Ashiana Housing Ltd
NSE:ASHIANA
Ashiana Housing Ltd
NSE:ASHIANA
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Earnings Call Transcript
Other Earnings Calls
Ladies and gentlemen, good day, and welcome to the Ashiana Housing Limited Q1 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Binay Sarda from Ernst & Young. Thank you, and over to you, sir.
Thank you [ Imbar ]. Welcome to the Q1 FY '23 earnings call of Ashiana Housing Limited. Please note that this webinar is being recorded, and the transcript of the webinar will be made available in a week's time from the call. The results and investor presentation have been mailed to you, and it is also available on the stock exchanges. In case anyone does not have a copy of the same, please do write to us, and we'll be happy to send it over to you.
Before we begin, I would like to remind you that our discussion today might contain forward-looking statements. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual [ results ] to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinion only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.
To take us through the results of this quarter and answer your questions, we have today with us Mr. Varun Gupta, Whole-Time Director of the company; and Mr. Vikash Dugar, CFO. Mr. Vikash will make his opening remarks, and then we'll move to the Q&A. [Operator Instructions]
With that said, I'll now hand over the floor to Mr. Vikash. Over to you, sir.
Thank you, Binay. Good afternoon, everyone. I hope all of you and your families are keeping healthy. I welcome you to discuss the performance of the first quarter of FY '23 for Ashiana Housing Limited. Thank you for joining the call today.
The year started with promising numbers. Area book recorded in Q1 FY '23 was 3.34 lakh square foot as compared to 1.51 lakh square foot in Q1 FY '22. Value of area booked also went up to INR 152.14 crores in the quarter gone by, vis-a-vis INR 52.2 crores in quarter 1 of the last year. Average realization went up to INR 4,557 per square foot in the quarter gone by as compared to INR 3,460 per square feet in quarter 1 last year, driven by increasing prices across projects and changing mix towards higher-priced projects.
Villas were launched in Ashiana Tarang, Bhiwadi during the quarter and also shops were opened up for sale in Ashiana Amantran in Jaipur. We handed over 2.11 lakh square feet in Q1 FY '23 out of which 43,000 square foot was delivered in partnerships. This was against a delivery of 81,000 square foot in Q1 FY '22.
Total revenue increased to INR 81.22 crores in the quarter gone by vis-a-vis INR 78.28 crores in quarter 4 of FY '22. The higher revenue was attributable to higher deliveries in AHL, which was 1.68 lakh square feet versus 1.14 lakh square foot. Total comprehensive income also improved to positive INR 10.29 crores in Q1 FY '23 vis-a-vis positive INR 9.22 crores in Q4 FY '22.
Pretax operating cash flow was recorded at INR 27.72 crores, positive by INR 27.72 crores in Q1 FY '23 vis-a-vis INR 27.48 crores, again positive in Q4 FY '22. Equivalent area constructed was at 3.85 lakh square foot in Q1 FY '23 versus 5.07 lakh square feet in Q4 FY '22 and 2.89 lakh square foot in Q1 FY '22. We bought 1 new land parcel in [indiscernible] Jaipur of 8.08 acres in the quarter gone by. Total potential sellable area in this parcel will be around 6.5 lakh square foot.
There might be delays in deliveries by quarter vis-a-vis expected customer handover date in 8 projects, which we have also shared in the presentation. And in 1 of the projects, there might be a delivery in 1 quarter prior to what we have promised to the customers.
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.
[Operator Instructions] We'll take the first question from Piyush Goyal from India Capital.
Am I audible?
Yes, you are Piyush.
My question is that given Gurgaon Amarah project is a fairly substantial in scale for your plans next few years. And given the past experience in Sohna, which is -- has been kind of a mixed bag. Can we spend a few minutes on what are some of the learnings from Sohna that you're looking to kind of make sure that Amarah is a big success? That's 1 part of the question.
And second is, what is going to be Ashiana Amarah's competitive positioning versus the peers in that new Gurgaon Dwarka Expressway micro market versus the peers. I'd like to hear your thoughts there.
