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

Ladies and gentlemen, good day, and welcome to Mahindra Lifespace Developers Limited Q4 FY '21 Earnings Conference Call. We have with us today Mr. Arvind Subramanian, Managing Director and Chief Executive Officer; 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, MD and CEO. Thank you, and over to you, sir.

Thank you, Nirav. Thank you to all of you who joined the call. Good morning. And welcome to our Q4 FY '21 earnings call. I wanted to take a moment at the start. We recently lost one of our dear colleagues at the start of this week to the COVID pandemic, and I'm sure many of you have also had close colleagues as well as near and dear ones affected by the pandemic. And I wanted to take a moment with you who join. I request you to join me in a moment's silence to remember those who have been badly hit by this pandemic. Thank you. As all of you know, many of our key operating entities from the residential business like Mahindra Homes, Mahindra Happinest and others as well as in our IC & IC business, Mahindra World City Developers Limited, World City Jaipur Limited and Mahindra Integrated Parks Limited are not consolidated on a line-by-line basis, and I request you to view our financials with that lens. Let me give you kind of a quick synopsis of how we are seeing the macro environment. And then I'll talk about the company's performance and outlook for the coming years. So from a macro perspective, as we know, last year has been a very, very challenging year. We've had a contraction in GDP, while Q4 showed a sharp rebound, and we hope that, that is a sign of things to come with when the pandemic eases, there will be a sharp rebound in the economy. The IIT index as well showed a similar pattern. It was muted at the start of the year and then a sharp rebound towards the end of the year. Retail loan growth showed a strong recovery. In the real estate sector, Q4 by all accounts across markets has been very strong from a demand perspective. There was almost a 44% sales growth reported in Q4 F '21 compared to the same quarter in F '20. And we are seeing that demand is resurfaced and bounced back across all price segments. So it's not limited to any particular price segment vertical size. There is a very clear preference for ready or near-ready inventory. And we are also seeing indications that customers are wanting to upgrade to either slightly larger homes or homes which are better suited to their needs in terms of facilities and amenities. The demand drivers underlying this are multi-decade low mortgage rates, which has boosted affordability. Specific regulatory interventions like the stamp duty reduction in Maharashtra, which certainly provided tailwinds to the industry, and some pent-up demand from the first half of the year coming into the second half. Turning our attention to the Mahindra Lifespaces and how we have performed. I wanted to take you back to the key pillars or the key elements of our road map that I had laid out when I spoke to you in July. One, I had said that by FY '25, we should be getting to INR 2,500 crores of residential sales. The second I talked about was the hidden value of the industrial business, the IC & IC business. And with all that is happening with global supply chains and relocation of manufacturing, I had expressed hope that, that would be an [engine]. And third, there was already indications even from previous years prior to the pandemic, that there is a structural shift happening in the industry. So I'll use these 3 anchors to also talk about how we've seen the year that has gone by as well as the years that are ahead of us. So firstly, are we on track to achieve the goal of INR 2,500 crores of sales by 2025? I feel very confident now, even more confident than I was when I first spoke to you about this in July of last year that we are indeed on track. And why do I say that? One, we've shown now repeatedly across many new project launches that we are able to bring new products to market with significant impact and significant velocity at launch. All the way back to Roots, Centralis, Happinest Kalyan, Happinest Palghar, Happinest Tathawade, all of these projects have sold upwards of 80% within the first 6 to 9 months of launch. And that gives us a lot of confidence that we have the fundamental capabilities, platforms, the product thinking that is resonating with what -- where we see the demand. The second is from a supply perspective. So the pipeline of land. Again, and I told you, we will be targeting about roughly 4 land transactions every year, aggregating to about INR 2,000 crores worth of sales potential. So that we build a good pipeline which will provide potential "dry powder" to get to the INR 2,500 crores