Ladies and gentlemen, good day, and welcome to Ashiana Housing Q3 FY 2021 Earnings Conference Call. As a reminder, all participant lines will be in a 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 an operator by pressing star and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Gaurav Sood. Thank you, and over to you, sir.
Thanks, Aman. Welcome, everyone, and thanks for joining this Q3 FY 2021 earnings call for Ashiana Housing Limited. The results and investor update have been mailed to you, and it is also available on the stock exchange. In case anyone does not have a copy of the press release, please do write to us, and we will be happy to send it over to you. To take us through the results for this quarter and answer your questions, we have today with us Mr. Varun Gupta, Full-time Director of the company, and Mr. Vikash Dugar, who is the CFO. We will be starting the call with a brief overview of the company's performance for this quarter, and then we will follow it up with a Q&A session.
I would like to remind you all that everything said on this call that reflects any outlook for the future, which can be construed as a forward-looking statement, must be viewed in conjunction with uncertainties and risks that we face. These uncertainties and risks are included, but not limited to, what we have mentioned in the prospectus filed with SEBI and subsequent annual reports, which you will find on our website. With that said, I now turn over the call to Mr. Vikash Dugar. Over to you, Vikash.
Good afternoon, everyone. Thank you for joining us to discuss performance of the third quarter of FY 2021 of Ashiana Housing. I extend a warm welcome to all of you. Area booked recorded in Q3 FY 2021 was 3.57 lakh sq ft, as compared to 2.29 lakh sq ft in Q2 FY 2021. The bookings in this quarter were higher due to launch of phase III of Ashiana Dakshin, Jaipur and launch of phase IV of Ashiana Shubham, Chennai. Area booked, as well as area constructed, has improved in this quarter as compared to the previous quarter. Area booked is lower as compared to corresponding quarter of previous year on account of Q3 FY 2020 having some newly launched projects.
We handed over 3.94 lakh sq ft in Q3 of FY 2021, out of which 2.14 lakh sq ft was delivered in partnerships. The area delivered in Q3 FY 2021 was higher at 1.80 lakh sq ft as compared to area delivered in Q2 FY 2021 at 1.06 lakh sq ft. Revenue recognized from completed projects was INR 62.42 crore, vis-à-vis INR 36.22 crore in Q2 FY 2021. Total comprehensive income was positive at INR 13.26 crore, vis-à-vis negative INR 1.74 crore in the previous quarter. Pre-tax operating cash flows were positive at INR 63.9 crore, increasing significantly from positive INR 30.04 crore in the previous quarter due to increase in collections.
Equivalent area constructed was at 3.54 lakh sq ft versus 3.01 lakh sq ft in the previous quarter, and was 2.39 lakh sq ft in the Q3 FY 2020. The quarter also witnessed healthy cash flow owing to higher collections aided by new sales launched in Ashiana Shubham, Chennai, and Ashiana Dakshin, Jaipur. 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 very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Anyone who wish to ask a question at this time, they may please press star and one. The first question is from the line of Himanshu Upadhyay from PGIM. Please go ahead.
Yeah. Hi, good afternoon. And, yeah, the results are showing better or coming better. I think your hard work is yielding results. I have few questions. What we are seeing is more sales contribution happening from projects launched one or two years back, and nearly nine projects are going to get completed in next eight to nine quarters. Would we expect that the cash flows will be much higher, especially operating in next two years, in comparison to what they were in last three years, so cash positions will become much better? So that was my first question.
Thank you, Himanshu. Yes, our cash positions are already improving. As you can see, we have had a very good quarter in operating cash flows. And, I think the basic reason was the sales in 2019, 2020 were, financially are very good, and that started reflecting into cash flows this year. I expect, our, cash position to be continued, to improve in terms of, or sustain. I think this quarter was a, a little, higher on the pre-tax operating cash flow side, than normal, but let's say for the year what we have gotten till now, nine months, hopefully these kind of numbers will continue on the operating cash flow side, on a year-on-year basis right now going forward.
So why this question was, because some of the contribution from projects like Anmol or Tarang, which are there, which are contributing still, which were launched two years or more back. So there we would be getting more than 50%-60% of sales value immediately or within one month because of two years that passed and construction would have raised more than 50%-60%. So that, that's why the question was there.
And from the other, collections seem to be good, like, if I would be, represent also is something in the, the amount of cash flows that are yet to be received from, under construction projects, which I think is north of INR 300 crores, at this point of time. Just for Ashiana Housing, INR 330 crores, partnership with another nearly INR 40 crores. So we have, a significant amount of cash flows already locked in from sales done, up till December. So as in, as in, when we sell more units, it within these, ongoing projects, a lot of that will straight flow, to net cash flows, because, the current cash flows are, in my opinion, sufficient to cover the construction costs to be incurred in these projects already.
So therefore, I'm coming to you that I expect cash flows to remain strong going forward.
Okay. We have said in last many quarters that NCR, Chennai and Pune are the focus areas for us. We have said that we are working on business development here. Even in pre-COVID, I mean when we went down, I think we had four deals which we were working on.
Mm-hmm.
We have not seen much. What we are hearing from competitors is that, terms of deal have become better, even in JD with landowners, okay? What is concerning us or hindering us from doing new deals in these markets, and what are the challenges, you are seeing? Can you elaborate on that?
If we are just experimentally a little bit more conservative than others, deal terms have become better is what you're, what you've heard is correct. Though over the last two months, I would say land markets have started hardening again in some markets, and there is liquidity flowing into the land market again in different markets. So it depends where you are. That said, we are in the midst of closing. We're just taking a little longer to close a couple of transactions that are through. In Pune, particularly, for us, the Ashiana Malhar project, which is there in the future projects, is the first thing that we wanted to take through.
Fully, it was an MoU done project, where zone conversions and all were received in August, and we fully locked in the development agreement and closed the transaction fully. And right now, building plans and environmental clearance are under approval and progressing. On the building plan front, we have, adequate progress. On environmental clearance, we'll get more knowledge in the next couple of months. We are hoping that we should launch the Pune project, sooner than later as, as, as the first step. And in NCR also, there are two very active transactions at this moment of time, and we are hoping that, maybe by the next call, we'll have, closures on those and, making those moves forward. So we are active.
We are a little slower than others because we tend to be a little bit conservative on our deal terms as compared to others.
Yeah, and one last question. In the last call, I think somebody asked, and we stated that we expect the land prices to remain low, and it will take time the prices to recover, okay? Because the balance sheets of many developers are not so strong, and that was a scenario which we painted in the last quarter. So is it a negative surprise to us that what you are saying means the land prices are starting to hardening up?
It is a negative surprise that prices have started hardening up in a few places. It wasn't something that I expected.
Okay. Okay, very interesting. Yeah. Thank you for... I'll join back in the queue.
Thank you.
Thank you. The next question is from the line of Rohit Potti from Marshmallow Capital. Please go ahead.
Thank you for the opportunity. It was quite interesting to see the realization that we got this quarter, probably the highest ever in our history. It's more than 10% up, I believe, from our average of 3,200. So what drove this increase?
Hi, Rohit. A large part of this is being driven by increased contribution of Ashiana Anmol in this quarter as compared to other quarters. Ashiana Anmol is priced closer to INR 4,800 per sq ft, INR 4,800-INR 4,900 per sq ft. So, you know, when it contributes close to 20%-25% of close to 10%-15% of sales in a quarter, even that, you know, INR 1,600-INR 1,700 can have a 200 INR delta on the entire volumes. We haven't seen price increases yet in projects, so there is no increased pricing. But that's, that said, we are seeing upward trajectory. Sorry, the other contribution of higher prices was also from our Chennai project.
Ashiana Shubham in Chennai is also now in 4,200, kind of, per sq ft pricing, and that also had a good contribution this quarter again. So both of those effectively ended up increasing the average realization. In Chennai, we have been able to increase prices, actually. It's just not that good stable. But now the sense that we are getting is that we should have upward price movements going forward. And that's the first sign we are getting, and we are, albeit very little in tiny increments, but we are increasing prices.
Oh, that's very interesting. So you're saying that as earlier, probably in the next couple of quarters, we might start increasing prices across other geographies and projects as well?
Yes, we should. I, I think we should. Okay?
Okay, that's ... Yeah.
We just did the last question somebody asked, did I get a negative surprise? And I was surprised negatively in some of my forecasts. So, that said, my view is that we should be increasing.
Oh, okay, that's helpful. The next question I have is, I mean, so I have come for your annual analyst meet couple of times, and one of the times, your brother had said that one mistake we made in the last time, last upcycle, was that we went a little aggressive on land purchase, particularly in Bhiwadi. Now, just curious to know, the management thought process on the current land inventory we have. I mean, to me, it seems like we are a little too conservative now because I think half our future projects is in Bhiwadi. And, given the aspiration and ambition that we have to grow, it doesn't seem like we have enough, probably, after, let's say, next two, three years.
So, I would like to know more of your thoughts on this topic, please.
No, so, agreed. As I said, we are looking to grow a few locations. We need lands. So outside of Bhiwadi, in every market we are in, we are actively scouting for transactions. That said, the mistake that we made in Bhiwadi, we don't want to repeat in any other location, where we get saddled with too much capital, excess capital deployment in any location and struggle with that. Maybe that's, and that keeps us conservative. But that said, we have, in terms of aggression on land transactions that we have in the organization today, I don't think we have had that in the last maybe six, seven years at all. Probably, this kind of aggression in terms of scouting transaction was back in 2012 and 2013.
Cool. So that's helpful to know. And last on, I mean, you mentioned that we have a couple of deals in advanced stages in NCR, to the previous caller, participant. So just curious to know the progress on, let's say, Kolkata, and even in Chennai, what's happening, because, I mean, as you mentioned, you've increased prices. Are there any further land parcels that we are expecting to land in Chennai as well?
