Arvind SmartSpaces Ltd Q2 FY2023 Concall Summary

Key Takeaways

• Orbital shift underway, numbers confirm it: H1 revenue rose 110% YoY and PAT rose 132%, while the company entered Bangalore, Pune and now MMR, backing management's claim of a trajectory change.
• Bangalore is scaling faster than expected: Brand resonance surprised management, two new projects were acquired this quarter, and four launches are lined up in coming months, putting the city on track to rival Ahmedabad.
• The HDFC platform is the growth engine: ₹900 Cr of capital, ₹5,000 Cr of top-line potential, and deployment expected to be fully committed before March 2023, with sales impact starting H2 FY24.
• Plotting-heavy mix is a margin play, not a top-line drag: Plotting projects carry attractive land prices and healthy margins, rotate capital in 24–30 months, and let the company outprice competition while protecting profitability.
• What to watch next quarter: Whether the three large launches (Devanahalli, Sarjapur, and one more) hit the market on schedule, and whether at least one MMR land acquisition closes before year-end.

Growth Trajectory & Financial Performance

• H1 performance: Revenue up 110% YoY, EBITDA up 32%, PAT up 132%, driven by both new launches and sustenance sales across Ahmedabad and Bangalore.
• Q2 bookings: Grew 3% YoY to ₹189 Cr despite a seasonally muted quarter, with the Fruits of Life launch in Ahmedabad selling its entire ₹90 Cr inventory within 36 hours.
• Collections lagged but should catch up: Q2 collections were ₹113 Cr vs ₹161 Cr last year, partly because Bavlu contributed only ~₹5 Cr in its launch quarter; management expects meaningful improvement as project milestones are achieved in coming weeks.
• Balance sheet is being deliberately leveraged: Net debt remains negative at ₹11 Cr, but gross debt was introduced this quarter to fund new acquisitions, with a stated ceiling of 0.7–0.8x debt-to-equity and a hard cap of 1:1.
• Promoter conviction: Kamal Singal exercised 28,50,000 warrants for ₹29 Cr, increasing his stake and signalling commitment to the growth plan.
• The 30–40% growth ambition: Management has grown critical parameters at 30–40% for the last 3–4 years and aims to sustain that rate, which would take the company toward ₹1,000 Cr and then ₹2,000 Cr in sales "very soon."

Kamal Singal: "the company is in the middle of an orbital change and trajectory is changing. That is very clear from the numbers"

Bangalore: The Second Engine

• Market entry exceeded expectations: Brand recall and resonance in Bangalore was much higher than management anticipated, quickly placing the company among the top 5–6 players in the city.
• Two new acquisitions this quarter: 27 acres at Doddaballapur Road under HDFC Platform 2, and 18 acres near IVC Road (Devanahalli area), fully owned; both have potential to expand 2x–3x subject to technical and analytical diligence.
• Launch pipeline is loaded: Four Bangalore projects are lined up for launch in upcoming months and quarters, including the first Devanahalli project "anytime from now" and a Sarjapur villa project before the financial year ends.
• Digital sales platform launched: Arvind Bel Air in Yelahanka now offers virtual unit experiences, drone-shot balcony views, real-time inventory visibility and cost break-ups, a capability the company plans to extend.
• Technology as a differentiator: The company was an early adopter of customer portals nearly a decade ago, runs fully stabilized ERP on Salesforce, and now tracks marketing creative performance in real time (e.g., villa images vs. clubhouse images).

Kamal Singal: "I will disagree a little bit on the brand recall in markets like Bangalore. In fact, it is the other way around. We knew that we would find resonance... But when we really entered, we found that the echo and the resonance was much higher than what we would have anticipated."