I'll take that, Piyush, I was -- I've been quite involved actually personally in Ashiana Anmol and now Ashiana Amarah now. I think 2, 3 learnings from Ashiana Anmol. I think in Ashiana Anmol, we didn't adopt our sales and marketing strategies as per the market as much, okay? That said, we didn't want to copy everything blindly in the market, but I think some of the aspects of the market we did not adopt. The moment we got that sorted. I think if you'll see quarter-on-quarter sales now in Ashiana Anmol, I think we sold nearly 1 lakh square foot last -- in the last quarter. It's been a significant change. And I think this quarter should be even better in Ashiana Anmol we are launching Phase 3 of Ashiana Anmol as well.
So I think some -- one learning was that. Second learning, I think, has been across locations. I think it takes -- what we understand is now the gestation period for Ashiana brand to get established is about 5 to 6 years. Here also, we launched Ashiana Anmol in calendar year 2015 -- early part of calendar year 2015. And it took about till October 2020, when sales started really ramping up. But once people have seen our product, once the brand is experienced, I think we stand out a little bit from the market in terms of the kind of quality of work we're able to deliver.
Ashiana Amarah has 3, 4 clear positioning perspective that we have, and this comes from a largely, there is 2, 3 things. One, Ashiana Anmol in here also both our kid-centric homes, which are positioned as the best place to bring up your family and with the right kind of amenities, the right kind of services. The other also is the brand is positioned aspirationally. It's something that you're stretching yourself to buy in the consumer audience that we have.
And then the -- of the features of the project which support these 2, 3 kind of positioning, there are 3 items that are there. One, child-centric amenities and services showed that we have multiple over there. It's the first Kid Centric Homes that we have also done [ clean slate design with ]. I think we got a master planner who's specialist in child-friendly architecture, [ Sushi ] master planned the project, along with the right -- we chose the architect, the master planner and the landscape consultant and gave them this kind of [ brief ] to work with. So some of the design features are also very unique around that.
Second part of it is that the spaces are a lot more lavish. The flats are lavish, there is a deck. The park area is like -- we have 6.7 acres of 1 single contiguous park, which is also not -- it's not very intimidating but -- and large at the same time the way it's designed and put together.
Third is thoughtful design. And little things have been thought through in the project. So I think when we put all those 3 kind of features put together, looking for an aspirational positioning along with a view that this is the best place to raise your family in the entire city. And we have received RERA of Phase 1 of Ashiana Amarah. We're launching in a couple of weeks. So we'll also know how it goes from here.
Understood. That's quite helpful. And is there sort of any -- I think you started using channel partners in Gurgaon, which you otherwise don't use in most other cities. Is that going to be the strategy for Amarah as well?
Yes, we are going to use channel partners. But I said we didn't adopt sales and marketing strategies. I think that 1 of the things that we did not adopt in Gurgaon was using a channel partner network, which we learned and we started in November 2019 in Ashiana Anmol. And now we will continue to engage channel partners. But the thing that we really wanted to control and our resistance ahead, I think we needed to find a solution which we wanted to give the consumer the right experience and the right information. We wanted to control exactly the information that was given. And with channel partners, we were a little [indiscernible] as to how much of that experience and information to the consumers will be controlled. So what we did was we made a strategy that the sales execution piece will be carried out by our team. So the channel partner brings in the customer. But the conduct of the visit of the project, the briefing of the project is carried out by our team. And that keeps control over the communication and engagement, and we also know our customer very well. So we found that solution, and we continue to do that.
Understood. And my second question is around land acquisition. You had mentioned in the last call and in the last few calls that the prices have shot up a lot and you're finding it hard to do deals that justify the prospective returns. And you said, especially Jaipur, you were finding hard. You announced a deal in Jaipur recently. So is there any update on sort of any change in the environment for land? Are you -- have you sort of reduced your hurdle rate while sort of saying -- because pricing power is kicking in, maybe we can pay up for land a little bit. Or any updates on sort of what's happening in the land across your 2 or 3 big markets.
