vis INR 25.19 crore in Q1 FY 2021. Total comprehensive income in Q1 FY 2022 was negative at INR 6.14 crore, vis-à-vis negative INR 2.3 crore in Q1 FY 2021. Total comprehensive income was negative INR 5.13 crore in Q4 FY 2021. Pre-tax operating cash flows continued to be positive at INR 29.60 crore in Q1 FY 2022, versus positive INR 67.16 crore in the previous quarter.
Equivalent area constructed was at 2.89 lakh sq ft in Q1 FY 2022, versus 3.90 lakh sq ft in previous quarter. The same was 1.21 lakh sq ft in Q1 FY 2021. Our construction commitments were in line with delivery schedule. On this note, I would like to conclude my remarks. We'll now be happy to discuss any questions or suggestions that you may have.
Thank you. Anyone wishing to ask a question, request you to press the Raise Hand button. We have the first question from Himanshu Upadhyay. Please go ahead. Himanshu, please unmute your line and go ahead, please.
Yeah, hello, am I audible now?
Yes.
Yeah, so my first question is on the fraud, what we have announced, okay? INR 2.4 crore at one of our sites, okay? Can you elaborate on that? What is the nature of it, and what was the weak spot, which led to it?
Hi, Himanshu. So the nature of the fraud was it was an accounting fraud in on the payments function within one of our locations. The weaknesses have been identified right now, but we continue to investigate and review if the weaknesses identified were the only ones, and to review processes that were there. And we are taking a thorough review of the internal controls just to understand if there have been other gaps, any at all, and to take corrective action on them.
So Varun, on the... This is on the receivable side, happened at our place, or it was on the cost side, it impacted us?
It was on the payable side.
So the cost-
You're not audible, Varun. Can you repeat, please?
It was on the payable side. It was on the cost side and payable side, correct?
There is no chance of more than this INR 2.4 crore, what we are expecting?
It's too early to confirm that, Himanshu. We think we've caught the majority and the bulk of the issue. If there are some numbers, we'll update you. We would like to not conclude the matter as if that there isn't any, and not do further investigations. We would like to be internally a little bit more thorough before we commit that. And that situation continues at this point of time, where we are thoroughly investigating the matter a little bit more in depth. But our view is that the chances of material increase from this number is low as of the information we have.
Sorry to continue on this point, but, is it a localized site? So it happened on the project site, where the cost, some issues were there, not at the HO level?
It is not at the head office level. Our view is that it is localized to one particular branch. And our first investigations and reviews of processes at other branches give a sense that there have not been slippages in these processes at those branches. And therefore our current view is that it is a localized problem at one particular branch.
Okay. Two further questions, not on this. So some of the players in NCR market have spoken about strong traction in the residential market in NCR market, okay? What are our plans for launches on Anmol next phases in Gurgaon? And what is the progress of, on Amara land in Gurgaon? This is the land recently which we bought. Am I, am I correct on this?
Yes, Himanshu, and I would just correct, the name is Ashiana Amara.
Okay.
All right. So part two, Ashiana Anmol, phase two launch, has been applied for with the RERA regulator. We cannot launch the project without getting a RERA registration. Unfortunately, the process in Haryana is more cumbersome than we thought. And we are awaiting the RERA certification before we go ahead and launch phase two in Ashiana Anmol. And Ashiana Amara project is currently in the process of getting approvals. We are looking to launch the project in the next, let's say, nine, nine odd months.
Okay. We have nearly 1 million sq ft of delivery in FY 2022, okay? Vrinda Gardens phase 4 and phase 5 have quite a high inventory. So what are our plans there? The completion is around the festival season, Q4, FY 2022, okay? So what, what is your ground-level feeling of Jaipur market, where we have quite a significant launch? I mean, not launches, sorry.
Okay. So, I will take those two questions, Himanshu. After that, I would request you to get back in the queue if you have more questions, please.
Sure.
But I'll take these two up. On Vrinda Gardens, our overall velocity of sales, it seems to be improving significantly in the month of July, and we hope to continue the momentum now into the quarter and thereafter. We think that as Vrinda Gardens is nearing completion, sales should pick up over there in that particular project, by the way things sort of seem right now. Due to certain other reasons, we also constructed the project faster than we ideally would have, just so therefore, some built inventory is coming in in that project. It's been significantly ahead of schedule, as per our expectations.
