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“Ashiana Housing Limited Q2-FY12 Results Conference Call”
November 3, 2011
MODERATORS: M R. VARUN GUPTA – DIRECTOR , FINANCE , ASHIANA
HOUSING L IMITED . MR. GAURAV SOOD – KANAV CAPITAL
Ashiana Housing Limited November 3, 2011
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Moderator: Ladies and gentlemen good afternoon and welcome to the Ashiana Housing Q2 FY2011
conference call. As a reminder for the duration of the conference, all participant lines are in the
listen only mode and there will be an opportunity for you to ask questions at the end of today’s
presentation. Should you need assistance during the conference call, please signal an operator
by pressing * and then 0 on your touchtone telephone. Please note that this conference is being
recorded. At this time, I would like to hand the conference over to Mr. Gaurav Sood of Ashiana
Housing. Thank you and over to you sir.
Gaurav Sood: Good evening to everyone. This is Gaurav from Kanav Capital, the IR firm for Ashiana
Housing. It is my pleasure to welcome you all to the Ashiana Housing second quarter FY12
investor conference call. This call is being held to discuss the performance of Ashiana Housing
for this quarter and to answer any questions that you may have. I hope that all of you have had
a chance to go through the quarterly results and international presentation that went out with
the invite. Today on the call from Ashiana Housing Limited, we have Mr. Varun Gupta
Director of Finance. Mr. Vishal Gupta, the Managing Director, may join us later in the call
once he is through with an important meeting he is attending. I would now like to hand over to
Mr. Varun Gupta, Director Finance of Ashiana Housing, for his opening remarks.
Varun Gupta: Good evening everyone. Thank you for joining us to discuss second quarter performance of
Ashiana Housing. I extend a warm welcome to all of you. This quarter has been a very
impressive one on almost all the critical parameters of growth in the company.
• Ashiana got listed in this year’s annual list of ‘Asia’s Best under a Billion’ compiled by
Forbes. This is the second time in a row that we made into the list and still ours was the
only one from the Real Estate sector out of 35 Indian companies in the list. The selection
of the best 200 companies is based on earnings growth, sales growth, and shareholders'
return on equity in the past 12 months and over three years.
• Your company was honoured with multiple awards in residential segment in Zee Business
– RICS Awards ceremony. Ashiana Aangan, the residential project in Bhiwadi, NCR was
awarded the Best Residential Project in North India and Ashiana Woodland secured the
Best Residential Project ward in East India region. These projects were judged on the
basis of all-round excellence, value for customers, benefits to community and a
commitment to sustainability.
• We acquired 10 Acres of Land in Kolkata in Uttarpara municipality. Uttarpara is a small
town in Hoogly District, and stationed about 15 km west from the commercial heart of
Kolkata. We contemplate an Utsav over there. We plan to start construction on the project
in next financial year.
• The bookings and construction numbers this quarter were the highest ever achieved in any
quarter till date. Bookings grew at 42% on a Year on Year basis to 4.82 lakhs sq ft this
quarter from 3.40 lakhs sq ft last year same quarter. Construction has also gained
momentum and grew at 39% YoY to 3.27 lakhs sq ft from 2.70 lakhs sq ft in the second
quarter of FY11.
Ashiana Housing Limited November 3, 2011
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With bookings of 8.63 lakhs sq ft till September in this fiscal year, we are bang on the track to
achieve the target for the year which is 16 lakhs sq ft. Bhiwadi and Jaipur contributed about 80% of
8.63 lakhs sq. ft. Jaipur has taken over Bhiwadi in the total sales to become our largest selling
geographical area over the last 2-3 quarters, within 5 years of entering the city and it validates the
fact that Ashiana brand is going strong and gives us confidence to enter more new cities.
On the construction side however, we have revised the annual targets from 14 lakhs sq ft to 12.5
lakhs sq ft. Revision happened due to non-commencement of work at Lavasa, which was built into
the year’s target.
On Lavasa, a final hearing is awaited from the MoEF. We have full faith in Lavasa Corporation and
await a positive resolution. The customers’ faith in the success of the project is also evident through
incremental bookings. However, in terms of saleable area of current and future projects, Lavasa
constitutes about 5% of the total. And as of 30th Sep 2011, we have collected thirty one and half
(31.5) Crores from the customers of Lavasa and the total amount spent including land and
construction costs is Rs. 22.91 Crores. The Gross Profit recognised from the project till 31st Mar
2011 is Rs. 8.91 Crores.
On financials this quarter, Ashiana reported an increase of 96% in Sales & Other Income to ` 57.73
Crores against that of ` 29.41 crores in the corresponding quarter last year. The Profit after tax
recorded an increase of 84% rising to ` 14.60 crores from ` 7.95 crores in the same period last year.
On other developments, we want to share that Miras Partners have retired from the partnership firm
“Ashiana Amar Developers” effective from 01st April, 2011. Ashiana Amar Developers is a
partnership firm formed in 2007 for development, in six phases, of a residential project “Ashiana
Amarbagh” having total saleable area of around 5,32,585 sq. ft. in Jodhpur (Rajasthan). Upon
retirement of Miras Partners, Ashiana Housing Ltd. has acquired 100% economic interest in the
firm. Entire revenues and profits from now on will accrue to Ashiana.
Similarly, Ashiana Housing Ltd. has retired from the firm Ashiana Amar Infrastructure. Ashiana
Amar Infrastructure is a partnership firm formed to develop commercial complexes in Jodhpur
(Rajasthan). However, no activities have been started yet. Going forward Ashiana will have zero
economic interest in the firm Ashiana Amar Infrastructure.
