Arihant Superstructures Ltd Q3 FY2023 Concall Summary

Key Takeaways

• Strong quarter, ambitious trajectory: Revenue grew 30.1% YoY to ₹115.21 Crores and PAT jumped 72.3% YoY, with trailing 12-month PAT crossing ₹50 Crores for the first time.
• Margins are improving, with a catch: EBITDA margins rose 57 bps to 21.25%, but the blended PAT margin of ~13% is weighed down by older, low-margin projects that will take years to cycle out.
• A strategic pivot to plotted development: The acquisition of 25 acres at Chowk for ~₹41 Crores, with approval for an adjoining 51 acres, signals a faster-turnover business line that management calls a "new form of real estate in Mumbai."
• The growth engine needs fuel: Management is seeking ₹150 Crores in additional capital, mixing debt and equity, to fund acquisitions and new launches, arguing that "opportunity loss would be more than any other balance sheet numbers."
• What to watch next quarter: The pace of new launches (Aayan, Arshiya, Aspire), progress on the plotted development sales launch, and any update on the ₹150 Crores capital raise.

Financial Performance

• Revenue driver: 30.1% YoY growth came from strong execution and sales momentum, with construction activity picking up "tremendously" across all sites in Mumbai MMR and Jodhpur.
• Realization gains: Average realization rose over 4% to ₹5,768/sq ft in 9M FY2023 because the company took price hikes during the quarter, and sales continued despite them.
• Profitability leap: PAT grew 72.3% YoY to ₹19.95 Crores, with PAT margins improving 97 bps to 13.03%, driven by operating leverage and price increases.
• Interest cost pressure: Interest costs rose from ₹5 Crores to ₹8 Crores as new borrowings were taken for land purchase and acquisitions, a necessary cost of the growth strategy.
• Receivables tied to growth: Trade receivables rose from ~₹60 Crores to ₹84 Crores because home loan disbursements take 90–100 days from booking, so the increase is a function of higher sales, not collection weakness.
• Revenue recognition model: The company follows the percentage completion method, which ensures profits are booked in time and performance is not one-off; as sales grow, revenue, EBITDA and PAT follow in CAGR.

Ashok Chhajer: "We are aware that yes whenever there would be rise in sales we will see the same type of performance after each sale in the next quarter. So we tuned to it, we would be able to do up and a similar kind of performance as we have done in the last 10 quarters."

Margin Structure & Trajectory

• Blended margin reality: Current blended PAT margin is ~13% because older projects like Arihant Aspire and airport-land projects, where land has been on books for a decade and construction costs have risen, contribute lower margins, though not losses.
• New project economics: Every new project is underwritten with a target of at least 20% PAT margin and ~30% EBITDA target, creating a widening gap between new and legacy profitability.
• The fade-out thesis: Blended margins are expected to see marginal YoY improvement as old low-margin projects cycle out; a 10% rate increase in large low-margin projects like Arihant Aspire would make a meaningful difference.
• Airport project timeline: Management expects "daylight in 25 around" for the airport project, with a balance project life of 5–7 years, so margin recovery from that asset is a multi-year story.
• Price trend support: Average prices have risen 7%–10% across all projects over the last two years, providing a tailwind for margin expansion as older inventory is sold at higher rates.

Ashok Chhajer: "Basically any project which is envisaged and which are taken newly are worked out within PAT margins of around 20% plus... The PAT margins are less but blended out with the new projects and the old projects we would be able to see a similar kind of that margin in the coming quarters also."

