Mahindra Lifespace confident of beating ₹2,500 crore pre-sales target for FY25

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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With robust demand leading to new projects selling out within days, Mahindra Lifespace Developers is confident it will exceed its pre-sales growth guidance of ₹2,500 crore for the current financial year (FY25).

Amit Kumar Sinha, MD and CEO says the company’s focus will increasingly shift from affordable to mid-premium to premium. “Of the sales value, about 80% of our future projects will be premium at least in the next three years, and 20% will be affordable.”

The company reported a strong operational performance for January-March with bookings and volumes at a multi quarter high. Collections also surged 35%. The quarterly booking run-rate was above ₹1,000 crore during the quarter.

The company also last week bought a two-acre land at Whitefield in east Bengaluru with development potential of around 0.2 million square feet of saleable area and a gross development value of approximately ₹225 crore, which will mainly comprise mid-premium residential apartments.

These are the edited excerpts.

Q: Can you tell us what led to the strong operational performance in terms of bookings? How is the demand situation right now and what is the quarterly run rate that you are looking at? In Q4 it’s gone to above ₹1,000 crore in terms of bookings, what do you think you can do as a sustainable rate in FY25?

A: It’s been one of our best quarters, great on the pre-sale side. We had a great launch Mahindra Vista in Kandivali, practically sold out within days. Q4 demonstrates the buoyancy that we see in the market, especially in Mumbai, Pune and Bangalore where we are operating. We expect the momentum to continue. The absorption is very healthy in Mumbai, Pune and Bengaluru.

We launched one project each in Pune and Bengaluru in the last six to eight weeks and sold out 70 to 80% in a weekend on both projects.

For FY25, we had given a guidance of ₹2,500 crore, but given the momentum, we hope to surpass that. It’s a lumpy business. There are cycles related to land acquisition, the land-to-launch timeline could vary based on approvals. But we are confident that we will be beating our target that we had publicly announced last time around which is ₹2,500 crore pre-sales for FY25.

Q: You have a development pipeline of a little over 37 million square feet. How much of that is completed and under construction; can you break it up for us? Where are you veering towards? Is it more premium or is it towards affordable?

A: Historically, we have played a big role in affordable. But over the last two years, we are focused a lot more on mid-premium and premium. The reason it makes sense is because the per capita income and land prices are going up, and it makes sense for us to create dream homes, which match our target segment. We will continue to look at affordable. The commitment we have made to the projects are already going and we’ll be looking at those products as and when they come along. But our focus will shift from affordable to mid-premium to more and more premium. In terms of the sales value of the project, about 80% of our future projects will be premium at least in the next three years and 20% will be affordable.

Also Read | Mahindra Lifespaces ends higher on ₹800 crore sales in Mumbai residential project

Q: You have been increasingly sounding optimistic about the sales numbers. Operationally, you got things in order. But let’s focus a little bit on the balance sheet. Your debt is not too high, it’s at around ₹550 crore, but since you’ve got such a big pipeline what will this debt number look like? That’s point number one. And you had a 50-acre land in Chennai that you had planned to sell when does that take place?

A: Let me start with the second one. We have a huge land parcel as part of Mahindra World City Chennai which is part industrial and part residential. On industrial, we do the master development which we have done with Mahindra World City Chennai as well as North Chennai and our business is to attract global MNCs which are looking for manufacturing facilities. These are kind of plug and play industrial park. We are already selling land as part of it.

The 50 acres that you might be referring to is the residential part of the World City as well as origins. Instead of selling those land pieces we are doing a plotted development. We have done two in the last 12 months. And we are also looking for additional high rises, where the economics make sense. We are not trying to sell those pieces to a third party or any other developer.

On the balance sheet, we are very thoughtful about our debt-to-equity ratios. Our goal is to be as conservative as we can be, but for growth, we will need capital and given Mahindra Lifespaces has been designated as a growth jump at the Mahindra Group level, we expect support in the form of equity or even debt to come from the group. Ideally, equity because it aligns very well with the nature of this industry.

We have just started the discussion on raising a platform that could be supported by external fund providers.

Q: So what is this platform for?

A: We have done a couple of them already. We have done one with HDFC Capital in the past. It’s for residential projects, which have an upfront equity requirement because you will have to buy a land parcel. So this is for that. The efforts have just started. But we’re thinking bigger in terms of how we get equity in the company to support our aspirations.

Q: This is beyond that 50 acres in Chennai that you spoke about, right?

A: It’s very different from Chennai.

Q: Any new sort of redevelopment projects in Mumbai in the pipeline, which we will hear about?

A: There is a lot in the pipeline. But we have a very high guardrail for saying yes and no to these projects. We have two in the pipeline that the societies are close to finalising.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow