Realty firm Arihant Superstructures has generated robust returns for its investors, rising over 700% in the last 1 year. The smallcap stock has rallied from around ₹20 in October 2020 to ₹161 currently, giving as much as 704 percent returns to its investors in this period.
In comparison, the real estate index Nifty Realty has added 117 percent, and the Nifty Smallcap index has gained 83 percent in the last 1 year. Meanwhile, the benchmark Nifty rose 51 percent.
An investment of ₹1,00,000 a year ago in this firm would have turned to over ₹8,00,000 currently.
Founded in 1983, Arihant Superstructures is a smallcap real estate firm that mainly focuses on affordable housing that accounts for 96 percent of its portfolio.
Headquartered in Mumbai, the firm has completed construction of over 10,000 houses and has around 12,000 under construction currently. The firm has worked on over 60 projects in the last 2 decades, covering an area of over 8 million sq feet.
The company has a market cap of ₹678 crore and had hit its 52-week high of ₹189.10 on October 19, 2021. Meanwhile, it had hit its 52-week low of ₹19.4 on October 23, 2020. On a YTD basis, the stock has added over 400 percent.
Financials
The firm reported a 180 percent rise in its net profit at ₹11.63 crore in the quarter ended September 2021 as against ₹4.15 crore in the year-ago quarter. It also posted a 38 percent rise in its net sales at ₹87.80 crore in the quarter under review versus ₹63.60 crore in the September 2020 quarter.
Good Investment?
As the economy opens up after the COVID-19 pandemic, the real estate space is on the cusp of revival. Reduced and affordable home prices due to the pandemic, lower home loan rates, recovery in employment and income have led to a recovery in demand for the real estate sector. With the demand rising, property registrations are also at an all-time high.
Arihant Superstructure has over 10 percent market share in the Mumbai Metropolitan Region (MMR) and Navi Mumbai area which is one of the fastest-growing and popular real estate regions in the country.
Despite the Covid restrictions, the firm has a strong pipeline of projects and has added more units as compared to its peers. It also has a high promoter holding of 74.3 percent which reflects the confidence of its promoters in the firm.
However, going ahead, growing costs of manpower, raw materials, changes in government policy, sudden decrease in demand, etc are key risks to watch out for.
Recently, India Ratings and Research (Ind-Ra) has assigned Arihant Superstructures long-term issuer rating at ‘IND BBB-‘ with a stable outlook.
“The ratings reflect Arihant group’s long operational track record of executing real estate projects, and moderate offtake and execution risks. However, the ratings are constrained by the group’s moderate financial risk as the funding of the projects is largely dependent on customer advances," the rating agency stated.
The firm also stated in a regulatory filing that its board has approved raising capital up to ₹500 crore through the issue of securities. The issue of securities could be through private placement, preferential issue, qualified institutions placement (QIP), follow-on public offering ("FPO"), or a combination thereof, the BSE filing stated.
Arihant Superstructure stock price has skyrocketed in the last one year on the back of demand recovery in the real estate sector. Despite this massive rise, the stock continues to have further upside potential in the future and has a 'buy’ rating from most brokerages.
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