Overall, this quarter a lot of phases across different projects were launched for construction and
bookings. Increasing momentum on execution and sales has given us the impetus to scout for
additional land parcels. Acquisitions at Bhiwadi and Kolkata in the year will help in generating
pipeline for future growth. We might look at another couple of acquisitions in coming months.
On this note, I would like to conclude my remarks.
We will now be happy to discuss any questions or suggestions that you may have.
Ashiana Housing Limited November 3, 2011
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Moderator: Thank you very much sir. We will now begin the question and answer session. Anyone who
has a question may press * and 0 on their touch tone telephone. If you wish to remove yourself
from the question queue, you may press * and 2. Participants are requested to use handsets
while asking a question. Our first question is from line of Deepak Agarwal from Impetus
Advisors, please go ahead.
Deepak Agarwal: Hi, just one question, the breakup of investments.
Varun Gupta: I will have the schedule with me. The breakup of investments on the standalone basis or
consolidated basis?
Deepak Agarwal: Consolidated basis
Varun Gupta: Okay so we have about 12 crores 81 lakhs in immovable property, 29 crores 35 lakhs in
partnership firms.
Deepak Agarwal: Okay.
Varun Gupta: And the remaining investments are debt fund, liquid funds. Mostly cash equivalent, about 45
crore out of that wil be cash equivalent.
Deepak Agarwal: Right. Thank you.
Moderator: Our next question is from the line of Kartik Mehta from Sushil Finance, please go ahead
Kartik Mehta: Hi Varun.
Varun Gupta: Hi Kartik
Kartik Mehta: Varun I just wanted to know that our equivalent area construction in this quarter is 3.27 lakhs
square feet, which is highest in the last six quarters and probably few, remember we were
facing a problem of labor shortage in the past and that was one of the prime reason behind not
ability to scale up the business, but now with this 3.27 is new landmark what we have achieved
in a quarter, is it right to assume that we will maintain the sort of high 3.25 plus sort of run rate
going ahead, except for the seasonality factor?
Varun Gupta: Except for the seasonality factor, it would be expected that the run rate is maintained. The labor
problem was a large issue. We were at 60% labor deployment around April and we hit about
92-95% labor deployment in September and then October was also another good month. We
got 1 lakh 18 thousand 500 square feet constructed in October, so generally feels good. But
labor is again becoming a little bit of a problem with Diwali and chhat happening in Bihar a lot
of labors are going back. We expect labor deployment to pick up again in November. So except
Ashiana Housing Limited November 3, 2011
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for seasonality again, the Diwali and all these seasonal issues, we expect the construction to
keep momentum going forward.
Kartik Mehta: Okay fine great. If you can just also give me the market value of your Thada land and Kolkata
land?
Varun Gupta: The Kolkata land I would refrain at this point of time, what exactly the market value is, because
it’s a very structured sort of a transaction. So payments are going over a longer period of time
and are linked to various approvals. Thada land, we had spent about 35 crores year which was
for acquisition of about 40 odd acres. We are acquiring another 20-25 acres so market value
shall be different, but post our acquisition, the rates in that area have gone up 20-25 % already.
So the procurement value of that land is being at a very good price. You will be able to find,
that Thada land is probably one of the better acquisitions by the company in recent times in
terms of capability to find the right size and right priced land parcels.
Kartik Mehta: So what you are trying to say is that 40 acres of land we brought with 35 crore and after that the
price of the same piece has gone up by at least 25%.
Varun Gupta: Yeah that’s what we are getting from market. But the remaining 20 we are acquiring is also at
the same price because we had entered into agreements at the same time with the 35 acres and
we are just closing that acquisition, but otherwise prices in the area have moved northwards.
Kartik Mehta: So 40 acres you have already paid off and another 20 acres you would be paying also, true?
Varun Gupta: Yeah we will pay off in this month.
Kartik Mehta: Okay so another 20 acre we will be adding, so total Thada Land parcel would be 60 acres and
for 20 acres, we will have to pay, but that as per the older rate not on the current prevailing
market rates and this is obviously NA land or agriculture land?
Varun Gupta: This is agriculture land.
Kartik Mehta: Okay and I understand that as per the resources that we are facing the regulatory hurdles
because they are going slow in terms of approvals and all these things, so probably this land
what we have acquired is not going to contribute anything in the next two years at least?
Varun Gupta: I wouldn’t say that in the next two years. We are hopeful for getting the regulatory clearances
in early part of next financial year that’s the basic objective. But that, as I said is not that people
are going slowly. They are changing the regulation for conversion of agriculture land to non-
agriculture land in Rajasthan because the courts have given a directive that the current process
is not correct by saying it is too opaque and not transparent.
Kartik Mehta: Okay fine, so that is why it is getting delayed?
Ashiana Housing Limited November 3, 2011
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Varun Gupta: Yeah that is why it’s getting delayed, but the process of acquisition here and the way it has
been done that the land is in R-Zone with proper demarcation for township zone where land has
been reserved for private developers for development in Bhiwadi, so overall expectation of
approvals is faster because the master planning by the Rajasthan government authority this year
has been much better as to what they were doing earlier in terms of clearly demarcating what
will be for private development and what would be for government development.
Kartik Mehta: Okay and I was just looking at our Bhiwadi project, Aangan is major contributor from Bhiwadi
which will be exhausted by early part of next year. The way we are constructing as of now. So
we will be running short of new project from Bhiwadi unless the Thada land comes on stream
or else Milakpur would be flowing earlier than Thada is it so?
