Ashiana Housing – Banking on Tier II and III towns!

Good set of results from the company, they are very confident of exceeding 1000 cr. in pre-sales. Now the pipeline and RERA approvals are also falling in place and sales velocity seems to be strong. My concall notes are below.

FY23Q1 concall

• Learnings from Sohna project (Ashiana Anmol): Takes 5-6 years to create a brand in a new market + need to be agile with marketing strategy such as engaging with channel partners for sales. They adopted this model in Nov 2019 and since then project kicked off
• Ashiana Amarah: Child centric amenities + spaces are lavish + thoughtful design from scratch. Positioned as an aspirational project. Have received RERA approval for phase I and will be launching in a couple of weeks. Will use channel partner network for bringing in customers, but sales will be taken by own team
• Jaipur: Land prices haven’t fallen, hopeful to do a couple of land transactions in next 8-10 months
• Goal for company is to reach 15% ROE which is still sometime away, double digit ROE looks reasonable and likely
• More supply is coming in plotted layouts in Jaipur and Gurgaon and not in apartments. Do not see supply side challenges for Ashiana (maybe in Pune supply can be an issue in 2-3 years)
• RERA approvals have been secured for Ashiana Amarah Phase I, Advik Phase I (senior living Bhiwadi), Ashiana Malhar in Pune (has also been launched for EOI)
• FY23 launches: 12-13 lakh sq.ft of greenfield projects + 13-14 lakh sq.ft as phase extensions in existing projects (so in-line with >25 lakhs sq.ft)
• FY23 target: Targeting 1100 cr. of pre-sales. Sales velocity is not an issue, need 2 more RERA approvals (1 in Jaipur, 1 in Jamshedpur) to meet pre-sales expectations. Overall pipeline (excluding stuck projects) is around 6000 cr. and current view is to maintain 1000 cr. annual run rate
• Maintaining gross margins of 25-30% in current sales with some projects even doing 40%+ gross margins (e.g. Ashiana Nirmay). On a broader basis, 40-55% of sales goes into construction costs
• Senior living: Don’t see lot of competition + end market is growing
• IFC credit line is more or less exhausted, don’t see the need for debt for reaching 15% ROE. Very conservative in debt

Disclosure: Invested (position size here, no transactions in last-30 days)