Okay. So in Chennai and Pune, we are in active conversations. Pune in very advanced stages of conversations. By advanced stages, mean we have a term sheet signed. We are doing diligence on the title and discussing on documents. But we know we have a hit ratio of one in three. For every term sheet signed, every three term sheets signed, only one go through. Okay? But we are in that stage in Pune. In Chennai, we are in advanced discussions. And in basically NCR are also on the term sheet kind of stage, transactions or diligence done and progressing to closing transactions. Chennai, we are actively discussing a lot of transactions. Kolkata, we have no outlook to do any more new transactions as of yet.
Yes, so Kolkata, what about the current existing Shriram deal that we have?
Again, we don't have any visibility there. That it's place where we get visibility, we go back. We get visibility, we go back. So, it's been a frustrating place to do work.
Understood. Understood. So, so we will focus, continue focusing on NCR, Pune, Chennai for now, I believe then.
Correct. Jaipur-
And Jaipur.
NCR, Pune, Chennai. Yeah, that's, that's, that's-
Understood. Okay, great. Thanks, and I'll get back in touch with you.
Thank you.
Thank you. A reminder to our participants, if you wish to ask a question, please press star and one. The next question is from the line of V.P. Rajesh from Banyan Capital. Please go ahead.
Hi, thanks for the opportunity. Am I audible?
Yes, you are.
Hello?
Yes, you are.
Yeah. So very first question, congrats on the transactions in Anmol. So if you can just elaborate what worked so that it suddenly started moving. And, do you foresee at this current speed, we will clear the inventory in the, let's say, next three, four quarters?
Yeah, Ashiana Anmol, yeah. So we changed some of our, today, the market, I think, in NCR has changed on the on a positive note. I think, overall there is the market has become a lot more buoyant than before. But within that market also, I think, we changed the the way we work, and I think, we got a a third-party strategic partner in the form of ANAROCK. And we also, with them, were able to open up the channel partner broker community in in Gurgaon that we were trying to experiment with to work in that market. And, and I think that's become successful the way, we have operated there, and been able to sort of control the sales process at the same time to ensure that no mis-selling happens. That was our worry, I think.
That's what it seems like we've gotten to. I would expect that we should be able to clear out Ashiana Anmol's ready inventory by the first quarter of next year, you know, to a very large extent. We might be left with a few units here or there in it. I think that's what will probably remain with the pace is going. But January has gone very well in Anmol for us.
Okay, that's excellent. Then the question on the town, you know, what are we doing on that? Because that is still very slow moving, so it may take up to two years at current pace.
Yeah, we continue to rack our brains like we racked our brains in Anmol, till we tried different things and something worked. Here also, we are in the process of trying different things and hoping something will work. I think a lot of this is trial and error, unfortunately. So we are hoping something will work in Ashiana Town.
Okay. On the land acquisition, you know, I'm just wondering if you are seeing the pricing hardening now, and since real estate is a long cycle, doesn't it make sense to get a little more aggressive? I know you said the activity levels have gone up, but I'm just trying to understand, you know, beyond just, let's say, one or two deals, because your ratio, you said, is one to three. Given that you have only three townships out in India, and you will only get one, why not be a little bit more aggressive out there?
We are looking at more-
You have already done that.
We are looking at, we are quoting more aggressively. We are looking at transactions more aggressively. Unfortunately, I have nothing to show for it right now. So till I don't have anything to show for it in the call, it's just really talk. So hopefully we'll have something to show for it, in the next call that we would have. But we are aggressively looking at it.
Okay, that's, that's encouraging. And then my last question is: you know, what is sort of the general guidance you have for the next year in terms of net square footage? Any thoughts, any preliminary reflections on that front?
No, there is, it'll be hard to guide on that, because we are, we are, we are doing our annual planning, and we haven't gotten around to that. But it's difficult to give a guidance on that, still, because a little bit of it will depend now getting approvals in a couple of projects and getting them out the door. So maybe again, next call, we'll have a better sense. One thing that is there, though, clearly cash flows are improving. And so if I don't have a next year guidance, but I have a clearer view that we will be more aggressive on getting more projects, signing up more deals, and looking at sales.
Because the one of the big things that has changed in this quarter as compared to earlier, and which is enabling us to be more aggressive, is that our view on cash flows and visibility on cash flows is far higher today than we have ever had before. And that is making a very large difference.
I see. And, lastly, given the success that you had, you know, in changing your sales model at Anmol, are you planning to do that as, you know, as a general principle, or you are still going to be internal sales for those spots?
Yeah. See, again, I think we've had to do that in Gurgaon, and personally, to me, it's a very expensive model. You know, I'd much rather sell through word of mouth, which we already do. And in Gurgaon also, hopefully, once we build scale, then hopefully, then more and more sales will come through our existing customers. I'm not talking about selling online, advertising or holding. Those are also very expensive. Channel partners are also expensive. So, one of the views is that in markets where we need them and there isn't much choice, we factor the cost in our financial models and go ahead and work with that.