Varun Gupta: No I would accept them flow at the same time as they both have the same hurdles. In fact,
Milakpur has a little bit other hurdles as well. So expectation is for Thada to come on line
faster, but that we expect Thada to come on line at the time like Aangan is finishing, that’s the
aim at the current level.
Management: That’s the aim we have.
Varun Gupta: And simultaneously we are also looking for other parcels in Bhiwadi and an around Bhiwadi,
which are already having approvals so we can start work on that faster.
Kartik Mehta: Okay and for that matter whatever debt we have raised it’s mainly for paying off Thada land?
Varun Gupta: No whatever debt we raised, they are two parts to debt, one was for construction of Aangan
which was raised earlier and we raised some debt against our hotels so as to cash out our equity
in our hotel Treehouse that is there in Bhiwadi. With hotel operations becoming stable and its
capability so as to pay back, we took a 10 year loan with the prospective to cash out the equity
that was there in that.
Kartik Mehta: Okay so basically you have done a securitization of the hotel cash flow?
Varun Gupta: If technically, yes sort of. It’s not securitized in the sense, there is no bond issue. So the
technical understanding of terms of securitization they have not been securitized. There is no
specific security…
Kartik Mehta: The quasi kind of a thing.
Varun Gupta: Yeah it’s a quasi thing we have charges on the receivable.
Kartik Mehta: Okay so basically it’s an arbitrage. You have played with these.
Management: Yeah we will cash out our equity basically.
Ashiana Housing Limited November 3, 2011
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Kartik Mehta: Okay and going ahead what should be our debt target we are looking at from the current level
because as of now we are still net debt-free company?
Varun Gupta: Yeah and most of the debt will lie as cash going forward because we want to keep cash on the
books for rainy days and not be susceptible to raising funds there. And we need to keep cash on
the books because the business is cyclical and our ability to withstand downturn will depend on
how much cash is available with the company at any point of time. So as long term debt is
available to fund cash reserve, we will look at that and may be to fund some long term assets in
the future. But I would say that at current, plan is debt to equity levels shouldn’t increase
beyond 0.25x.
Kartik Mehta: So what you are saying that from here onward, you would definitely go for higher debt at least
from the current level and you would preserve cash.
Varun Gupta: Yes we will preserve cash, so it will depend as we plan out over the future. It should be little
higher than this.
Kartik Mehta: Because if you have to acquire land in Bhiwadi over and about 20 acre and you will be
certainly paying off remaining amount in Kolkata, so what these land parcel, you would be…
Varun Gupta: We still have close to 70 crores of cash on the books anyways. So we are pretty much well-
funded going forward.
Kartik Mehta: For this whatever land parcel we discussed we are pretty much well-funded.
Varun Gupta: The plans on the debt are not thought out very well, but we will not go beyond 0.25 x levels in
the near term.
Kartik Mehta: Okay because the only time you raised debt was in 2008-2009 time and then the real estate
market bottomed down and the stock prices went up so probably It would reach again that you
go for borrowing this time as well!
Varun Gupta: Alright. Yeah.
Kartik Mehta: That’s all from my side Varun. Thanks.
Varun Gupta: Thank you Kartik.
Moderator: Our next question is from the line of Ravi Dodia from CRISIL, please go ahead.
Ravi Dodia: Hi Varun.
Varun Gupta: Hi Ravi.
Ashiana Housing Limited November 3, 2011
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Ravi Dodia: Congratulations on good set of numbers.
Varun Gupta: Thank you.
Ravi Dodia: Varun see I have basically three questions. One is you know, I was looking at booking numbers
in the current quarter and that the growth has been phenomenal of around 42% year on year,
but just you know say your equivalent area construction target revised because of Lavasa, but
booking target is still maintained at 16 lakhs square feet. So I just want to understand where
will this come from?
Varun Gupta: Principally Rangoli garden, Rangoli gardens has been performing better than expected in terms
of volumes, so that is the largest driver in terms of keeping the target where it is and even
Aangan has been performing better than what was targeted. So that’s the two largest project of
the company have been performing better that’s the basic idea. And for construction, for sale if
the market responds, its much easier to respond with inventory, but to up construction in
Rangoli garden at the same pace is little bit more challenging to cover up. Basically, that’s
what’s going on and Rangoli and Aangan have been doing better than expected.
Ravi Dodia: Okay and also we were looking at your margin for the current quarter, see on the realization
front also, though year on year, it has increased a bit, but on Q on Q basis, it has declined
despite having some higher contribution from Lavasa compared to first quarter FY12, so I just
want to understand why average realizations have declined, also cost of construction in the
projects which are currently under construction, it has gone up in the last quarter, second
quarter?
Varun Gupta: Okay, two things one is why realizations are down and other why cost is up?
Ravi Dodia: Yeah.
Varun Gupta: Okay, on the cost front, we revised the estimated cost of construction for Ashiana Aangan in
this particular quarter by about 4-5% because the large amount of cost that was factored in
terms of steel, the cost came up little higher than what was estimated and labor cost was again
revised once more because of Labor Minimum Wages rising, so those are the principle reasons
why cost have gone up. A, because of debt, B. another aspect on the margin front is Ashiana
Amar Developer on the consolidated front which was only contributing in share of profit of
partnership firms, so you were only having income without any corresponding cost. For the six
months till date, we have consolidated Ashiana Amar Developers into the quarter. So in that
sense, since we were accounting for both revenues and cost of construction, margins are little
lower even though there is no impact on the net profitability and on the realizations front as
compared to last quarter. The impact is also because retail is contributed a lot lower. The retail
had contributed 5% in the bookings in first quarter as compared to 1% here, retail price points
are significantly higher than they are in residential just probably 1.5 x to 2 x depending on
Ashiana Housing Limited November 3, 2011
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locations and it creates an impact even if it 5% and if its 1.5x you know it adds about 2-3.% to
the overall realization for that quarter, but I wouldn’t make much of it, we will be raising prices
in Rangoli Garden. In October, we raised prices again and realizations seemed to remain strong
with strong enquiries in bookings. Price points are not concerning.