sales target. And indeed, we are again well on track for that. We've done over the 9 months since we last spoke, 3 transactions to -- the first was in February in Kanakpura. And in March, we announced an acquisition in Kalyan. And in early April, we announced an acquisition in Pimpri in Pune. Between these, these are just a shade under INR 1,500 crores. So in 9 months, we've done INR 1,500 crores worth of sales potential. And we feel, looking at the pipeline that we have, that we are well on track to achieving the milestone I'd set of getting to INR 2,000 crores worth of GDV addition every year for the next few years. Now these steps and this kind of early success is coming against a backdrop of an industry that is really getting fundamentally reshaped. It's very clear that there is a perfect storm brewing, which is favoring the more formalized players. And this is happening in at least 4 different scales. One, as we have seen, demand is migrating to the more formal sector, particularly under construction demand, presales demand. Most customers are not willing to trust unknown developers or developers who don't have the track record of delivery. The second is from a capital perspective. Both access to capital as well as cost of capital, there is a significant advantage that players like us are able to derive over local competitors. We have probably a 500 or 600 basis points advantage on the cost of capital. And more importantly, access to capital has gotten skewed towards the more well-funded players with strong balance sheets and strong track record of governance. The third area where this consolidation is playing out is in the land supply. Again, we have seen several deals where landowners are clear in their minds now that they would only like to deal with well-funded formal sector players. Even if it means they sacrifice a few crores or a few percentage points of potential land value, they believe that the surety of the deal being consummated is much higher when they have a counterparty like us sitting across the table. And the fourth area, which is also very important, is talent. Again, real estate has historically not been an attractive sector for talent. But today, talent is getting attracted to the sector but is choosing to work with the more corporate, the more formal players. And that, I think, is as important as the other factors that I gave. And the third pillar was the IC & IC business. As I said, with what's happening around the globe, it is only a matter of time, I believe, that this business will start coming into the limelight. The advantage we have is that we are past the investment phase in this business. All our facilities are shovel-ready and stand head and shoulders above the competition in terms of the quality of infrastructure, the quality of services. In the recent customer satisfaction survey that we have done with all our clients in the 2 world cities, the world cities in Chennai and Jaipur, we got resoundingly positive feedback on how these facilities were able to get ready to bring manufacturing back or manufacturing activity back much sooner than their peers in those locations. And these have become case studies in the 2 locations, thus, the local governments, local administration came and studied how we were able to bounce back from the pandemic and the lockdowns to facilitate our clients returning to business and have asked for our help to do the same with other industrial parks under their supervision. Turning to some of the key highlights in terms of numbers. Sales was perhaps one of the strongest beacons of our performance last year. We've achieved annual sales of INR 695 crores, which given the standing start we had for the year, Q1, as you recall, was a complete washout and Q2 was very weak as well. Being able to get to close to INR 700 crores, which is higher than what we have done in the previous year, is I think a wonderful achievement. Within that, the split has also been very balanced. What really gives me a great amount of confidence for the future is that this INR 700 crores was not achieved on the back of 1- or 2-star performances. It is a broad based performance. About 60% of that came from our mid-premium portfolio and 40% from our affordable portfolio. Finished goods contributed to roughly 1/3, about 34%, of that sales value. And new launches was again about INR 260 crore, out of the INR 695 crore, so which tells you that we've been able to sell under-construction projects, we've been able to sell in customers, not just new launches, and we've been able to sell across price points and across geographies. In Q4, we achieved a quarterly sales of INR 346 crores out of that yearly for INR 695 crores. So almost half the annual sales was done in the last