Mahindra Lifespace Developers Limited (532313) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Mahindra Lifespace Developers Limited Q1 FY '21 Earnings Conference Call. We have with us on the call Mr. Arvind Subramanian, Managing Director and CEO; Mr. Vimal Agarwal, Chief Financial Officer; and Mr. Sumit Kasat, Head, Investor Relations. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Arvind Subramanian, Managing Director and CEO. Thank you, and over to you, sir.

Thank you, Steve. Good morning to everyone, and welcome to our Q1 F '21 earnings call. Firstly, I'd like to thank everyone for participating in this call. At the outset, I'd like to remind you that several of our key operating entities, their financials are not consolidated on a line-by-line basis. And therefore, I would request you to view and analyze our reported financials with that, keeping that in mind. Let me quickly kind of put into context how we see the macroeconomic environment, our business performance in light of that and some of the key operating metrics. I don't need to belabor the point that we are facing an extremely difficult economic climate. Various analysts have forecasted between 4% and 5% contraction in GDP this year. The first quarter indicators from all sectors are very somber. Credit growth is decelerating. Personal loan growth has decelerated significantly. IIP has -- for infrastructure and construction has contracted. And the real estate sector is no exception to this trend. Reports are that new launches have fallen by as much as 98% and residential sales have plummeted by up to 80%. So again, this very difficult backdrop, I don't want to sugar quote our performance in metrics. But what I would like to lay out is what have we been doing and what are we focused on. So I'd say there's 3 broad focus areas that we as a management team have been driving, first and foremost, the well-being and engagement of our team. This has been a top priority for us to make sure that despite the lockdown and despite working remotely, a, all our employees are well supported in good health and feeling safe. Similarly, our construction workers, our site teams and all stakeholders, our channel partners. We are constantly reaching out to them, making sure that they're all following safe working practices, and yet continuing to be engaged. We have started most of our construction sites and offices where we are operating on a roster basis. The second focus area is on cash resilience. You would all appreciate that at this time, conserving cash and making sure that we continue to have a strong balance sheet, which has been a big strength of the company over the past many years. That focus if anything, is even more important in the months and quarters to come. So we are extremely focused on our cash cycle, making sure our collections are robust, and our spends are contained. And that will remain a focus at least for the next 2 quarters. The third is using this time to build new capabilities. We have invested significantly in further augmenting our digital sales capabilities to be able to conduct what we call 0 touch sales, which is a customer sitting at his home should get all the information in a media rich format to be able to take a buying decision to purchase their home. And we've rolled out a suite of capabilities and technology platforms to enable that to happen. What are the opportunities we are focused on? Again, I would say 3 things. One, from a residential business perspective, we are seeing a very attractive pipeline of land opportunities. The portfolio of opportunities, we are now evaluating and are in advanced negotiations on looks far better than it was 6 months back. So that, if anything, is a green shoot in this difficult environment. The second is the geopolitical situation between U.S. and China and the implication that could potentially have the positive impact that could have on our industrial clusters business. Again, we are seeing a steady growth in inquiries from very marquee companies who are looking to set up manufacturing facilities in India. And within India, our assets, -- the 4 assets that we have operational are very well positioned and have been rated by these customers among the top choices that they would look at if they were to come to India. The third opportunity is around resi demand itself. And here, we are seeing some very interesting signals. And I would qualify them to say that at this stage, these are weak signals. So I wouldn't want to extrapolate from them, but there are encouraging signals. Both in our affordable housing portfolio, where we are seeing continuing demand in continuing transactions, but also in our mid-premium portfolio, where, again, we are seeing some recovery of demand towards the end of June and coming into July. Now what is driving this? Is this just pent-up demand of the last 3 or 4 months, which is now getting released into the market? Is it a new set of buyers who -- because of the lockdown experience have made up their minds that they must commit to that house purchase, which they've earlier been deferring? Too early to tell. But another trend that we are seeing very clearly is NRI demand. Again, 2 kinds of buying patterns there. One is NRIs who are now seriously considering coming back to India, either because of their work situation in the geography that they're in or for other reasons. And the second is NRIs who are buying for their parents, who have been in their family homes for a while, and they feel that in this kind of a public health environment, getting their parents to stay in a modern gated community is far safer and they're better looked after, better provided for in these kinds of residential developments. Let me with that highlight some of the key indicators on our business performance for Q1. We did sales of INR 39 crores, roughly 50/50 between the affordable and the mid-premium on the residential side. There's been an increased focus on finished goods inventory. Our collections for the quarter stood at INR 72 crores. We've had no completions in this quarter despite having a couple of applications for OC submitted to the authorities. Many of the authorities have been short staffed and have been chasing other priorities. And therefore, these approvals haven't come through, we are hoping that they will come through in the current quarter. And similarly, we've chosen not to do any launches in the last quarter. We do have 5 potential projects that we could bring to market in the current financial year. All of these are with approvals and our designs are ready. Our marketing plans are ready. And we will have to sense when the market affords us a window of opportunity to bring these to market. Between these 5 projects, there's a total of about 2 million square feet. Not all of it we will bring to the market. As I said, it will depend on our sense of the specific micro market. Is it opening up? Is there sufficient demand? And in the IC & IC segment, we did 2.5 acres of sales for INR 7.7 crores. With that, let me turn it over to my colleague, Vimal, to take you through the financial highlights.

