Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Arvind SmartSpaces Ltd (BOM:539301, Financial) reported a 49% improvement in Q1 FY25 bookings, reaching INR201 crore.
- Collections improved by 21% to INR248 crore during the quarter.
- The company added a combined top line of INR410 crore from two existing projects.
- Net debt position improved significantly, turning negative to INR58 crore as of June '24.
- The company has a strong business development pipeline and is looking to add new projects in the coming quarters.
Negative Points
- Revenue for Q1 FY25 was INR75 crore, up only 11% year-on-year, which may be considered modest growth.
- EBITDA for Q1 amounted to INR8 crore, indicating relatively low profitability.
- PAT for Q1 was INR5 crore, which might be seen as underwhelming given the company's scale.
- Some projects, like the Sarjapur project in Bengaluru, are progressing slower than expected.
- The company faces challenges in maintaining high margins due to the variability in quarterly performance.
Q & A Highlights
Q: A good number of bookings and collections. Just wanted to know any update on Mumbai front? Second, how much percentage do you see the shift in asset class investments from real estate to other asset class given that indexation benefit is gone or how this industry will function from now on?
A: Sure. Thanks, Kunal. I think Mumbai, as we have been telling that the entire team, the BD team is busy bringing in something concrete very soon. As we speak, we are very close to kind of telling you something about something of a decent size in Mumbai even if the (technical difficulty) is done, I think it's to be more appropriate that we announced the details only until the former JT sign, which is still to happen. But yes, it's secured that something is on our days when it comes to Mumbai as a market. So we're definitely going to be doing something there and sooner than later. Coming to the second question about shift from real estate as an asset class to another as I think this discussion on indication, et cetera, et cetera, possibly is something which is quite a balanced thing, it has positive, it has negatives. And obviously, (technical difficulty) based on the holding period of an asset, 5, 6 years, it should not impact really for a person who invest a fresh. In any case, a very significant component of overall investment is based on sales of old house and then purchase of new houses to avoid taxes, et cetera, et cetera, from profits arising from the sales of old houses. So in that context, I don't see any significant shift or negative coming out of this whole thing in the short and medium term. If at all, this will balance out. Commonsensically speaking, and generally, the sense that I get personally is that when a person invest in real estate and for that matter for any other asset class, more in real estate being a medium to long-term investment, people are not really taking this call depending on whether the tax rates are x or y if that is not too much of an issue. Now five to six years being neutral, maybe even the seventh year being very, very neutral. I think this is a marginal call, and it should not become a very, very significant catalyst in deciding whether or not to do real estate. That extent, I'm okay with this.
Q: Sir, one more last question is that as when anybody sees the win SmartSpace as a company, we have visibility for next 3 years of pipeline and how much collections we get as you said, INR2,700 crore of unrealized cash flow that company has, in a long-term perspective, say, 7 to 8 years, do you think the run rate of the company, and what cash flows company generating or booking is what company getting? Can you give a broader perspective? Will it be the same as last 3 years where or how will it be? Will it be 5% less growth? Or will it run at the same until FY30? Objectively looking at the company, nobody gets a further of the company. So just wanted to understand how will next 6 to 10 years mean?
A: Sure, Kunal. So if you were to bifurcate your question to medium term and long term, we are right now in the middle of executing our investment cycle, which includes the raising of debt, which obviously is negative right now. Very, very strong cash inflows for the last 2 years, almost last year as last year and first quarter of this year, we've generated thereabouts of free cash flows being from by business into investments. So it's a healthy sort of internal approval source as well. So internal approvals (technical difficulty) of debt, which is negative today to a very, very reasonable set and also the GST platform. This takes care of our one to two years of kind of appetite for investments in that sense. Going longer, we will rather look at the whole growth trajectory in terms of what have we achieved in the previous years and what do we want to do in the coming few years. We have been, growing in all our major parameters to the extent of 30%, 35%. Most of the time, it is more than 30%, but if you were to put a range of, say, 25% to 35%, we should land somewhere there in the long term as well. So we are putting all the blocks in place to ensure from a capital point of view, from pipeline casing point of view, et cetera, et cetera, that this got our trajectory remains in the same way. And accordingly, we can expect that the company will continue to show operationally this kind of growth between 25%, 35% over the next few years.
Q: My first question is in terms of recently in this quarter, we have done the (technical difficulty)
A: I mean if you can speak a little louder, please?
Q: So sir, just wanted first question was on a clarification on the NH 47 project, where we have done the private placement to land partners (technical difficulty) see if you can give an idea that what was the deal as well as when we are going to launch this project in this quarter itself. So what would be the size of this project in first phase in that sense? And for product profile ticket size, if you can give the idea there.
A: Sure. So this project, which essentially is located at a village called (technical difficulty) of the most ambitious projects that we've undertaken. This comprises almost in excess of 850-odd, which is 500 acres thereabouts. It is one of the most sustainable projects in our portfolio till date with a huge water body being created to have water collected during any season, et cetera, et cetera, which is sufficient for most of the residence and the landscaping and other requirements. This is based on a very, very deep hydrological study that we've carried out the first time in any of our projects, which takes care of the water balancing thing, how much water do we need, where can it come from, what is the runoff of water going from the land, et cetera, et cetera. On the other side, it has some very, very exciting products, some very, very state-of-the-art villas, the best class to working on this, et cetera. So it's one of the most ambitious and I mean, personally speaking, very, very exciting project that we are taking over being such a large one, we thought we'll do some test marketing here through some of our bigger channel partners. We've done that, and we kind of sold INR100-odd crore of inventory to figure out which class of -- I mean when you're speaking of 500 acres, it's better to get a sense of what is doing actually better on ground as compared to what our assumptions were. And it can be done in a closer circuit with people who have been working with us for a very long time, and that's what we did. The test market that we did very, very good.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
