“ashiana housing limited q2-fy12 results conference call” call/123716_20111103.pdf · 11/3/2011...

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“Ashiana Housing Limited Q2-FY12 Results Conference Call”

November 3, 2011

MODERATORS: M R. VARUN GUPTA – DIRECTOR , FINANCE , ASHIANA

HOUSING L IMITED . MR. GAURAV SOOD – KANAV CAPITAL

Ashiana Housing Limited November 3, 2011

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Moderator: Ladies and gentlemen good afternoon and welcome to the Ashiana Housing Q2 FY2011

conference call. As a reminder for the duration of the conference, all participant lines are in the

listen only mode and there will be an opportunity for you to ask questions at the end of today’s

presentation. Should you need assistance during the conference call, please signal an operator

by pressing * and then 0 on your touchtone telephone. Please note that this conference is being

recorded. At this time, I would like to hand the conference over to Mr. Gaurav Sood of Ashiana

Housing. Thank you and over to you sir.

Gaurav Sood: Good evening to everyone. This is Gaurav from Kanav Capital, the IR firm for Ashiana

Housing. It is my pleasure to welcome you all to the Ashiana Housing second quarter FY12

investor conference call. This call is being held to discuss the performance of Ashiana Housing

for this quarter and to answer any questions that you may have. I hope that all of you have had

a chance to go through the quarterly results and international presentation that went out with

the invite. Today on the call from Ashiana Housing Limited, we have Mr. Varun Gupta

Director of Finance. Mr. Vishal Gupta, the Managing Director, may join us later in the call

once he is through with an important meeting he is attending. I would now like to hand over to

Mr. Varun Gupta, Director Finance of Ashiana Housing, for his opening remarks.

Varun Gupta: Good evening everyone. Thank you for joining us to discuss second quarter performance of

Ashiana Housing. I extend a warm welcome to all of you. This quarter has been a very

impressive one on almost all the critical parameters of growth in the company.

• Ashiana got listed in this year’s annual list of ‘Asia’s Best under a Billion’ compiled by

Forbes. This is the second time in a row that we made into the list and still ours was the

only one from the Real Estate sector out of 35 Indian companies in the list. The selection

of the best 200 companies is based on earnings growth, sales growth, and shareholders'

return on equity in the past 12 months and over three years.

• Your company was honoured with multiple awards in residential segment in Zee Business

– RICS Awards ceremony. Ashiana Aangan, the residential project in Bhiwadi, NCR was

awarded the Best Residential Project in North India and Ashiana Woodland secured the

Best Residential Project ward in East India region. These projects were judged on the

basis of all-round excellence, value for customers, benefits to community and a

commitment to sustainability.

• We acquired 10 Acres of Land in Kolkata in Uttarpara municipality. Uttarpara is a small

town in Hoogly District, and stationed about 15 km west from the commercial heart of

Kolkata. We contemplate an Utsav over there. We plan to start construction on the project

in next financial year.

• The bookings and construction numbers this quarter were the highest ever achieved in any

quarter till date. Bookings grew at 42% on a Year on Year basis to 4.82 lakhs sq ft this

quarter from 3.40 lakhs sq ft last year same quarter. Construction has also gained

momentum and grew at 39% YoY to 3.27 lakhs sq ft from 2.70 lakhs sq ft in the second

quarter of FY11.


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With bookings of 8.63 lakhs sq ft till September in this fiscal year, we are bang on the track to

achieve the target for the year which is 16 lakhs sq ft. Bhiwadi and Jaipur contributed about 80% of

8.63 lakhs sq. ft. Jaipur has taken over Bhiwadi in the total sales to become our largest selling

geographical area over the last 2-3 quarters, within 5 years of entering the city and it validates the

fact that Ashiana brand is going strong and gives us confidence to enter more new cities.

On the construction side however, we have revised the annual targets from 14 lakhs sq ft to 12.5

lakhs sq ft. Revision happened due to non-commencement of work at Lavasa, which was built into

the year’s target.

On Lavasa, a final hearing is awaited from the MoEF. We have full faith in Lavasa Corporation and

await a positive resolution. The customers’ faith in the success of the project is also evident through

incremental bookings. However, in terms of saleable area of current and future projects, Lavasa

constitutes about 5% of the total. And as of 30th Sep 2011, we have collected thirty one and half

(31.5) Crores from the customers of Lavasa and the total amount spent including land and

construction costs is Rs. 22.91 Crores. The Gross Profit recognised from the project till 31st Mar

2011 is Rs. 8.91 Crores.

On financials this quarter, Ashiana reported an increase of 96% in Sales & Other Income to ` 57.73

Crores against that of ` 29.41 crores in the corresponding quarter last year. The Profit after tax

recorded an increase of 84% rising to ` 14.60 crores from ` 7.95 crores in the same period last year.

On other developments, we want to share that Miras Partners have retired from the partnership firm

“Ashiana Amar Developers” effective from 01st April, 2011. Ashiana Amar Developers is a

partnership firm formed in 2007 for development, in six phases, of a residential project “Ashiana

Amarbagh” having total saleable area of around 5,32,585 sq. ft. in Jodhpur (Rajasthan). Upon

retirement of Miras Partners, Ashiana Housing Ltd. has acquired 100% economic interest in the

firm. Entire revenues and profits from now on will accrue to Ashiana.

Similarly, Ashiana Housing Ltd. has retired from the firm Ashiana Amar Infrastructure. Ashiana

Amar Infrastructure is a partnership firm formed to develop commercial complexes in Jodhpur

(Rajasthan). However, no activities have been started yet. Going forward Ashiana will have zero

economic interest in the firm Ashiana Amar Infrastructure.