Yes. Thank you, Arvind. And just moving on to the financial performance for Q1 F '21. The consolidated total income stood at INR 22 crores as per IND AS, as against INR 111 crores in last quarter, which is quarter 4 F '20. The consolidated PAT, post minority interest stood at minus INR 20 crores, so a loss of INR 20 crores as against a loss of INR 224 crores in quarter 4 because it did had an exceptional expense built in so far as quarter 4 is concerned. The PAT of minus INR 20 crores actually also reflects huge amount of focus so far as discretionary spends are concerned. And we have ensured that we don't spend anything so far as it's not adding up to our business for the quarter. Our debt, and therefore, the cash continues to be a huge strength for us. The company has INR 112 crores of net debt on a consolidated basis at a cost, which is now reducing for the last 5 quarters, the interest cost now is 8.24% and we do have cash in hand of approximately INR 150 crores. That's all from my side. We can open the session for Q&A, please.

[Operator Instructions] The first question is from the line of Prem Khurana from Anand Rathi.

So 2 questions from my side. So 1 was presently, what we've seen with our organization is, I mean we get to have a best of the volume for us when we launch new projects. And given the fact that, when you said the COVID situation is still fluid, and you're not sure about the new launches. So how do we intend to strike a balance between, I mean also need to kind of deliver volumes and you also need to kind of be sure that whatever you launch is kind of getting it, so you don't launch something which is not getting absorbed in the market. So how do you intend to kind of strike a balance between these two? Because if it is as if, I mean, you're not able to sell, it could come as a drag on your cash flows level?

Yes, Prem, thanks for that question. It's a difficult question to answer. Honestly, as you rightly pointed out, the launch of a new residential project is a life event, right? And if it goes well, it sets the project up for success, if it doesn't got well, it continues to be a drag on the project right through the life cycle. So it's very important to get it right. And therefore, judging, when is the market ready to kind of pay attention to that product. Very often, you find good products being brought to the market at the wrong time when there is other clutter in the market, just doesn't grab attention and therefore, for no fault of the product does not get a good response. So we are constantly sensing that we are very deeply engaged with the trade, with the channel partners as well as directly with customers to sense when that window of opportunity opens up. And as I said, the focus has been to be fully prepared. So that in short notice, we can trigger these launches.

Sure. But if you would share also, I mean, in the fact that would you -- would we get to have some change in the kind of product that we used to offer before COVID and what you would be required kind of an offer now because people have started talking about doing larger homes because, I mean, most on the tree believe, I mean, work from home is a reality or is it here to stay now, so which is where you would have to have some more space to be able to accommodate your incremental requirement now?

Yes. So Prem, I think, again, this is actually a longer-term trend that we have seen even before the COVID situation that people are wanting to do more with the existing space. So in some of our recent products, we had actually, even as far back as October last year, introduced shared working spaces in the community as part of the common amenities. So work from home maybe more fashionable to talk about, a more topical to talk about now. But we had anticipated it coming from a different direction, of course, not from a public health care, but from a consumer need, several -- more than a year back. So we will continue to scan the environment for such changes. I think I fully agree with you, this experience of the lockdown and working from home. And also just the entire family living in the same house, confined to the same space performance at a stretch has thrown up a lot of unstated product needs that the customer might not have been fully aware of, might not have been articulating as much in the past. Because earlier, at any point of time, other than a nighttime, only a few of the family members who were at home at the same time. So how do you think about space? What is private space? What is public space? What should be in the home? What are the amenities? How do you think about the community? These are all aspects of the product that are becoming far more -- customers becoming far more discerning about these choices. I'm also seeing customers willing to trade up for these choices. We launched an interesting experiment last month where we went back to some of our booked customers of smaller typologies, and we offered them an upgrade plan. And we saw a good uptake on that. So -- which is why, as I said, there are some positive signals in the market that the demand actually is quite resilient, particularly end-user demand, which is what we are focused on. And if you have the right product, you can certainly do well. So I'm not at all despondent about the midterm prospects of the market.

And just 1 last from my side, if I may. Possible to share some more details on the China opportunity landscape that you have, I mean the MoUs that would be in discussion as of now on additions like portfolio augmentation side?