But where we can sell with a much smaller and lower cost of sales, like in Jaipur or Jamshedpur, I don't see any reason to get on board at this point in time. I think that's the primary concern there on cost. And the second is the amount of effort and exercise you have to do to build a network. It does consume energy. And then making sure that sales processes are with Ashiana's brand and ethos and standards, that mis-selling does not happen, and there is customer centricity and less. You know, it's customer centric and not transaction centric, if I say a sales process. I think I'm not someone of the view that we will repeat this across the board, unless or until we have a handle on those both.
If we are able to keep our costs in check and mis-selling in check without too much effort, then something we can roll out to other associations, b ut, the costs that are involved in Gurgaon, and I don't think sustainable as a business model for us, for other locations.
Okay. And lastly, I need a take on Noida, because I think you had mentioned that area as well. So any land deals or any thoughts on that?
We have a term sheet in Noida for a senior, not Noida, but the Greater Noida area, for a senior living project. And we're hoping that that term sheet consummates into a transaction, and we're able to do that.
All right. I'll get back in the queue. Thank you.
Thank you.
Thank you. Any participants who wish to ask a question at this time, they may please press star and one. Next question is a follow-up question from the line of Himanshu Upadhyay from PGIM. Please go ahead.
Yeah, my question was on the Pune market. We have a project which we are going to launch or we are preparing to launch. The government has reduced some of the duties, not duties, but taxes and the conversion charges and all those things. Would we benefit? And how much benefit in terms of cost of the overall project you think you will be getting because of those benefits?
I, I don't think the benefit will really accrue to the kind of project that we're looking to do. I think that the benefit is more in city-centric projects, where asset consumption is very high and very big. For a lot of premiums to do that, we are not in a, in a city-centered environment. So I, I don't think we will get any benefit that is, that is material to the project. If anything comes, it, it will be insignificant amount. That said, what has happened in Maharashtra in terms of the stamp duty, the reduction in terms of corpus that the government has done, I think the biggest benefit would be that the sentiment of the market towards real estate has become very positive, and that should enable sales.
Okay. And, for us, the launch would be next calendar year, or we think we can launch in this financial year, means FY 2022?
We should launch in FY 2022.
Okay. And, we had an agreement with IFC. So what is the thing means when we are seeing these increased land dealings or we are thinking about more projects, is IFC also there or?
Yes, yes, we are still. They are still there and we are in discussions. Hopefully, one of these projects that we sign up is, is going to be partly financed them.
And, one more thing, last question, Varun. Do we need to increase the bandwidth or even the funnel, means the funnel of projects, because the success rate here is low? Or you think, w hat can we do over a longer period to increase the means, newer projects? Because as the company grows, let's say 4 million sq ft, it is what, let's say we have as investors expectations from the company, next 3-5 years, you should do it. You should be able. So what can or what will you need to do to increase the number of land transactions and the size of the company? Some of your thoughts. Obviously, one question I had was, do we need to increase the funnel size of projects we are evaluating?
Look, the sheer size of the project as to how big we are in the project size itself? Or the number of projects we are evaluating, you might mean?
No, I am saying the number of projects we are evaluating or let's say, land transactions, do we need to increase? Because, funnel size, so number of projects, because, yeah, obviously, we want to do one or two projects and-
Again, I think these conversations are coming back to because we don't have anything to report. I would request you guys to hold on a little bit and, and wait. A lot of this is less execution capabilities. A lot of this is also patience at our end as to when to buy and what, when to do a transaction. See, again, the biggest, t he one thing that is fundamental to determining our returns are entry costs, okay? And if you look at not only us, most real estate companies, even if they have had very good sales reported, have had poor return on equity numbers. And I think a large part of that is driven by a very high land cost payment that is there.
So a little of the reasons we are picky and choosy is not, you know, we are not evaluating number of transactions. It's also a little bit of wanting a certain return on the table for us to do a transaction. And aggression there, which we did in 2012, 2013, in terms of pricing, was some of them went counterproductive and hurt us over the last 4, 5 years. Ashiana is more or less a project where we had sales, and we might get sales. Price and revenues is very, very poor on return ratios and gross profit margins, just because we got the land pricing and the deal terms wrong, and we can't do anything about it. So again, I would just like to clarify on that, that.
So that's the nature of the management team here as to what it is, and we believe that that's the right way to go. Over-aggression here would be a cause of concern and not just a issue. So I would request that you hold on for a quarter or two. We are working on transactions, but a lot of it that has to do with the, with the caution that we have on the numbers that we use as assumptions.
Okay, thanks. We'll see and wait for more time.
Yes.
Yeah.
Yes. Thank you for that, sir.
Thank you. The next question is from the line of Darshan Shah from White Equity. Please go ahead.
Thanks for the opportunity. I just have one question. So, we have seen much higher bookings at the time of launch in Jaipur and Jamshedpur over last, let's say, since last year. But we have not seen the similar thing panning out in the Ashiana Shubham, the latest phase that you have launched. So can you just please share some reason behind it?
A couple of reasons is that Ashiana Shubham is, A, not a fresh project launch, in general, but largely because it's a senior living project, so it's a very end-user-driven, sales and not a, sort of, a investor-driven sales. So in senior living, we don't expect that kind of launch momentum in the first place itself. I think it's the nature of the projects, which differentiates. That said, we see senior living as having great return ratios now going forward because they provide better margins and better pricing overall. We've been able to, you know, figure that out in senior living.
