Ashiana Housing - Banking on Tier II and III towns!

Thanks for the great summary.

It is understandable that management continues to talk about what they know and what can be measured. But I honestly think they may be in denial. It is very naive of them to think that margins should expand and marketing costs will be more controlled.

The long term impact of COVID on the real estate market is a major overhang. From my current experience asking around in tier I/II cities, land prices haven’t dropped much because of the extremely slow velocity of sales. It is only when transaction volume picks up and the loam moratorium ends will we see what the real estate sector looks like.


What’s your valuation model tells about this company, is it good buy at this level? Please share your views on valuation

Valuation is very cheap, they sold flats worth 671.63 cr. this year, which will lead to profits of 100-130 cr. On a Mcap of 535 cr., this translates at 4-5 times of current year’s earnings.

I think the real question we should ask is what sales will be in 5 years, here is a hypothetical scenarios:

In five years, Ashiana is able to increase sales from 20 lakh sq.ft to 30 lakh sq.ft @price of Rs. 4000/sq.ft (this year’s realization was Rs. 3388/sq.ft). If it happens, revenues will be 1200 cr.; PAT margins have varied b/w 15-25% in the past with gross margins of >30%, a conservative PAT margin will be around 15%. PAT: 15%*1200 ~ 180 cr.

Now you can put your price multiple to come to your projections :slight_smile:


Can someone help me understand the Operating Cash flows arrived at in the Investor Presentation? It says OCF has increased to 34 cr from 16 cr. Also there is a foot note which mentions the following -

Note: Cashflow From Operations before land acquisition reported above are different from the statutorily reported operating cashflows (as per Ind AS 7)

How do I arrive at these numbers from the Cashflow statement because it shows different values?

Can you help me understand the math here? Already 20 Lakh Sq ft has been booked at 3388/sqft this year right? I believe the total land parcel is 30 Lakh sq ft as of now. So that means we have 10 Lakh sq ft left to be booked. Now if they have sold 20 Lakh sqft this year alone, we can assume that they can sell off the rest of the 10 Lakh sqft within a year or two. From the QnA

The balance cash collections on ongoing projects is around Rs 400 crores and the timeline on this is the next 24 months

  1. Why did you assume 5 years for the remaining 10 L sqft? Am I missing something here?
  2. Shouldn’t 10 L sqft cost just 400 cr instead of 1200 cr in your assumptions?

Please let me know your thoughts.

I realize that I wasn’t clear enough, thanks for pointing it out. I will go back to the unit economics of Ashiana and try to explain my thought process. The core business model of Ashiana is similar to a processing company where they buy land and turn it into a building and sell it (youtube playlist explaining their model). The management has previously stated that in order to generate ~20% growth, inventories should be liquidated in a 5-7 year timeframe.

In order to analyze Ashiana, these are the factors I generally look at:

  • Bookings along with the booking value (giving us the average realization)
  • Construction or delivery
  • Pre-tax cash flow (tells us if money from current booking is enough to construct)
  • Gross profit margins (proxy for variable costs)
  • Indirect expenses (proxy for fixed costs)

Here are the numbers from the past:

The cyclicality of this business is clear from the above (look at bookings volume). FY14 was the peak booking of the last cycle (22.13 lakh sq.ft), which was when the real-estate entered into an oversupply situation. The oversupply seems to have bottomed out in FY18, since then bookings are going up for Ashiana and this is consistent with other listed real-estate companies. I have done some work on past real-estate cycles (eg: the 1997 peak of Indian real estate) and realised that the peak of bookings (in sq.ft) is generally twice of the previous peak (give or take 25%, its not exact science though!). Over the very long term, price of real-estate goes up by 1-2% over inflation (this is valid globally). In India, realizations bottomed out somewhere in FY19 (for most listed developers). We can have a ballpark estimate for growth in realization (as 6% GDP growth + 4% inflation ~ 10%). This is my mental model.