Project Pipeline & Launches

• Arihant Aaradhya (Kalyan): Launched in Q3 FY2023 with good response; the product created "a slight disruption in the Kalyan micro market" by offering quality living at an affordable price versus premium pricing in the vicinity.
• Upcoming launches: Arihant Aayan (Titwala) and Arihant Arshiya (Khopoli) received approvals in Q3 and will open for sale in Q4 FY2023; Arihant Aspire (Panvel) is gearing up for a new launch after good response to Della Tower last year.
• Shilphata delay: The Shilphata project is now expected in Q3 FY2024, delayed from the original Q1 FY2024 plan, as a small portion of additional land is being added and design will be completed alongside.
• Approval bottlenecks: Three to four projects faced delays in approvals; planned approvals for two to three phases in Q1/Q2 could not happen, but these are expected to see "daylight in this quarter and coming quarters."
• Deliveries in Q4: New deliveries are lined up, with OC already applied for some projects in Taloja; the company expects another 350–400 units delivered in this financial year.
• Portfolio addition: The company added ~0.24 crore sq ft with a gross development value of ₹1,100 Crores plus to its project portfolio in this financial year.

Parth Chhajer: "The product has created a slight disruption in the Kalyan micro market and offers quality living to our homebuyers at an affordable price when compared to premium pricing in the vicinity."

Plotted Development & Land Strategy

• Chowk acquisition: Acquired 25 acres at Chowk (off old Mumbai-Pune Highway) via outright purchase for ~₹41 Crores, marking a strategic entry into horizontal/plotted development.
• Scale-up potential: Approval received to acquire an adjoining 51 acres in Raigad; on completion, the total land parcel will be 76 acres, with total potential approximately three times the 25-acre figure per management's confirmation.
• Faster turnaround: Plotted projects complete in 2–3 years versus 7–10 years for larger apartment projects, enabling faster capital recycling and revenue recognition.
• Product economics: The 25 acres will yield ~275 bungalow plots with ~6.6 lakh sq ft area; the full 76 acres could yield ~700 bungalow plots at an average sale price of ~₹75 lakhs per plot.
• Location thesis: Management describes the location as "very, very, very hot" and one of the most premium plotted developments, driven by better infrastructure like the MTHL link and JNPT corridors reducing travel time.
• Second-home tailwind: A big spurt in second-home demand over the last 1.5 years post-COVID is driving plotted development success, with peers like Wadhwa seeing strong traction.

Ashok Chhajer: "...now when we see that the biggest brands are also coming into it, it would see a new form of real estate in Mumbai."

Capital & Funding

• ₹150 Crores capital raise: The company is looking for ₹150 Crores in additional capital, structured as a mix of debt and equity, "whichever comes first," to fund new acquisitions and growth.
• Debt for land: Debt was raised from STIC for the 25-acre Chowk acquisition, and a little more debt may be procured if required for future acquisitions.
• Existing project self-sufficiency: The company does not require working capital for existing projects; collections are sufficient to run ongoing operations without additional facilities at scale.
• Equity invitation: Management explicitly invited investors to participate in equity issuance for new acquisitions, framing it as a growth partnership.
• Acquisition conviction: Management believes this is "the time to get the best of the businesses acquired" in MMR and Navi Mumbai, which are seeing big growth, with acquisitions now yielding profitable transactions in the next five years.

Ashok Chhajer: "Business should be undertaken is more important and the opportunity loss would be more than any other balance sheet numbers."

Strategy & Vision

• Portfolio scale target: The company aims to increase its portfolio from ~1.5 Crore sq ft to ~2.5 Crore sq ft over the next half-decade, with a 4x multiplier in size, people, and revenues over five years.
• Full product platter: The portfolio spans ₹18–20 lakhs to ~₹3 Crores, plus plotted development, aiming to offer a complete range for homebuyers and ensure "growth is not stoppable."
• Holding company focus: For the next two years, all new projects are expected to come under the holding company Arihant Superstructures Limited with 100% stake; subsidiaries may get new projects only when they generate free cash flows.
• Organizational ambition: Management is building a large, sustainable company with professional delegation, aiming to be a leader and highly respected brand across industry, vendors, peers, and consumers.

Parth Chhajer: "...if the company has the platter with the market that the consumer is looking for, I think growth is not stoppable."

Guidance & Commitments

Key Metrics