Arihant Superstructures Limited Q3FY17

Financial Highlights

Arhant Superstructures Logo
Income Statement Arihant
Arihant Incoem Statement
  • Revenue for the quarter clocked Rs. 369.9 Million with 26.6% EBITDA at Rs. 98.6 million.
  • PAT margin is 13.9% at Rs. 51.3 million. Compared to Q2 company has recorded better numbers but in comparison to YTD Q3 FY16 it is trailing mostly because of
    • higher interest cost on borrowing cumulation.
    • Recognition of two projects that have higher costs and revenue from them is yet to catch up
    • Higher selling and distribution costs
  • Average price that company got in Q3 was 3317 per Sqft with Rs. 2986 in Jodhpur and Rs. 3661 in Mumbai in affordable housing segment- Arihant Aanchal at Jodhpur and Arihant Arohi and Anshula at Navi Mumbai.
  • Due to new opportunities coming up in future particularly in Navi Mumbai, one can expect fresh equity offer after around 18 months.
  • Sale of 70 flats in Jodhpur and 82 flats in Mumbai in the quarter. This year company has given possession of 1200 flats.
  • Average selling price of a house in Mumbai is Rs. 5000 per sq feetwhereas in Jodhpur it is Rs. 2500 per sq feet.

Effects of Demonetisation

  • Stagnation in Sales in November and December
  • All sales for the quarter have taken place mainly in the month of October.
  • The collection cycle of 90 days is also expected to stretch. Partial revival is expected only April'17.
  • With bank's coffers full of money to be lent, housing sector should see a solid revival.
  • Labour payments by contractors are being done by e-route.

Growth Drivers on account of Government policies

 

  • Government has a strong focus on affordable housing segment and company has been a operating in this segment since 2009.
  • RERA, demonetisation and GST together shall lend impetus to the sector.
  • Direct incentives to developers and additional benefit to end consumer in regards to home loans will fuel this segment
  • Reducing the eligibility of size from 60 sq metre of built up area to 60 sq metre of carpet area as defined in RERA and includes projects that got their certificate of commencement after June 2016
  • Various incentives and benefits for affordable housing programmes
  • More players are expected to enter the affordable housing due to government's encouragement through policies but the company is already having good projects in its kitty alongwith the right kind of experience.
  • On account of no taxes on profits from affordable housing projects, the margins should increase by 25% on affordable housing projects. Other than this one advantage, there seems to be no factors leading to increase in margins.

Future Outlook

Future monetisation Arihant
  • New programme called Arihant Ananika was launched on 11th February which saw sale of 89 units totalling to 85000 sq feet just in a period of 7 days.
  • Of the 14 projects of the company, 10 fall in the affordable or low cost housing segment.
  • Total of ongoing projects requiring approvals and on shelf for sales is 11 million sq feet, of which 7 million Sq feet pertains to affordable or low cost housing segment and 2 million to projects under approval.
  • In 2017-18, company targets to sell 25 lakh sq. feet and deliver 18 lakh sq. feet.
  • Company expects to deliver 25 lakh sq feet YOYfrom 18-19, 19-20 and 20-21 with 70% in Mumbai and 30% in Jodhpur and EBIDTA at 36-38%.
  • About 4-5 million of sq feet shall be delivered in the next three years in affordable housing.
  • Other than the above and redevelopment projects into premium section in Navi Mumbai (Vashi), company does not have any other huge land banks.
  • Company will get 30-35% of the total area in the redevelopment projects that have been signed.
  • Land costs have seen a slight fall mainly coming through villagers who own land and developers who undertook projects but are unable to complete them.
  • 63% of company's portfolio pertains to affordable housing i.e. projects in the category of Rs. 2000-4000 and 29% caters to upper middle class with Rs. 4000-6000 category of projects.
ote: All numbers, estimates and projections exclude projects under approval.

ote: All numbers, estimates and projections exclude projects under approval.

Note: All numbers, estimates and projections exclude projects under approval.

Note: All numbers, estimates and projections exclude projects under approval.

  • Owing to incentives on taxes, company should be able to pass on 5%-10% benefit to the end user.
  • Presently the company is focussing on the region of Panvel and does not have plans to expand beyond Navi Mumbai and Jodhpur.
  • New Airport to be constructed by GVK in Navi Mumbai, upcoming Corporate park and Nhava Sheva Sewri link reducing the time taken to travel from South Mumbai to Navi Mumbai are some of the factors that will fuel growth and demand for housing in this area. A new city adjoining Navi Mumbai is also coming up and has all the political will and support required.
  • Jodhpur happens to be the hub of employment, education and modern living in Western Rajasthan and therefore company's focus as well.
  • Company's IRR mark is 20% PAT margins on all investments which gives a target of 26% year on year basis. Average cycle of a project is 36 months.
  • Company is geared up for a 2 times increase from the present level.
  • Company will be interested in JVs only when there won't be requirement of buying the land and in segment of Rs. 2500 sq feet.

Arihant's Strength

  • In affordable housing completing projects within the cycle and controlling expenditure is extremely important and is a challenge for smaller as well as big companies. Arihant is sitting right on the sweet spot
  • Company does not charge transfer costs, escalation charges and impose lock-in period.
  • Standard operating procedures that are infused into all projects right from Rs. 15 lakh to 80-90 lakhs.
  • 20% of the sales happen on referral basis which results in cost savings on channel partner commission, brokerage and advertisement.
  • Risk alert system helps the company being proactive.
  • Company's model is that of outsourcing labour to a contractor and procuring from the company to contractor. Company does not give lock and key to any company where there is no engineering section.