Overall, this quarter a lot of phases across different projects were launched for construction and

bookings. Increasing momentum on execution and sales has given us the impetus to scout for

additional land parcels. Acquisitions at Bhiwadi and Kolkata in the year will help in generating

pipeline for future growth. We might look at another couple of acquisitions in coming months.

On this note, I would like to conclude my remarks.

We will now be happy to discuss any questions or suggestions that you may have.


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Moderator: Thank you very much sir. We will now begin the question and answer session. Anyone who

has a question may press * and 0 on their touch tone telephone. If you wish to remove yourself

from the question queue, you may press * and 2. Participants are requested to use handsets

while asking a question. Our first question is from line of Deepak Agarwal from Impetus

Advisors, please go ahead.

Deepak Agarwal: Hi, just one question, the breakup of investments.

Varun Gupta: I will have the schedule with me. The breakup of investments on the standalone basis or

consolidated basis?

Deepak Agarwal: Consolidated basis

Varun Gupta: Okay so we have about 12 crores 81 lakhs in immovable property, 29 crores 35 lakhs in

partnership firms.

Deepak Agarwal: Okay.

Varun Gupta: And the remaining investments are debt fund, liquid funds. Mostly cash equivalent, about 45

crore out of that wil be cash equivalent.

Deepak Agarwal: Right. Thank you.

Moderator: Our next question is from the line of Kartik Mehta from Sushil Finance, please go ahead

Kartik Mehta: Hi Varun.

Varun Gupta: Hi Kartik

Kartik Mehta: Varun I just wanted to know that our equivalent area construction in this quarter is 3.27 lakhs

square feet, which is highest in the last six quarters and probably few, remember we were

facing a problem of labor shortage in the past and that was one of the prime reason behind not

ability to scale up the business, but now with this 3.27 is new landmark what we have achieved

in a quarter, is it right to assume that we will maintain the sort of high 3.25 plus sort of run rate

going ahead, except for the seasonality factor?

Varun Gupta: Except for the seasonality factor, it would be expected that the run rate is maintained. The labor

problem was a large issue. We were at 60% labor deployment around April and we hit about

92-95% labor deployment in September and then October was also another good month. We

got 1 lakh 18 thousand 500 square feet constructed in October, so generally feels good. But

labor is again becoming a little bit of a problem with Diwali and chhat happening in Bihar a lot

of labors are going back. We expect labor deployment to pick up again in November. So except


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for seasonality again, the Diwali and all these seasonal issues, we expect the construction to

keep momentum going forward.

Kartik Mehta: Okay fine great. If you can just also give me the market value of your Thada land and Kolkata

land?

Varun Gupta: The Kolkata land I would refrain at this point of time, what exactly the market value is, because

it’s a very structured sort of a transaction. So payments are going over a longer period of time

and are linked to various approvals. Thada land, we had spent about 35 crores year which was

for acquisition of about 40 odd acres. We are acquiring another 20-25 acres so market value

shall be different, but post our acquisition, the rates in that area have gone up 20-25 % already.

So the procurement value of that land is being at a very good price. You will be able to find,

that Thada land is probably one of the better acquisitions by the company in recent times in

terms of capability to find the right size and right priced land parcels.

Kartik Mehta: So what you are trying to say is that 40 acres of land we brought with 35 crore and after that the

price of the same piece has gone up by at least 25%.

Varun Gupta: Yeah that’s what we are getting from market. But the remaining 20 we are acquiring is also at

the same price because we had entered into agreements at the same time with the 35 acres and

we are just closing that acquisition, but otherwise prices in the area have moved northwards.

Kartik Mehta: So 40 acres you have already paid off and another 20 acres you would be paying also, true?

Varun Gupta: Yeah we will pay off in this month.

Kartik Mehta: Okay so another 20 acre we will be adding, so total Thada Land parcel would be 60 acres and

for 20 acres, we will have to pay, but that as per the older rate not on the current prevailing

market rates and this is obviously NA land or agriculture land?

Varun Gupta: This is agriculture land.

Kartik Mehta: Okay and I understand that as per the resources that we are facing the regulatory hurdles

because they are going slow in terms of approvals and all these things, so probably this land

what we have acquired is not going to contribute anything in the next two years at least?

Varun Gupta: I wouldn’t say that in the next two years. We are hopeful for getting the regulatory clearances

in early part of next financial year that’s the basic objective. But that, as I said is not that people

are going slowly. They are changing the regulation for conversion of agriculture land to non-

agriculture land in Rajasthan because the courts have given a directive that the current process

is not correct by saying it is too opaque and not transparent.

Kartik Mehta: Okay fine, so that is why it is getting delayed?


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Varun Gupta: Yeah that is why it’s getting delayed, but the process of acquisition here and the way it has

been done that the land is in R-Zone with proper demarcation for township zone where land has

been reserved for private developers for development in Bhiwadi, so overall expectation of

approvals is faster because the master planning by the Rajasthan government authority this year

has been much better as to what they were doing earlier in terms of clearly demarcating what

will be for private development and what would be for government development.

Kartik Mehta: Okay and I was just looking at our Bhiwadi project, Aangan is major contributor from Bhiwadi

which will be exhausted by early part of next year. The way we are constructing as of now. So

we will be running short of new project from Bhiwadi unless the Thada land comes on stream

or else Milakpur would be flowing earlier than Thada is it so?