Ravi Dodia: Okay, on the price point front we might be able to increase prices by say 4-5%, but according
to you cost pressure will continue to remain.
Varun Gupta: The cost pressures remain going forward or not I wouldn’t be able to say. The labor front yes,
the cost pressures will remain. We need to find efficiencies. On the material front, most of our
Material cost expansion has been in the commodities front in cements, sand, stone chips, steel,
and those. So if commodities prices ease going forward, then there should be some easing of in
the prices, but I would say the commodity cost have mostly peaked specifically in steel and
cement that is my particular view, but when we go ahead and underwrite projects, we always
take current cost of construction and current sales price whenever we will be picking up land
and try to be conservative on that.
Ravi Dodia: Okay sure. Regarding the 10 acre land in Kolkata that you will not be able to disclose, it was
acquired at what price right?
Varun Gupta: Yes, not at this moment of time. We will disclose it probably next quarter. At this moment of
time, we will not be able to disclose the transaction cost.
Ravi Dodia: Okay. Last question from my end regarding you know Lavasa, its definitely good that you have
updated all your shareholders about what is the current status, but you know just want to get the
sense from your side say if HCC or Lavasa is not able to get whatever required approvals from
the environment ministry, what will be the last thing that can go wrong in the Lavasa and what
will be its consequences on Ashiana as well as investors who have booked property at Utsav
Lavasa?
Varun Gupta: Well the last thing if goes through that there is no clearance given in the project and we have
shut it completely. One thing at Lavasa is shut completely and the second thing that we will try
and explore is, can we do Utsav on our own even if Lavasa project is not through from both the
legal prospective and the market prospective. One thing about the market prospective it seems
that it might be possible because significant amount of the infrastructure in Lavasa in terms of
roads and things are already up running, but that’s the second resort if the clearance is not
given. Even if that is not possible where we are not able to do Lavasa on our own if things are
denying, then we will take steps to probably return the money to our investors or property
buyers or give them alternative properties that we can offer them in different locations. So we
will have Utsav in Kolkata and Jaipur to provide to people where they could go if not Lavasa
for Ustavs. We are also looking for land in Pune or anywhere near that. If that is not there then
we will try and refund their money as permitted by our balance sheet. Current balance sheet
Ashiana Housing Limited November 3, 2011
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remains strong enough because of total cash outflow, expected cash outflow is about 31.5
crores to our customers and book loss that can happen on the books is about 31 crores on a
gross level should get tax credit against that that would be about 25 odd crores if I take a 20%
tax level on the loss. Those are our current figures, most people are sticking as we are getting
incremental bookings in Lavasa and our expectation is that it will get sorted because between
the press release that we had sent and posted that it is come out that the state government has
started probably what you will call creditable actions against Lavasa corporation in the MOEF,
as stated was the only precondition that was pending was the credible actions by the state
government. It shows expectations now are quite positive for a clearance to come in.
Ravi Dodia: Okay.
Varun Gupta: And one thing which you mentioned even though you know Lavasa is not getting go ahead,
Ashiana can go ahead and construct Utsav Lavasa, so I don’t know if he can, we will have to
take legal clearances and understanding, we will go to our lawyers and understand that. We
don’t want to do this at this point of time because we don’t want to do any step that might have
a negative impact in Lavasa’s project. We are with them in this project through and through
and if we took any steps that might jeopardize negatively wouldn’t be right for us to take at this
movement.
Ravi Dodia: Okay sure thanks a lot Varun
Varun Gupta: Thank you Ravi.
Moderator: Our next question is from the line of Avinash Gupta from Globe Capital, please go ahead.
Avinash Gupta: What has been our track record in terms of if you acquire the land, time frame in acquisition of
land and launch of the project?
Varun Gupta: What is the timeframe that it takes?
Avinash Gupta: Yeah, how much time it has been taking up in the past few projects?
Varun Gupta: It depends from project to project. We have done mostly structured transactions, so the last two
projects that we have launched Bramhananda and Rangoli Gardens, between significant cash
out flows from our works and launch of project there has been a gap of three to six months,
where we might have signed up an agreement and we agreed that we accruals are in.
Avinash Gupta: Okay.
Varun Gupta: So whenever there is structured transactions cash outflows would be different, similarly is the
case in utsav Kolkata that we are doin,g is we linked payments out to certain accruals being in
place and infrastructure being in place. So in that sense, for a total cost of the project might be
Ashiana Housing Limited November 3, 2011
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little bit higher than what you would buy for regular land, but since the time between launch of
project and capital outflow, is substantially lower so those transactions make sense to us. So
that has been there, but that the same time Thada, the land in Bhiwadi will have a gap of at least
a year I would say between capital outflow and launch of project.
Avinash Gupta: Other thing, in how much time we are able to handover the possession to those who booked the
building or booked the flat?
Varun Gupta: Between launch of phase so once we have started collecting bookings, we do projects in
particular phases like four or five phases or three phases depending on the size of the project.
So once we have launched a phase for particular booking, we take about 24 to 30 months to
handover from the start of launch of that phase and if you say that most of our bookings have
been over the life of the phase then you are having an average time of 12-15 months of handing
over the flat.