Now for Ashiana, in the current ongoing projects out of 31.17 lakh sq.ft, 19.35 lakh sq.ft has been booked leaving ~11.82 lakh sq.ft of unsold area. For finished projects, 6.84 lakh sq.ft of property is to be sold (this is ready to move inventory). Future planned projects have saleable area of 60.76 lakh sq.ft. And then the company has 67.88 lakh sq.ft of land which will be turned into property at some point. This means they have a total saleable area of 11.82+6.84+60.76+67.88 ~ 147.3 lakh sq.ft. This is the supply scenario. Does this make sense? (numbers are provided in the latest presentation)

For realization, prices peaked out in FY16 at 3293 which was recently crossed. Long term growth in price realizations in India has been ~10%. In order to be conservative (given how much excess inventory exists in certain parts of India), I took realizations as 4000/sq.ft in 2025. I might be wrong in my assumptions though!


Thank you for the detailed explanation. For some reason, the above investor presentation link did not completely load for me and I missed the information on the final slides (got it from bse now).

But that helped in getting your indepth analysis which helps me understand the business! Thanks again

This video explains what you are looking for

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To be bullish on Ashiana, you have to be bullish on the micro market in which Ashiana Operates. 60%+ of Ashiana future and current projects are in very niche micro markets.

First make a case on why people will buy houses in those micro markets


Promoters have bought 185’956 shares (worth ~60 lakhs) from open market. This means the average price comes close to 32 which is surprising because Ashiana never traded below 39 (probably an error from company secretary). Anyway, promoters are buying little bit of shares from open market.


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Q1 Results out

I was able to only attend part of the conference call, here are my notes. I will update it once the conference call transcript is available

  • Ashiana Amantran cancellation of 41 flats which are still in the system will be recorded in Q2FY21; July and August good months for booking
  • July has been a good month across all properties; see good overall traction in bookings; Needs to be seen if the booking are because of pent-up demand? Management sense: Compression in interest rates favors consumers; 3% rental yield (± 50 bps) in most of the projects
  • Q2 booking will be better than Q1; Ramp up of construction in months to come, delivery might be a little delayed
  • Receivables not alarming according to management
    o Maintenance segment: particularly for people who do not stay at the property, so receivables can be a little stretched because of that and they pay when they visit
    o When delivery letter is issued and last 4-5% of payments is pending, sometimes that gets delayed
  • Ashiana town: July and August continue to be good. This year will be better than last year
  • Cash situation will improve in Q3 (maybe suboptimal in Q2), optimistic on the cashflow front
  • New launches: Vrinda graden phase 5 in process, Nirmay: second block will be launched this quarter, more launches in different phases of different projects later this year; New lauches for FY21: ~1mn sq.ft
  • Bhiwadi & Jaipur area: Economic activities are coming back to normal, in Jaipur where tourism and jewelry parts a large part of the economy are constrained. In Bhiwadi, auto manufacturing activities started coming back in July
  • EMI scheme: no 10:90 scheme for Ashiana; Focus on schemes which give upfront cash
  • Direct sales: Got into it more because of compulsion
  • Still looking for senior citizen project for Chennai

Disclosure: Invested (position size here)



I thought to chime in though I don’t own any stock in Ashiana nor do I intend to.

I am an investor in Ashiana properties in Bhiwadi for over 6 years. Pre covid the occupancy rates from a rental perspective were quite high and Ashiana is looked as up market as per the standards there. Rentals have grown but is nothing in absolute terms compared to say Gurgaon which is a 45 min drive away. Folks in middle income group have started staying in Bhiwadi even though their offices are in Gurgaon.
The industrial belt including auto companies and glass companies like Saint Gobain is what drives occupancy.

I dont think property prices have appreciated much. I have not kept track of it. But for me rental income has increased almost 100%.


disc: no investment in ashiana stock


Hey! What accoring to you will be the current approximate rental yield in the Bhiwadi area?