Varun Gupta: No I would accept them flow at the same time as they both have the same hurdles. In fact,

Milakpur has a little bit other hurdles as well. So expectation is for Thada to come on line

faster, but that we expect Thada to come on line at the time like Aangan is finishing, that’s the

aim at the current level.

Management: That’s the aim we have.

Varun Gupta: And simultaneously we are also looking for other parcels in Bhiwadi and an around Bhiwadi,

which are already having approvals so we can start work on that faster.

Kartik Mehta: Okay and for that matter whatever debt we have raised it’s mainly for paying off Thada land?

Varun Gupta: No whatever debt we raised, they are two parts to debt, one was for construction of Aangan

which was raised earlier and we raised some debt against our hotels so as to cash out our equity

in our hotel Treehouse that is there in Bhiwadi. With hotel operations becoming stable and its

capability so as to pay back, we took a 10 year loan with the prospective to cash out the equity

that was there in that.

Kartik Mehta: Okay so basically you have done a securitization of the hotel cash flow?

Varun Gupta: If technically, yes sort of. It’s not securitized in the sense, there is no bond issue. So the

technical understanding of terms of securitization they have not been securitized. There is no

specific security…

Kartik Mehta: The quasi kind of a thing.

Varun Gupta: Yeah it’s a quasi thing we have charges on the receivable.

Kartik Mehta: Okay so basically it’s an arbitrage. You have played with these.

Management: Yeah we will cash out our equity basically.


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Kartik Mehta: Okay and going ahead what should be our debt target we are looking at from the current level

because as of now we are still net debt-free company?

Varun Gupta: Yeah and most of the debt will lie as cash going forward because we want to keep cash on the

books for rainy days and not be susceptible to raising funds there. And we need to keep cash on

the books because the business is cyclical and our ability to withstand downturn will depend on

how much cash is available with the company at any point of time. So as long term debt is

available to fund cash reserve, we will look at that and may be to fund some long term assets in

the future. But I would say that at current, plan is debt to equity levels shouldn’t increase

beyond 0.25x.

Kartik Mehta: So what you are saying that from here onward, you would definitely go for higher debt at least

from the current level and you would preserve cash.

Varun Gupta: Yes we will preserve cash, so it will depend as we plan out over the future. It should be little

higher than this.

Kartik Mehta: Because if you have to acquire land in Bhiwadi over and about 20 acre and you will be

certainly paying off remaining amount in Kolkata, so what these land parcel, you would be…

Varun Gupta: We still have close to 70 crores of cash on the books anyways. So we are pretty much well-

funded going forward.

Kartik Mehta: For this whatever land parcel we discussed we are pretty much well-funded.

Varun Gupta: The plans on the debt are not thought out very well, but we will not go beyond 0.25 x levels in

the near term.

Kartik Mehta: Okay because the only time you raised debt was in 2008-2009 time and then the real estate

market bottomed down and the stock prices went up so probably It would reach again that you

go for borrowing this time as well!

Varun Gupta: Alright. Yeah.

Kartik Mehta: That’s all from my side Varun. Thanks.

Varun Gupta: Thank you Kartik.

Moderator: Our next question is from the line of Ravi Dodia from CRISIL, please go ahead.

Ravi Dodia: Hi Varun.

Varun Gupta: Hi Ravi.


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Ravi Dodia: Congratulations on good set of numbers.

Varun Gupta: Thank you.

Ravi Dodia: Varun see I have basically three questions. One is you know, I was looking at booking numbers

in the current quarter and that the growth has been phenomenal of around 42% year on year,

but just you know say your equivalent area construction target revised because of Lavasa, but

booking target is still maintained at 16 lakhs square feet. So I just want to understand where

will this come from?

Varun Gupta: Principally Rangoli garden, Rangoli gardens has been performing better than expected in terms

of volumes, so that is the largest driver in terms of keeping the target where it is and even

Aangan has been performing better than what was targeted. So that’s the two largest project of

the company have been performing better that’s the basic idea. And for construction, for sale if

the market responds, its much easier to respond with inventory, but to up construction in

Rangoli garden at the same pace is little bit more challenging to cover up. Basically, that’s

what’s going on and Rangoli and Aangan have been doing better than expected.

Ravi Dodia: Okay and also we were looking at your margin for the current quarter, see on the realization

front also, though year on year, it has increased a bit, but on Q on Q basis, it has declined

despite having some higher contribution from Lavasa compared to first quarter FY12, so I just

want to understand why average realizations have declined, also cost of construction in the

projects which are currently under construction, it has gone up in the last quarter, second

quarter?

Varun Gupta: Okay, two things one is why realizations are down and other why cost is up?

Ravi Dodia: Yeah.

Varun Gupta: Okay, on the cost front, we revised the estimated cost of construction for Ashiana Aangan in

this particular quarter by about 4-5% because the large amount of cost that was factored in

terms of steel, the cost came up little higher than what was estimated and labor cost was again

revised once more because of Labor Minimum Wages rising, so those are the principle reasons

why cost have gone up. A, because of debt, B. another aspect on the margin front is Ashiana

Amar Developer on the consolidated front which was only contributing in share of profit of

partnership firms, so you were only having income without any corresponding cost. For the six

months till date, we have consolidated Ashiana Amar Developers into the quarter. So in that

sense, since we were accounting for both revenues and cost of construction, margins are little

lower even though there is no impact on the net profitability and on the realizations front as

compared to last quarter. The impact is also because retail is contributed a lot lower. The retail

had contributed 5% in the bookings in first quarter as compared to 1% here, retail price points

are significantly higher than they are in residential just probably 1.5 x to 2 x depending on


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locations and it creates an impact even if it 5% and if its 1.5x you know it adds about 2-3.% to

the overall realization for that quarter, but I wouldn’t make much of it, we will be raising prices

in Rangoli Garden. In October, we raised prices again and realizations seemed to remain strong

with strong enquiries in bookings. Price points are not concerning.