Look, it would be premature to share specific deals, but really, we are focused on 3 markets from a residential perspective, Mumbai, Pune and Bangalore. And in all these 3 markets, we have a very exciting pipeline. As I said, it's looking far more attractive than it was 6 months back.

[Operator Instructions] The next question is from the line of [ Arpit Ranka ] from [ Cowal ]

Congratulations on taking over as MD of the company. So I'll use this opportunity to maybe have your thoughts on the longer-term perspective, like, since you're just starting in this new role. So in terms of customer surveys that are getting done, we typically rank in the top 5 brands when it comes to, say, residential real estate. But scale wise, we seem to be lagging, like except for FY '19, we never crossed, let's say, pre-sales of INR 1,000 crores. So it's always in that sub INR 1,000 crores category. Now -- so what is your thoughts on where -- are we doing justice to the brand we have, firstly, and 3 years, 5 years out if not, where do you see us kind of aiming for? What do we see ourselves aiming for?

Yes. So firstly, thank you, but I think you really hit the nail on the head in terms of where our focus is. We are certainly not where we need to be from a scale perspective. And there is no running away from that. As you said, we have a great brand a lot of it is the heritage that the Mahindra Group has built up over 75 years now. And we need to grow into that space that we command the mind space with a customer. How do we translate that mind space and mind share into market share is really the task ahead of us. If I were to look 3 to 5 years ahead, I would be deeply disappointed if we were not a few multiples of where we are now. So that's a very clear focus for us. But at the same time, it's important that the growth is a sustainable growth. In our business because launches and land opportunities are lumpy, it is possible to get into cycles where suddenly you see a spurt in 1 year and then the subsequent years start petering out because you don't have the fuel in the tank to continue to fire the sales engine. So we are very focused on building our pipeline in that manner so that every year, we are able to build on the success of the previous year. For that, it is not just about land opportunities and launches, it is also about the discipline around sustenance sales, the engagement with the distribution and channel, build-out of our pre-sales verticals and other excelling capabilities. All of this lays the foundation for this repeat sustainable performance. I very much think of this like a classical consumer durables business. Yes, it's a higher ticket size than typical consumer durables. But if one were to think about the discipline that it takes to build a successful durable business, it's the same disciplines we need in the real estate business.

Yes. No, that's fair enough. And I recollect you had given an interview to 1 of the business magazines in June, where you had said that, that you are looking at, say, land acquisitions of about INR 2,000 crores worth potential sales like every year from now on. Now what if -- do you kind of still maintain that? And two, what will be the nature of these deals that you look for? Like in terms of priority, of course, I'm sure you'll be open to JVs, JDs outright group lands. But in terms of priority, if you were to list them out, it helps us understand how you're thinking about scaling up the business?

Yes. No. So I still maintain that number of looking at about INR 2,000 crores worth of sales potential. We are well on track for that. I think, as I said, the pipeline is looking good. We are in advanced discussions, even in a couple of situations, we've started diligence as well as legal and technical diligence. So I continue to kind of maintain that as what we will strive for year after year. The nature of deals will vary, as you rightly said, we are open to all possible transaction structures. We have no priors in terms of ruling out certain structures. But we are finding, we are one of the few players who's willing to do outright in this market. And the minute the conversations, which is to an outright, the terms become so much more attractive from a landowner's perspective and from our perspective. So landowners willing to offer us much better terms. So while often the conversation starts with a joint venture, revenue share, et cetera, structure, the minute outright option is on the table. We are finding a lot of landowners preferring that because for them as well, cash in the bank is worth a lot more than a future potential. So each deal is evaluated from all aspects. Deal structure is an important part of that. Even when we do outright, we are invariably looking at deferred payment structures where either payments are linked to approvals or a time bound, where it's not all the money being paid upfront. So that helps improve the IRR and derisks it from a go-to-market perspective.

The next question is from the line of Adhidev Chattopadhyay from ICICI Securities.

Could you please guide us on what are the projects that we can launch in this financial year. Anything about the approval status and the ones where you are definitely planning a launch possibly in the second half?

Yes. Adhidev, good to speak to you. Look, we have, as I said, about 4 or 5 potential projects that we could bring to market. The first is likely to be Palghar where we are actually looking to do an entirely online, entirely digital launch and that we should be bringing to market in the next couple of months. We think that's a good product which -- the first phase of Palghar had seen a lot of success. So there's a positive vibe about it, and it's a product that we believe we can bring to market in a digital manner. So that we will be doing in the next couple of months, somewhere between end of August, early September, hopefully. Beyond that, we have 1 in Pune, 1 the Saki Naka project in Mumbai, the Bangalore project as well as, 1 project in -- a residential project in Mahindra World City, Chennai. Those are the other four, which could potentially be launched this year. As I said, how many of them we bring to market will really depend on how the market opens up in those specific micro markets.