Okay. So right now, I think the most activity is happening in Jaipur. We are evaluating more projects there. We signed up one. We have been working on that for about 10, 12 months already, and we are working on a few more. I think the key aspect that I would say and the land front in Jaipur is to, what I would say, find pockets where we believe Ashiana can create value. So it's -- land prices are up, they haven't fallen down. So that it makes our job that much harder.
Like it's like if I come from an investor's perspective, if the entire market has become expensive to buy and you find valuations rich. You have to work extra hard to find those pockets of value, if that's the way to put it where we can buy and invest in. And the same thing applies to us is that when the entire land prices have gone up, we have to find sort of those locations where we believe we can get a differential sales price, whether for a brand or where the product we'll bring in or the location of a combination of a few things. And we have to rack our brains as to what to do.
So we put together a strategy to look at other parcels in Jaipur where we believe we can create value for the consumer and also therefore, charge a little bit of a higher price and therefore, makes sense of some land parcels. So we've been working on those thinking right now. So hopefully, we'll do a couple of more transactions in Jaipur over the next, let's say, 6 to 10 months.
We will take our next question from Rohith P. from Marshmallow Capital.
So last 1, 2 years have been very interesting in the sense that we have seen the sales go through the roof, which is very good for us. But at the same time, the construction costs have gone even more through the roof, I would say. So just curious to know, so in a way, we have been penalized for -- is it a situation that we have been penalized for our good projects, which are sold well because maybe our margins will be compressed going forward for them, the price at which we have sold them. So could you speak about that? How do you look at the IRR and the margins for the projects that are under construction right now and where we've already sold?
Rohith, I think I've spoken on this before. I think margins are more compressed where land deals were done 2013 to 2017. Even some of the projects might be coming up now. Let's say, Ashiana Malhar is a project which is getting launched now, which we had done the deal in, I think, March of 2017 or September 2017, something like that, I'm not sure exactly, but somewhere in 2017. As compared to, let's say, when we have done transactions 2018 onwards. And though projects have been launched, let's say, Ashiana Daksh is a project we've launched, which was a transaction that closed in 2018. We will -- even though we launched, we sold everything at launch and then construction costs have gone up, our returns on those projects are still good.
I think the land prices played a more definitive role. And in my view, as I said, inflation is a friend right now. I think overall sales price increases are higher than construction cost increases. You can see the sales price also changing for us and the quarterly sales. Some of it is because of mix, but a lot of it is also because of the -- we've been able to increase prices substantially. So -- and I would not like to comment on each and every project. But as I said earlier, at this point of time, the goal for the company is to get to a 15% return on equity number. Given where we are, it is still a tough ask, sustainable 15% ROE. But I think as I've been telling earlier, double-digit now ROEs seem very much reasonable and likely. We are putting energies and effort to get to a 15% return on equity.
Well, this is very -- that was very good to know. So in general, we've been hearing that the recent [indiscernible] construction cost is making some of the existing projects not so profitable as you initially envisaged. And it's good to know that we are not going through that issue. In general -- yes, sorry.
I don't -- I think, 1 of the key things is if you construct quickly after launch, you'll face less of those challenges. So we have gone ahead and constructed. So we are -- we have a lesser of a challenge over there.
Perfect. That's helpful. And how does the supply look in all our major markets? Is it increasing materially because you've been talking about how inflation is a friend, and we are seeing higher price increases as compared to construction cost increase? Is the supply also increasing in terms of new launches by competition, et cetera?
Right now, I think supply is still constrained. It's not increasing. If I see most -- more and more supplies still coming in the plotted layout spaces in Jaipur and Gurgaon, I think, which are going to be our 2 largest markets in terms of group housing Kid Centric Homes, Premium Homes in that category as of today. These 2 markets have seen more layout launches and less buildup unit launches. So I think buildup area -- apartment supply still remains to be constrained.