Ravi Dodia: Okay, on the price point front we might be able to increase prices by say 4-5%, but according

to you cost pressure will continue to remain.

Varun Gupta: The cost pressures remain going forward or not I wouldn’t be able to say. The labor front yes,

the cost pressures will remain. We need to find efficiencies. On the material front, most of our

Material cost expansion has been in the commodities front in cements, sand, stone chips, steel,

and those. So if commodities prices ease going forward, then there should be some easing of in

the prices, but I would say the commodity cost have mostly peaked specifically in steel and

cement that is my particular view, but when we go ahead and underwrite projects, we always

take current cost of construction and current sales price whenever we will be picking up land

and try to be conservative on that.

Ravi Dodia: Okay sure. Regarding the 10 acre land in Kolkata that you will not be able to disclose, it was

acquired at what price right?

Varun Gupta: Yes, not at this moment of time. We will disclose it probably next quarter. At this moment of

time, we will not be able to disclose the transaction cost.

Ravi Dodia: Okay. Last question from my end regarding you know Lavasa, its definitely good that you have

updated all your shareholders about what is the current status, but you know just want to get the

sense from your side say if HCC or Lavasa is not able to get whatever required approvals from

the environment ministry, what will be the last thing that can go wrong in the Lavasa and what

will be its consequences on Ashiana as well as investors who have booked property at Utsav

Lavasa?

Varun Gupta: Well the last thing if goes through that there is no clearance given in the project and we have

shut it completely. One thing at Lavasa is shut completely and the second thing that we will try

and explore is, can we do Utsav on our own even if Lavasa project is not through from both the

legal prospective and the market prospective. One thing about the market prospective it seems

that it might be possible because significant amount of the infrastructure in Lavasa in terms of

roads and things are already up running, but that’s the second resort if the clearance is not

given. Even if that is not possible where we are not able to do Lavasa on our own if things are

denying, then we will take steps to probably return the money to our investors or property

buyers or give them alternative properties that we can offer them in different locations. So we

will have Utsav in Kolkata and Jaipur to provide to people where they could go if not Lavasa

for Ustavs. We are also looking for land in Pune or anywhere near that. If that is not there then

we will try and refund their money as permitted by our balance sheet. Current balance sheet


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remains strong enough because of total cash outflow, expected cash outflow is about 31.5

crores to our customers and book loss that can happen on the books is about 31 crores on a

gross level should get tax credit against that that would be about 25 odd crores if I take a 20%

tax level on the loss. Those are our current figures, most people are sticking as we are getting

incremental bookings in Lavasa and our expectation is that it will get sorted because between

the press release that we had sent and posted that it is come out that the state government has

started probably what you will call creditable actions against Lavasa corporation in the MOEF,

as stated was the only precondition that was pending was the credible actions by the state

government. It shows expectations now are quite positive for a clearance to come in.

Ravi Dodia: Okay.

Varun Gupta: And one thing which you mentioned even though you know Lavasa is not getting go ahead,

Ashiana can go ahead and construct Utsav Lavasa, so I don’t know if he can, we will have to

take legal clearances and understanding, we will go to our lawyers and understand that. We

don’t want to do this at this point of time because we don’t want to do any step that might have

a negative impact in Lavasa’s project. We are with them in this project through and through

and if we took any steps that might jeopardize negatively wouldn’t be right for us to take at this

movement.

Ravi Dodia: Okay sure thanks a lot Varun

Varun Gupta: Thank you Ravi.

Moderator: Our next question is from the line of Avinash Gupta from Globe Capital, please go ahead.

Avinash Gupta: What has been our track record in terms of if you acquire the land, time frame in acquisition of

land and launch of the project?

Varun Gupta: What is the timeframe that it takes?

Avinash Gupta: Yeah, how much time it has been taking up in the past few projects?

Varun Gupta: It depends from project to project. We have done mostly structured transactions, so the last two

projects that we have launched Bramhananda and Rangoli Gardens, between significant cash

out flows from our works and launch of project there has been a gap of three to six months,

where we might have signed up an agreement and we agreed that we accruals are in.

Avinash Gupta: Okay.

Varun Gupta: So whenever there is structured transactions cash outflows would be different, similarly is the

case in utsav Kolkata that we are doin,g is we linked payments out to certain accruals being in

place and infrastructure being in place. So in that sense, for a total cost of the project might be


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little bit higher than what you would buy for regular land, but since the time between launch of

project and capital outflow, is substantially lower so those transactions make sense to us. So

that has been there, but that the same time Thada, the land in Bhiwadi will have a gap of at least

a year I would say between capital outflow and launch of project.

Avinash Gupta: Other thing, in how much time we are able to handover the possession to those who booked the

building or booked the flat?

Varun Gupta: Between launch of phase so once we have started collecting bookings, we do projects in

particular phases like four or five phases or three phases depending on the size of the project.

So once we have launched a phase for particular booking, we take about 24 to 30 months to

handover from the start of launch of that phase and if you say that most of our bookings have

been over the life of the phase then you are having an average time of 12-15 months of handing

over the flat.