Okay. Sure. And we have not seen any further cancellations in our Luminare or any of the other projects, right, from customers?

No, nothing significant. And I think that's been actually a positive message to us over the past quarter where there have been cancellation requests, for example, in a few projects. But in most of these cases, we are able to work with the customer. There are customers who have the intent to continue, but because of either a job loss or an income loss over the past quarter have become more nervous. So we are able to work with most of these customers to help them with home loans to kind of tweak the payment structure a little bit to meet their cash flows, and those conversations are ongoing. But we don't see a significant -- very different risk of cancellation at this point.

Sure. Sure. And final question is on our SEZ projects, especially Jaipur, so how are now bankers looking at the situation post COVID, means are they all on board? Means considering that there may be a weakness for the next couple of years in -- how do you say, the sale of land? Or I think how is the refinancing and what is the debt maturity? How does that tie up on the more capital-intensive part of our business?

Sorry, so do you -- can you say the question again? I didn't fully get you.

What I want to understand is like that a majority of our debt is our SEZ projects, right, where in current environment, it may or may not see a pickup. So one thing in terms of the debt maturity, how are we placed and how are bankers looking at it?

So couple of points here. See, 1 is so far as debt is concerned, for example, if you pick up the South World Cities or the Origins which we have, the land aggregation has progressed to a significant extent. And there are a couple of approvals we have got to -- for example, there was this 100 acres of land deal notification approval we have got a couple of months back. What it does is that rather than safeguarding or reserving the entire land parcel, for residential development. Now we have the opportunity to explore -- exploit that land parcel of 100 acres, 120 acres between residential and commercial retail. And therefore, our ability to monetize that at a faster base is much, much better versus where we were say a couple of quarters back. Similarly, if you look at our second project, which is Origins, Chennai, this is a JV with Sumitomo there are -- during the lockdown also, there are good traction we have seen. And outside of that Origins, we have another 200 acres, 250 acres of land where there are inquiries going on, we are sure that some of these will culminate as we progress come out of this lockdown situation. And therefore, our ability to bring down the debt so far as world cities are concerned looks pretty decent at this point in time.

And the outright from the institutions is there, in fact, there are other institutions who are approaching us, looking at exposure to our SEZ business and the industrial cities where our clusters business more broadly.

Sure, sure, sure. So in a nutshell, what I get is, I don't think you'll be needing any funding from your stand-alone business to infuse equity, right, in these SEZ projects to support them? Is that the right way of looking at it?

No. So largely, the investments have been done in the past years. I think we are on the path to monetize some of these assets as we go along. Having said that, to grow or expand business or to acquire newer lands, we may have to look either strategic partnerships in future or maybe some funding in future. So can't completely say that I don't need funding to further expand and monetize those assets.

But look, we have already joint ventures in both the Origins in Chennai as Vimal explained with Sumitomo, and in Ahmedabad with IFC, we paid out all our long-term debt in Jaipur. So overall, business is very healthy.

The next question is from the line of Parikshit Kandpal from HDFC Securities.

Arvind, congratulations on being elevated to the CEO level.

Thank you, Parikshit.

Yes. So what I'm hearing is, like there's a lot of more aggregation, which is coming up from this call. And you're talking about outright purchase of land. So the first question is on what kind of sizes, I mean you’re comfortable in terms of value I'm saying, not in terms area, but in terms of value, what kind of balance sheet, current balance sheet supports, what kind of outright purchase of land?

Look, we are looking at transactions from say, where the upfront payment is anywhere from INR 50 crores to INR 200 crores. And we're quite comfortable with those kinds of ticket sizes.

And these will be largely affordable centered projects or mid-income housing projects and for the outright part?

No, no. Both affordable and mid premium, where we have a good pipeline on both and is...

So even in MMR, you have like -- those opportunities are being considered in all the 3 markets, which you said Pune, Bangalore -- sorry, MMR?

That's right.

Okay. So just on the -- since you took over and you would have interacted with the parent and the senior management there. So what sort of sense you're getting in terms of support coming in from there and what's the group's own strategy towards M Life because really, as earlier participant asked in the last so many years, we have really not done something great to be there in the lead board or that we are also the developers. So we've been doing small things. But -- so what are you hearing more from your management? What they think about this company since you have taken over? And what were your own -- so before taking over, what were your own expectations from the management and your own vision for the company?

That's a conversation that will take a couple of hours to have. But look, I think the group is extremely committed. They see this business as something that can further enhance the Mahindra Group brand. It fits very well with where the group sees its future. Of course, like all of you the group has the shareholder is keen to drive better performance from both the scale as well as ROE perspective. And those are the key goals in front of us.

Okay. So you said that you are looking to hit that INR 2,000 crores of presales kind of run rate over a period of time. So the first goal post is hitting that number or achieving that number. So how much time are you looking at doing that and achieving that?

