This week I decided to get some information on their 2nd largest project – Beyond 5, which is expected to contribute Rs 600cr to the company’s topline over the next 4-5 years as per the company’s presentation.
This is also located in Ahmedabad, about 10-15 km away from the Uplands project. This has a 9-hole golf course and a Sachin Tendulkar – designed clubhouse (SMAASH) of 60000 sq feet (that’s massive!).
Around the golf course, Arvind will be building around 100 villas which will occupy 2% of the land area. The remaining area will be developed and sold as plots. There are totally about 600 plots of varying sizes starting from 500 sq yard, including the 100 plots over which Arvind will do the construction. Depending on the buyer’s requirement, Arvind can undertake construction activities over the vacant plots or else the buyer can do his own construction. They also intend to start a property management arm and help in leasing villas to visitors on behalf of the owners. But that’s for much later.
Beyond 5 is still in pre-launch stage. 80% of the approvals have been received and remaining are expected by year end. Which is when they will launch the project. The rates mentioned below are the pre-launch rates which could go up when the project is launched. This is a joint development with the land owner (Arvind does not own the land). Arvind will develop, construct, market and maintain (for about 2 years after handover, after which the society would take over). Land has been already been fully converted to Non-agricultural and title is clear. The project will be completed over 3 years. Fencing has been done. Road network construction is under process. Office building will be fully ready in November. 25-30% of the project has already been sold out.
The marketing person candidly advised that if someone is looking for investing and does not intend to stay there, the plots are the best option. Beyond 5 has been designed more as a weekend getaway and not for staying all the time, although the buyer is free to do so if he wants. If someone is looking at their first or second home, then Uplands is a better choice. Within Beyond 5, purchasing a constructed villa makes sense for those who intend to use it frequently, like say every month or fortnight. For less frequent users, it does not make sense as the maintenance charges would he high. He informed that the land price is already double of what they had negotiated with the owner when they entered into the agreement 2 years back. Since then there have been several developments in the surrounding area such as a resort, a water park, a club etc (I missed the names, but he mentioned one owned by Bakeri family – related to Achal Bakeri of Symphony).
Now for some statistics:
- Land cost is 5500 Rs per sq yard, plus additional 1000-1500 extra per
square yard depending on golf-facing, 30-meter-road-facing,
18-meter-road-facing, corner plot etc. - Construction cost is 17500 per sq yard.
- Villas range from 1bhk to 4 bhk with 147, 256, 360, 560 sq yard area
- Plots range from 500-1200 sq yard.
- A 1bhk villa would cost around 60lakh, and a 4 bhk around 1.8-2 crores – land and
construction put together. - A 1000 sq yard plot would cost around 68 lakhs.
All cheque payments, in white. No black money. 20% down, 3.5% in 12 instalments, and 1.5% over the next 24 months (appx). The entire project is self funded by Arvind.
I wasn’t able to get a breakdown in order to arrive at the Rs 600 cr figure mentioned by the company in their presentation.
Observations – like Uplands, this also appears to be a post sort of high end project – but more like a resort for short stays. When asked about the demand for so many villas (800 of Upland and 100 of Beyond 5), the marketing person started singing praises about the potential of the area (never ask a barber if you need a haircut).
Profitability from this project would be lower since majority is plot development, however investment required from the company would also be lower.
These 2 projects constitute 72% of the expected revenue, with the remaining 9 projects contributing 28%. So there is significant concentration risk. While Arvind as a group may have the ability to execute the projects, demand scenario for upmarket projects in Ahmedabad is something that needs investigation. Their remaining projects are smaller “fast moving” constructions, and new launches in this category would be necessary to sustain cashflows.
There seems to be a significant gap between the “potential” of the company and current market cap of 160 crores. The market could get more confident as the offtake improves and if they announce new launches.
Discl – not a recommendation. Had taken a starter position earlier and added a bit recently.
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