So therefore, we will have some inventory, but it's not a project that worries me in any way, that we'll get saddled with inventory, which will move very slowly, as happened in other projects before, given the pace of sale that we are now seeing in July, and what we saw last year. In terms of Jaipur, inventory is coming down. We are in the process of signing up more projects. We are giving more offers. Hopefully, we will have a couple of projects signed soon. That said, the land prices in Jaipur, one of the reasons not to have done projects over the last two, three years, in Jaipur after signing of Ashiana Daksh, we found the land prices in Jaipur a tad bit expensive.
We are in the search for value transactions which make fundamental sense. We hope to be able to find that. We are getting a lot more offers of land than where we are looking for pockets where we can create value.
Okay, thank you from my side. I'll join back in queue.
Thank you, Himanshu.
Thank you. Request the participants to state your name and your institution name before beginning to ask the question. We have the next question from the line of Avadhoot Joshi. Please go ahead.
Hi, good afternoon. Thanks for the opportunity. This is Avadhoot from Newb erry Capital. So about the Ashiana Amara, the new land parcel which we have bought, are we going to launch kid-centric homes over there?
Yes, hi, Avadhoot, that's correct. We are going to launch kid-centric homes over there.
But considering our past experience in the Gurgaon kid-centric homes, were difficult to sell for us, and we are holding inventory also. So what's the strategy around that to avoid this in Amara case?
So there are two differences, Avadhoot. Avadhoot, in the existing project of Ashiana Anmol, Ashiana Anmol was actually launched as a regular Comfort Homes project, where we changed track because sales were slow in the first place to experiment with Kid-Centric Homes. So therefore, the project was slow as a Comfort Homes project in the first place. In Ashiana Amara, we've gotten a lot more time. This transaction took over 3 years to conclude from the day we actually more than 3 years from the day when we started looking up the project. So we've been able to design a Kid-Centric Homes project from a clean slate thinking, rather than retrofitting it into an already launched project.
All three other projects, Umang, Town, and Ashiana Anmol were comfort homes project, which we changed to kid-centric homes project during difficult times, and we were not able to apply clean slate design thinking to it. So here, the thinking is different. We've got a master planner who has done a PhD in child-friendly housing from the U.S. A lot of learnings that we have had from the three projects have been applied for. So the entire thinking around the project is significantly different from our earlier projects, where it was retrofitted into existing comfort home projects. And I think that will make a huge difference in the way this is positioned and, and the project comes out overall when it's developed and delivered.
Okay, understood.
If I can just add in another question.
Yes, please.
Yeah. Just a general comment on the demand and supply situation that you have been seeing, especially post the lockdown lifting, and more specifically on the pricing trend, have you seen any increase in the prices as such with the commodity inflation coming in and all that? And what's your general comment?
Okay. So, two things. Since the lifting of lockdown, sales have been good. We've, we have been... we expect the July-August-September quarter to be significantly better than the first quarter, significantly better. And sales are, I would say, back to as if things were normal, as of today. And second, on the point of pricing, again, clarification, are you talking about cost input pressures or customer, the output price to the customer itself?
Output price to the customers.
Okay, so-
Is there a general increase-
Yes, there has been a general increase in sales price as on July. We increased prices across projects in varying degrees. But anyway, the first indication that we have gotten is that the price has gotten established, and we've been able to do sales at higher prices across projects. And as I said earlier, my view is that real estate is in a good five-year bull run, and we should see regular price increases going forward right now.
Okay. And when you say price increases, this would be commensurate with the competition? Any comments on the supply side?
So to know competitive price increases in real estate is very difficult to get, yeah. You know, how do you know what others have increased on a very commensurate basis, exactly? Market is fragmented. It's not like three other developers who are raising prices, right? There are 20, 40 of us in any given market. So hard to comment on that, on the same. But I think, again, on the supply side, one thing is clear, that the increase in prices are to me has a lot to do with the decrease in supply that has happened over the last five years, and overall decrease in inventory in markets that have happened. And the lack of new launches or in various micro markets that is driving up prices.
Okay. Thank you. That helps. Thanks.
Okay. Thank you.
Thank you. We have the next question from the line of Rohit Balakrishnan. Please go ahead.
Hello? Hello.
Yes, I can hear you.
Yeah, thank you for the opportunity. Sir, I have just a couple of questions. So I just wanted to understand, in terms of your launch pipeline, how do you see that for the rest of the year? Do you see any major launches happening for us in the coming quarters? That was my first question.