Okay, thanks.
Thank you. Next question is a follow-up question from the line of Rohit Potti from Marshmallow Capital. Please go ahead.
Thank you for taking my questions again. Varun, I saw Ashiana's name linked with, I think a Noida developer, Krrish Group. Any clarification, any. Do you already have anything to share on this?
So there was some land that was there through coming through the bankruptcy courts over there. So we had put in basically a bid so we can evaluate the project. We had not even put in a financial bid. We had just put in that we are interested to evaluate the parcel with another investor. We evaluated the parcel and didn't find it suitable for development, the kind of development we want to do, and we are not evaluating it.
Okay, that was helpful. And second question I have was, I mean, except for, let's say, the blip in the COVID quarter, we have generally seen very strong momentum over the last couple of years. Do you see that continuing over the next few quarters as well? I mean, we have seen good numbers being reported across the board, and do we see this interest in purchase of houses continuing going forward as well?
Yeah, my opinion, Rohit, we are at the beginning of a long upturn in real estate. So, we were probably in a 5-6 years bear cycle, probably, and I think we are at the bottom of the cycle or just moved up from the bottom of the cycle. My view is that we are entering into the next 5-6-year bull cycle within real estate. But again, I put word of caution. I've been horrible at forecasting earlier, and I can be horrible now. But that said, that's my view.
Fair enough, that was helpful. And the last question from my end is, within the three segments that we have, so is there a preferred order that we have? Like senior living, kid-centric, and comfort homes. Yes, by far the little senior living and, and, I believe that post-pandemic there has been increased interest in that space, in general. So, any thoughts here?
I think, irrespective of the pandemic, I think our interest in senior living was becoming larger and larger. I think, it's one of the space that we would like to nurture, going forward to do a larger contribution to the future. A, because it's just less cyclical in nature, and B, it's less competitive in nature.
Am I not right in thinking that I think a lot of, quite a few organized developers are entering this space right now. So that, I mean, that would increase competition, but I guess it would serve to increase awareness and the size of the market as well.
Yes, at this point of time, I don't think enough developers have entered where competitive intensity is a worry, at least at this juncture.
Sure. So, would I be right in thinking that, the management bandwidth or what we want to do going forward because of the differentiation and the experience we have over the last couple of decades here?
Yes, it will take more and more, more and more management bandwidth as well.
Perfect. And, could you speak a little more about kid-centric homes? We were very excited about this when we launched it 2, 3 years back. Is it still a work in progress, or have you figured out a product like in senior living, which you can replicate in multiple geographies?
It is still a work in progress, you know, one thing that was there missing in senior, in kid-centric homes was somehow all the three kid-centric homes we have done have been retrofitted into existing projects or existing thinking. Okay? We are evaluating one particular project right now, in NCR, where we are in very advanced stages for the transaction, from a clean slate design thinking into senior living, into kid-centric homes. And I think that project, with its design, with its execution, with its sales, with its marketing positioning, I think will have a large bearing in defining our way forward on kid-centric. I think that's what I'm really waiting for.
I think, of the three projects of Ashiana Umang, Ashiana Town, and Ashiana Anmol, the one in Jaipur, Ashiana Umang, is something I would consider successful, as a kid-centric homes, and probably, outside of the new clean slate thinking, provides a model of how we want to think about kid-centric homes in the future. So it is still a work in progress and a lot of learning involved.
But as I said, so you expect the margin profile and, and the pricing here to be better because of the differences you intend to bring, and that's why you're doing it, obviously, and I guess, right?
Yeah, yeah, correct. So, you know, we are looking for more than anything else, reducing competitive intensity. I think that will get better pricing, that gives better margins, more stability to the business. I think what we are really, really looking for is to differentiate ourselves from the competition in order to reduce competitive intensity.
Great. That's all from my end. It's always a pleasure to attend your concall. Thank you.
Thank you.
Thank you. Next question is from the line of Ankur Jain from Prayas Capital. Please go ahead.
Hi, Varun. Good evening.
Good evening, Ankur.
Yeah, Varun, I had one question on senior living space. So if you know, the kind of aspiration that we have that in the next, let's say, 4-5 years, the company wants to scale up to 4 million-5 million sq ft a year. So in that context, what percentage or what portion of the sales do you think can come from the senior living space? I mean, can 50% of our sales come from senior living space? And if yes, given that we are focusing on 4-5 geographies, can they individually contribute 4 lakh-5 lakh sq ft each for the senior living space? Thanks.
Sure. Ankur, inherently, in short of what we started thinking of, instead of thinking of, revenue share of the company or the square footage share of the company, we would also look at senior living to contribute a certain kind of a profit share mix in the organization.
Okay.
In our view, senior living should contribute about 40% of the overall profitability of the organization going forward. In that, there are three key markets, Chennai, NCR, and Pune, and Bombay. Like, we have to enter Pune and Bombay, for senior living. There's no choice. These are the three key senior living markets that are there in the, in the country.