Avinash Gupta: That mean if I start the phase 1 today I hope with the booking today, I will hand over the
possession between 30 or within 24 months or so something like that.
Varun Gupta: Yeah its 24-30 months. I would say let say 30 months which is on the outside and 24 months
on the inside and may be plus 2-3 months here or there if..…
Avinash Gupta: In generally should I take it that none of our projects got delayed beyond 6 months from the
launch.
Varun Gupta: Yes none of the projects I wouldn’t say, there are two projects which have gotten 9 months to 1
year delay it has been Ashiana Amarbargh in Jodhpur and Ashiana Greenwoods in Jaipur but
in that also particular phases got delayed and we picked it up in the next phases and now
Lavasa is obviously delayed more than
Avinash Gupta: That is okay, I mean in case of government action we are not able to proceed then it is a
different thing. On our account, these are robust then can you tell me how many…
Varun Gupta: Out of 10 projects in terms of percentage area we have also been smaller and we have been
able to pick it up in the second phases of those projects second and third phases of those
projects as applicable deliver on time and make it up, I think primary reason in Jodhpur was
that it was the first project in the location and we didn’t provide enough for the local condition
over there.
Avinash Gupta: Okay thank you that is all from my side.
Varun Gupta: Thanks Avinash.
Moderator: Our next question is from the line of Bharti Gupta from Sushil finance, please go ahead.
Ashiana Housing Limited November 3, 2011
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Bharti Gupta: Good evening sir, I just have a couple of questions like first of all would like to understand
your new recognition policy like since start of this financial year you are seeing the recognition
policy and not on the POCM and recognizing projects based on the completion like once the
project is 100% complete only then it will go into the revenues.
Varun Gupta: And the second question?
Bharti Gupta: Actually I have a couple of questions so if you could answer one by one.
Varun Gupta: Okay. On the recognition policy we changed our policy with effect from last year in terms of
percentage of completion method of accounting to possession based accounting. What we have
done is whatever has been affected in percentage of completion accounting in the last financial
year continues to go in percentage of completion accounting so most of these quarter, this
financial year your revenue recognition will be on percentage of completion in fiscal year
2011-12. In financial year 2012-13 we have moved to possession based accounting where the
accounting of revenue happens when we hand over the flat to the customer or we have a
deemed handing over to the customer whereby sale we have done our part of the contract and
the customer may not have taken possession for whatsoever reason that he may not be taking
possession for. But other than that, we will account for basically on handing over of possession
of a particular flat to the customer. This is a little bit more conservative policy which will
affect our revenues for financial 2012-13 whereby they will trend downward in terms of
accounting revenue and accounting profit but cash flow should remain similar or higher than
this year.
Bharti Gupta: This have already started from the current financial year but for the projects which were not
under POCM till last year for which the revenues were not recognized we are not recognizing
any revenue in the current year, right?
Varun Gupta: Correct Bharti.
Bharti Gupta: So but in this case your inventories and your advances from customers will be quite bloated in
the balance sheet. If I am correct, right?
Varun Gupta: Yes going forward it will start getting bloated if that is word correct I would say.
Bharti Gupta: Bloated as if I would say that your inventories will be quite high, inventory as well as your
advances from customers will be quite high in the balance sheet.
Varun Gupta: Yeah I would refrain you from use of absolute terms in quite high and quite low. It will higher
than what it would have been if it is accounted for percentage of completion basis. That is a
better way to put it. I think if that is the reason to move to possession accounting is because
possession accounting gives a better reflection of your inventory in your actual advances from
customers. And the belief that the financial statement that is more important to understand in
Ashiana Housing Limited November 3, 2011
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the real estate company is the balance sheet and its reflection has to be more towards than the
P&L if that is there. So that has been one the reasons why to move on to it and a better
reflection of advances from customers where your liability is to your customers is accounted
for. The case in point is Lavasa where the liability to the customers is 31.5 crores and is
understated at 13 crores which reflected in the current books because of percentage of
complete recognition. So, in that essence we have moved to possession accounting having truer
reflection not a higher reflection or a lower reflection, truer reflection of our assets and
liabilities. I would like to stress that very, very importantly because that is the most important
aspect. If I am a manager internally looking at a financial statement of the two accounts which
are the most important in managing my financial is the customer liability section and the
inventory sections. Am I taking money from my customer and putting it into construction and
if I am not putting it into construction where I have put it, do I have money as the cash on the
books as when the customer stop funding me, will I have the money to fund and meet my
customer liability that is already there and whatever has not been delivered. So in essence is
very important that the customer liability and the inventories have true differentials. So it is not
bloated but a better reflection.
Bharti Gupta: Understand your point sir like it is more conservative way to look at it and in a way it is also
correct to show a true reflection to the investors but just from the point of view of
understanding of calculation as in from a analyst’s perspective like if we are saying that is
comparatively, say comparing it from what accounting policies used to follow and the change.
So accordingly our current liability should increase that is from the advances, so as far as the
accounting thing is concerned how do we have to take into consideration the change in the
policy for the model working perspective.
Varun Gupta: From that perspective, cash flows will not move. So what was been earlier reflected as
earnings okay the net credit that was been shown as earnings which is going into reserves and
surplus that differential credit will be carried forward in the advances from customers less
inventory section from a cash flow perspective and it will reflect the higher cash flow. We
have stated earlier we have not been able to disclose that cash flow statement that we think is a
better reflection, this particular quarter it has been with our auditors, we have a cash flow
statement that will disclose our cash flows going forward from our running projects so what
key things is from a manager’s perspective, I have to actually need to factor in is how much
cash is coming in from customers and how much cash is going out towards construction. Those
are the two things and how much excess cash our running projects are generating that can be
deployed further into lined acquisition those are the three things that is basic mechanic here.
