Emkay starts 'Buy' on Arvind SmartSpaces; sees cash flow, pre-sales growth

Emkay projects a 34 per cent pre-sales CAGR for Arvind SmartSpaces over FY25-28E, reaching ₹3,100 crore

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Emkay Global Financial Services has initiated coverage on Arvind SmartSpaces with a ‘Buy’ rating and a target price of ₹850 per share, implying 38.8 per cent upside from Tuesday’s close of ₹612.

 

The brokerage values Arvind SmartSpaces at 6 times Sep-27E embedded Enterprise value to Earnings before interest, tax, depreciation and amortisation (EV/Ebitda) (5-year average), implying a 30 per cent net asset value (NAV) premium. 

 

“We believe the premium is justified, as Mumbai Metropolitan Region (MMR) projects would be added over the medium term, which would boost the growth pipeline (as capital value in MMR is much higher vs that in Ahmedabad or Bengaluru). Our calculations suggest that there is scope to increase the NAV premium to 60 per cent, although this would be contingent on the pace of project additions,” Emkay said. 

Significant ramp-up in business development; launch visibility strong

Arvind SmartSpaces has seen a sharp acceleration in business development (BD) over the past three years, with its project portfolio expanding from around 25 million square feet (msf) in FY22 to 109 msf in year-to-date (Y-T-D) FY26, adding a gross development value (GDV) of ₹10,700 crore.

 

The projects are largely asset-light, with joint ventures (JVs) and joint development agreements (JDAs) accounting for 81 per cent of the portfolio by volume and 73 per cent by value. This structure has enabled the company to scale up while deploying only ₹1,100 crore in capital during FY23–H1FY26.

 

Historically focused on Ahmedabad and Bengaluru, Arvind SmartSpaces has now begun diversifying into MMR, India's largest housing market. Emkay Global Financial expects further BD activity in the region, with a directional investment mix of approximately 40 per cent in Bengaluru, 40 per cent in Ahmedabad, and 20 per cent in MMR.  CATCH STOCK MARKET LIVE UPDATES TODAY

Pre-sales growth to continue with better geographical diversification

The significant project additions worth ₹10,700 crore over the past 3–4 years have substantially improved launch visibility. Arvind SmartSpaces currently has unsold inventory worth ₹2,400 crore and an additional ₹7,700 crore in projects not yet opened for sale, providing pre-sales growth visibility for the next four years.

 

Further, project additions worth ₹14,400 crore are expected to be funded through internal cash generation, unutilised limits under the HDFC Capital platform, and the ability to add leverage. This is expected to further strengthen medium-term visibility.

 

Accordingly, Emkay projects a 34 per cent pre-sales compound annual growth rate (CAGR) over FY25–28E, reaching ₹3,100 crore. The brokerage also expects growth to become more diversified, with an increasing contribution from MMR, a new market for the company.

Strong cash flows to keep balance sheet robust despite scale-up

The brokerage expects collections to grow at a 32 per cent CAGR over FY25–28E, reaching ₹2,200 crore, supported by strong pre-sales growth and timely project execution. This is expected to generate a cumulative net direct operating cash flow (OCF) of around ₹800 crore.

 

The brokerage has factored in ₹1,800 crore in deployment toward new business development over the next three years (a mix of internal accruals and external funds), which would potentially add a GDV of around ₹14,400 crore. Importantly, this growth is expected to be achieved without stretching the balance sheet.

 

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