Arkade Developers Q1 Profit Spurts Over 4x | NDTV Profit
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00:00We have Amit Jain, MD and Chairman, Arcade Developers to speak to us about how Q2 is
00:06essentially going to play out, what trends are playing out for Arcade.
00:10Welcome Mr. Jain.
00:12Just talk to us about how volume is essentially holding up, how you sense demand continues
00:20to be strong, is that how it is?
00:22And just for viewer context, largely Bombay based Arcade Developers, so the kind of possible
00:30commentary coming through will largely be Bombay based.
00:32But Mr. Jain, over to you.
00:35Yeah, so, good morning.
00:38This year, like year on year basis, our revenues have grown up 103%, more than 100% and quarter
00:44on quarter basis as well they have grown slightly.
00:48So this shows the continuous demand basis, residential premises in Mumbai, it continues
00:55to be upswing.
00:57Mr. Jain, if you look at your FY24 performance, you had about a 12 to 13% of a pre-sales growth
01:04at 617 crore, collections also reported a healthy growth over 50% growth that we are
01:10looking at.
01:11I want to understand how the trend shaping up and not only just Q1, but even Q2, if you
01:15have to take the pre-sales and collections in consideration.
01:20There is a constant demand for new homes, new homes with amenities is always in demand.
01:25So that is reflected in the revenues as well pre-sales and the collections.
01:32The kind of growth that we can expect for this year, we can look at a 20 to 25% of growth?
01:38Yeah, 25% is what we are targeting at CAGR.
01:44Do you believe that a lot of the numbers also are due to the kind of new launches you had?
01:50You had two big new launches this quarter?
01:52Yeah, we have had two new launches and we are launching one more project in eastern
01:57suburb of Bandhu.
02:00And when will that happen?
02:01How quickly?
02:03This month itself, like in October we are launching a new project.
02:06Okay, and how many more projects to go through the rest of this financial year?
02:13In this financial year, by the last quarter, we should come up with two more projects
02:17in western suburbs.
02:19So three in all is what you are suggesting, over and above the two which you have launched
02:24in Q2?
02:25Yes.
02:26Okay, and how much of those, sure, and how much of the sales is contributed by the new
02:33projects versus your older ones, what is the split like?
02:40So new projects will contribute to say in and around 50% versus 50% by the old projects
02:47and by the end of this financial year.
02:50Okay, Mr. Jain, you mentioned about the Bandhu project which we can anticipate in the next
02:55month or so.
02:56I want to understand what is the kind of size that one should anticipate from this and even
03:01in your launch pipeline, I want to understand your launch pipeline, what is the kind of
03:05million square feet land that we are looking for, not just this year but in your three
03:10year perspective, what is the kind of land bank that one should be looking at for?
03:14So Bandhu project is a three acre land parcel, it has seven buildings and the configuration
03:21is two and three BHK flats.
03:24The ticket size is 1.5 crore onwards and it has a top line potential of 800 crores and
03:33on a regular basis, on a year on year basis, we are targeting at three to four projects
03:38and growing at an average of 20 to 25% year on year.
03:43Three to four projects is your target for the year, I want to understand in this, what
03:48is the mix between the redevelopment projects that we are looking at and the new land development
03:53projects that you are seeing and how does profitability between these two differ?
03:58So last financial year, our revenues were two-third from new projects and one-third
04:03from redevelopment project and at any given moment of time, our wishful split would be
04:1150-50 from new projects and redevelopment projects, that's the balance we wish to maintain.
04:19Okay I want to quickly, you know before I come back to you sir, I want to quickly look
04:24address the flashes at the bottom of your screen, complete waiver of five entry points
04:32from toll is what the Maharashtra cabinet has taken in terms of a decision for Mumbai.
04:38So toll of course being waived at five entry points, decision comes into effect from midnight
04:43tonight, couple of stocks that would likely get affected, MEP Infra of course already
04:48flashing at the bottom of your screen but let's pull that one up okay, on lower circuit
04:51that one, can we also pull up IRB Infra, try and see if there is absolutely any impact
04:57on some of these toll road players, there you go, seeing a bit of an impact on the stock
05:03on the back of that, around a percent and a half lower.
05:06Of course the cash was lower, it's recovered a little bit post that but nonetheless we
05:11are lower than where it was prior to this announcement coming, so that's how it is.
05:17Mr. Jain, I want to try and understand realizations, how is it playing out?
05:22Because if you are suggesting demand is strong, realizations only get better, is that how
05:27we see the trajectory for realizations?
05:37Mr. Jain, not sure, just want to quickly understand your view on realizations, demand you believe
05:44or rather you are suggesting remains upbeat, so how are realizations essentially playing
05:49out?
05:50Profits are pretty healthy, our profit margins like our bottom line is 40 crore rupees before
05:57tax and post tax is 30 crore this quarter.
06:03No right, but sir, per square foot realizations is what I am trying to get to, give us a flavor
06:11as to how that's evolving, is there consistent growth on that count as well because the base
06:16is getting higher?
06:19So no, margins are pretty much consistent, they are not growing, in fact the margins
06:26in redevelopment are squeezing day by day because of competition.
06:34Okay but sir, with regard to what are you seeing on ground, earlier the projects you
06:40were launching versus now, is the per square foot cost of the sale price of the projects
06:48you are launching now higher, are you seeing those incrementally higher realizations for
06:53the same value?
06:54Prices are going on increasing and because we are able to get premium or margins in new
07:01projects are going on increasing as well.
