What's In Store For Arcade Developers?
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00:00Hello and welcome to NDTV Profit. You are watching IPOdda and my guest today is from
00:04Arcade Developers. It's a Mumbai based real estate company which is coming out with an IPO
00:09which opens on September 16th and closes on September 19th. The company has priced the IPO
00:15between 121 to 128 rupees per share. It's a fresh issue of 410 crore shares and that values the
00:20company at nearly 2400 crores at the upper end of the price band. And joining me is Mr. Amit Jain
00:26who is the chairman and managing director of the company. Mr. Jain thank you very much for
00:30joining us today. My first question to you sir, you're raising 400 crores, you are you know in
00:37the most competitive real estate market in the country. What are you going to use this 410 crores for?
00:47This is going to be used for development of ongoing projects
00:52and new opportunities for upcoming projects. Give me a sense of the kind of
01:00profile you have because you are limited your you know your operations to the MMR region which is
01:07called Mumbai metropolitan region with a large of a mix of development and redevelopment projects.
01:14So give us an idea of how big is your company, what kind of projects you have done and what are
01:18the projects which are ongoing and maybe upcoming. So we are a four decade old company
01:27and we've started from western suburbs and the definition of Bombay as it kept varying we've
01:36had projects going on all across Bombay. We've done projects in South Bhope, we've done projects in
01:42extended suburbs of Meera Road and Virar as well and a decade back like since 2017 we are
01:51moved to eastern suburbs. We started a project in Kanjur which is successfully completed. Now we
01:57have projects in Bhandup and Mulund on the eastern side. We have ongoing projects on western side as
02:05well from Santa Cruz to Borivali currently we are having projects. Give me a sense of the kind of
02:14you know development that's happening in the western suburbs because you know if you look
02:18at the suburbs there's a huge you know change which is happening with respect to number of
02:25redevelopment projects which are coming up in that suburb and it's estimated that in the next few
02:29years as those redevelopment projects gets completed there's going to be a huge influx of
02:36units coming in residential units coming in from all categories from affordable to premium and
02:41luxury. How do you see that market panning out given the fact that at this point in time
02:46Mumbai is one of the largest cities where unsold inventory is there?
02:51No, so western suburbs have been developed before to eastern suburbs so and it's always had a
02:59premium-ness to it. The demand for real estate in western suburbs is more than what it's been on
03:06the eastern side or the supply on eastern side is more vis-a-vis the demand. So western suburbs
03:12always come on for a premium and because of paucity of land you can say the demand is
03:20you can say the potential of redevelopment projects have gone up. The western side are
03:26having old and dilapidated buildings which need to be redone so that is where the redevelopment
03:33comes handy and there is always like the supply on paper is different than the supply in actual.
03:41In actual like if you look at the availability of ready inventory it is almost always absorbed
03:50by the market. We always hear that there is going to be excessive supply but we never see a day
03:59when it actually happens. Give me a sense of your revenue breakup. Currently nearly 33% of
04:06one-third is coming from redevelopment and remaining 66% from development as you take
04:12more projects and a lot of new projects. So how does this revenue you know
04:20breakup going to change going forward? So that is where this fine balance yeah so
04:26so yeah we wish to maintain a 50-50 percent of balance you know 50-50 percent from revenue of
04:35new projects as well redevelopment project that is what wishfully we wish to maintain a balance
04:42which is like currently 34 percent is from redevelopment at no point we intend it to
04:48cross 50 percent. What about the upcoming projects can you give us an idea? So western suburbs the
04:58so we are launching a project in Banduk coming soon like three acre land parcel
05:04it is a fresh project the acquisition is complete approvals are in place and we are
05:10almost about to launch the project the project name is Arcade Rare.
