Macrotech Developers Q1 2023 Concall Highlights

Industry Updates by Management

• Two major housing markets i.e US and China are facing problems. High mortgage rates in US are slowing down the housing sector.
• Management on Sector – “Housing markets in India are at the beginning of a long sustainable upcycle lasting for about 10 to 15 years.”
• While the RBI raised interest rates, increased mortgage rates had a minimal impact on demand.
• Risk of inflation to housing market profitability is quite moderate. Recent 9% inflation impacted just 2% increase in COGS for Lodha

Operational Highlights

• Pre-sales of INR 2,814 cr and Collections stood at INR 2,616 cr in Q1 FY23.
  Revenues from operations stood at INR 2,676 cr , with EBITDA of INR 903 cr and adjusted PAT of 355 cr.
• Operational margins were not adversely affected by rising raw material prices. Input prices had also started dropping, which further impacted margins.
• Debt reduced by INR 500 cr targeted to reduce debt below INR 6000 cr by end of FY23.
• The majority of debt taken from UK business is paid , the rest will be paid soon. Repatriation of around INR 1500 cr+ will start in FY23.
• Added 3 JDA(Joint Development Agreement) projects worth GDV of INR 6,200 Cr & 5.1 million square feet. Guided on adding projects worth INR 15,000 cr of GDV.
• Launched at 2.7 Million square feet in Q1, a further 8.5 million square feet will be launched  for the rest of the year.
• Management focused on improving return ratios and want to expand in different geographics thus focused on asset light high growth JDA model for next 12 to 18 months. Focused on growth with conservative debt levels.
• It Intends to pay Dividend of 10% to 15% of consolidated PAT, around INR 250 cr to 300 Cr from FY23. Management is targeting ROE of 20% over the next three years.
• 7000 to 9000 cr of ready inventory available and will deliver 12,000 units this fiscal year.
• 18% to 20% PBT margins for Mumbai JDV projects, while PBT margins for Pune and Bangalore are between 16% to 18%.

Initiatives by Lodha for Consumers:

Lodha offers its buyers a fixed interest rate of 6.99% for the next two years. As a result, middle-class housing and affordable housing projects will be supported. 

Region wise updates:

Bangalore Update:

• Entered the Bangalore housing market , and signed their first JDA with strong cash flows.
• The company’s first project in Bengaluru has been signed through the JDA route by acquiring 100% equity shares of a company namely G Corp Homes Private Limited and is located adjacent to Manyata Tech Park. The project has GDV potential of ~Rs. 1200 crore and saleable area of ~1.3 million sq. ft. Project launch is expected in the next 6-12 months.
• The company has recruited Mr. Rajendra Joshi as CEO for the Bengaluru market. 
• AIms to acquire 10% market share in next 5 years and then 15% in upcoming years.

Pune:

• Belmodo project in Pune giving revenue of INR 250 to INR 300 cr per year.
• Entered into a Joint Development at NIBM Road, named Lodha Bella Vita with an area of 1.6 million square feet. This residential project consists of 2,3 and 4 BHK units. 60% of launched inventory is sold in the last 10 months achieving sales of INR 450 cr. Success of the NIBM road is attracting many land owners for new joint ventures.
• Increased prices in recent quarters by 3 to 5%.
• Another JDV at Hinjewadi, GDV of INR 2,600 cr with 75% share of Lodha.
• Lodha’s market share in Pune stands at 3% to 5%, targeting to acquire 10% inext two to three years and toward 15% to 20% thereafter. Pune Real Estate market is INR 35,000 cr to INR 40,000 cr.
• In upcoming days Pune may potentially contribute 10% of topline pre-sales. Targeting for 2-3 new launches in FY23.
• Lodha park and World tower had sales of INR 300 cr and 200 cr respectively.

US $1 billion Green Digital Infrastructure Partnership with lvanhoé Cambridge and Bain Capital

• The platform will establish a pan-India presence in the digital infrastructure space that includes logistics and light industrial parks as well as in-city fulfillment centers. 
• The platform will jointly invest ~USD 1 billion to create ~30 million sq. ft. of operating assets to serve India’s digital economy. 
• Each of the 3 partners will have a ~33% equity interest in the property ownership, whilst Lodha will lead the development, operations and management of the assets. 
• The first project is a ~110-acre logistics and industrial park development at Palava, an established location for digital infrastructure in Mumbai.
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