A decent quarter, company is building up its pipeline that can lead to pre-sales of 2.5-3 mn sq.ft going forward. Need more projects in Jaipur to fulfill growth ambitions.
FY22Q3 concall notes
- In the past few years, company has been able to increase prices in senior living housing in Bhiwadi and Chennai (especially Chennai where price increases have been high)
- Have been able to pass on construction price increases in current projects (sales/sq.ft has gone >4000 for the first time). Margins should actually expand thereby more than covering construction price increases, however they are unsure of passing full increase in land prices. In Jaipur, current land prices are factoring in 10% higher final selling prices per sq.ft
- Have enough projects (except in Jaipur due to high land prices) to do 2.5-3 mn annual pre-sales run rate. Out of the 7-8 planned launches in FY23, 6 should be enough to fulfill this pre-sales run rate
- Targeting 15% ROE on consolidated level. This number should be met (on a reported numbers) in FY23. Not sure if it will sustain after that. This answer will be clear in FY23
- Cost of debt has come down to ~10% (improved from 12-13% a couple of years back). Ideally, customer advances pay for construction cost
- Hoping to finish inventory of Ashiana Town in next 24 months
- Land acquisition funding sources: Jamshedpur + Jaipur + Pune => JV route; Gurgaon => IFC financing + ICICI bank debt; Chennai (Mahindra World City) => Purchased through internal funds as IFC had some regulatory issues in deploying funds, this should get resolved by April and IFC should be able to finance this land purchase. One of the Chennai project is JV with Arihant
- Gurgaon: Sohna project doing well in terms of brand building, margins are very low due to higher land prices paid earlier. Ashiana Amarah should give better financial results, very confident in their design for this project
- Pune: Lot of legwork required, first project is regular housing. Using channel partner for sales (similar to Gurgaon model)
- Kolkata: No resolution yet, no planned launches
- Older projects are doing 25-27% of gross margins (lower than 30% target). The newer projects should work at 30% gross margins given the land prices paid. Looking for projects of value where Ashiana is able to make it work where other players are not interested
- Implementing a new ERP system (Far vision) and appointed Grant Thornton to improve internal controls
- Apart from Milakpur (3.1 mn sq.ft) and Kolkata project (1.5 mn sq.ft) which are stuck, the other existing projects (~7.1 mn sq.ft) along with existing inventory (~1 mn sq.ft) should be exhausted in a 6 year time frame
- Annual fixed cost excluding SG&A but including finance and depreciation is ~65 cr.
| - | Selling costs: |
|---|---|
| o | Chennai: Selling cost has come down from 8% of sales to 4% |
| o | Gurgaon: Selling cost per unit of sales should come down in Amarah project |
| o | Pune: Should see increase in selling costs because it’s a new market |
Disclosure: Invested (position size here)