05:16Okay and can you give us an idea of how big what is the total amount of square feet that will come
05:23up for you know completion in the next few years? We are currently having close to say 3.7 million
05:36square feet of construction coming up in next few years say two to three years the projects in hand
05:43that we intend to complete. Okay and how many of them have been already launched and how many will
05:49be launched in the next few quarters? So we have currently ongoing projects we have six ongoing
06:02projects and we are in process of launching four projects across eastern suburb as well western
06:09suburb. Okay. We have launches in Goregaon in western suburbs yeah. Mr. Jain give us a sense
06:17of how construction cost has moved up in this city because as I can see you know the cost is
06:23also going up for construction and your margins if I am not wrong EBITDA margins were at 26.3%
06:30in FY 24 they have also fallen by a percentage over the previous year. So how is the construction
06:36cost moving up and you see price passing out passing off pricing you know to the customers
06:44are customers taking higher prices? Yeah yeah the prices are almost absorbed always the construction
06:54prices are increased on two front one is the normal inflation and the second is in an effort
07:01to give better amenities for the project we spend we go that extra mile you know to give more and
07:08more amenities which converts into a incremental construction cost but then effectively we do end
07:18up getting premium for the same yeah. What would be the average price per square feet for you
07:25for the projects that you've already delivered and the one which you are ongoing?
07:29For the delivered project the construction cost should be in the range of three to three and a
07:39half thousand per square feet and for the upcoming projects it should be in the range of three and a
07:45half to four thousand rupees square feet the construction cost with GST. Give us a sense of
07:54how competitive is this landscape because Western Suburb has seen a lot of
07:59organized players you know increasing their presence especially because now
08:03a lot of redevelopment projects are coming in so how competitive is this landscape for you?
08:12So there is enough of room for everyone who is delivering and we have a healthy track record
08:18and a consistent year-on-year basis delivery so we there is room for all good players I would say.
08:28What has been the average? Within the micro markets we always are amongst the leaders here.
08:34What would be the average delivery time for a housing unit for you
08:41especially if it's going through a redevelopment process?
08:49So it depends on the size of the project if it is a standalone project it can be
08:56as close as say two years from the start of the project and if it's a layout it can be basis the
09:02size of the layout say three to four years from the start of the project. Give me a sense of
09:10the kind of your balance sheet strength because you know you are looking at six new
09:16projects which are ongoing and if I'm not wrong your RGPC says that six upcoming projects are
09:21also coming in. How strong is the balance sheet to manage all these projects?
09:30We have a very healthy cash flows and we have our own capital and the cash flows from the
09:39ongoing project is always healthy we have good sales velocity and the mix of ongoing and the
09:46upcoming project the cyclical pattern is very good so as the ongoing project are able to
09:53manage the cash flows for the upcoming projects like FY 2024 we had a top line of 635 crore
10:01with a bottom line of 165 crore the part was 123 crore and which is growing healthy on a year
10:09on year basis. Give me a sense of how do you recognize your revenues? We are a debt free
10:16debt free company which is which is yeah debt free company for these numbers is unheard of in the
10:23industry. Okay what about you know the revenue recognition method how do you recognize your
10:30revenues? On a percentage completion method. Okay so how does the recognition revenue also
10:44you know coincide with the kind of occupation certificate that you get for various projects
10:49going forward? No that's the completion method we go basis percentage completion method so as
10:58and when the project progresses basis the percentage of that we offer profits. Okay.
11:05Instead of waiting for the end up to occupation yeah. You know give me a sense of sir you are one
11:13of the largest in the micro market of Bori Valley how big is that market for you and when you spoke
11:21about the fact that you have ventured into the eastern suburbs as well can you give us an idea
11:26of how how that market is vis-a-vis the western market where you began your operations from?
11:35So like say for example we completed two projects in western suburbs this year one is the Bori
11:41Valley project arcade ground which comprises of 200 plus units and the top line is in the range
11:50of 300 to 350 crore we completed the second project we completed this year is in Goregaon
11:58arcade aspire which again is having 200 plus unit with the top line of 400 plus crore and the
12:07upcoming two projects in eastern suburbs the Mulund one is arcade nest and Bandup one is arcade rare
12:15both combined should have a top line of 1400 crore. Sir I was going through your RHP and
12:23it mentioned that you have two primary subsidiaries which are there arcade paradigm
12:27and arcade reality how many projects are they looking at together?