We think else is a smaller component of the balance sheet I would say.
Bharti Gupta: Right, so that will be available from the next quarter onwards.
Varun Gupta: Probably next financial year onwards we would like to disclose financial years and then move
on to quarterly recognition.
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Bharti Gupta: Fine and another question is during the quarter during the quarter as per your booking status
you have mentioned for all the respective individual projects for Aangan, Rangoli and
everything but we have not mentioned Greenwood. So is the Greenwood project 100%
completed and 100% booked.
Varun Gupta: Yes Bharti, the Greenwood project is complete in all respect. We have 10, 11 odd units left, I
think may be less than that what we use the word is called residual stock which takes its own
time to sell. So Greenwood has been removed from the current projects we have another land
parcel right next to Greenwood which is under approval which when it comes up which had
some potential for development.
Bharti Gupta: Under approval hasn’t we already acquired that or in process to acquire that thing.
Varun Gupta: We have acquired that but we need approval, it is an agricultural land that needs to be
permitted.
Bharti Gupta: Okay and sir I would like to know from the revenue recognition from individual projects
during the quarter.
Varun Gupta: Individual revenue?
Bharti Gupta: Individual revenue recognition during the quarter from an individual projects.
Varun Gupta: We will fax you on that Bharti.
Bharti Gupta: Alright sure and sir just a few more questions, during the quarter your loans and advances also
gone up, does that thing pertain to your land acquisition?
Varun Gupta: Yes.
Bharti Gupta: Okay.
Varun Gupta: And also we have paid advance taxes so that is also there.
Bharti Gupta: So that includes your advance tax and your land acquisition charges.
Varun Gupta: And we paid a significant amount of MAT tax as well from last year because we didn’t think
MAT was due and we had a Supreme Court judgment. So we had to pay that off in the last
quarter so that is probably been an effective in loans and advances this particular balance sheet.
Bharti Gupta: And during the quarter the share of income from JVs that is the partnership firm is gone done
but the major reason I believe would be that since they have acquired the stake into Amar Bagh
that is why the share of profits in the JVs has gone down, is that correct?
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Varun Gupta: Yes Bharti, it is correct.
Bharti Gupta: Okay so going forward how will that be stated like what is kind of the arrangement between
you and your JV partner.
Varun Gupta: We are partnership firms Bharti and they are accounted as share and profit of partnership firm
over there Ashiana Amar Developers well of course there are no more JV partners, the
partnership is between Ashiana Housing and its wholly owned subsidiaries. So we have gone
for it completely.
Bharti Gupta: Okay and just one last question on your tax rate. Can you just give guidance on your tax rate
for the current financial year and for the next year.
Varun Gupta: It should be around 20% Bharti with the MAT tax rate, we will be paying MAT taxes.
Bharti Gupta: Because your low taxation the MAT tax rate has been with Greenwood, Aangan, Amarbagh
and Utsav at Jaipur, the Rangoli Gardens and your Brahmananda project are full taxation rates
if I am not wrong.
Varun Gupta: Yes, let me correct. Currently Rangoli Gardens will get accounted as share of profit of
partnership firm. So in Ashiana’s books there will be no tax on it, as it will come on an after
tax basis. On Brahmananda we will be paying tax at the full rate but what has been happening
is we have expensing MAT as of now and we have significant amounts of MAT credit which
will get utilized over a period of time. So when we have full tax rate, we will be utilizing that
MAT tax credit and we will be paying around this 20% rate, I would say for another year at
least in financial 2012-13.
Bharti Gupta: Okay thats all from my side. Thank you.
Varun Gupta: Thank you, Bharti.
Moderator: Our next question is from the line Sachin Kasera from Lucky Securities.
Sachin Kasera: Yeah good afternoon Varun.
Varun Gupta: Hi Sachin.
Sachin Kasera: Yeah congrats for a good set of numbers.
Varun Gupta: Thank you.
Sachin Kasera: I think on the query if I look at the equivalent equal area constructed versus the area booked
for the period 2008, 2009 and 2010 financial year the EAC is higher than the area booked for
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2011 and 2012 the gap has increased significantly. So how do we see this trend in the next 2-3
years. You see this gap the EAC will continue to remain lower than the area in the next 2-3
years or we will be able to catch up this gap?
Varun Gupta: Sachin, I would say EAC would trail area booked by a year or so.
Sachin Kasera: Okay so that is the trend that we can look at it.
Varun Gupta: That is the trend I would be looking at.
Sachin Kasera: Secondly in terms of the booking if we see this year you are looking at approximately around
16 lakh square feet and we normally try to grow at around 18-20% every year. Considering the
area we have already launched where I think apart from Rangoli we don’t have too much of
stock available. Considering you would have to sell something like 20 lakh square feet in
FY13. So where is the incremental we need to I think get 2 or 3 projects fast launch otherwise
how do we plan to achieve the 20 lakh square feet.
Varun Gupta: On the front of area booked & EAC, where EAC is going to trail, area booked from, like a year
or so, we would like that because we would like to book the unit first and then construct it
because that will be positive from a cash flow perspective where we are booking the unit,
getting cash flows and then constructing, so we are at a negative working capital environment.
So that is the preferred thing in normal times and when downturns are happening, that is when
EAC is picking up a little bit more than area bookings because we are meeting out the
customer liabilities that we have taken earlier on and starts catching up a little bit and then in
the gap again in normal times, looks like lagging about a year in a preferred scenario.
