SANJAY LALBHAI, CHAIRMAN
OverView
Customer-centric design was woven into the DNA of the Arvind Group from
its inception. Arvind SmartSpaces continued this legacy by creating living spaces that
inspire our customers to live better lives; lives that are enriched by the quality,
aesthetic and functionality of the homes we build. Our guiding principle of
#DesigndtoInspire is a call to action. It is a philosophy that guides all our actions from
the selection of land to the design of the product; from the execution of project to the
living experience in an Arvind home.
I am pleased to communicate that this positioning has resonated
strongly with our customer base. The result of this distinctiveness in product curation
was that the Company emerged as one of the fastest growing listed real estate development
companies in India. The Company reported a 38% growth in bookings and 46% growth in
collections compounded across the five years ending with the last financial year.
Drawing from the strengths and confidence in business performance, I am
pleased to share that the Board of Directors 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 marks consecutive years of dividend
distribution.
Profitable responsible growth
A strategic priority when we went into business was a commitment to
market real estate differently. We would invest in creating products with a deep insight
of customer needs and trends, focus on operational efficiency to deliver industry leading
margins and invest in delivering class- leading customer ownership experience. At our
Company, we resolved to deepen our niche recall and positioning through a simple approach:
provide customers what they truly want. For instance, at the time of the pandemic and
after, there was a general propensity to build larger apartments (vertical construction)
on the grounds that prospective homeowners would seek to live better. This was in
alignment with what we felt as well, with one difference. We felt that a larger number of
homeowners would not only seek to live in larger homes but would be inclined to graduate
from apartment-centric homes to villa-defined residences.
The result of this insight was that we were taking the conventional
application a step ahead: we curated villa homes marked by spacious interiors and lush
landscaping. The result is that we
did not service an existing market; it would be fair to state that we
created one. The launch of a series of properties curated around this proposition proved
to be a gamechanger at two levels - in terms of the consumer experience and superior
profitability. We sold quicker since our product resonated with the customer's evolving
needs; we sold at better realisations; we developed and delivered faster; we generated
higher accruals for onward reinvestment, the start of a larger virtuous cycle.
Core competence
While our land aggregation, Balance Sheet, digital marketing, HDFC
platform,
CRM, organisational culture and strengths are enunciated in the
subsequent pages of the Annual Report, let me call attention to the product value
proposition here. The success of the Company in building a brand for itself as a creation
of tranquil living spaces within the context of urban congestion has emerged as a
distinctive recall. The Company is seen as providing a luxury benchmark: the capacity to
provide an elevated living experience within urban agglomerations.
This distinctive capability has been wrought through the development of
strong operational capabilities - from the identification of large plots extending from
100 acres to 500 acres; the competence to convert land as a raw material into a finished
product; the ability to aggregate resources leading to efficient construction (largely
different from the templatised manner in which projects are constructed vertically) and
the insight to balance the insides of homes with the outsides.
I am pleased to communicate that the Company deepened its competence
and insight into this property development niche. The Company is being recognised as among
the thought leaders in urban life quality; it is being
respected for the contrar?an ability to grad?ate beyond cookie-cutter
homes; it is being recognised for its capacity to create a market and then occupy the
largest share.
The perceived value of the properties we developed was reflected in
their occupancy.
There has been a general trend of such plotted developments to be
treated as second homes that arerarely visited by their owners, reducing them from to-
be-lived-in assets to investable assets. The result is that most of such horizontal
properties attract consumer traction at the outset only to be transformed into ghost towns
thereafter.
The Company countered this probable threat into an opportunity. The
Company constructed world-class club houses first within its plotted developments,
creating a traction for buyers ('there is something to do in the evenings in engage with
others'). The Company opened membership of these clubs to external members without
ownership of the plotted properties, helping create a vibrant community. The result is
that a number of our homeowners have made friends with other home owners; the external
members have been impressed enough to buy into our properties. The result is that every
single of our properties has enjoyed a post- launch traction that has only grown; this has
helped us liquidate available inventory; in turn, this has helped us generate
progressively better realisations.
Stronger brand
If there is one thing that we have successfully achieved in the last
few years, it is the recall that 'This company is different.' The result of this
positioning is that our customers have become our biggest brand ambassadors; they have
been able to bring their friends and relatives to buy from us. In FY23-24, 22% of our
bookings were through referrals.
What customers have told us is that we are not just another real estate
development company releasing periodic inventory in a crowded market: we are being seen as
a company that is willing to alter its product mix in response to changes in consumer
preference. The Company promoted a vertical development before the pandemic, generating a
majority of its bookings from this format; once social distancing and
the need to live better emerged during the lockdown and after, the
Company pivoted with speed to the horizontal development format, now generating a majority
of its work-in-progress from this differentiated offering. We are again seeing a shift in
consumer sentiment and a potential reversal of this trend, a reality for which the Company
proactively prepared by being able to see ahead of the curve.
The stronger brand at our Company has had an eco- system effect. We are
now not just attracting more customers willing to pay better; we are also attracting
landowners seeking to enter into joint development projects with our Company.
By the virtue of being able to bring properties to market quicker and
market them quicker as well, we have set into motion a
sustainable momentum where our brand is translating into superior cash
flows and higher capital efficiency. This was visible during the last financial year: the
Company stayed zero debt while net operating cash flows more than doubled. We believe that
we are among select real estate development companies in the country to possess net cash
on the books despite an increasing size of the gross development value of our portfolio by
3X in the last year
Conservation over construction
The commitment to ESG is perhaps more relevant to our sector than most.
The real estate development sector needs to consistently engage with nature; we build in
nature, we build on nature and we build around nature. The extent to which we can moderate
our impact on nature represents an overarching priority. The result is an ongoing
interplay between construction and conservation.
At Arvind SmartSpaces, we have ensured that in this interplay,
conservation has won each time.
I have no doubt that because of this consistent outcome, we have grown
in our business and outperformed our sector. Much as it may appear to most that we
performed creditably on the basis of what we built, I have no doubt that it was the other
way around; we performed creditably and built a brand on the basis of what we consciously
selected not to build. The result is that 'Designed to Inspire' is not a reference to the
brick and mortar dimension of our existence; it is a reference to the way we have treated
nature instead.
At Arvind SmartSpaces, we designed our real estate properties by
seeking minimal biodiversity disturbance. Our designs were directed towards retaining or
planting local tree species; our properties were designed around floral sequences and
patterns that enhanced our project and inspired stakeholders. By committing to
inspire - the bottomline of all that we were or are engaged in - we
created properties that would not just qualify as the flavour of the day but remain
evergreen and enduring. Our properties have been built around eco-friendly products,
designed around natural daylight, low on environment load, enhancing value for all those
who live within. I have no doubt that by building such homes, we are playing a responsible
role in enhancing the lives of our customers.
Outlook
The outlook of the Company remains optimistic. India appears to have
entered a new economic phase with growth in some quarters during the year under review
being higher than 8%, making it the fastest growing global economy. The Company is engaged
in the execution of 27 mn sq ft of projects with a pipeline of 44 mn sq ft. We estimate an
unrealised operating cash flow exceeding Rs. 2,563 Cr coming from the current pipeline of
projects.
The Company is optimistic on account of strategic business-
strengthening initiatives likely to enhance value across the foreseeable future. We
believe that during the last couple of years, we strengthened a platform for sustainable
growth; we are optimistic that this platform will empower our next round of growth that
enhances value for all those associated with our Company.