Mm-hmm.
Those all three will need to contribute to meet a decent part. I don't think they will contribute maybe 4 lakh-5 lakh sq ft a year.
Okay.
But I've said I would expect them to contribute better profit margin, on a per square foot basis, as well. And, so, like, one decision that the company has taken in the same time, there was a land in Bhiwadi called Ashiana Town Gamma, which we were not sure whether to do senior living, whether to do kid-centric homes, regular housing part. I think the first intent in this has been to move entire Ashiana Town Gamma to senior living, and we started planning from that perspective. So the thinking is to sort of, from a profit share perspective, return on capital employed perspective, more and less from a square footage share or a revenue share, of the company.
Right. Got it. Just further on that, I mean, if, let's say, your aspiration is to have 40% of the profits share coming from senior living, so just a general ballpark number, would it like, l et's say 25% of, if we are 25% of our sales are coming from senior living, would that attribute to 40% of profits?
It should. It should, according to me, it should. Maybe if not 25%, a 30% number should contribute 40% of profits.
Okay. Thanks, Varun. Thanks, Varun. That's it.
Thank you, Ankur.
Thank you. The next question is a follow-up question from the line of V.P. Rajesh from Banyan Capital. Please go ahead.
Yeah, Varun, a couple of more questions. One, you know, organizationally, how are we set up? Because I know in the past you were geared up for a very large development target. And then we obviously did not let anyone go. So, you know, what is the organization set up like? Where can it go to in terms of millions of square foot over the next few years as the cycle turns?
We should from a managerial bandwidth, because I think we are comfortably set up for 2.5 million-3 million sq ft, which we were. After that, we'll need to add people and look at the organization setup. But we have also, in the last 3 years, made a significant headway in the way we think about people and organization setup, and, you know, developing them, hiring them, retaining them, organizing them. We've made lots of progress on that front, overall as an organization. And I think that's been very important and key. I think, though there is our executive team and our senior team is going through a little bit of change with certain retirements happening and certain, you know, newer folks coming in.
I think that transition is also an important transition for us to manage, from in our setup.
Okay. And the second question, you know, if you want to look at your average, selling price, it has been in that INR 3,000-INR 3,500 range for a while, which means if you in fact, take inflation into account, we have essentially shifted down. So how do you think about that? Does it make you more attractive to a incremental buyer? You know, or I mean, I'm just trying to think whether we are consciously, coming down the price point or, you know, that is just the nature of the market.
Cyclically, the market has been performing below inflation. On the boom cycle, it was cyclically performing above inflation. And my view on the prices hardening is from that perspective, that overall as an industry, the home buyer has never had it better from an annual income to price of the, property, and from an annual income to EMI on that price of the property, the ratios are even better with the reduced interest rates. That, I think is the most right. Okay? But then it's been like that for maybe 18 months, not just the last 12 months or six months.
In my view, the cycle should start turning from that side of the demand perspective, and, and basically, that inventory is overall, unsold inventory has been reducing in the market over the last, let's say, you know, 4-8 quarters, maybe even more, maybe 12 quarters, inventory has been reducing. So I think those things will start happening. And, therefore, I see a price increase room going on.
Right. No, I was, y ou are right that the affordability has definitely gone up. I was just asking more from the perspective that, you know, what does it do to your market position? And number two, you know, given that steel and cement prices have not necessarily gone down over the last five years, it has pinched our profit margins. So in that sense, you know, do you foresee that in the next two, three years, you will start to recover some of that?
Yes. From a market positioning perspective, our market positioning remains the same, and hasn't changed. From the cost side, yes, margins have been under pressure and I am hoping for margin expansion now going forward.
Okay. And lastly, on the land sales, and I know we have talked a lot about it, and I have a lot of respect for you guys, but my only comment is that you were quoting the annual transaction, that was probably closer to the top of the cycle. And as you yourself said, that, you know, we are getting, out of the bottom here. So again, I would encourage you guys to be aggressive to, you know, get the land, for the next, growth phase of the next five, six years as you said. That's all. Thank you.
Thank you for your advice. Thank you.
Thank you. Any participants who wish to ask a question at this time, they may please press star and one. The next question is on the line of Harsh Beria, an individual investor. Please go ahead.
Hello. Hi, I have a couple of questions. You had mentioned that you are targeting higher ROE compared to other developers. Yes. Currently, what is the project level IRR that you're kind of targeting, like a ballpark range to maintain a reasonable IRR installation?
Just we don't underwrite IRR so much there. We underwrite investment multiple on that investment, the GP margin, and our velocity cycle. I think that translates into a pre-tax underwritten IRR at the time of signing off closer to mid-20%. Okay? On a pre-tax basis, about 25%-odd on a pre-tax basis. But, you know, if you look at our reported ROE figures over the last four years, it's not reflecting any of that, correct? So I, I think more than what we are targeting is IRR. What is more critical is how conservative or reasonable our assumptions are that is driving that IRR. And honestly, that's what we are learning is more that we are able to find conservative, reasonable assumptions when we look at-...
