Page 32 - Arvind 2024

that the project sustains largely through advances provided by buyers. This negative working capital approach ensures that the Company’s debt-to-equity ratio remains well below its guardrail of 1:1 (also assisted by timely equity infusions by the promoters).
Partnership with HDFC
Capital
At Arvind SmartSpaces, we believe in creating, enduring and eventually beneficial partnerships, whether it is with landowners, vendors, contractors or financial partners. The availability of large funding lines makes it possible for the Company to capitalise
on opportunities related to land acquisition and timely project development.
In 2019, the Company entered
an 80/20 venture with HCARE 1, a Special Purpose Vehicle entity directed at mid-market and affordable housing development. The first project, a plotted development, was acquired at Devanahalli, Bengaluru, in 2020. This platform was concluded within two-and-a-half years.
In 2021, HDFC Capital Advisors participated in a preferential issue, HCARE 1 subscribing to 8.8% equity in Arvind SmartSpaces (fully diluted basis).
In 2022, Arvind SmartSpaces raised Rs. 900 Cr with HDFC under HCARE III to create a residential development platform with a revenue potential in excess of Rs. 4,000 Cr. The proposed investments in this platform by Arvind SmartSpaces and HCARE III are Rs. 300 Cr and Rs. 600
Cr, respectively (three projects acquired under the platform). The Company provided a successful exit to HDFC in one project during the last financial year.
Outlook, FY24-25
The Company’s long-term credit rating improved to A+
with a Stable outlook. Arvind SmartSpaces is attractively positioned to generate sustainable growth. The Company aims to sustain 30-35% growth across relevant metrics, comprising bookings, collections, revenue, EBITDA, and PAT; EBITDA margins are likely to be sustained around 25%, indicating business model predictability.
Leveraging the growth headroom available within its Balance Sheet without stretching its financial hygiene and its existing funding line available from HDFC, the
Company plans to expand its projects pipeline. The Company is committed to multi-fold bookings growth without compromising profitability. The Company will focus on creating long-term value by transforming large land parcels into attracttive destinations. Driven by this aspiration, Arvind SmartSpaces aims to emerge among India’s leading real estate players.
Highlights, FY23-24
Arvind SmartSpaces reported a 33% growth in topline and 62 increase in profit after tax during the year under review. The fact that the Company reported profitable growth
is a validation of its business model and competitiveness. During the year under review, Arvind SmartSpaces remained one of few companies in its sector with negative net debt, a rarity in a business marked by sizable capital investments. The Company’s net debt decreased to Rs. (41) Cr as of March 31, 2024, from Rs. (30) Cr as of March 31, 2023. This under-borrowed nature of the business, at a time when it is growing attractively year-on- year, indicates the robustness of the Company’s strategic approach and business direction.
The growth of the Company during the last financial year cascaded into increased liquidity, critical to business acceleration and sustainability. The Company made record collections of Rs. 876 Cr, a 46% year-on-year growth, the highest in its existence. This
outperformance was attributed to the seamless process execution encompassing sales, registrations, construction, and deliveries. Strong collections resulted in net operating cash flows of Rs. 458 Cr in FY23-24. This liquidity will empower the Company to sustain project progress and generate an Net Estimated Unrealised Operating Cashflow of Rs. 2,563 Cr
from its projects across the foreseeable future.
Consequently, the Company’s long-term credit rating improved to A+ with a Stable outlook compared to its previous rating of IND A with a Positive outlook in December 2022.
In view of the improvements in business model and projected outlook, the Board of Directors have recommended a final dividend of Rs. 2.50 per equity share and special dividend
of Rs. 1.00 per equity share, totaling Rs. 3.50 per equity share of Rs. 10 each (i.e. 35%). This announcement marked two consecutive years of dividend distribution.
30 | Arvind SmartSpaces Limited