The other markets where I think now increasingly for us, Senior Living is a more important space, whether it's Bhiwadi, where Senior Living has become a larger part of revenues. Chennai, best Senior Living is [indiscernible]. And Jamshedpur as a market is anyway supply constrained because of the land title issues and therefore, creating supply is difficult. Right now, I don't see supply side challenges for us. Pune [indiscernible] will take some time for us for it to become a large market for us. Pune is somewhere where I hear some launches have come in, where oversupply can become an issue maybe going forward in about 24, 36 months.
Okay. Okay. So that's interesting to know. Could you share the launch pipeline for this year? So you mentioned that Amarah will be launching in the next couple of weeks. What about other locations like Pune and others?
I will share 3 particular projects where we have RERA, and we are looking to launch 2 more. Vikash ji can give exact numbers of what we plan to launch in various places in different -- so we have RERA received for Ashiana Amarah Phase 1, Ashiana Advik Phase 1. Ashiana Advik is the Senior Living project in Bhiwadi. And we have RERA received for Malhar in Pune. Malhar is already launched for expression of interest as of today. So those 3 projects are definitely Phase 1s are getting launched. Other than that, I think Vikash ji can give a little bit more detailed sense of what we [indiscernible].
Yes. So I think if I recall correctly, during the last earnings call also, we had shared that we have a launch pipeline of around 25 lakh [indiscernible] number. And that includes both new projects, that is [indiscernible] projects and also the future phases of the present and ongoing projects. Now that is the kind of number that we are targeting. And if we talk about the new greenfield project then Amarah, you talked about Malhar, Amarah, of course, the nearest one, then Advik, it's a Senior Living project in Bhiwadi that is planned. Then another Senior Living project in Pune also is flat. Then there is 1 project in Jaipur that we are planning, Ashiana [ Aekanch ], somewhere around December or Jan, Q3 or early Q4 is what we are planning.
Then there is also a project in Jaipur, which is 1 lakh-odd square foot kind of plan which is there Ashiana Greenwood, it is a part of the earlier launch project called Ashiana Greenwood. And then there are 2 projects in Chennai also that we are planning. So these are the kind of plans that we have. Chennai, of course, is both of them are Senior Living projects. So all in all, this number in my sense should be somewhere around, in terms of square foot, is roughly maybe 12 to 13, 14 lakh kind of number, ballpark, square foot.
Vikash ji, so these are Phase 1s of planned launches, not the whole projects like Ashiana Amarah itself is 21 lakh square foot. The phases that we plan to -- of the new launches is 12 lakh to 13 lakh. You had also put together phase data of existing projects as well, right?
Yes. So it also would be roughly this kind of a number, 13, 14 lakh square feet again, which would include Ashiana Shubham Senior Living project in Chennai. Anmol Phase 3, you already talked about, we are on the verge of launching. Then there is 1 phase of Jodhpur Dwarka project. And then couple of launches in Jaipur as well, Gulmohar villas and Umang extension Phase 6. So roughly, I think 13, 14 lakh square feet is the kind of plan there as well. The future phases in the ongoing projects.
And we are looking to launch about 2.5 million-odd square foot this year across various phases.
Perfect. This is a very busy year then. My last question, again, is on the construction costs. So how is it trending right now? I mean, with the steel prices coming down, are we seeing a respite there? Is it better?
When something has gone up from INR 40 to INR 80, INR 85, it comes down to INR 65, INR 67, it does feel like a little bit of a respite. But that said, construction costs, what I would say are more stable right now. It's not increasing. So there is -- I wouldn't say there is a respite. Because even though steel prices might have come off, other costs have not come off. And in, also like finishing items where the costings were more or less constant, some increase in pricing there is coming, where people are also passing their input cost further. So -- and labor costs are also revising upwards. There is an inflation, which is leading to wage inflation as well. So I would say it's -- has it become better than what it was 3, 4 months ago? Yes. But it's not like it's dipping or it's going to reduce any further.