Avinash Gupta: That mean if I start the phase 1 today I hope with the booking today, I will hand over the

possession between 30 or within 24 months or so something like that.

Varun Gupta: Yeah its 24-30 months. I would say let say 30 months which is on the outside and 24 months

on the inside and may be plus 2-3 months here or there if..…

Avinash Gupta: In generally should I take it that none of our projects got delayed beyond 6 months from the

launch.

Varun Gupta: Yes none of the projects I wouldn’t say, there are two projects which have gotten 9 months to 1

year delay it has been Ashiana Amarbargh in Jodhpur and Ashiana Greenwoods in Jaipur but

in that also particular phases got delayed and we picked it up in the next phases and now

Lavasa is obviously delayed more than

Avinash Gupta: That is okay, I mean in case of government action we are not able to proceed then it is a

different thing. On our account, these are robust then can you tell me how many…

Varun Gupta: Out of 10 projects in terms of percentage area we have also been smaller and we have been

able to pick it up in the second phases of those projects second and third phases of those

projects as applicable deliver on time and make it up, I think primary reason in Jodhpur was

that it was the first project in the location and we didn’t provide enough for the local condition

over there.

Avinash Gupta: Okay thank you that is all from my side.

Varun Gupta: Thanks Avinash.

Moderator: Our next question is from the line of Bharti Gupta from Sushil finance, please go ahead.


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Bharti Gupta: Good evening sir, I just have a couple of questions like first of all would like to understand

your new recognition policy like since start of this financial year you are seeing the recognition

policy and not on the POCM and recognizing projects based on the completion like once the

project is 100% complete only then it will go into the revenues.

Varun Gupta: And the second question?

Bharti Gupta: Actually I have a couple of questions so if you could answer one by one.

Varun Gupta: Okay. On the recognition policy we changed our policy with effect from last year in terms of

percentage of completion method of accounting to possession based accounting. What we have

done is whatever has been affected in percentage of completion accounting in the last financial

year continues to go in percentage of completion accounting so most of these quarter, this

financial year your revenue recognition will be on percentage of completion in fiscal year

2011-12. In financial year 2012-13 we have moved to possession based accounting where the

accounting of revenue happens when we hand over the flat to the customer or we have a

deemed handing over to the customer whereby sale we have done our part of the contract and

the customer may not have taken possession for whatsoever reason that he may not be taking

possession for. But other than that, we will account for basically on handing over of possession

of a particular flat to the customer. This is a little bit more conservative policy which will

affect our revenues for financial 2012-13 whereby they will trend downward in terms of

accounting revenue and accounting profit but cash flow should remain similar or higher than

this year.

Bharti Gupta: This have already started from the current financial year but for the projects which were not

under POCM till last year for which the revenues were not recognized we are not recognizing

any revenue in the current year, right?

Varun Gupta: Correct Bharti.

Bharti Gupta: So but in this case your inventories and your advances from customers will be quite bloated in

the balance sheet. If I am correct, right?

Varun Gupta: Yes going forward it will start getting bloated if that is word correct I would say.

Bharti Gupta: Bloated as if I would say that your inventories will be quite high, inventory as well as your

advances from customers will be quite high in the balance sheet.

Varun Gupta: Yeah I would refrain you from use of absolute terms in quite high and quite low. It will higher

than what it would have been if it is accounted for percentage of completion basis. That is a

better way to put it. I think if that is the reason to move to possession accounting is because

possession accounting gives a better reflection of your inventory in your actual advances from

customers. And the belief that the financial statement that is more important to understand in


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the real estate company is the balance sheet and its reflection has to be more towards than the

P&L if that is there. So that has been one the reasons why to move on to it and a better

reflection of advances from customers where your liability is to your customers is accounted

for. The case in point is Lavasa where the liability to the customers is 31.5 crores and is

understated at 13 crores which reflected in the current books because of percentage of

complete recognition. So, in that essence we have moved to possession accounting having truer

reflection not a higher reflection or a lower reflection, truer reflection of our assets and

liabilities. I would like to stress that very, very importantly because that is the most important

aspect. If I am a manager internally looking at a financial statement of the two accounts which

are the most important in managing my financial is the customer liability section and the

inventory sections. Am I taking money from my customer and putting it into construction and

if I am not putting it into construction where I have put it, do I have money as the cash on the

books as when the customer stop funding me, will I have the money to fund and meet my

customer liability that is already there and whatever has not been delivered. So in essence is

very important that the customer liability and the inventories have true differentials. So it is not

bloated but a better reflection.

Bharti Gupta: Understand your point sir like it is more conservative way to look at it and in a way it is also

correct to show a true reflection to the investors but just from the point of view of

understanding of calculation as in from a analyst’s perspective like if we are saying that is

comparatively, say comparing it from what accounting policies used to follow and the change.

So accordingly our current liability should increase that is from the advances, so as far as the

accounting thing is concerned how do we have to take into consideration the change in the

policy for the model working perspective.

Varun Gupta: From that perspective, cash flows will not move. So what was been earlier reflected as

earnings okay the net credit that was been shown as earnings which is going into reserves and

surplus that differential credit will be carried forward in the advances from customers less

inventory section from a cash flow perspective and it will reflect the higher cash flow. We

have stated earlier we have not been able to disclose that cash flow statement that we think is a

better reflection, this particular quarter it has been with our auditors, we have a cash flow

statement that will disclose our cash flows going forward from our running projects so what

key things is from a manager’s perspective, I have to actually need to factor in is how much

cash is coming in from customers and how much cash is going out towards construction. Those

are the two things and how much excess cash our running projects are generating that can be

deployed further into lined acquisition those are the three things that is basic mechanic here.