Vikashji, do you have anything on this? We had prepared something last quarter and shared, but I don't remember exactly. You're on mute, Vikashji. Sorry. So I think in the previous call, we had given some kind of a sense that taking all the planned launches during the year, somewhere in the vicinity of 1.5 million is the kind of number that we are looking at for the entire year.
Okay. And this will be more back-ended to Q3, Q4, or more in the Q2, in this quarter or more towards the back end?
So one of the significant, one of the most significant launches is regarding the project Ashiana Amara in Gurgaon. So we are like, we are like planning to do it in the last quarter of current year. Might be little bit challenging. It might spill over to the next quarter of the next quarter, which is Q1 of next year. So that is one of the prominent launches that we have. Apart from that, we have got a launch in Pune as well. That, in all the probability, should happen this year only. So those are the two prominent launches. Anything from your side, Varunji, if you'd like to add?
Yeah. I would just, I would just like to add, Rohit, on, the front of,
... Phase launches, I think they are more evenly spread across the year. We have launched two phases in the first quarter, already one in Ashiana Tarang and one in Ashiana Dwarka. In the second quarter, Ashiana Nirmay launch happens, and in Ashiana Dwarka, we relaunched the phase, because, you know, the phase got stuck during the half the launch happened pre-lockdown, and the lockdown got stuck, so we launched it again the second lockdown. So there are three launches have happened, already in the H1 of this year, and hopefully we should get two more phase launches in H2. And then the rest are dependent on the rest are dependent on new projects getting approvals, as Vikash Ji had sort of enumerated.
Got it, sir. Thank you. This Amara is how big in terms of sq ft? And this is the Sector 93, Gurgaon.
Yes.
Right?
Yes, sir. This is 21 lakh sq ft of saleable area, give or take a few.
Got it. Okay. And the second question was, in your, on your completed, so ongoing projects, where there is some inventory, there are two, three which sort of are, for the lack of a better word, maybe slow moving. One is Amantran, and then there is Vrinda Gardens. So if you can just talk a bit about that, and also wanted to understand Shubham, phase four, how is that going?
Just, let me just pull that information in front of me as well, so I can look at it.
So slow moving in terms of sales, you mean to say, Rohit?
No, no, actually, actually, I would—I mean, no, I would correct. I would not say slow moving. I mean, I would say inventory is more, I mean, as compared to saleable area. I just wanted to understand the salience in these two projects, in these two projects and also Shubham. I don't, I, I didn't mean slow moving as such. I just meant that as a percentage of your saleable area versus your—versus your area booked, is what I wanted to know.
Given the stage of construction in Ashiana Amantran, which is about a year ago, we started work in a, in a. And we have, I guess, another, let's say, two years to go for construction here. We're looking at Q3 of FY 2024 for delivery. You know, we've sold about 60% of the stock, and I'm happy with that. That pace is that where we have a basic thumb rule, at completion of the project, we should not have any stock really left to sell. That's a good project. I think Ashiana Amantran is checking those boxes, and as of now, the information that we have tells me that we will not have any stock left, as and when the phase, those phases are complete.
Similarly, in Ashiana Shubham, phase four, I'm satisfied with the sale velocity that we have reached over there at about 33-odd%, there, and the pace that it continues to move at. My sense is, again, we'll have very limited stock left there, or no stock left there at the time of completion, and those are two projects which are not not bothersome in any manner, or not. That's also a correct thing to say. Let me say, if you take up a project and as per our expectations, the pace of sale in Amantran and Shubham, both are satisfying. And we will make decent returns from that perspective.
In Vrinda Gardens, that project has always been a little one of the slowest moving projects in Jaipur, and therefore, we've always had some units at the time of completion of whichever phase we completed, and then we had to sell that off. And for, due to some other reasons, we also needed to complete the remaining phases by a certain timeline. To meet that, we expedited that construction. But that said, as of today, the way the month of July has gone and the way last financial year also went, that is, financial year 2021, I'm overall happy with how Vrinda Gardens is faring. And the kind of stress that I was expecting that project to have, I don't think it will have.
It will obviously have stock ready at the time of completion, but not something that will bother us in any manner or stress our balance sheet in... So we are quite okay with how that thing, how Vrinda is also going at this moment in time.
Got it. Thank you. And just one, one more question. You mentioned, like, your view is that the sector per se is on a uptrend for at least next four to five years. So just from our perspective, I mean, we've been, last year, last to last year, FY 2020 was, was a decent year, peak in a sense is about 2 million, 2.2 million sq ft. So, I mean, how do you see us, and do you think, I mean, over the next three, four years, can we sort of break, let's say, can we get into 4, 4.5, 5 million sq ft? Are we prepared as an organization? Because, I mean, it will require buying land or doing deals. As an organization, can we sort of gear up for that?
What are your views? What, I mean, if you could just give some broad, direction,
Yeah, sure. Rohit, after financial year 2020, our plans was to take up a lot more land. COVID happened, and then we became a little bit more conscious...cautious as to what to do after the first lockdown. As of this time, we are actively looking at multiple transactions. We have 4 live term sheets at this moment of time, and we hope to conclude some of those. We did 2 transactions already in May, in June, which were large, one in Pune in senior living, and Sector 93 in square footage. So, the great part of financial year 2020 sales was that it threw us a lot of cash last year, and we are liquid at this point of time.
And we are therefore have a view that we should do a lot of transactions. And the first, I think the first piece is to get to 3 million-4 million sq ft to get there in square footage. But more than that, also, I think from a sector uptick, we need to become profitable, which we will become in financial year 2023 very well, substantially. And after that, we need to hit Return on Equity in teens. I think that's the first view of the company, as to how do we get there and put ourselves in gear in that, and launching projects would be key for that.
Fortunately, we have now a lot of inventory already, which I think about 50-60 lakh sq ft of inventory, which can be launched if we get approvals across four projects: senior living in Ashiana Town Gamma, Ashiana Malhar, the land in Varale in Pune, and Ashiana Amara in Gurgaon. Which can, you know, provide the first thrust in terms of launches. They are not going to be enough, so therefore, we are in active... lots of active discussions for land at this point in time.
Thanks. And sorry, if I can ask one more follow-up?
Yes, last one, please, Rohit.
Yeah, sure. So, in terms of, as you sort of move ahead, just wanted to understand from a gross profit per sq ft point of view, we've done 1,000 odd, and as we sort of get into Pune and as more of our sales per square, I mean, square footage, would be from areas like Gurgaon, Pune, which are slightly higher in terms of realization. How do you see gross profit in terms of, I mean, both your realization and your gross profit, how do you see that evolve in the next 3-4 years? If you can just also give some color there.
Yeah, you see, a little bit will depend on how prices and costs behave. At this moment of time, the transactions we have done, the four transactions that we spoke about right now, launches, there I expect gross profit margins to be good, because land prices have already been locked in, and sale prices seem to be going up at this moment in time. My view is that future sale prices should increase. On some new projects, I think, and we are looking for value transactions. Question is: How will land prices behave in context of the sale value that will drive things? But, you know, we've gone through five years of either margin stagnation or margin compression, so GP per sq ft levels, margin stagnation, net profit margins, margin compression down to negative numbers.
I think we are hitting a period of margin expansion over the next five years.
Thank you. Thank you, sir. Very helpful. All the very best.
Thank you, Rohit.
We have the next question from, Parag Jhawar. Please go ahead.
You're on mute, Parag.
Hello?
Now we can hear you, Parag.
Yeah. Hi, Varun. I have a question, or rather a clarification on the pricing environment comment that you made. So wanted to understand which markets are you seeing improved pricing and environment, and is it across the board, or are there stronger markets right now? And secondly, from your side, also, are you less aggressive in taking price hike in some of the projects or markets where you have more inventory to sell, like Ashiana Town, for example. So if you could comment on these two.
I'll go first, Vikashji, if you want to add anything, if it comes to mind, because it's a larger thing. To me, I think price increases are across the board, excluding the comfort homes market, kid-centric homes, comfort home market in Bhiwadi. So Ashiana Town, Tarang and Surbhi, where we are not getting capacity to increase prices. Across locations and the senior living projects, we have been able to increase prices quite consistently. Is the first thing that comes to mind for me. And so we see a general increase across the board. Vikashji, if you want to add anything on this or you-
Absolutely, and with continued focus on the senior living piece, wherein we see in relative terms better pricing power. I think as the mix increases in future years, I think the pricing will be a stronger side of ours. And that is the reason we have been confidently saying that even in the scenario of rising commodity prices we will be able to negate possibly the adverse impact on margin by increasing the prices also. So should see positive side going forward.