quarter. And that is not a surprise, given, as I said, the first 2 quarters were extremely weak because of the lockdowns. Our average price realization for the year stood at INR 6,528 this time. In terms of new launches, we launched just under 1 million square feet, so 9.4 lakh square feet across 4 different projects, 2 were new projects that we brought to market and 2 were further phases of existing projects. The new projects for Alcove, which is our Sakinaka project, which after many years, we were able to resolve the approval issues and bring it to market in March. That is about 1.5 lakh square feet. And Happinest Tathawade, which is about 0.5 million square feet in Pune. I wanted to call out, in particular, the performance of Happiness Tathawade. It has been very heartening. Within a span of about 3 weeks, we were able to sell 80% of the launched inventory. We launched about 420 units. We sold roughly 340 units within a span of 3 weeks. All our 2 BHKs in this project were sold out before prelaunch. And about 60% of our 1 BHK was sold. And this is a market that has historically favored 2 BHKs. So it all bodes very well for us because the forthcoming inventory is more heavily skewed towards to 2 BHKs. In terms of the last pipeline, as I told you, we concluded our 2 transactions in the last financial year and 1 in the early part of this year in early April of this financial year. Both those transactions, which is Kalyan as well as Kanakpura, as well as [another] transaction that was agreed upon with Mahindra & Mahindra as the seller, we are expecting to bring to market within this financial year itself. So they've been structured in a way. And our preparation is at the level where we will get approvals and be able to launch in this, fingers crossed, within this financial date. Beyond these 3 deals, we have a very strong pipeline going into F '22. It's a mix of outright with approvals in the land owner scope, joint development agreements and society redevelopment improvements. In terms of collections and handovers, we've achieved an annual collection of INR 758 crore, which again is very, very heartening. In these difficult times, the fact that we've been able to achieve close to INR 800 crores or INR 750 crores of collection and have very little bad debt or long-term defaults in that pool is, again, an indication of the trust that customers have placed on us. We've handed over 605 units over the financial year, 445 of which were handed over in the fourth quarter. Completions has been a little bit of a challenge, candidly. The first 2 quarters, we had significant challenges on labor availability. For the first quarter, labor was available on site, but we were not allowed to work. And then as soon as the lockdown was lifted, most of the migrant labor expectedly and understandably wanted to move back to their villages, and we had to rebuild the labor force. We were able to rebuild it to almost 80%, 90% at the pre-pandemic level by Q4. But the second lockdown, which started in mid-March has again, put the brakes on construction activity. That has resulted in a few completions slipping from Q4 to potentially Q1 of this (sic) [next] financial year, and that has impacted our financials. On the IC & IC business, annual leasing volume has been 55.6 acres, aggregating to INR 128.7 crores. And again, this needs to be viewed with the understanding that international travel has been severely restricted. And many of our clients for our industry are multinational companies and their global teams, their global manufacturing and supply chain teams who typically visit every site before they decide on a new factory location. So we have a good buildup in pipeline, but the consummation of those deals is taking longer than usual because of the international travel restrictions. Out of those 55.6 acres that were done in the year, again, almost more than half, 27.8 acres or INR 66.4 crores in value terms was done in Q4 of F '21. Again, an indication that as the economy opened up, as travel opened up, there was a strong conversion of the pipeline into actual sales. Many of the initiatives that the government has taken, whether it is the PLI schemes that have been announced, the softening of interest rates and credit availability, the lower tax rates for new manufacturing facilities, coupled with the global realignment of manufacturing supply chains, I think, bodes well for this business in the years to come. We're also getting many inquiries for very pursued facilities and warehousing in our industrial parks, and we are in the process of evaluating what is the best way to serve this demand. So overall, I'm cautiously optimistic on this segment of our business. Let me turn the call over to Vimal to take you through the financials.