If you had asked me this question, pre lockdown, my answer would have been different than it is now. But I would say, in about 3 years, if we are not there, then we are significantly behind where we need to be.

Okay. So a 3-year is a very -- like very, very conservative kind of target or it's like more real estate, I mean in the base case?

Honestly, it depends on a lot of environmental factors like how this lockdown plays out, if we are -- if we believe what some of the more pessimistic analysts are talking about that this situation will last till October, November last year -- and next year, then we are looking at the outer end of that time window. If we believe, on the other hand, that our actual -- vaccine will be out later this calendar year, and everybody will be back to normal by for second quarter of next financial year, then the situation is different. So honestly, hard to put a finger on it. But I think, as I said earlier in the call, our focus is on whatever our controllables are, which is our preparation, our teams, our capabilities, funds, ensuring we have cash, maintaining a healthy balance sheet. Those are the things within our ambit of control, and we are ensuring that we are on top of those things.

Okay. And just last one. Within this mix of INR 2,000 crores, so what would be the split of luxury and mid-income or affordable? And likely economic interest of Mahindra Group in this?

Sorry, for -- you're talking about the?

So when you achieved this INR 2,000 crores whenever, so I want to split between what is the blend of mid-income and how -- and luxury in this as a product. And also likely economic interest, something 40%, 50%, 60%, 70% or whatever. What could be the economic interest? And what will be the partner share in this, something like that, some ballpark number?

Yes. So look, I think from a sales mix perspective, I expect it to be half and half, roughly which is what we've been tracking to in the recent past as well. I think both those legs are important. They complement each other in many ways. They are not mutually exclusive. Particularly if one were to look at the distribution and relevance to the distribution, relevance to the customer, how do you build a brand, it is important to have both those legs very firmly planted. In terms of our economic interest, we have typically always had more than 50% economic interest in all our projects. We don't dilute below that.

Okay. And just last, if I may please. So now when you interact with earlier and now. So when you interact with your stakeholders like landowners or JV partners or JD opportunities. So anything has changed? I mean is it like more you're asking the pipeline of opportunity that's changed? So what could be the priority now, whether it's outright land or JD, JV? So what is the pecking order there? So how do we evaluate these opportunities of the pipeline now?

So honestly, that's very situation specific. Each land parcel. We -- as I said, we have all options on the table. The landowner typically comes with a certain preference on their side. And we are open to all options. Therefore, we often negotiate with multiple structures simultaneously to see what's the best way to get the right fit between landowners value versus our value -- perception of value. So there is no 1 size, fits all pattern or a standard pecking order, which we follow.

Okay. So nearly 3 million to 4 million, can we add on a yearly basis, the new business acquisition or land acquisition? There is the sellable area...

As I said, the -- I mean, the way we like to measure it is sales potential. So we want to add INR 2,000 crores worth of sales potential each year.

The next question is from the line of Himanshu Upadhyay from PGIM.

So I have some basic questions, okay. I think some of the fundamentals, what we have seen over the years in the company. We have seen quite a few launches, or I would say acquisition of land, which we have done and the launches, but the launches have failed. And again, we do very few land deals, okay. But historically, what we have seen in last 5 years or maybe beyond 5 years also, but the success rate has been very poor. So I would say, let's say, at Pune, we had a failure, we have seen failure in Gurgaon. We have seen failure in Bombay. Failure in the sense the launches have been pretty long. One project we had in South Bombay. We have one, which is still dragging on the Serenes project, okay. What are you thinking on those things? I mean, is there something which you need to fundamentally look at because even where the acquisitions have happened the launches have not been there. But -- and which is much more typical on the mid-income and as far as means luxury segment than on the affordable segment, which is the lower ticket size items. So how are you thinking on those aspects? What can be -- could have changed or what can have been changed? Some of your thoughts on those things. And what do you think, as a process, you need to improve that such issues do not come in future what we are buying or launching and anything? Any ideas on that would be helpful.

Sure, Himanshu. So firstly, I mean, let me correct your perception. I don't think it's right to say that we've had a series of failed launches. In fact, if 1 were to look at the recent past, we've had more successes than failures. If you look all the way back to the Palghar launch, the Centralis launched, the Roots launch, the Kalyan launch, all of them have been stupendous successes. So yes, of course, we don't have 100% strike rate and...

No, Arvind, I'll just -- so on affordable, I'm saying that you are seeing quite a phenomenal success rate, okay? But in the premium segment or a mid-segment there we have seen more of these issues, so let us at Saki Naka or what is -- we are facing currently in Gurgaon or in Pune, so I'm saying, affordable, like clearly see, there has been a success, we are not talking on those, but...

So it's not just the affordable one...

Being present, but a business, which was there for us. I'm more focused on that now.