25% IRR target, I would say, is what it would probably be. Maybe a little lower someplace and maybe a little higher some places, but mid-point be.
Okay, another question is, you had also mentioned that the cost of sales is much lower in Jamshedpur, sir. When do you expect to launch that in Jamshedpur other project like the Phase two of it?
Can you say that again, please?
Uh, hi-
Can I, can I request you to repeat the question, please?
We have lost the current participant. We will move to the next question that is from the line of Raj Shekhar. As an individual investor, please go ahead, Raj.
Yeah. Hi, thanks. I think most of the questions are answered. I'm particularly interested in the Pune market, with the competitive intensity there. So, and, we have all good plans, and I don't doubt that. My question is, what parts of Pune are you, are we targeting? And, do we, what do we see, the prospect of that market in particular? Because Chennai, and, and I, I understand the full, fully, but just, just, curious to understand a little bit more about Pune dynamics.
So Pune, we are looking at two things. The current land is for a Comfort Homes project in Hinjawadi, which is, which has high competitive intensity. Okay. We entered the market just to see what we can do and, is there a room for us to play? We believe that, with the kind of work, quality of work we do, the way we design our projects and the way we service our customers with care, there might be room for us to differentiate from a very, very otherwise a cluttered market. The other thing we're looking to do in Pune, is mostly near Pune and on the access from Bombay, is to look at Senior Living projects, whereby we can service both, the Bombay and the Pune customers.
So it's basically being on the, on the highway, the either the expressway or the old highway, and within those accesses, connecting Bombay and Pune, so, and to senior living to differentiate ourselves. So that's the thinking over there. Pune, otherwise, as a market is a very fast-moving, low margin, whole lot of developers market, where a lot of developers are there, a lot of buyers are there. Speed of sales is very good, but margins are in general, constrained, overall. It's not somewhere where our developers make a very high margin, but they get high velocity.
Okay, thank you.
Mm-hmm.
Thank you. The next question is from the line of Ritika Agarwal from ValueQuest. Please go ahead. Ritika, please unmute yourself and-
Yeah. Hello. Thank you for taking my question, sir. So I just wanted to know in terms of launch pipeline, what was your launches in FY 2020 versus YTD, and how do you see launches scaling up going ahead?
I don't have exact numbers. We are calculating this because a lot of people ask this. But in FY 2020, we launched new projects. We launched four absolutely new projects, two in Jamshedpur and two in Jaipur. In FY 2021, we haven't launched a new project at all, and we don't intend to. All projects launched in this financial year have been phases of existing projects. I don't have an exact number of what we have launched in this financial year or the last financial year. But-
I think that one please.
Okay, yeah.
We will share that information.
And we will collate that information as to what we have launched every year and just share that with you. That's fine.
Sure.
For the next year, again, the most of the projects that we're looking to launch are existing projects, existing phases of, new phases of existing projects. And, I would hope that we launch another senior living project in Bhiwadi, the project in Pune, two for sure, and maybe look for off the pipeline that we're trying to build in, projects today, maybe launch a project with out of that. So that's, that's, that's what we're looking for next year.
Sure. Sure, sir. So, what I see from the numbers is, we doubled our sales volume and value in FY 2020 to 2 million sq ft. So, going forward, do we expect that run rate to continue and increase going ahead?
Yeah, so this financial year, definitely not, will not hit 2 million sq ft in FY 2021. I think that's, pretty certain, given the kind of sales we have had over the last nine months. It's a number we want to continue and grow as we go forward. Again, difficult to comment for the financial year 2021, 2022, but 2022, 2023 onwards will definitely be more than 2 million sq ft. The idea of working on type of land and opening new projects and, selling things, the whole exercise that is happening, right now is with that perspective that we're able to grow that number going forward. And, as I said, we have good cash flow visibility, we are active in transactions, and we have a view that the cycle of real estate is turning for the positive.
Those three are giving me a sense that we should be growing that 2 million sq ft number going forward.
Sure, sir. That's really helpful. Thank you so much. That's it from my side.
Thank you.
Thank you. Next question is from the line of Manan Patel. As an individual investor, please go ahead.
Thank you for the opportunity, sir, and congratulations for good cash flows. Sir, my first question is regarding the kind of transactions that we are looking at in new deals. So I wanted to understand the kind of capital outflow. Are we also looking to purchase land outright, or it's just JDA? Or if you can throw some light on that.
We are actively looking at both. Any land purchase that we'll be purchasing outright will be on the IFC platform. So therefore, capital deployed to that extent will be that, you know, there will come in capital from IFC in the platform, and so our internal accruals will not be utilized fully to fund that. We are looking to do JDAs as well.
Understood. And sir, if I look at our philosophy of having land 5x-7x our execution, so where in that, like, that number we are? Currently, obviously, the numbers are lower, but given our aspiration, we would have to build up a substantial pipeline. So, do you think the number of deals or the ticket size per deal is going to increase substantially 1 year or 2 down the line?
Yes, we are looking at, I think more the deal sizes and the deal pipeline, both will continue to increase, right now as we go forward. We will be signing up more projects, but looking to keep capital intensity low, either through doing it on IFC platform or doing joint development.