Sachin Kasera: My question is entirely different one. I am saying …
Varun Gupta Let me go back. On the second of the booking inventory availability, correct?
Sachin Kasera: Right.
Varun Gupta: On the saleable inventory availability, it is of concern that we may not have enough stock to
sell, but we have been working on it. To get to that 20 lakh square foot, we are more or less
sorted in Jaipur. We are sorted in Jodhpur for next year, we are sorted in Jamshedpur for next
year. The concerned point in the running thing is in Bhiwadi, where we have signed up a
project and we are also looking for some already converted approved project. So significant
amount of our time is being spent on trying to convert the parcel that you already acquired in
Bhiwadi into a project as soon as possible or alternatively get an approved project which can
provide the saleable inventory that is there. The fifth point would be Lavasa hopefully Lavasa
shall open up soon and in the next financial year, we would have stock opened out in Lavasa
for booking as well. So that is the primary thing and going forward, for next year, we have
signed up one more project in Kolkata which should translate into launch in next financial year
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and we have been discussing we are looking at one more city. Hopefully, we will close that
city in a time that it will get launched somewhere during the next financial year, if not in the
early part of next financial year. So that is the basic plan right now going forward.
Sachin Kasera: But if I get it right, initially at the beginning of the year, were we looking at couple of medium
to large launching the second half of financial year? Is that understanding right?
Varun Gupta: We were looking at acquisition which would culminate into launches. There has been
launches, the acquisitions has been completed, the launches will happen next financial year.
Hopefully we were trying to get it sooner, but they have been a little bit slower, the regulatory
hurdles and then Bhiwadi came in unexpected, because the acquisition of that was completed
in early part of the financial year and we were not able to launch because there has been
approval hurdles. We were expected to launch that because sooner than what will happen.
Sachin Kasera: Yeah, because in that scenario, you know, if we see from a next year perspective, we become
highly dependent on Rangoli for our sales, which would from a risk perspective, you know, if
Jaipur, suppose Rangoli were to slowdown, then we would be facing severe risk in terms of
our target.
Varun Gupta: I agree with that and we are working on that to look for more approved land partners in and
around the Rajasthan and we are hopeful that approval processes in Rajasthan will get sorted
sooner than later.
Sachin Kasera Okay, second question, specifically in Rangoli, you did mention that there has been a traction
that seems to do better than expected and you also take up certain price hike. So could you take
us first to at what price you launched Rangoli in the initial phase of launch and what is the
price currently?
Varun Gupta Let me put it this way, Rangoli had a phase-1 which was low rise, which pricings are different
and since phase-1 is completed, so I will not get into those price points. The phase-2 price
points were launched at about 1700 levels to 1800 levels and we are at about 2000 to 2050
levels at this point.
Sachin Kasera: And do you see further scope for improvement there?
Varun Gupta: We do see scope for increments in Rangoli, but we will be cautious going forward as we are
always cautious in hiking the price points. As long as affordability’s are good, the hikes have
been sustained without any dip in our volumes. So we will be slow and steady in our hikes.
Sachin Kasera: In this Rs.300 increase that we have seen in revision, has that the cost would also get paced
with it or is it basically which should lead to better margin for this incremental sales.
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Varun Gupta: This should lead to somewhat better margin, but yes costs have also increased in the past, but
overall increase is higher than the costs.
Sachin Kasera: On the land side, as the presentation mentioned that we are now approximately around 100
acres of land right on a four parts of details are providing.
Varun Gupta: Yes, Sachin.
Sachin Kasera: Of which you said that Uttarpara, you cannot disclose the value of the land. So of the
remaining ninety acres, what is the total cost activity deal that has been agreed upon and how
much has been paid for?
Varun Gupta: The remaining 90 acres, everything has been paid for.
Sachin Kasera: Okay, everything has been paid for and what would that costs have been, all that 90 acres put
together?
Varun Gupta: All 90 acres put together our cost would be 50 odd crores, I would say for us and market value
of those land will be about significantly larger than that.
Sachin Kasera: That is fine. And apart from this 68.26 square feet that is available for our future saleable area,
as of now in the projects where we are working and with 100 acres, are there any other land
parcels available to us which we can convert?
Varun Gupta: As far as the Greenwood land parcels that we are talking about, the smaller Greenwood parcel
that is available, right next to Greenwood projects where approvals are pending, we will
disclose that size also. It is a little bit difficult to ascertain the amount of saleable area, we do it
right now, we will come back on that. And that is one, we are also in Thada land and Bhiwadi,
we have signed up additional acres, about additional 20 acres of land has been signed up and
closing of that documentation should happen in this particular month. So those are the two
things. We are looking at one more city, but that city, closing has been taking a little longer
than expected.
Sachin Kasera: And you mentioned that within 1.6 lakh plus square feet of EAC in the month of October.
Varun Gupta: 1.18 lakh square feet.
Sachin Kasera: I forgot it. It is 1.18 lakh square feet. Fine, I think that is all from my side. Thank you very
much for answering my questions.
Varun Gupta: Thank you, Sachin.
Moderator: Our next question is from the line of Chinmay from East India Securities. Please go ahead.
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Chinmay Sangoram: Hello. Good evening. Congratulations on a very good set of numbers. Actually I just wanted to
look at a couple of data points. You had mentioned that you are looking at 16 lakh square feet
in terms of area booked and 14 lakh square feet in terms of area constructed for FY12. So do
you still hold that guidance or have you revised it?