12:35No so those had projects which are now complete and those two subsidiaries are not active as of
12:42now. Okay and going forward do you go by the SPB method for any project or it's taken on the books?
12:55As yet whatever we have is in the parent company only as on date. Okay give me also a sense of
13:04the kind of projects that you take on. Going forward say if the need be. Please complete.
13:16So we acquire land in Mumbai markets and redevelopment we are not into SRA projects.
13:26Okay give me also a sense of the category of residential units that you you know construct
13:33which are the category. Do you look at affordable premium or premium or luxury
13:37projects? How is it broken down your entire portfolio? So we are into say value premium
13:49can be the right segment you know value for money and premium projects. So say it starts
13:57from 2 BHK onwards and the ticket size may be on an average would be on an average maybe 2.5
14:06crore rupees 2 to 3 crore bracket. We also have projects in other markets where the
14:18what price? At the price range of say 30,000 is the average price. Okay and you are saying
14:26that value premium is and your entire portfolio is consisting of value premium housing?
14:34Yeah yeah value premium segment by value premium is it
14:38projects with lifestyle amenities and in preferred location in mature markets.
14:46Sir Mumbai is very competitive market you know you you've been growing at a very steady healthy
14:53levels from 220 crores in FY 23 to 635 crores in revenue in FY 24. Can you give us an idea of
15:01which are the projects which are coming up for completion or percentage completion method
15:05and how many square feet will be completed in the next
15:09one or two years and how the revenue breakup would be?
15:12So this year we are completing two more projects one is in Santa Cruz Arcade Aura and one is in
15:19Marol Arcade Prime and after which we will be having say new launches and ongoing project
15:26included six ongoing projects after the completion of these two projects and next year out of those
15:33six we intend to complete three projects one is in Vile Parle Arcade Pearl and one is in
15:40Malad Arcade Eden and one is in Goregaon Arcade Vistas.
15:52Give me a sense of it will be on a cyclical basis say two to three projects per year
15:58we intend to complete and launch likewise. Okay give me a sense also give me also a sense of
16:04you know how you want to use some of the proceeds because I read in the RFP that you
16:10want to use some of the proceeds for your general purpose but also to acquire some land parcel so
16:15that you can take up more projects. Are there any active consideration that you are undertaking?
16:20Land parcels yeah. And do you plan to move out of the MMR region to?
16:25We are studying new markets we are studying Thane markets we are in negotiations with
16:36various vendors for land parcels in Thane and we should be done with something good coming soon.
16:46I just need a clarification. The deployment is for
16:49Mulund Parla and Malad project as well. Okay I just need the clarification on
16:57debt you said that you have you are a debt free company and with good cash flows which is there
17:03and RHP I was looking at the RHP and it mentioned about promoter debt which has been given to the
17:08company what is the status of that debt will it be will it has to be repaid to the promoter at
17:15some point in time and what kind of a financial cost that is there on your books?
17:25So its own money promoter is led to the company and its come at a cost of 12% interest and
17:34as and when the requirement is we decide if its required or not required to be repaid or
17:43its required its basis the demand supply as of now in the RHP we have not planned to repay.
17:55Okay yeah that's what I read also that you know it's just a disclosure made by the promoters
18:02as part of the RHP. My final question to you sir you know you are you are in the Mumbai
18:08metropolitan region what is the kind of growth rate that you see for developers here and what
18:15are the big challenges which are coming up for you? So growth rate is we are seeing a healthy
18:26growth rate currently if I look at the history the historical growth rate of the company has been in
18:31the range of 25 to 30% CAGR and challenges keep on coming but with an experience of
18:40four decades we are equipped to handle varying challenges as and when they come
18:47we can call the company to be seasoned over a period of years.
18:53Mr. Jain it was a pleasure talking to you today your IPO RK developers is opening on 16th of
18:57September closes on 19th price between 121 to 128 is a fresh issue of 1410 crores giving a
19:05company a valuation of nearly 2400 crores at the upper end of the price band. Thank you for being
19:09on NDTV Profit and being on IPO ALDA. Thank you.