We think else is a smaller component of the balance sheet I would say.

Bharti Gupta: Right, so that will be available from the next quarter onwards.

Varun Gupta: Probably next financial year onwards we would like to disclose financial years and then move

on to quarterly recognition.


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Bharti Gupta: Fine and another question is during the quarter during the quarter as per your booking status

you have mentioned for all the respective individual projects for Aangan, Rangoli and

everything but we have not mentioned Greenwood. So is the Greenwood project 100%

completed and 100% booked.

Varun Gupta: Yes Bharti, the Greenwood project is complete in all respect. We have 10, 11 odd units left, I

think may be less than that what we use the word is called residual stock which takes its own

time to sell. So Greenwood has been removed from the current projects we have another land

parcel right next to Greenwood which is under approval which when it comes up which had

some potential for development.

Bharti Gupta: Under approval hasn’t we already acquired that or in process to acquire that thing.

Varun Gupta: We have acquired that but we need approval, it is an agricultural land that needs to be

permitted.

Bharti Gupta: Okay and sir I would like to know from the revenue recognition from individual projects

during the quarter.

Varun Gupta: Individual revenue?

Bharti Gupta: Individual revenue recognition during the quarter from an individual projects.

Varun Gupta: We will fax you on that Bharti.

Bharti Gupta: Alright sure and sir just a few more questions, during the quarter your loans and advances also

gone up, does that thing pertain to your land acquisition?

Varun Gupta: Yes.

Bharti Gupta: Okay.

Varun Gupta: And also we have paid advance taxes so that is also there.

Bharti Gupta: So that includes your advance tax and your land acquisition charges.

Varun Gupta: And we paid a significant amount of MAT tax as well from last year because we didn’t think

MAT was due and we had a Supreme Court judgment. So we had to pay that off in the last

quarter so that is probably been an effective in loans and advances this particular balance sheet.

Bharti Gupta: And during the quarter the share of income from JVs that is the partnership firm is gone done

but the major reason I believe would be that since they have acquired the stake into Amar Bagh

that is why the share of profits in the JVs has gone down, is that correct?


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Varun Gupta: Yes Bharti, it is correct.

Bharti Gupta: Okay so going forward how will that be stated like what is kind of the arrangement between

you and your JV partner.

Varun Gupta: We are partnership firms Bharti and they are accounted as share and profit of partnership firm

over there Ashiana Amar Developers well of course there are no more JV partners, the

partnership is between Ashiana Housing and its wholly owned subsidiaries. So we have gone

for it completely.

Bharti Gupta: Okay and just one last question on your tax rate. Can you just give guidance on your tax rate

for the current financial year and for the next year.

Varun Gupta: It should be around 20% Bharti with the MAT tax rate, we will be paying MAT taxes.

Bharti Gupta: Because your low taxation the MAT tax rate has been with Greenwood, Aangan, Amarbagh

and Utsav at Jaipur, the Rangoli Gardens and your Brahmananda project are full taxation rates

if I am not wrong.

Varun Gupta: Yes, let me correct. Currently Rangoli Gardens will get accounted as share of profit of

partnership firm. So in Ashiana’s books there will be no tax on it, as it will come on an after

tax basis. On Brahmananda we will be paying tax at the full rate but what has been happening

is we have expensing MAT as of now and we have significant amounts of MAT credit which

will get utilized over a period of time. So when we have full tax rate, we will be utilizing that

MAT tax credit and we will be paying around this 20% rate, I would say for another year at

least in financial 2012-13.

Bharti Gupta: Okay thats all from my side. Thank you.

Varun Gupta: Thank you, Bharti.

Moderator: Our next question is from the line Sachin Kasera from Lucky Securities.

Sachin Kasera: Yeah good afternoon Varun.

Varun Gupta: Hi Sachin.

Sachin Kasera: Yeah congrats for a good set of numbers.

Varun Gupta: Thank you.

Sachin Kasera: I think on the query if I look at the equivalent equal area constructed versus the area booked

for the period 2008, 2009 and 2010 financial year the EAC is higher than the area booked for


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2011 and 2012 the gap has increased significantly. So how do we see this trend in the next 2-3

years. You see this gap the EAC will continue to remain lower than the area in the next 2-3

years or we will be able to catch up this gap?

Varun Gupta: Sachin, I would say EAC would trail area booked by a year or so.

Sachin Kasera: Okay so that is the trend that we can look at it.

Varun Gupta: That is the trend I would be looking at.

Sachin Kasera: Secondly in terms of the booking if we see this year you are looking at approximately around

16 lakh square feet and we normally try to grow at around 18-20% every year. Considering the

area we have already launched where I think apart from Rangoli we don’t have too much of

stock available. Considering you would have to sell something like 20 lakh square feet in

FY13. So where is the incremental we need to I think get 2 or 3 projects fast launch otherwise

how do we plan to achieve the 20 lakh square feet.

Varun Gupta: On the front of area booked & EAC, where EAC is going to trail, area booked from, like a year

or so, we would like that because we would like to book the unit first and then construct it

because that will be positive from a cash flow perspective where we are booking the unit,

getting cash flows and then constructing, so we are at a negative working capital environment.

So that is the preferred thing in normal times and when downturns are happening, that is when

EAC is picking up a little bit more than area bookings because we are meeting out the

customer liabilities that we have taken earlier on and starts catching up a little bit and then in

the gap again in normal times, looks like lagging about a year in a preferred scenario.