07:04I understand and how much higher is that sir because last couple of years there has been
07:08a steep rise, I know not as steep as maybe a Bangalore but Bombay has still seen a rise,
07:14so how is it being seen now, what's the kind of jump up in realization you are seeing?
07:22Prices are beating inflation, say on a year-on-year basis they are going up at the rate of 10%
07:28on an average.
07:29Sir Jain, you said that we are still seeing a 10% of a price increase in the realizations,
07:36I want to understand, so one is the realization plus the strong demand trend that we are looking
07:40at, so of course in real estate revenue, CHR cannot be taken into account but if you
07:45have to look at the average profitability margins that one can maintain, what are the
07:49type of margins one should see for the business going forward?
07:53So 25% bottom line is what we are looking at, 25% of the top line is the margins that
08:01we are achieving currently.
08:03And you expect to maintain this for the next 2 to 3 years as well as we go forward, correct?
08:08Yeah, we expect to maintain it.
08:10Okay, and coming to the debt picture, I want to understand how is the debt shaping up,
08:15in the last conversation you mentioned that we expect to be debt free, so are we at that
08:22position yet or is this, are we going to wait for another few quarters?
08:27We are very light on debt, we have taken construction finance for one of our projects and that is
08:33a very nominal debt, the debt to equity ratio currently is 0.3% including promoter debt.
08:40No further debt coming through and likely realizations from the new launches from the
08:453 projects that you have should take care of debt by the end of this year, is that how
08:49one looks at it?
08:50Yeah, no further debt we are looking at because we also have funds from the IPO raised up.
08:56I was just going to come to that, so how is that, what is the pipeline like for the utilization
09:01of that?
09:03So, we have a lot of problems, so I believe there is an audio issue, we will just quickly
09:14check on that and come back to you, but of course, arcade developers, market debut in
09:20September of 2024, the fresh issue was roughly 400 crore for developing ongoing projects,
09:28stock is up 22.5% from the issue price, largely a Bombay based developer, market cap is roughly
09:353000 crore, so, right, so sorry, you know, there was an audio issue, please, if you could
09:42reiterate what you were saying.
09:44No, so we also have funds from the IPO to deploy, we have identified new land parcels,
09:51new opportunities and new markets of Thale, that apart we will be deploying the funds
09:56for approvals and construction of ongoing projects.
10:00Okay, and how many parcels are you currently looking at, what would the ticket size be
10:05like, how much of this 410 crore will go and how quickly?
10:10So we have identified a land parcel in the range of say 175 crore in Thale, and that
10:16apart the remaining 250 crore will be deployed for approvals and constructions of ongoing
10:23projects.
10:25Okay, and of these land parcels that you are acquiring, in which ticket size are we looking
10:30for, is it more leaning towards the luxury side or the upper scale or mid-income side,
10:35I don't know, understand, yeah, value premium segment, again, 2 and 3 BHK apartment is what
10:41we are looking at, and starting from somewhere around 1.5 crore rupees.
10:49If you have to look at even the existing projects, what is the current mix that we can, one can
10:53see between the luxury side and the premium side of it?
10:58We are in the value premium segment, in current projects also, majorly we are having 2 and
11:033 BHK inventory, in eastern suburbs it starts from 1.5 crore, western suburbs is 2 crore
11:11onwards.
11:12Right, and sir, with regard to your accounting, you have suggested 25% revenue growth, largely
11:20project completion, right, that will, it will be linked to project completion, your
11:25top line.
11:26Completion, all of it is percentage completion.
11:28Right, okay, it is percentage completion, right, so sir, how do you expect some of these
11:33projects to start to unwind, how many projects do you believe will get closed this year?
11:40This year we have already got occupation for 2 projects and we are expecting 2 more OCs
11:45by this year and for Santa Cruz and Marol project.
11:49And how many projects do you have live, sir, just for your context?
11:52Currently we are having 7 ongoing projects.
11:56Right, and plus the 3 that you will add both, 1 this quarter and another 2 rest of the year,
12:03right?
12:04Plus 1, 2, yeah, plus the 3, yeah, so 1 we are recently launching and 2 by year end.
12:10So okay, yeah, right, so by year end you will have 10 projects in the pipeline.
12:14We will also complete 2 projects, no, we will complete 2 as well, as I said.
12:18Yeah, yeah, yeah, understood, so you will have 8 again, understood, understood, understood.
12:24And sir, of course, you know, you will also have good cash flows coming in, you have identified
12:311 project, any others that you are looking at, because you will very quickly start looking
12:36at F526 in terms of how that is going to play out, you have got clarity on F525.
12:40It is an ongoing project, our business development always is on a lookout of new opportunities,
12:46it is an ongoing project.
12:48Okay.
12:49To summarize, in a year we identify 3 to 4 projects to close, you know, and launch.
12:55So it is cyclical, yeah.
12:57Right, sure.
12:58Mr. Jain, you mentioned that you have 8 projects currently in pipeline and which are also ongoing.
13:04Want to understand what is the gross development value of these projects and even if we go
13:09forward, last I mentioned that you are not looking to expand beyond the MMR region, is
13:13that the stance currently also or are we looking for opportunities beyond the MMR region?
13:19No, we are looking at options in MMR region only.
13:24Okay, and the gross development value of these projects if you should look at it?
13:29Say, 4000 crore.
13:314000 crore for 8 of these projects?
13:34Yeah, for projects which are targeted to be completed in around 3 years.
13:38Okay, fair to understand.
13:41Okay, thank you so much, sir.
13:43It's been a pleasure speaking, breaking this down in terms of numbers.