Varun Gupta: 16 are held on to. The 14 has been revised down to 12.5 based on non-commencement of work
at Lavasa. In fact, when it starts, we might revise it upwards again.
Chinmay Sangoram: Okay. And another thing is that you had mentioned that around 15 to 20 lakh per month was
the cost of the Lavasa hold up. So what is the scenario right now? Has it gone up or is it still
the same?
Varun Gupta: It is still similar, but what we have been able to do is utilize some of the resources which we
had in our other projects. So we tried to utilize some of the employees there, but the cost
remains similar because the rent outflows or certain other outflows remain.
Chinmay Sangoram: Okay, and last thing is what is the cost incurred, I mean, overall if you see on an organizational
level, what is per square feet cost that you are incurring on construction?
Varun Gupta: On an average level?
Chinmay Sangoram: Yeah, on an average level.
Varun Gupta: Yeah, it varies between 800 to 12000 currently.
Chinmay Sangoram: Okay, because last time you had mentioned around 1100 per square feet.
Varun Gupta: A 1000 to 1100 is a good average to take.
Chinmay Sangoram: Okay, I guess I am done. I will come back if I have any more questions.
Varun Gupta: Thank you Chinmay.
Moderator: Last question is from the line of Satish Katyal as an investor. Please go ahead.
Satish Katyal: Yeah, Hi Varun. Good evening. I just want to know what type of process in technology
changes have you effected in the last one or two years with a view to speed up the execution
time as well as to effect some cost reductions or is it the same technology going on for some
years now?
Varun Gupta: No, we have upgraded technology over the last couple of years, but let me put it this way; we
haven’t done any big bang change or significant change. What we do is incremental changes
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throughout the project. So on a let say on speeding up construction, we have mechanized a lot
of our construction in terms of using more equipment in terms of shuttering, scaffolding ….
Satish Katyal: And pouring the concrete, do you use some sort of a batching plant or transit mixers or
concrete pumps?
Varun Gupta: Depending on the size of the project, if it is viable, we do have a batching plant at Ashiana
Aangan and we are using RMCs across the board.
Satish Katyal: Is your casting time is still 20-21 days or have you even been able to bring it down to 10-12
days?
Varun Gupta: The casting time is between 13 and 15 days, I would say, depending on project to project.
There are some projects, if there is not that much pressure to cast on time, in that kind of time
frame, we might, well use more.
Satish Katyal: No, let’s forget about the pressure from the customer’s point of view. From your point of view,
if you execute faster, you turn around the things faster, you know.
Varun Gupta: Yeah, that is one. So for two weeks’ timeframe, is what we are looking at right now. Most of
our project is two week time frame right now.
Satish Katyal: And do you have a certification program for your subcontracts. I don’t mean because of the
labor shortage, have you partly mechanized it, I mean, even creating those lines for putting the
electric lines and things like that. Normally we hand it over to a subcontractor and let him do
the usual way with the use of labor, but there are small equipments available, which can be
used and they can speed up things like small chippers, which are electrical also.
Varun Gupta: Sir, I wouldn’t be aware of electrical front, but we have been using a lot of smaller machines to
mechanize a lot of our work and if it can be like chase cutting machines that are being used and
new drilling machines.
Satish Katyal: Now, I mean, because whatever I have read about you over the years, and whatever I have
listened to now for the first time, I see that you are growing at good rate, but I was just wanting
to know that if you don’t upgrade your technology, your pace will be slowed down because
you will again more and more depend on labor, which cannot give you that pace which you
might require. I know it is a long term point. You can’t say it offline immediately, but if it is on
the horizon, that will be good, you know.
Varun Gupta: We are mechanizing quite well and one of the tasks that our engineering team is there is to
bring down our construction time frame by six months in the next three years. So we are
working on it and we have been able to cut down time frame of construction significantly. I
believe Ashiana Aangan Phase-4 and 5 will be ready in 12 months which is still +12
Ashiana Housing Limited November 3, 2011
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construction, the structure was ready in six months’ timeframe. So we casted roots every two
weeks and our speed of construction has been very good. The Rangoli Gardens Phase-1 is
expected to be delivered between three to six months earlier than what was promised to our
customer.
Satish Katyal: But we want you to grow four times and then you will require something different, you know.
Varun Gupta: We might require something different whenever that is there, but still that has already been
done and going forward, we believe that speeding up our construction and improving our labor
efficiency is an important measure to grow forward.
Satish Katyal: Also reduce dependency on labor, you know.
Varun Gupta: Yes, in a long term situation, we have to improve ourselves. We have internal targets on that.
Satish Katyal: Well, thank you very much.
Varun Gupta: Thank you Satish.
Moderator: That was the last question. I now hand the conference over to Mr. Gaurav Sood for his closing
comments.
Gaurav Sood: Thanks Marina. Thanks everyone for participating on the call. As I detailed in the investor
update, if you have any further questions for clarification, you can always call up on the
number or email Varun directly. I will hand it over to Varun for his closing remarks. Thanks a
lot.
Varun Gupta: I would like to thank all of you for being on this call and being patient with the questions and
answers.
The Forbes listing, the Zee Business and RICS Awards, the area bookings in the first two
quarters has all been demonstrative of our efforts in building our customer centric development
driven business model. The trust in the brand and the synergy in its operations have allowed us
to rapidly growth of business in the past and in the future as well. Ashiana believes in
executing well and growth will follow.
With that, I would like to conclude this call. A lot of material we have talked about is on our
website and you can also mail your queries for any further clarifications. Thank you very
much.
Moderator: On behalf of Ashiana Housing Ltd, that concludes this conference. Thank you for joining us.
You may now disconnect your lines.