Thank you, Arvind, and good morning, everyone. I'll take you through the high-level financial performance for Q4 versus Q3 F '21 as well as for full year financial '21 and FY '20 as well. Starting with the quarter, the consolidated total income stood at INR 58 crores as against INR 70 crores in Q3 F '21. The consolidated EBITDA, including other income and share of profit from our JVs, stood at negative INR 30 crores as against negative INR 3 crore in Q3 F '21. The loss is both including the investments we have made in the market on new project launches. That's an important point I wanted you to note, please. The consolidated debt after noncontrolling interest, it stood at negative INR 27 crores against negative INR 11 crores in Q3 F '21. Moving to financial performance for F '21. The consolidated total income stood at INR 188 crore as against INR 646 crore in FY '20. The consolidated EBITDA, including other income and share of profit stood at negative INR 60 crores as against negative INR 46 crores in FY '20. The consolidated PAT post minority interest stood at negative INR 72 crores as against negative INR 193 crore in FY '20. At present, the company has debt of INR 244 crore at consolidated level, while cash in hand and bank balance is about INR 135 crore. The cost of debt for IND AS consolidated entities is 7.05% while the stand-alone cost of debt for Mahindra Lifespaces is about 5.9%. Thank you. We can open the floor for questions now.

[Operator Instructions] The first question is from the line of Parikshit Kandpal from HDFC Securities.

Congratulations on a nice rebound in then fourth quarter and comeback on the presale. My first question was -- can we touch about the prelaunch landings which you did. I think Bangalore was the only one I think it got consummated, particularly [indiscernible] land deals happen, so Kalyan and Pune. And Pune was also kind of a related party. So just wanted to know that we were doing a couple of large land deals in MMR. So if you can update within the land deals, what is the pipeline for MMR, for Pune? Also is there any MU that you have signed for maybe redevelopment because we did mention about redevelopment. Over the next 3 to 2, at least in 1 is, what is the visibility of one of the large deals happening? And beyond that, how is the pipeline looking in terms of overall retail potential cumulative?

Sorry, your voice was a little bit muffled, but I think I got the essence of your question on the land deals, about trying to explain the deals that we've done and what that means as well as the pipeline going forward. So as you rightly said, the 2 deals that were done last year, Bangalore was something that we had kind of shook hands on and initiated almost 1.5 years back, but it did go through its ups and downs, and we are very happy that we consummated the deal in February. We are hoping to bring it to market in Q3 of the current financial year and are well on track to do that. All approvals are -- most of the approvals are in place. There are some final things to be sorted out before we are able to launch. Similarly, the Kalyan land parcel of close to 10 acres is again a very attractive land parcel where we structured the deal in a manner where the landowner is getting us the approval. So there's a small up-front land payment and most of the consideration will be paid closer to launch. And that is generally the principle that they're trying to follow in most of our land acquisition. We're trying to defer the land payouts to as close to launch as possible. So one of the questions I have got in the past from analysts and investors is how quickly can you consummate the land deal? I think more than consummating the land deal, it is about how quickly it can be launched, which is our main focus. And we try and push out the consummation of the deal to as close to the launch as possible. So all these 3 land parcels, Bangalore, Kanakpura in Bangalore, Kalyan in MMR, and Pimpri in Pune, we are very much on track to launch within this financial year. And that is very important for us. In terms of the pipeline going forward, as I had mentioned in my opening comments, it's a very strong pipeline. I'm extremely confident that we will be able to stay true to our intent of doing INR 2,000 crores worth of GDV addition year-on-year for the next couple of years and keep building up from that. INR 2,000 crores is only the first milestone. We will keep growing beyond that. And the nature of the transaction is also very encouraging. As I said, it's not all outside. It is partly outside, partly revenue shares, joint development and some interesting opportunities around society redevelopments and distressed asset as well.

So in terms of value, how do you see this? Is it like INR 10,000 crore in potential other deals you have in advance or is already in addition to? How do you quantify the size just to get some standpoint where we are adding?

No. As I said, INR 2,000 crores worth of GDV addition. The next stage of our pipeline, which is still in kind of final negotiations and negotiation of funds, et cetera, would add up to about INR 4,500 crores.

Okay. So INR 4,500 crores of active advanced land negotiations and is going on currently. This is what you are saying?

Yes.

And which...

I would want to caution that, that doesn't mean the entire INR 4,500 crores will be consummated. That is -- and that's why it's a pipeline, which is not a done deal.

Just on the large 2 transactions, investments which we have been planning for some time. And because the taking some time now because I think we were planning to close it by March, and we are already in May now. So any fallback on any of these kind of transactions or any advantages?