[Operator Instructions] We will take the next question from the line of Sourabh Gilda from Motilal Oswal Financial Services.
I just have 1 question. Like we have -- we had a sales of around INR 154 crores in Q1, and we laid out a very strong launch pipeline for the rest of the year. So just wanted to know like you -- do we still stand by the guidance of INR 1,100 crore sales that we guided during the last quarter for FY '23. And the related question to that would be like how do our sales trajectory for over the next medium term, let's say, 2 to 3 years -- how do you see the sales panning out?
So Sourabh, we continue to target INR 1,100 crores of sales this year right now. The launch pipeline also gives us confidence with RERA in 3 of those projects. As I said, the INR 1,100 crores is dependent on launches. I think we need 2 to 3 more new projects to -- particularly Jaipur and Jamshedpur need to come together as well, which are under approvals for that number to be met. As of now, it seems very likely that we should [ meet that ].
I think velocity should not be a concern. As you rightly mentioned -- sorry, just to add. I think it is the timing of the launches, which will be critical. I don't see velocity are being an issue. The momentum in terms of sales is very much there, just to add.
Thank you, Vikash ji. Second bit was...
On the sales trajectory.
So on the sales trajectory, right now, according to us, we have probably about a INR 6,000-odd crore potential inventory for sale, whereby launches are likely approvals, which are not stuck. Some of the projects are stuck like [ Kolkata ] is stuck and Milakpur is stuck. Excluding those, roughly about INR 6,000 crores of inventory is there. Right now, the intent is to maintain a INR 1,000 crores kind of a revenue run rate is to what we're looking at. I don't know how the next 2 years will pan out. We are working on what we see as potential, what launches will get there and how we see doing that. But I think the current view of the company is to maintain that number and then ramp that up as we go along. So getting more projects and putting that together. But let's see. First, right now, our head is sort of -- we're keeping our head down and trying to get to the FY '23 number more than anything else.
Right, right. Understood. And just to clarify, when you say you have inventory of INR 6,000 crores. So does it include all the planned launches that you laid out?
Yes. Total land bank. Total land bank excluding some of the stuck assets.
We have 1 question on the text box, it says going by some of our comments today as well as in previous con call, is it fair to say that we are looking at around INR 1,000 to INR 1,200 crore area book with net profit of around INR 100 crores. Does that mean our profitability would be more constrained in the current up cycle compared to the previous one? This is from [ Rahul Bhansali ].
[ Rahul ], I wouldn't agree with that, that our profitability will be more constrained in this up cycle as compared to the previous up cycle. As I said, the newer projects will have better profits than some of the older projects as a more -- some of those newer projects get lined up for launches and they come up for approvals and launches. I think profitability and margins will expand. I would refrain from commenting on exactly what that profitability will be at a revenue figure. We do -- our annual report will be coming out to report again some of the percentage and per square foot margins we make, depending on delivery where you can -- it will help you also to put together where you see our profitability to be -- but I do believe that the up cycle should lead to margin expansion. I think -- that's my belief because, again, I believe we can raise prices given the -- where markets are and price increases should be faster than increase in construction costs at this moment.
[Operator Instructions] Our next question is from the line of Harsh Beria, an individual investor.
Am I audible right now?
Yes, Harsh, you are.
Congrats for working on a very, very good pipeline, and it seems like INR 1,000 crores run rate should be maintained [indiscernible] all the work we are doing. So congrats for that. My question was on margins, but not on the gross margin, just excluding land cost. So in the current projects we are selling, what is the kind of margins we are making, excluding construction costs?
That would be very hard to say because a lot of the differential in the margin is driven by land cost. My opinion is the -- because land cost, let's say you sell something at INR 5,000, okay? Your construction costs might be INR 2,200, INR 2,300. You bring that INR 5,000 down to, let's say, INR 3,800. Your construction cost still remains INR 1,900 square foot, right? So that -- so typically, construction cost can range anywhere between 40% to 55% of our sales price. So depending on where it is.