I understand. But I mean, I'm just highlighting is not just affordable Roots, Centralis were both mid-premium projects, which have done extremely well as launched, fully sold out, Centralis, is 100% sold out, Roots, all the inventory we brought to market has been sold out. We're now bringing the next set of floors into the market. So -- but your broader point is taken, which is how do we ensure our strike rate or success rate is -- continues to improve on launch success. And that is, as you rightly pointed out, a key determinant of the economics of this business. So doing well with launches is very important. We are doing it the old-fashioned way, which is ensuring that we build a very robust distribution. Earlier, our distribution focus was very episodic. Over the last year, 1.5 years, we've built a far more structured approach to distribution. In the City of Mumbai, for example, we've now empaneled close to 4,000 channel partners. About -- at every launch, we expect about anywhere from 300 to 400 of them to be active in that launch in terms of driving, walk-ins and sales. And we are finding ways to constantly engage with them, help them build their capabilities. We have an app now, which helps us connect with the channel partners. So the channel partners download that, they find that helping their productivity. Similarly in our presales vertical and sales, we've built out that capability very strongly, both in terms of the data bases, the calling patterns, the scripts, the training. So these are back to basics, kind of it doesn't sound very fancy. It doesn't sound very cool and sexy, but that is the nature of this business. One has to go down and fix the plumbing and keeping on tweaking that. So a lot of our efforts there and my colleague at Mahindra, who heads our sales, spends all his time just on that.

No, Arvind, I take your point. But see, in the places like Luminare, I think the pricing went wrong or something else or the product, whatever it went wrong. But again, in Pune, the issue means Pune, I'm saying not the current projects, 1 of the projects which was a super premium, we had issues, okay? Or I would say, and even in Bombay, the Saki Naka has got so much deferred or -- so I'm saying, do you think it is only sales issues or given at the acquisition of the product and the prelaunch or the -- what product was the requirement had any issues?

So there's certainly some of that. So some of the acquisitions were in time. Gurgaon, for example, we acquired that land and launched it at the peak -- historical peak of the Gurgaon market. And it's only when the market has only gone South since from our pricing perspective. Saki Naka has taken a while for us to get our approvals together, you're absolutely right. So I think the lesson in that is how do we incorporate those learnings into our future land acquisitions. And that's something we have been quite sharp about, which is why I said some of our payment structure, in fact all of our payment structures are now deferred payment structures for land where we're linking it to receipt of approvals or they are significantly time bound. So that this risk is mitigated a lot more than we were able to do in the past.

And 1 more question was, see, one of the things is if we meet the customer, the demand is lower because the prices are not cheap. And for the builders, the prices of land is not cheap. So nothing is disrupting or breaking the chain, okay? Means chain of lower sales, okay? If we see the overall market, what market requires is a better product at a cheaper rate, I think? And that comes from a land and somebody has to be a disruptive in the market, okay? The type of land prices, what we are seeing in the market, do you think you can disrupt those markets and gain market share or grow? Or do you think because see, at the constant prices, obviously, or what we have seen in last 1 or 2 years or even beyond, the demand has not come up in the premium and mid-income housing. I'm not talking about affordable currently. So any thoughts of yours? And how are you thinking of those angles? Because it becomes just a status quo. You load -- I mean smaller launches, slower sales at the pre launches and then slow execution and all those, means, slow execution, slower come sales happens and everything. So how are you thinking? Are the prices coming to a point where you can disrupt the market and the gainers, just your thoughts.

Yes. Look, firstly, your point about better product at lower prices is a truism, not just for real estate and residential, it applies to pretty much every industry. That's what consumers want, they want better value at lower prices. I think the way to disrupt the market is not only on pricing, though. I believe the residential market, in particular, is very like for a product disruption. The product has fundamentally not changed for the last 30 years. We are still selling the same products that we sold or designing with a way are they are so similar. And if any -- the only thing that changes, maybe it is miniaturized a little bit. What used to be, the average size used to be maybe 1,200 square feet, it's now come down to 800, 900 square feet. But other than that, fundamentally, nothing has changed in the product. So I actually believe there is a lot of opportunity to disrupt the product. I think our -- the early success we saw in Kalyan, where we bought a lot of innovation to the product, reaffirms that belief of mine. But it is not just about -- I mean, that -- why that is an affordable housing project, it is not just about that segment that needs disruption. I think product innovation has been solely missing in this industry. That's something we are deeply focused on.

But on the cost side for yourself, means, do you think the price of land, which is an important component, there can be significant better value. So newer launches can be somewhat more faster sales or better?

See, so I think this pandemic is affording us that window of opportunity, whereas I said, landowners are softening there stance around price expectations. So -- which is why it's really important that we are alert to those opportunities and seize them when they come along, which is what we're doing.