Sachin Kasera: My question is entirely different one. I am saying …

Varun Gupta Let me go back. On the second of the booking inventory availability, correct?

Sachin Kasera: Right.

Varun Gupta: On the saleable inventory availability, it is of concern that we may not have enough stock to

sell, but we have been working on it. To get to that 20 lakh square foot, we are more or less

sorted in Jaipur. We are sorted in Jodhpur for next year, we are sorted in Jamshedpur for next

year. The concerned point in the running thing is in Bhiwadi, where we have signed up a

project and we are also looking for some already converted approved project. So significant

amount of our time is being spent on trying to convert the parcel that you already acquired in

Bhiwadi into a project as soon as possible or alternatively get an approved project which can

provide the saleable inventory that is there. The fifth point would be Lavasa hopefully Lavasa

shall open up soon and in the next financial year, we would have stock opened out in Lavasa

for booking as well. So that is the primary thing and going forward, for next year, we have

signed up one more project in Kolkata which should translate into launch in next financial year


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and we have been discussing we are looking at one more city. Hopefully, we will close that

city in a time that it will get launched somewhere during the next financial year, if not in the

early part of next financial year. So that is the basic plan right now going forward.

Sachin Kasera: But if I get it right, initially at the beginning of the year, were we looking at couple of medium

to large launching the second half of financial year? Is that understanding right?

Varun Gupta: We were looking at acquisition which would culminate into launches. There has been

launches, the acquisitions has been completed, the launches will happen next financial year.

Hopefully we were trying to get it sooner, but they have been a little bit slower, the regulatory

hurdles and then Bhiwadi came in unexpected, because the acquisition of that was completed

in early part of the financial year and we were not able to launch because there has been

approval hurdles. We were expected to launch that because sooner than what will happen.

Sachin Kasera: Yeah, because in that scenario, you know, if we see from a next year perspective, we become

highly dependent on Rangoli for our sales, which would from a risk perspective, you know, if

Jaipur, suppose Rangoli were to slowdown, then we would be facing severe risk in terms of

our target.

Varun Gupta: I agree with that and we are working on that to look for more approved land partners in and

around the Rajasthan and we are hopeful that approval processes in Rajasthan will get sorted

sooner than later.

Sachin Kasera Okay, second question, specifically in Rangoli, you did mention that there has been a traction

that seems to do better than expected and you also take up certain price hike. So could you take

us first to at what price you launched Rangoli in the initial phase of launch and what is the

price currently?

Varun Gupta Let me put it this way, Rangoli had a phase-1 which was low rise, which pricings are different

and since phase-1 is completed, so I will not get into those price points. The phase-2 price

points were launched at about 1700 levels to 1800 levels and we are at about 2000 to 2050

levels at this point.

Sachin Kasera: And do you see further scope for improvement there?

Varun Gupta: We do see scope for increments in Rangoli, but we will be cautious going forward as we are

always cautious in hiking the price points. As long as affordability’s are good, the hikes have

been sustained without any dip in our volumes. So we will be slow and steady in our hikes.

Sachin Kasera: In this Rs.300 increase that we have seen in revision, has that the cost would also get paced

with it or is it basically which should lead to better margin for this incremental sales.


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Varun Gupta: This should lead to somewhat better margin, but yes costs have also increased in the past, but

overall increase is higher than the costs.

Sachin Kasera: On the land side, as the presentation mentioned that we are now approximately around 100

acres of land right on a four parts of details are providing.

Varun Gupta: Yes, Sachin.

Sachin Kasera: Of which you said that Uttarpara, you cannot disclose the value of the land. So of the

remaining ninety acres, what is the total cost activity deal that has been agreed upon and how

much has been paid for?

Varun Gupta: The remaining 90 acres, everything has been paid for.

Sachin Kasera: Okay, everything has been paid for and what would that costs have been, all that 90 acres put

together?

Varun Gupta: All 90 acres put together our cost would be 50 odd crores, I would say for us and market value

of those land will be about significantly larger than that.

Sachin Kasera: That is fine. And apart from this 68.26 square feet that is available for our future saleable area,

as of now in the projects where we are working and with 100 acres, are there any other land

parcels available to us which we can convert?

Varun Gupta: As far as the Greenwood land parcels that we are talking about, the smaller Greenwood parcel

that is available, right next to Greenwood projects where approvals are pending, we will

disclose that size also. It is a little bit difficult to ascertain the amount of saleable area, we do it

right now, we will come back on that. And that is one, we are also in Thada land and Bhiwadi,

we have signed up additional acres, about additional 20 acres of land has been signed up and

closing of that documentation should happen in this particular month. So those are the two

things. We are looking at one more city, but that city, closing has been taking a little longer

than expected.

Sachin Kasera: And you mentioned that within 1.6 lakh plus square feet of EAC in the month of October.

Varun Gupta: 1.18 lakh square feet.

Sachin Kasera: I forgot it. It is 1.18 lakh square feet. Fine, I think that is all from my side. Thank you very

much for answering my questions.

Varun Gupta: Thank you, Sachin.

Moderator: Our next question is from the line of Chinmay from East India Securities. Please go ahead.


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Chinmay Sangoram: Hello. Good evening. Congratulations on a very good set of numbers. Actually I just wanted to

look at a couple of data points. You had mentioned that you are looking at 16 lakh square feet

in terms of area booked and 14 lakh square feet in terms of area constructed for FY12. So do

you still hold that guidance or have you revised it?

Varun Gupta: 16 are held on to. The 14 has been revised down to 12.5 based on non-commencement of work

at Lavasa. In fact, when it starts, we might revise it upwards again.