Understood. And sir, apart from, as you mentioned, paying up for the land, so what other hindrance is like, do you also consider time to bring that deal to market? Like, what kind of number that would be in terms of number of months or years?
Yeah, from any deals, time to getting it to market, I would say 12 months would be probably the appropriate time to look.
Okay. According to you, the major hindrance right now is our willingness to pay up for the land. Is that understanding right?
Yes. Yes, and finding those pockets where we think we have the ability to create differential returns and other developments. There are pockets of land where we cannot, but there are pockets where we believe we'll bring value to the table and improve returns that are possible on any particular land parcel. And finding those land parcels and paying for those and looking for those, and I think, and our willingness to pay, those are some of the hindrances, that is.
Understood, sir. That's very helpful. Thanks a lot.
Thank you.
Thank you. Next question is a follow-up question from the line of Harsh Beria. As an individual investor, please go ahead.
Hi, sorry, I got dropped off in the call before. I have another question about longer-term plan. So in this real estate down cycle, what we saw was the earnings and the cash flows were very volatile after, like, the peak of 2014, 2015 earnings. Do you have plans to try to create an annuity income stream? For example, a commercial real estate leasing or provide contract manufacturing, like company like a Sobha Developer does, or also doing like the maintenance activities that you guys do, but on a profitable basis. How do you look at that, creating a stream of annuity income?
Sir, we are not looking to create a scheme of annuity income. We don't have the capabilities to do commercial real estate or contract manufacturing or the temperament to do the same. We are a home builder. We build homes. Building homes have lumpiness and cash flows. That's the nature of the business. So I don't see it changing. I have a particular view that we are not. In essence, that this whole annuity income and wanting an annuity income is a mirage for an organization like ours, and we don't want to go out there.
Okay. That's all from my side. Thanks.
Thank you. Next question is from the line of Raj Shekhar. As an individual investor, please go ahead.
Yeah, thank you very much again for taking my question. Just a quick one before I ask my question on the follow-up on the previous question. So while you are, maybe a neutral observer to the commercial estate market, because we are not there, what's your view? My question is, more specifically on our own company, because you have, given a good, or we sound very promising in terms of prospects. So how do you see the return on equity curve, over the next couple, three, four, five years? Because that's something which we have been quite inconsistent. So how do we see that, going? So there are two questions. Thanks.
What is your question on commercial real estate, Raj Shekhar?
Yeah. So generally, as a distant observer, what do you think, where do you see that market moving in terms of commercial real estate? Do you see promise? While we may not be there, do you see or just the news all around is that it's gloom and doom?
Yes, because as I, I don't believe in gloom and doom so much, and I don't believe in, things going, really, booming also so much. Again, I'm not the right person to comment on it, completely. The only thing is, I don't think this, whole aspect that people, you know, companies will shut offices and people will start working from home permanently, and there will be no office spaces needed. That gloom and doom story I don't believe, okay? But that said, real estate is a business, whether it's office, whether it's retail, whether it's residential. One commonality of these businesses are they are all three of these are cyclical, and they're cyclical, not driven by demand. They're cyclical, driven by supply. And, lots of times capital starts chasing a particular kind of product and overbuilding happens in that.
To me, what I understand is over the last five, six years, since commercial real estate was doing better, it was attracting more capital than residential real estate. I don't know if it was enough to lead to overbuilding and are we what nature of the cycle we are there over there. That I don't have enough to comment. My only suggestion would be if you are evaluating commercial real estate, you want to understand the supply side cycle and has there been overbuilding or is overbuilding in progress, which can create a problem? That's the thing. My understanding on both, all three sides is. So the reason I'm also a little bit more bullish on residential real estate, as I said, the unsold inventory in residential real estate has been declining with reduced launches, reduced building and supply side.
Economic start, you know, favoring the a bull cycle going forward in residential real estate. So that's my limited view on that. On the return on equity, I don't think as an organization we will get to having stable return on it. So there are two things. Will return on equity improve from here? Yes, and we hope to get to mid-teens in a three-year window. The first target is to look to get to mid-teens. But that said, since the industry is cyclical, ROEs will be cyclical. Our attempt would be therefore to create a floor on return on equity and down cycles where it should not fall to, you know. Again, we don't have a number on that yet. Right now, we...
As I said, we don't see the cycle coming down, so the thinking is not what the floor should be, but the thinking is to start going above it, hit mid-teens, and then hope to improve ROE going forward, even more. So that's my longish answer on that. And we are very intense focus on improving ROE in the company. That I can tell you, right? And it's not just with the finance function or with the directors. The entire team, the management team is thinking around what to be done to improve ROE.
And for that, we trust you. Thank you very much for your answer.
Thank you so much.
Thank you. Ladies and gentlemen, that will be the last question for today. I now hand the conference over to the management for the closing comments. Thank you, and over to you.
We would like to thank all of you for being on this call 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. With that, we would like to conclude the call. A lot of material we have spoken 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 this call.
Thank you very much. Ladies and gentlemen, on behalf of Ashiana Housing, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.