Okay. So on a ballpark basis, so we should be able to do 25% to 30% gross margins in the current sales which we are doing assuming today's inflation...
If you take sales value less construction costs, less land cost and less what we call project overheads, if you take those costs out, we should be operating between the 25% to 30% range on our current [ margins ]. Some projects even better. Like in this quarter, if you go back to our gross margins, those were in the mid-40s, if I remember correctly on a blended basis -- early 40s again because of 1 particular project where the land cost is very low because it's a 12-year-old land purchase that we have in Ashiana Nirmay. But outside of that, I think we'll generally be operating in that 25% to 30% range.
That's really good to hear. And on a reported basis in FY '23, what is the kind of gross margins, which we will report? So this may not reflect sales happening -- the sales that happened a couple of years back.
Around that 25% to 30% number generally. So FY '22, we will -- you can -- we'll give a little bit more breakup and threshold where it's easier to capture those numbers in the annual report. You can have a look at it. But 25% to 30% is where generally we'll be trending depending on the project and the mix.
So just to add, we shared this number in detail in our annual report. And our annual report is being drafted and this would get shared in next 2 weeks at the most. So you'll get greater detail out there, and you can have a look.
Perfect. That's really helpful. And I'm looking forward to reading the annual report as well. So on a reported basis, we should be able to do INR 80 crores to INR 100 crores of PAT this year.
I think we will share that number in a couple of more months, we'll give a guidance on it. So in the next call, we'll have a guidance on the same.
Perfect. That's it from my side, and good luck with the project launches and sales for this year.
Thank you, Harsh.
Can I just add to the previous question? Harsh must be in the queue. So Harsh, what we do is that we share the delivery timelines in our quarterly presentation also, you can get a sense as to what is the kind of delivery which is lined up. And you also get margin per square feet kind of a number, gross margin per square feet kind of a number in the annual report. You can try and have a look at those kind of numbers that will give you some kind of a sense.
Our next question is a follow-up from the line of Sourabh Gilda from Motilal-Oswal Financial Services.
So I just had a follow-up regarding the comments you made earlier. Like when you said margins are compressed on land, which were done in 2013 to '17 period. So since then, like land prices would have actually gone up. So isn't -- like opposite should have happened like the margins must be accretive in parcels, which were acquired in maybe '13 to '17 period?
You're on mute, Varun.
Sorry. As land prices, Sourabh, actually corrected between 2017 to 2020 -- 2021. So those 4 years, whatever we did, land prices were softer than the areas before that, whether in actual outright purchases or in joint ventures, you have the percentage that you had to give the landlord reduced. So now like earlier projects, if it's a revenue share, a higher percentage is locked in. So even if sale prices have gone up, they have not covered the same or your higher land cost was locked in. So those places, the things were constrained. So that's where it is at.
We have a question on the chat [ box ] again. So it's read. Do you see any increase in competition in the Senior Living segment, maybe in the form of higher new launches or existing player pricing aggressively? This is from [ Arun Selman ].
So on Senior Living, we don't see a lot of challenge at this moment of time. Not too many players have entered the space. And the space is also growing itself. So at this point of time, even if more competition comes in, I think they will grow the market at least in the short term as the market grows. So in terms of excess supply, excess competition driving down sales prices, that challenge is not something that we are seeing at this moment.
[Operator Instructions] We have a next follow-up question from the line of Harsh Beria, an individual investor.
So I think this question was asked like maybe a year or 1.5 years back as to I think an investor was asking if it's better for him to buy a house in a Senior Living project of Ashiana or to buy Ashiana's stock today? What's your answer today?
I have given the same answer on these decisions listening to your spouse instead of [ making ] or listening to me on this decision. So we don't have any views on the same way, I would be happy if you either bought both. But answer should have been that time also buy both. I wouldn't give an opinion on the [ same ].