And 1 last question. So we have been in the Gurgaon market and which has had been in the doldrums, okay? And if the price of land, I think the maximum fall should have been in the NCR market, okay? But we said, we don't want to look at it. But means is it a clear and full and final that we don't want to look at it, even if we have a good brand equity? Or you think at some point of time, you would like to revisit and if the deals are really attractive, you would look at it? Or how are you thinking about that parcel?

Yes, it's not -- certainly not a full and final. It's just a timing issue. I think I said this on the last call as well. This is a business where density is very important, spread without density, you end up actually destroying value. You need to be relevant to the local consumer, you need to be relevant to the local distribution, you need to understand the local regulation, building codes, all of that stuff. So we want to build depth in each of the markets we are already in, which is Mumbai, Pune and Bangalore. NCR is a very attractive market. Demand is robust. It's an interesting competitive landscape. So it's certainly not rolled out. It's only a question of phasing.

And in terms of the 3 markets or 4 markets where you are focusing on...

Hey, Himanshu, sorry to cut you, I think we have a few more people on the queue. So can you come back in the queue?

Yes. Yes.

Sorry for that we have less time.

The next question is from the line of Deepak Mehta, an Individual Investor.

Yes. Sir, actually, my question is already asked. So I will ask so -- are we exploring new Tier 2 or Tier 3 cities where you want to expand in the metro, the demand is -- and the prices are not that much growing up and getting increased. And my second question is that a few months back there was a news that bank are asking developers to cut the prices to accommodate the demand. So these are my questions.

Thanks, Deepak. Look, as I said, just now to Himanshu, we are wanting to first build depth in our existing markets. So getting into the next set of markets will be a decision we will take in 3 or 4 years' time once we have a reasonable portfolio of work in the existing markets. And there's been many different pieces of advice coming from various people about cut your prices and liquidated inventory, I don't think we need to, at this point, touchwood. We are in a good situation with most of our projects where we don't need to do anything knee jerk or drastic. The challenge with that following that kind of a path is it's a one-way street. Once you go down that path, either from a drastic price cut or your deep subvention plans doing 595 or 1090 those are the irreversible moves, and they've always been value destroying moves. I've not seen a single example where that has created value. So we are steering clear of that.

The next question is from the line of [ Arpit Ranka ] from [ Cowal ]

Arvind, a couple of follow-ups. So one, real estate seem possibly one of the highest FDIs in recent years in India. And a lot of other real estate players have gotten, say, private equity backing, which brings in long term money, which what the business requires, we did that with industrial city business. So any thoughts or any changes in how you're evaluating some of those options in the next 1 or 2 years in terms of giving us that breathing space to think big, if at all, that's something that you've been thinking about?

No. It is something we've been thinking about as well as having some conversations on. But it's important to find the right fit between the intent of the investor and our intent. So conversations are ongoing with a couple of very interesting conversations actually. But there is no gun to our head right now that -- it's not that we have any desperation to raise capital in the near term. And therefore, we have the ability and patience to find the right partner and do the right things, at the right point of time. It is certainly something that will strengthen the business in the midterm. So it is on our radar and not just on our passive radar, but we are having active conversations on that.

Okay. That helps. And so the other 1 I have is more -- kind of wanted to understand, see, one of the things which people -- all stakeholders kind of presume when they look at Mahindra Life is the land bank which is available with the group and some of the larger groups have done that. What they have done is basically, they've come out with a very clear statement around how they plan to kind of engage with the real estate arm in conjunction with the land holdings? Now and whatever -- the thought process of the Mahindra Board is maybe, but you are representatives. Can maybe make a case and bring clarity to this issue, which is kind of lurking there in the background, it's certainly positive, but the extent of positivity is not necessarily always communicated, is it something that you think is possible to communicate in the coming, say, year or 2, a very clear understanding of what is possible on this front? Is this -- is what I'm saying, even making sense, I'm not sure, but it is something which has been playing on my mind for a while now. And I thought I'll ask you to kind of add to this and maybe educate us on this.

Yes. So I think, look, I think this has been a recurring question on our investor calls, if I remember, Sangeeta addressing this 2 quarters back, we -- Sangeeta and I together addressed this the last call as well. It is an active conversation happening, but you would appreciate that for the group companies that have the land, for M&M, for example, they are also a listed entity, and it's important that they do their diligence and do this the right way. So the conversations have progressed, but are we in a position where we are ready to announce anything not yet. And will be -- we'll announce in the next 3 months or 6 months? Again, I don't know. And when I say, I don't know, I'm not saying, no, I'm not saying yes.

No, no. Of course. No, I understand the challenges with regard with this, that's why I said that maybe you as representing the largest stakeholder body because kind of always bring this when you happen to connect with, say, the larger group entities and have interactions, we are not even saying bring us some commitment or something? All I'm saying is some clarity as to what is the right way to think about this piece of our business. See without this, if we do the right things, anyways it will create value.