HDFC Platform 2: Structure, Deployment & Payback

• Platform economics: ₹900 Cr total corpus (₹600 Cr HDFC, ₹300 Cr ASL), targeting ~₹5,000 Cr of top-line potential with EBITDA margins in excess of ~25% on acquisitions.
• Deployment pace is ahead of schedule: Within two months of platform creation, two projects have already been added (Fruits of Life, partly launched, and the Doddaballapur project), and management is confident the entire ₹900 Cr will be committed before March 2023.
• Capital recycling model: The intent is to invest, earn, and redeploy quickly; plotting projects are designed to rotate 100% of capital within 24–30 months, while build-up projects take 45–48 months.
• Sales impact timeline: Real impact from HDFC investments in terms of fresh sales will start from H2 FY24, with a couple of exceptions like Fruits of Life where the acquisition-to-launch cycle compressed to ~3 months.
• HDFC's equity stake: HDFC became an 8% owner of equity in the parent company itself, aligning interests beyond the platform.

Geographic Expansion: MMR & Pune

• MMR entry is now active: Management confirmed the company is "now entering MMR" and putting efforts toward it; MMR and Pune will become the third geography alongside Ahmedabad and Bangalore.
• Entry mode will be capital-light at first: The preferred route is JDs (joint developments), given MMR land parcels require significant capital; outright investment will be capped at ₹100–150 Cr per location, and the first couple of projects will likely come through JV/JDs with limited own-money exposure.
• FY23 MMR target: Management wants to commit 1–2 projects from a land acquisition standpoint this financial year, targeting ~₹500 Cr of top-line potential from new MMR acquisitions and commitments.
• Pune is already live: The company entered Pune a few quarters back and has one project up and running.
• Sequencing logic: Management waits until existing markets are deep enough to support volumes appropriate for the company's size before entering a new one; Ahmedabad and Bangalore now provide that base.

Kamal Singal: "It is about starting and starting it well, starting it on a very strong footing, and that is where we believe that 1 or 2 projects to be committed with this financial year will be a great idea in a new market."

Product Mix & Land Strategy

• Plotting-heavy mix is deliberate: Recent acquisitions have been plotting-heavy, which are low on top line but carry very attractive land acquisition prices and healthy margins; the company can outprice competition while maintaining profitability.
• Plotting economics: Saleable area in plotting projects is 55–56% of total land because there is no built-up area; later phases can add villas or low-density construction, increasing saleable area and revenue density.
• Shift toward built-up projects: Focus is now shifting to adding group housing and built-up projects through acquisitions, JDs, and JVs; the proportion of JDs will increase, and some developments are expected in coming weeks and months.
• Land-bank philosophy is manufacturing-like: Land is treated as raw material; the KRA for the entire team is to hit the market as soon as land expenditure is incurred, add value, and exit at the earliest possible time.
• Acquisition discipline: Projects are only initiated once a critical mass threshold is hit (e.g., 25 acres for Doddaballapur) to ensure viability; aggregation is done through aggregators before the company commits capital.

Kamal Singal: "It is more like a manufacturing mindset where land is raw materials and idea is to add value, an idea is to exit and sell it at the earliest possible time, and the KRA for the entire team and the group is to see that we hit the market once the land expenditure is incurred."

Risk Management & Conservatism

• Interest rate tolerance: Management sees no big worry as long as rates stay below 9%; 8.5–9% is viewed as normal, not an exception, and should not impact demand in a very significant way.
• Acquisition caution despite available capital: Despite having money and resources, management will remain "very, very conservative" and "very, very cautious" on new acquisitions, not wanting to hurry into anything imprudent.
• Project-level performance is clean: Every single project to date has been performing well, cash positive, and broadly in "autopilot mode" where investments have been recovered very quickly.
• No guidance policy: Management explicitly declined to give bookings guidance for FY23 or FY24/FY25, stating it is policy not to guide on critical parameters; a request for monthly sales disclosures was noted but not committed to.

Kamal Singal: "We do not want to be in a hurry to doing anything which is faster or which is not as prudent as it should be"

Guidance & Commitments

Key Metrics