Here are my notes from FY20 annual report

  • Will start measuring net promoter score to understand how happy their clients are across projects
  • Ranked #1 brand in North India, #5 in India, #1 senior living brand (third consecutive time) by Track2Realty
  • Launched 4 greenfield projects (2 in Jaipur, 2 in Jamshedpur). No further greenfield projects in FY21
  • Debt as on FY20: 104.97 cr. (excluding IFC funding of 18.74cr.), Out of this 20.2 cr. is working capital debt. Cost of borrowing: 10.5%
  • Cash as on FY20: 154 cr. (4-5 cr. monthly expense)
  • Generated positive operational cashflow at 34.22 cr. in FY20 vs 16.41 cr. in FY19
  • 90% of customer loans are from top 2 housing finance companies in India
  • Land bank: 86.82 acre, looking for land acquisition opportunities in Jaipur, Gurgaon, Pune, Chennai and Bhiwadi
  • Jaipur market is doing well, there was never oversupply problem here
  • Gurgaon and Bhiwadi markets are facing challenges, with sales in Sohna (Gurgaon) slow. Bhiwadi senior citizen living project is doing well
  • Ongoing projects: 31.17 lakh sq.ft saleable area out of which 19.35 lakh sq.ft has been booked
  • Lavasa (Pune) phase IV has been constructed, however sales is yet to be commenced pending OC approval
  • Projects launched in 2013 and 2015 have seen pricing impact, where they have unable to pass on inflation in construction costs to customers due to oversupply in market
  • Enquiries and site visits are back to pre-COVID levels, expect normalcy return in 2nd half of this fiscal
  • Number of permanent Employees: 524; Median salary: 3.47 lakhs; 9.18% increase in salary of employees other than managerial personnel; 7.1% including managerial personnel
  • Internship program from leading management institutes went well and has now been institutionalized.
  • Sold 1505 flats against a sales target of 1600
  • Advertising and business promotion expense: 28.28 cr. (vs 25.59 cr. in FY19)
  • Had to writedown 17.39 cr. selling expense whose corresponding revenue were not similar to the costs was incurred
  • Gross profits was lower at 23.51% vs 30%+ in previous years because of Sohna project (accounting for 47% revenues recognized) which had much lower gross margins
  • Partnership profit: 300/sq.ft (vs 331/sq.ft in FY19)
  • Total collection: 353.1 cr. vs 292.36 cr. in FY19
  • COVID impact:
    o Project delays
    o Demand contraction
    o Supply contraction
    o Continued consolidation towards reliable real-estate players with balance sheet strength
    o Trying to manage cashflows properly

Disclosure: Invested (position size here)


CNBC Awaaz interview (link)

  • Construction back to pre-COVID levels
  • July, August good months in terms of bookings
  • Site visits higher than pre-COVID levels, virtual visits going well and shortening buying cycle
  • Seeing substantial traction in conversions where bookings are happening with substantial payments
  • Ashiana not alone in demand revival; Lots of other developers also seeing traction in residential space, Possible reasons: low inflation in residential real-estate prices over past 5 years, low interest rates increases affordability;
  • Getting more sales in under construction property compared to ready to move property
  • Maintenance booking revenue: 4.5 cr./month (not for profit business)
  • Debt: 55 cr. in corporate balance sheet; 15-20 cr. in project level funding
  • Company has a business coach based out of Vancouver Canada, and they have also seen spike in residential real-estate demand across Canada

Is anyone able to find out the price at which the promoter has brought this stake.

It can help us to understand at which the promoter believes that this stock is undervalued

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Govt extends several incentives including free Floor Space Index (FSI), concessional project finance, free of cost trunk infrastructure facilities, among others to push participation in Affordable Rental hsg scheme


BOMBAY DYEING/ARVIND SMART SPACES/ ASHIANA HOUSING/ Mahindra life /ajmera/ godrej prop etc

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