Yes.

Having clarity on this helps you think and put it in perspectives all what I'm trying to add. And I presume I speak for a lot of people when I try to kind of communicate this across. So if you just keep this in mind, I'm sure you do, but as something where any clarity or any clarification, even if the quantification of that doesn't necessarily matter, but what is the thought process kind of that all -- even if that is communicated, that helps is what I was trying to kind of...

Yes. Look, if some of our history is indicative of the future. We have brought land parcels to market, which are part of the group land parcels. So Roots was on land as well initially owned by M&M. Centralis in Pune was a Mahindra land parcel, et cetera. So there has been -- admittedly, those are small. And what you are seeking and what other investors are seeking is more the big bang stuff, and I understand that. But all I'm saying is if history is a predictor of the future then there is a history, right?

Next question is from the line of Parikshit Kandpal from HDFC Securities.

Sir, just on the opportunities on slum and redevelopment site, if you can highlight that? And just 1 more on that is our own land parcels owned by Mahindra -- sorry, the M Life in Porbandar or in Pune. So any thoughts of yours after taking over and things you're looking to do?

Yes. So Parikshit is, I think, 2 parts to your question. Let me answer the redevelopment first. I think redevelopment opportunities are very interesting. There's 2 kinds of redevelopment that we are looking at, slum redevelopment and society redevelopment. Each has different complexities associated with it. In fact, just earlier this week, I visited a land parcel, which is a redevelopment proposal which is a very interesting proposal we are looking at. So we are actively looking at it. It has, as I said, and as a dimension of complexity, which particularly as a Mahindra Group, we need to be very aware of and ring-fence ourselves strong. So the diligence there takes a little bit more time. Now the diligence from a legal perspective, but also just our own -- making sure we are comfortable with the counterparty who's bringing it to us. How it's going to get navigated? What's the structure? What has happened upfront before we even get in. I think those are very, very important questions. They get a heightened importance in a redevelopment transaction than in an outright or other kinds of transaction structures. Sorry, the second question you had was what are we doing with Thane and those kinds of land parcels? So those are, again, in a planning stage. We are moving forward with some of those, but those are very large land parcels. So we will have to look at how we bring those to market and over phases, over many years, but work is underway.

So in a year's time, maybe something will have there on the ground there, at least in the Thane land?

Tough to comment whether it will be a year, but as I said, work has started, the planning that has started. There's a set of approvals that will be needed. So all of that preparation has started.

And at least 1 redevelopment will close in a year's time if we start off?

I don't look at our land pipeline as targets for redevelopment, outright, JD, et cetera. It is a portfolio. And we want to, as I said, do INR 2,000 crores sales potential worth of land acquisition each year. Now in a particular year that may be heavily skewed towards 1 type of transaction structure than another. But each transaction will be seen on its merits. And there is no quota system to say, look, I want to do at least 1 redevelopment deal or anything of that sort.

But within 6 months, something will happen, at least a couple of 1 or 2 would be kind of begin to at least to show the visibility...

On land acquisition, yes, I mean this financial year certainly, as I said, I'm quite optimistic based on the pipeline, I see and the negotiations that are underway. We should have some closures within this financial year significantly.

Lastly on the distress side, sir, I mean, why -- I mean, there's a lot of other developers, Tier 2 developers, even some larger ones are in trouble, at least in the financial distress. So why can't -- are we looking at even tying up with them and like how Godrej has been doing some of the ones in Mulund like L&T is doing?

We do have a couple of these proposals often their proposals that you wouldn't touch with a bashful. So one has to distressed asset looks very good conceptually. But when you get into the details, there's a reason why they're distressed. And therefore, 1 has to be careful about that. Again, as I'm not ruling out those. We do have a couple of proposals, which are looking interesting. But the smoke is much more than the fire.

Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to Mr. Arvind Subramanian for closing comments.

Thank you very much, Steve. So thanks, everyone, for joining. As I -- just to recap, I think this is a particularly tough market environment that we are operating in, both from our demand as well as the supply side. We are seeing some green shoots, but it's too early to tell how sustainable these are -- it depends on many factors that are -- have nothing to do with the real estate sector or demand for real estate. If we do end up with a second or third wave of infections and things like that, 1 doesn't -- just doesn't know how to predict. And therefore, in that environment, we are focused on making sure we are building our capabilities towards being able to spring out of this problem as soon as the market affords us that opportunity. So both in terms of internal capability building, launch preparation, land acquisition, and most importantly, the IC & IC business, where we think that could be the silver lining in these dark clouds. So thank you again for joining, and I look forward to speaking to you again in a few months.

Thank you. Ladies and gentlemen, on behalf of Mahindra Lifespace Developers Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.