... The price increases that you have taken right now, is it just to counter the RM price hike that has happened over the last six months, or is it adding to the gross margin also?
As of now, the price increases that we have done would probably just take care of the margins, the cost input, but I don't see them being interlinked.
I think the basis of the price increase has not been exactly based on the commodity price hike which has happened. The two are definitely not linked. And the price stagnation, which was there, looking at the opportunity we saw after a long lull period to increase prices is the reason why we actually started increasing prices gradually, so.
Understood. That's helpful. Thank you.
Thank you, Praveen.
Thank you. Anyone with a question, request you to please press the Raise Hand button. We have the next question from Abhijit Joshi. It's a follow-up. Please go ahead.
Yeah, hi. Thanks. What's the quantum of the price increase that we are talking about? And the second question is, what's the status of Ashiana Malhar, the Pune project?
Okay, so I think price increases in general across the board have been in the range of about 3%. Between, let's say, first April and now, price would be 3%, somewhere 2, somewhere 4, in that, in that range, I would say is what we've increased so far. And in Ashiana Malhar, we have received all building plan permissions. The environmental clearance permissions are ongoing. Our application is in, we have part of the process is through, and part of the process is ongoing. We hope that within the next 3 months, we should have the environmental clearance received. Post that, we can apply for RERA and the launch of project.
Okay.
Thank you.
Thank you. We have the next question from Himanshu Upadhyay. Please go ahead.
Yeah, hi. My question was, you said that there are four projects where not four projects, but four land deals, which we are working on, okay, currently. Are these for outright sales or JD, JV only we are thinking? And we had this IFC some agreement, okay?
Mm-hmm.
What is the progress on that? Are we on that platform, are we seeing anything, any progress happening or new projects, evaluation?
Yeah. So the Ashiana Amara project is substantially funded through that platform, Himanshu. So we had funded Ashiana Daksh, Ashiana Amara, and we are evaluating one more project on Chennai through the IFC platform. So the IFC platform comes in only in outright purchase, so we are evaluating projects in Chennai, one on an outright basis with on an IFC-based with IFC. We are other projects in Jaipur and Jamshedpur, where we have term sheets signed for, are in on a joint venture basis. And we are also talking to a developer for another sort of a acquisition on a joint venture basis. Like we jointly acquire with another developer, a project that we are looking at.
It's a mix of things that we are looking at.
One small question, or a comment also, or whatever you take it. The Jamshedpur, which has been a very interesting market for us, we have seen a lot of success in that market. Are we getting any traction or land deals in that market since, how, in the four-
We have one term sheet signed, Himanshu, in Jamshedpur at this moment in time. It's a difficult place to find land transaction because of the status of land in Jharkhand. They say all of 10% land in Jharkhand is only tradable of all lands. And they become even more complex in urban areas in its tradability, so it's difficult to find pockets there. So we are searching for land there. One term sheet signed, and we are evaluating.
And one last thing: This is on Kolkata land, where we have seen issues and we have said, "We'll see what happens in future," okay? But what is your... Is there some way we can move out of this land transaction, or are we thinking of anything on that, or we are just thinking, "Let us keep it on the back burner. As time comes, we'll evaluate it, and we'll progress on other projects or other sites"? So what is happening on this?
It's, we are evaluating options to make that progress faster, and what can we do? Is there some different thinking required? But I would say more, it's more on the back burner, where our larger thoughts are being put into getting new projects, bigger projects, off the ground in other markets where we are more comfortable.
Okay, okay. Thank you, Varun, from my side.
Thank you.
Thank you. Anyone with a question, please press the Raise Hand button. We'll wait for a minute or so. Is there anyone with a question? Request you to raise, press the Raise Hand button. I believe there are no further questions, so we'll hand over the call to the management for closing comments.
Abhijit, would you like to close, please?
Yeah, yeah. I'd like to close.
Thank you.
We would like to thank all of you for being on this webinar and being so patient with all the questions and answers. If we were unable to take any questions, please feel free to write to us directly or reach out to us directly. And with that, we would like to conclude the webinar. A lot of material we have spoken about it, about is posted on our website, and you can also email your queries for any further clarification. Thank you once again for taking the time to join us on the, on this webinar. Thank you.
Thank you, Abhijit.