Arihant Superstructures Ltd Q1 FY2023 Concall Summary

Key Takeaways

• Sales volume surged 85% YoY despite rising rates and inflation, with 533 units sold in Q1 FY23, proving resilient demand in the affordable and mid-income segments.
• Margins expanded sharply: EBITDA margin rose 313 bps YoY to 21.3% and PAT margin rose 215 bps to 11.9%, helped by a ~20% QoQ drop in steel prices that eased construction cost pressure.
• The launch pipeline is fully loaded: management guided for ~2,400 unit launches over the next three quarters with a revenue potential of Rs. 1,100 Cr, and a 45–50% sales CAGR over FY22.
• Execution capacity is being built ahead of the curve: the sales team has tripled, the engineering team has doubled, and the company aims to double its annual construction run-rate to 0.2 Cr sq ft by FY24.
• What to watch next quarter: whether the Titwala and Kalyan launches open on schedule, the pace of price increases to offset the new ~₹125/sq ft GST cost headwind, and any sign that rising interest rates are beginning to slow walk-in conversions.

Sales Momentum & Demand Resilience

• Volume-led growth: Q1 sales of 533 units (4.05 lakh sq ft, Rs. 234.8 Cr) represented ~85% YoY growth in both volume and value, maintaining momentum from prior quarters.
• Rate hikes, no slowdown: despite a 90 bps interest rate increase during the quarter, management saw no dip in walk-ins, sales, or bookings, attributing resilience to first-time buyers moving from rental apartments in the affordable segment.
• Completed inventory nearly cleared: only ~90 unsold units (~60,000 sq ft, ~₹20 Cr value) remain across completed projects, described as "pretty much in control."
• Conversion rate ambition: the company targets improving its walk-in-to-sale conversion from ~14% to ~20%, supported by a tripled and specialized sales team now using Salesforce.
• Phase I deliveries as a confidence catalyst: the first phases of Arihant Aspire and Arihant Aalishan are due for delivery by end of calendar FY23, which management expects to be a "very, very big game changer" for buyer confidence, replicating the pattern seen at Arihant Anaika.

Parth Chhajer: "We believe that even if the interest rate go to around 8.5% the home buyers decision to purchase a home will not have a large impact but delay in making a decision to purchase the apartment will have a larger impact on the ability of the home buyer to purchase later on."

Launch Pipeline & Portfolio Expansion

• Near-term launch cadence: ~2,400 units slated to open for sale over the next three quarters, with a total revenue potential of Rs. 1,100 Cr. Q2 alone includes the Titwala project (~200 units), Kalyan (80 IBA, approvals received), and new buildings at Arihant Amisha in Taloja.
• New micro-market entry: the company ventured into Titwala (MMR, affordable housing) with an estimated saleable area of 3.74 lakh sq ft and revenue potential of ~Rs. 220 Cr, purchased in May with a launch targeted for September.
• Asset-light model project added: a new project at Shil Phata (200m from Arihant Aarohi) adds 6.80 lakh sq ft of saleable area and ~Rs. 400 Cr revenue potential in the mid-income segment.
• Arihant Aakarshan launch success: launched at Taloja under the 80 IBA category, ~60% of opened inventory (266 of 439 units) sold as of the call date, reinforcing the company's ~50% market share in the locality.
• Portfolio strategy anchored to population metrics: projects are selected per city population metrics rather than concentrated in one area; the majority focus remains on affordable (<₹5,000/sq ft) and mid-income (₹5,000–₹9,000/sq ft) housing, with selective premium projects like Vashi at ₹15,000–₹16,000/sq ft.

Parth Chhajer: "we keep taking up project in our portfolio as per the population metrics of a city rather than just putting all eggs in one basket"

Margins & Cost Dynamics

• Margin expansion driven by operating leverage and input costs: EBITDA margin rose 313 bps YoY to 21.3% and PAT margin rose 215 bps to 11.9%, with steel prices cooling ~20% QoQ from ~₹85/kg to ~₹68/kg providing meaningful construction cost relief.
• GST headwind incoming: new GST rates on materials effective the week of the call will add ~₹125 per sq ft to construction cost on saleable area; the company plans to adjust pricing for new sales in coming months to offset the impact.
• Land acquisition economics: the company targets a PAT margin of at least 20% on total revenue generated from land, prefers outright purchases over JV or area-sharing models, and avoids buying land with a holding horizon beyond three to four years.

Parth Chhajer: "we do not really want to go in for a JV model or an area sharing or something with the land owner we defer to buy the land..."

Execution Capacity & Team Scale-Up

• Team built for scale: the sales team has tripled from ~40 two years ago to ~130 (160 including pre-sales, recovery, and back office), subdivided into specialized functions covering channel partners, client closure, and tele-calling. The engineering team has doubled, and 15+ civil contractors are now onboarded versus 3–4 previously.
• Technology enabling the ramp: Salesforce is deployed for sales and pre-sales, while Farvision handles engineering and collections; management credits the combination of technology and human resources for driving scale.
• Construction run-rate target: the company aims to double annual execution from the current 0.1 Cr sq ft to 0.2 Cr sq ft by FY24, and expects to sustain that 0.2 Cr sq ft pace year-on-year from FY24 onward.
• Un-launched pipeline provides long visibility: 0.95 Cr sq ft of already-acquired land is to be executed over ~7 years, averaging ~0.15 Cr sq ft per year, underpinning the growth trajectory beyond the near-term launch pipeline.

Parth Chhajer: "The biggest challenge today is also implementation of the project so that will always remain the most difficult challenge so how well we can implement the project is going to make it different..."

Project Progress & Delivery Milestones

• Deliveries on track: OC was received for two projects at Taloja, delivering 390 units in the quarter. Management guided for 1,000–1,200 units to be delivered over the next three financial years from existing ongoing inventory.
• Key project updates: at Arihant Aalishan, Phase I RCC is complete for two towers with finishing underway and Phase II at 7% completion, with sales at 46%. At Arihant Aspire, three towers are launched with sales booking at 63% versus 55% construction completion, a spread management called "very healthy."
• Arihant Advika redevelopment progressing: the society was vacated in June 2022, excavation has started, and civil construction is set to begin in August; a soft launch has already yielded ~₹59 Cr in bookings.
• Land bank addition target: the company aims to take total land bank to 2 Cr sq ft over the next year, with management noting the deal pipeline looks good but nothing officially announced yet.

Capital Allocation & Governance

• Fundraising enablement: the board approved an enabling resolution to raise up to Rs. 500 Cr, described as an annual exercise. New land acquisitions at Titwala and Shil Phata were funded via ICICI Ventures take-out money at 16.43%.
• Dividend policy under discussion: the board is amenable to dividends going forward; FY22 priority was investing surplus in new acquisitions given the real estate up-cycle, with a favourable dividend policy expected in coming years. [12-13]
• Leadership formalized: Parth Chhajer was appointed as Additional Whole-Time Director, joining a three-person Executive Director structure: Ashok Chhajer (CMD — land acquisitions and business operations), Parth Chhajer (sales, architecture, product, collections, marketing), and Nimish Shah (approvals, construction, engineering), supported by four Independent Directors.

Guidance & Commitments

Key Metrics