Another question is about like the capital intensity going forward. So I think last year, we did like something like 6 or 7 land deals. This year, we're also going into a lot of land deals. We have like a credit line from IFC. So how much do you think are covered to pay upfront for these land costs to lock higher gross margins? And how should we see the debt positioning of the company going forward? Do you guys want to take it up as you're doing a lot of land deals?
So I don't think we'll -- I don't -- we are well capitalized even after doing so many transactions, we are sitting on a lot of cash, Harsh. I don't see a challenge of -- capital being a challenge in doing transactions. If we do joint ventures, we require little cash. Anyway, if you're looking for outright purchases. Then we can right now, the IFC's line is more or less exhausted. I think a little bit of capital is yet to come in, which is for the Chennai development. It's going to come in a little bit of a stage very thin sliver. Otherwise, that line from IFC is completely sort of exhausted now.
So outside of that IFC line, our debt position is very little. We are net cash positive if I exclude IFC's capital contribution into the company -- into the project. And capital does not seem to be a constraint. Though our preference will remain for joint venture transactions over outright purchases. But depending on the transaction, I think we have flexibility to do what we want to do.
Just wanted to add 2 things. One is that the IFC line is not exactly -- not technically a credit line. It's a platform that we have signed with them, wherein there is a capital contributed by them. And what happens is that it is in a cable variable structure as and when -- only when the project generates the cash flows, we payout to them. So those kind of terms and conditions are there.
And we plan to deploy -- a preferable mode would be JDA model only, a joint venture only. And if at all, outright is required, then we have our own funds to deploy. So generally, we borrow only in case -- wherein we need to fund the project for working capital requirement. They're also the first preference is customer advances. If at all, there is any kind of bridge funding to be done, depending in case there is the velocity of the project is -- sales velocity is slow and all, we do go for debt. So that's our outlook on debt by and large. So those are the 2 bits I just wanted to add.
Yes. And this is also reflected in the capital position of the company, how you guys have managed the balance sheet in this whole downturn. I was just thinking that like you're trying to do -- you're trying to reach 12% to 15% ROE. Can this not be a bit easier if you use debt more judicially? So not to make the company back up. That's not what I'm saying. But just to use the equity in a more efficient way because having high ROICs in this sector is very hard. So for higher ROEs, we need a judicious amount of debt, that's where I'm coming from.
Harsh, point taken. Just -- I think the capital structure is to suit the temperament of the management team. And I think it's 1 thing on an excel sheet. I think capital structures also influence decision-making, which changes the ROIC on the project. I think 1 of the things that when we look at finance in classical finance sense, we take the project economics to be independent of the capital structure, whether -- will the ROIC on the project change when the capital structure changes or not. Our view is that excessive debt changes the ROIC of a project itself in a negative manner.
And second bit also of the view is that the business is cyclical. I wouldn't call the last -- the up cycle we are in, I couldn't call the last down cycle that we are in. I don't think any of us have an ability to call the cycles. And being -- ability to survive the down cycle, to thrive in the up cycle is a necessity of this business. So we tend to be conservative. I think we'll be conservative. I also -- that is simple 2x2 derive chart drawn out where financial risk on one -- on the x-axis and operational risk on the y-axis. And the only quadrant you really don't want to be is where both those risks are high.
Unfortunately, in the real estate development business is a very high -- operationally high-risk business. So we tend to avoid financial risk in the business as much as we can. I think that's where we come from. Let's see, I think we can do 15% ROEs without much leverage and the support of financial leverage there, I think we can find ways for the same.
[Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference back to the management for closing comments. Over to you, sir.
We would like to thank all of you for being on this call and being so patient and with all the questions and answers. If you -- we were unable to take any questions, please feel free to write to us directly or reach out to us directly.
And with that, we would like to conclude the call. A lot of material we have spoken about is posted on our website, and you can also e-mail your queries for any further clarifications. Thank you once again for taking the time out to join us on this call. Thank you.
Thank you, members of the management.
Ladies and gentlemen, on behalf of Ashiana Housing Limited, that concludes today's session. Thank you for your participation. [Operator Instructions]. Thank you.