Chinmay Sangoram: Okay. And another thing is that you had mentioned that around 15 to 20 lakh per month was

the cost of the Lavasa hold up. So what is the scenario right now? Has it gone up or is it still

the same?

Varun Gupta: It is still similar, but what we have been able to do is utilize some of the resources which we

had in our other projects. So we tried to utilize some of the employees there, but the cost

remains similar because the rent outflows or certain other outflows remain.

Chinmay Sangoram: Okay, and last thing is what is the cost incurred, I mean, overall if you see on an organizational

level, what is per square feet cost that you are incurring on construction?

Varun Gupta: On an average level?

Chinmay Sangoram: Yeah, on an average level.

Varun Gupta: Yeah, it varies between 800 to 12000 currently.

Chinmay Sangoram: Okay, because last time you had mentioned around 1100 per square feet.

Varun Gupta: A 1000 to 1100 is a good average to take.

Chinmay Sangoram: Okay, I guess I am done. I will come back if I have any more questions.

Varun Gupta: Thank you Chinmay.

Moderator: Last question is from the line of Satish Katyal as an investor. Please go ahead.

Satish Katyal: Yeah, Hi Varun. Good evening. I just want to know what type of process in technology

changes have you effected in the last one or two years with a view to speed up the execution

time as well as to effect some cost reductions or is it the same technology going on for some

years now?

Varun Gupta: No, we have upgraded technology over the last couple of years, but let me put it this way; we

haven’t done any big bang change or significant change. What we do is incremental changes


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throughout the project. So on a let say on speeding up construction, we have mechanized a lot

of our construction in terms of using more equipment in terms of shuttering, scaffolding ….

Satish Katyal: And pouring the concrete, do you use some sort of a batching plant or transit mixers or

concrete pumps?

Varun Gupta: Depending on the size of the project, if it is viable, we do have a batching plant at Ashiana

Aangan and we are using RMCs across the board.

Satish Katyal: Is your casting time is still 20-21 days or have you even been able to bring it down to 10-12

days?

Varun Gupta: The casting time is between 13 and 15 days, I would say, depending on project to project.

There are some projects, if there is not that much pressure to cast on time, in that kind of time

frame, we might, well use more.

Satish Katyal: No, let’s forget about the pressure from the customer’s point of view. From your point of view,

if you execute faster, you turn around the things faster, you know.

Varun Gupta: Yeah, that is one. So for two weeks’ timeframe, is what we are looking at right now. Most of

our project is two week time frame right now.

Satish Katyal: And do you have a certification program for your subcontracts. I don’t mean because of the

labor shortage, have you partly mechanized it, I mean, even creating those lines for putting the

electric lines and things like that. Normally we hand it over to a subcontractor and let him do

the usual way with the use of labor, but there are small equipments available, which can be

used and they can speed up things like small chippers, which are electrical also.

Varun Gupta: Sir, I wouldn’t be aware of electrical front, but we have been using a lot of smaller machines to

mechanize a lot of our work and if it can be like chase cutting machines that are being used and

new drilling machines.

Satish Katyal: Now, I mean, because whatever I have read about you over the years, and whatever I have

listened to now for the first time, I see that you are growing at good rate, but I was just wanting

to know that if you don’t upgrade your technology, your pace will be slowed down because

you will again more and more depend on labor, which cannot give you that pace which you

might require. I know it is a long term point. You can’t say it offline immediately, but if it is on

the horizon, that will be good, you know.

Varun Gupta: We are mechanizing quite well and one of the tasks that our engineering team is there is to

bring down our construction time frame by six months in the next three years. So we are

working on it and we have been able to cut down time frame of construction significantly. I

believe Ashiana Aangan Phase-4 and 5 will be ready in 12 months which is still +12


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construction, the structure was ready in six months’ timeframe. So we casted roots every two

weeks and our speed of construction has been very good. The Rangoli Gardens Phase-1 is

expected to be delivered between three to six months earlier than what was promised to our

customer.

Satish Katyal: But we want you to grow four times and then you will require something different, you know.

Varun Gupta: We might require something different whenever that is there, but still that has already been

done and going forward, we believe that speeding up our construction and improving our labor

efficiency is an important measure to grow forward.

Satish Katyal: Also reduce dependency on labor, you know.

Varun Gupta: Yes, in a long term situation, we have to improve ourselves. We have internal targets on that.

Satish Katyal: Well, thank you very much.

Varun Gupta: Thank you Satish.

Moderator: That was the last question. I now hand the conference over to Mr. Gaurav Sood for his closing

comments.

Gaurav Sood: Thanks Marina. Thanks everyone for participating on the call. As I detailed in the investor

update, if you have any further questions for clarification, you can always call up on the

number or email Varun directly. I will hand it over to Varun for his closing remarks. Thanks a

lot.

Varun Gupta: I would like to thank all of you for being on this call and being patient with the questions and

answers.

The Forbes listing, the Zee Business and RICS Awards, the area bookings in the first two

quarters has all been demonstrative of our efforts in building our customer centric development

driven business model. The trust in the brand and the synergy in its operations have allowed us

to rapidly growth of business in the past and in the future as well. Ashiana believes in

executing well and growth will follow.

With that, I would like to conclude this call. A lot of material we have talked about is on our

website and you can also mail your queries for any further clarifications. Thank you very

much.

Moderator: On behalf of Ashiana Housing Ltd, that concludes this conference. Thank you for joining us.

You may now disconnect your lines.

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