Anant Raj Ltd Q2 FY2024 Concall Summary

Key Takeaways

• Real estate drives a 1.5x revenue surge: H1 FY24 revenue hit ₹667 crores, with PAT nearly doubling to ₹107 crores, powered by plot sales in Anant Raj Estate and a 30-35% price hike at Ashok Estate since launch.
• Data center revenue begins, but timelines slip: The first 3 MW is operational and yielding ₹75 lakhs per MW per month in margin, yet the 21 MW target has pushed to mid-2024 due to equipment lead times.
• A ₹10,000 crore pipeline sits inside a single land parcel: The 200-acre Sector 63A land bank alone holds this top-line potential, with a new luxury group housing launch imminent and margins set to expand because the land was paid for a decade ago.
• Debt reduction is real and aggressive: Net debt fell from ₹1,650 crores to ₹770 crores, and would be ₹570 crores without ₹200 crores of data center capex; management promises a "substantial" further reduction in FY25, funded entirely by internal accruals.
• What to watch next quarter: The pace of the 21 MW data center build-out, the sell-through rate of the 250-flat luxury launch, and whether the Tirupati affordable housing and Delhi commercial projects open new, non-63A revenue streams.

The 63A Engine: Plot Sales, Pricing Power & the Group Housing Catalyst

• Current sales are plot-driven: Revenue in H1 came primarily from plot, villa, and floor sales in Anant Raj Estate, with Ashok Estate as the main contributor; 80% of Ashok Estate inventory is already sold.
• Pricing power is evident: Selling prices at Ashok Estate have risen 30-35% since its July 2022 launch, a direct pass-through of rising land values to finished product prices.
• End-user demand underpins the cycle: 75% of current sales are to end users, a structural shift from the investor-driven booms of a decade ago that management calls "real demand" and expects to sustain for 24-36 months.
• Group housing unlocks a margin step-change: A new luxury project with 0.11 crore sq ft of sellable area is launching in Q3; construction cost is capped at ₹500 crores on land acquired 8-10 years ago, against a selling price of ₹18,000 per sq ft, promising a significant margin uplift when revenue is recognized next year.
• The launch is designed for speed: 250 flats are being launched this quarter with RERA approval a fortnight away; broker circles expect a sell-out within 2-3 days, generating ₹1,800 crores in top line against that ₹500 crore cost outer limit, with the surplus earmarked for debt reduction and data center capex.

Sarin: "the land is already paid for as you know, and the land is definitely more than 10 years, 8 to 10 years old. So, that's already done. The construction cost outer limit for 0.1 crore square foot will not be more than 500, sir. And the selling cost today is about 18,000 per square feet... we feel that the margins from here when the group housing comes, starts contributing, which is going to be from next year, is going to be further will further improve, sir."

Data Center: First Revenue, First Delay, and a 300 MW Bet

• Revenue has begun, with a high-margin structure: The first 3 MW data center is operational and yielding revenue at ₹90 lakhs per MW per month against a cost of ₹15 lakhs, delivering a ₹75 lakh per MW monthly margin; management expects to reduce that cost by another 15% in 4-5 months.
• The 21 MW timeline has slipped: Originally targeted for FY24, the full 21 MW at Manesar is now expected "maybe a quarter plus," or mid-2024, because equipment lead times have increased by 3-4 weeks; ₹200 crores in strengthening work is already complete, with equipment being installed in phases.
• Demand tailwinds are structural: The Data Protection Bill mandates domestic data storage, and national capacity is expected to surge from 640 MW to over 3,500 MW in 3-4 years, with disaster recovery requirements doubling effective demand; management notes that all current capacity is fully leased and no undercutting exists in the market.
• Competitive advantage is land-cost driven: Because the company already owns its data center land, its IRR and payback period are superior to peers like CtrlS and Sify; even if undercutting emerges in 4-5 years, Anant Raj has the capacity to undercut and still be better off, while first-mover stickiness makes shifting providers difficult.
• The 300 MW ambition is funded by discipline, not debt: Management was explicit that it "does not have that kind of money" for the ₹7,500 crore investment a 300 MW build-out implies, and will not take on debt; instead, it will use rent securitization and internal accruals, discounting receivables rather than borrowing, with the 21 MW phase acting as the proof-of-concept to unlock aggressive expansion.

Sarin: "we don't have that kind of money, and as you know, at Anant Raj, we are very clear that we are not going to be taking on debt."

Margin Trajectory & the Land Bank Advantage

• Margins have jumped on land price appreciation: EBITDA margin moved from 19% to 25% as rising land prices lifted selling prices for finished products like villas, flats, and floors; the land was acquired at historical cost, so the uplift flows directly to the bottom line.
• Group housing will push margins higher still: Because the land for the upcoming luxury project was paid for 8-10 years ago, the construction-cost-to-selling-price spread is exceptionally wide, and margin expansion is expected when group housing revenue begins contributing next year.
• The inventory runway is a decade long: The company sits on comfortable inventory for the next 8-10 years, anchored by nearly 200 acres in Sector 63A with a ₹10,000 crore top-line potential, plus almost 100 acres in Delhi to be monetized later; land will be replenished in 63A as connected parcels become available and cash flows permit.
• Two non-63A projects diversify the pipeline: A hospitality-cum-service-apartment and commercial complex in Delhi (Anant Raj Center) and an affordable housing project in Tirupati (₹340 crores top line, at least 30% margin) have all approvals including RERA and will launch in Q3.

Balance Sheet: Debt Reduction as a Stated Priority

• Net debt has more than halved since early 2021: From a peak of ₹1,650 crores in January 2021, net debt now stands at ₹770 crores; without the ₹200 crores spent on data center strengthening from internal accruals, it would be ₹570 crores.
• The commitment is to reduce debt "substantially" in FY25: Management declined to give an exact number when asked about a ₹50-100 crore reduction, but emphasized the reduction will be material, funded by the cash flows from the new group housing launch and ongoing operations.
• Data center capex will not add to debt: All data center spending is funded from internal accruals, with the company explicitly ruling out incremental borrowing; future phases will use rent securitization and receivable discounting rather than on-balance-sheet debt.

Sarin: "The Company is not taking on any debt for data center at all. It's all from our internal accrual. So, just have a look, sir. We have spent 200 from our internal accrual. So, these 770 figures which actually if you reduce 200 more, this would have actually gone down to 570, sir."

Demand Environment & the Cycle Call

• The current upcycle is expected to run for 24-36 months: Management sees the real estate cycle as fundamentally different from past booms because 75% of buyers are end users, not investors, creating "real demand" that is less prone to speculative reversals.
• Revenue has doubled annually from a ₹250 crore base: The company scaled from ₹250 crores in FY21 to ₹1,040 crores last year, with ₹666 crores already recognized in H1 FY24; management declined to provide forward revenue guidance or segment-level breakdowns for FY26 when asked.
• Data center demand is policy-driven and non-discretionary: The Data Protection Bill creates a regulatory requirement for domestic data storage, and management framed the Russia-Ukraine conflict as a cautionary tale of what happens when a country's data sits outside its borders, suggesting the demand driver is both structural and urgent.

Sarin: "10 years back when we used to have booms and all, of course, for 10 years, nobody talks about a boom, especially in our sector. That time you would see investors and all those things, but this time this is real demand, sir, because almost 75% of our sale is now to end users."

Guidance & Commitments

Key Metrics