Arvind SmartSpaces: Will it make smartspace for Retail Investors?

One think I want you to know about how property markets operate in india.
Yes i am optimistic about the prospects of the company but Dont go by the bookings.

My freind have recently money to a reputed developer in NCR. As a security a villa is booked in his name in case builder defaults.
Also some booking are done by property dealers. About 25 % of initial inventory is sold this way. And here also as I can see about 25% of project is sold. So wait for some clarity to emerge.

I know about it as I invested about 3 months as I want to buy a house in delhi ncr but the trend is applicable throhghout india.

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Hey Ashish, I think you’re being too kind. In my view, based on my personal and anecdotal experience, way more than 25% of initial inventory is sold to brokers / other speculators. These speculators for example buy a 5,000 Rs/sqft villa by paying just 1000/sqft (mortgage, 20% of prop value) wait for a few months and sell the villa in a few months for 5300 /sq ft (5% appreciation in villa prices), but a 30% return on their invested capital.

That being said though, I think it is almost irrelevant from Arvind infra’s perspective. Irrespective of who the buyer is (end user or speculator) Arvind get’s the money which reduces working cap and enables them to construct.

Additionally, land Speculator and real estate brokers have a really good grip of their respective markets. If they are snapping up these villas, they expect a pretty good appreciation /demand for it (otherwise why would they buy it)

Am i missing something out? I think bookings are a good barometer of assessing the perceived attractiveness of a real estate project.

On a totally side note, since we are on the subject - An interesting panel discussion on the current real estate scene (Motilal oswal real estate panel) Link below.

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Fairly detailed presentation on Arvind’s website

Many doubts should be cleared through this note.

A lot is riding on the 2,500cr revenue projections, but project details provided in Q2 presentation might imply that not all of that revenue belongs to Arvind.

Specifically comparing “Sporcia” and “Electronic City” projects in Bengaluru, both have very similar areas (5 acre, 0.52 msqft), revenue projections (225 cr) and completion year (2017). That makes sense except for the fact that Sporcia is 100% AIL while AIL has 65% stake in Electronic City. There could be couple of explanations

  1. 225cr in Electronic City is total revenue and AIL will get 65% share
  2. Electronic city is more expensive, thus 65% share provides for the same revenue as 100% of Sporcia. Considering Sporcia is behind Manyata Tech Park, I would expect Sporcia to be more expensive than Electronic City. So in my view this explanation does not stand

Does that mean that AIL revenue would be ~1400 cr adjusted for their share in properties?

@onliabhishek, as you seemed to be sure of the revenue share, could you take a look.

Disclosure: Not invested, evaluating.

Hello fellow Arvind infra shareholders,

I’m sure we are all enjoying the (everyday upper circuit) ride, while it is definitely helping us make money, I’m beginning to get worried. If not for so called “operators” (that are mostly hired by management to boost up their resp stock prices) how can a stock go up in a straight line like this? The volume data isn’t too impressive either to suggest a genuine spike in interest in the counter. On the other hand, I find it had to believe that Arvind mills would spin off a a pump and dump type company. So just wanted to know, have any of you had this experience where, you buy stock of a reasonably reputed company / brand (like Arvind) and it hits upper circuit pretty much every day? How does this ride end?

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Hi such type of constant upper circuits r definitely not normal. But u will agree tht there is a lot of value in the company. Also the low volume might be bcoz of it being included in T group and thus only delivery based buyers wud be buying. Thus it’s a good sign.

Hi Abhishek,

No question on the fundamentals, believe the company is grossly undervalued. About the delivery issue, just a point to clarify, I wish it was in the T2T segment, but the average delivery volumes for the past week has been all over the place, all the way from 27% on Monday to 97% yesterday. That’s what has me confused. Furthermore, upper circuits followed by lower circuits?? Can’t figure this out! Have you had any similar experiences?

Disc : Heavily invested at lower levels.

Carnage !! Could anyone open the press release and the review note on Arvind Infra’s website for Q3? I am unable to for some reason. If anyone could upload it here that would be greatly appreciated

Here it goes…Press_Release_Q3.pdf (224.1 KB)

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``Review_Note_Q3.pdf (1.7 MB)

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From the company’s presentations, I have compiled some aggregated project related information just to get a sense of how the company is progressing operationally (financial details are freely available elsewhere). Some of the data is not available for all quarters, as their presentation formats have also evolved. Also some of the FY16 numbers are not exactly the same as summation of Q1 to Q4.

As expected, there are some down and some up quarters. A key point is the negative cashflow (which the management is transparent about), which has resulted in increase in debt by appx. Rs 20 cr. Debt equity remains comfortable at 0.62.

FY16 sales = 115 cr
Unrecognized revenue from sold units = 344 cr
This provides some visibility.

However, unfortunately, this visibility is stemming from only 2 projects (as below), which to my mind, is a high concentration risk, moreso as the other projects are getting completed.

To put a positive spin to it - the company has posted 32% sales growth and 60% profit growth with nil contribution from its top 2 projects.

After results, the company was in upper circuit of 20%. Then concall happened. And the next trading day, it is down 10%. Something has not been received well. If anyone has any information on this, please do put up.

Meanwhile today’s interview:

Other info (results and presentations) available on this link

Discl - I have invested in it in the last 6 months, and added more on Friday just after results were announced (purely lucky timing).

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Missed this:

Arvind promoters have been steadily increasing their stake in the company:
aug 15 (listing time) - promoter stake was 43.76%
Sep 15 - 45.74%
Dec 15 - 47.02%
Mar 16 - 47.37%

They have also allotted warrants to themselves (50.7 lakh warrants at 88 per share ie 50 cr rupees appx). price is a tad bit higher than the pricing formula. after full conversion (post 18 months) their stake could rise to 56.95%

extract from the agenda item:

The minimum price as per the pricing formula prescribed under SEBI ICDR Regulations for the Preferential Issue of Warrants to be converted into Equity Shares is Rs. 83.86 (Rupees Eighty Three and Eighty Six Paise only), being not less than higher of the following:

(a) Rs. 83.86 (Rupees Eighty Three and Eighty Six Paise only) as average of the weekly high and low of the volume weighted average price of the Equity Shares quoted on the National Stock Exchange of India Limited during the twenty six weeks preceding the Relevant Date; OR

(b) Rs. 80.94 (Rupees Eighty and Ninety Four Paise only) as the average of the weekly high and low of the volume weighted average price of the Equity Shares quoted on the National Stock Exchange of India Limited during the two weeks preceding the Relevant Date.

However, your Board proposes to issue the Warrants to be converted in to Equity Shares at a Price of Rs. 88.00 (Rupees Eighty Eight only) per Warrant.

The Relevant Date for the pricing of the Equity Shares to be issued on conversion of Warrants pursuant to the aforesaid preferential allotment is March 22, 2016 i.e. 30 days prior to the date of Extraordinary General Meeting being April 21, 2016.

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Did anyone get a chance to log on to the conference call on 13th May? If yes would really appreciate it if you could post your notes/take aways. Doesn’t seem to be up on researchbytes.

Sorry if I am missing something obvious.

Uplands 1 has 282 villas and is being built on 4.1 million sqft.
Villa cost: 2.42 cr.
Total expected revenue= 282*2.42 = 682 cr.

Management said the total estimated revenues from Uplands over a period of time would be
something close to Rs.1200 crores.

Meaning the rest (1200 - 682 = 518 cr) of sales is supposed to be realized from Uplands 2 and Uplands 3 in future. Has the land for Uplands 2 and Uplands 3 been separately acquired or will these future projects be developed on the same land of 4.1 m sq-of the Uplands 1 ?


I am sorry. Just saw Uplands project is for 800 villas, Uplands 1 has 282 villas out of that. Is that right?

Please find the concall transcript attached.

arvind infra fy 16 concall.pdf (297.5 KB)

There are a couple of points I am trying to get clarity on:

  1. PAT is appx 17 cr, on standalone and consolidated basis. No dividend is declared. Shouldnt all (or most) of it flow into Reserves? But increase in reserves is only about 2 cr or so.
  2. Concall says that increase in other current liabilities (OCL) is because of short term borrowings. Why should short term borrowings be included under OCL when there is a separate entry for this item in the balance sheet? Extract from the concall as under (Pg 5)

Sreeraj Mehta: If I look at the other current liabilities, that has gone up from Rs.36 crores to Rs.76 crores. Would it be fair to assume that most of it would be customer advances?
Mehul C Shah: It is mainly the company has borrowed some money during the last quarter, it is a short-term borrowing.
Sreeraj Mehta: It is not customer advances?
Mehul C Shah: No.
Kamal Singal: Significant component of that is short-term borrowings that the company has taken in the last quarter, but yes, of course, there could be certain components which can be clubbed under customer advances, but I think broadly significantly it is short term loans taken from the banks.

The rest of 17 cr. is showing in share capital, not in reserves. AIL got demerged from arvind Ltd last year. For every 10 shares of arvind Ltd. Of 10/- each, 1 share of AIL of 10/- was issued.

The company was featured on CNBC Awaaz Know Your Company show on 26.08.16.

Some key points (nothing new):

  • 50% Projects are on owned land and 50% on Joint Development model
  • 14 mn sq ft under development with revenue potential Rs 2500cr
  • Mix of projects that will be completed in 2-3 years, 3-4 years and 7-8 years
  • 65% projects are mid-priced 2-3 bhk; and 35% are high end (3-5 cr and upwards) villa projects. No presence in affordable segment, but eyeing it.
  • Demand is seeing signs of improvement. Sector has bottomed out in his view.
  • Ahmedabad and Bangalore are large markets, enough for the company’s immediate growth. May look at other opportunities as they arise.
  • Target debt/equity not to exceed 1. Funds are very well sufficient to meet growth.
  • Guided for 30-40% revenue growth with EBIDTA of 30-32% and NPM of 15-16%.

Discl. invested and views are biased.

Does anyone has transcript of conf call which was scheduled after the results were announced? Primarily interested in their revenue recognition plan for - Uplands and Beyond Five projects

Can someone please answer my below query -
As of Mar 16, the company had a share capital of 25.82 Cr, with 258.2 lakh shares. In May 2016, promoters issued warrants worth 57.5 lakh shares (@ Rs. 88), which should increase diluted shares to 315.7 Lakhs (258.2 + 57.5 Lakhs) by June 2016.

Thus, the basic and diluted EPS figures during Sept 16 should differ by about 22% (‘315.7/258.2 -1’), given that the share capital (and hence basic shares outstanding) remain same as of Mar and Sept 2016. However, the actual figures reported were basic EPS of 0.89 and diluted EPS of 0.82, which indicates only 8.5% (‘0.89/0.82-1’) impact of dilution. Am I missing something here?