Obviously, no cause for concern. It is more about making sure that we are extremely comfortable with the terms that [are delivered]. In all these cases, the diligence is largely completed. So there's no concern around title or any other legal aspects. It is more dotting the Is and crossing the Ts on the terms. We don't want to do these deals with a gun to our heads saying we had said March 31st and therefore it must be March 31st. So like in the case of Pimpri, it did slip into the first fortnight of April. That's fine as long as we get a good deal, that's more important.

Just lastly...

But we have no concern on those transactions.

Then just lastly, one more question on this. So we have seen our presence now in central and western line in the country, so we are seeing good redevelopment opportunities [indiscernible], emerging and some of the ones coming in the Navi Mumbai redevelopment market. So are we looking at it in terms of growth expansion within the MMR region.

Yes. So MMR, we are looking at -- Navi Mumbai very active and have some advanced conversations there as well. So as you rightly said, our footprint in MMR will be Western, Central and Navi Mumbai.

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

So just to follow-up on previous question, so for this INR 1,500 crores of sales value. Sir, could you give us what would be sort of indicated margins? Or what is the target margins you're going to be working with? If you would just break up the land and construction spend, how much will that attribute to overall for these projects?

The land and construction spend, I will have to put it together. But indicated margins, we definitely target margins in the [INRs] in the high teens. I'm even talking about project IRRs. It could be IRRs would be much higher. Margins, in fact, should be in the early 30s. That's our investment hurdle in all our projects.

Okay. Sir, where I'm coming from is, what are you saying that if you looking a INR 500 crores of land spend annually, right, going forward. So is it on a yearly basis, this is an outgoing you have incurred in FY '21? If you just share that number on the land cost and approvals, how much we would have spent overall?

Now, in FY '21, it will be much lower because, as I said, most of our land transactions are structured with deferred payments. So the actual outgo will happen closer to the launch in all these 3 transactions that we did. So 2 have been closed in FY '21, technically, one is early FY '22. But let me talk about all 3 since they are all confirmed dates.

Okay. Okay. So sir, for this year, what would be the guidance for FY '22, how much would you end up including all the advances and everything, what would be the indicated number for that?

Yes. So I think this year would be in the range of that INR 500 crores because we will add another INR 2,000 crores plus our GDV pipeline and consummating the earlier deals plus the first tranche of the new deal would end up to the range of INR 500 crores. Again, it will vary depending on the mix between JDAs and outrights. As you well know, the JDA's up-front payment base is mature.

Sure, sure, sure. That's fine. Secondly, sir, obviously, I know that we are impacted by COVID and all. So how are you looking at sales for this? Is there an upper end or lower end of guidance which you are looking at for the residential business?

Look, as I said, we are still on track and are committed to getting to that INR 2,500 crores by FY '25. So starting at roughly INR 700 crores last year, you can interpolate the numbers between that. I don't want to give year-on-year guidance, but we are holding fast with our mid-term guidance of INR 2,500 crores. And that is -- look, even the INR 2,500 crore, I must emphasize, is just the first milestone. So if one were to think of it as an Everest track, this INR 2,500 crores is base camp. It's about consolidating at that level and then moving up to INR 4,000 crores and INR 5,000 crores etc and beyond that.

Sure, sure. Sir, my last question is my question on the impact of the rise in raw material prices. And also what is the labor availability currently across sites, using [ indiscernible ] because of COVID? Yes, these 2 things.

I think that's a great question, Adhidev. And in fact, to me, the supply side of the equation in our business is more worrying than the demand side. I think we've seen enough indicators last year that when the market opens up, the demand for housing and particularly good quality housing is extremely strong. On the supply side, however, both with the commodity price growth still having gone up by almost 50% over the last year from INR 40,000 a tonne to INR 60,000 a tonne, due to cement prices going up and labor availability being a huge challenge to its frequent lockdowns. And that is, unfortunately, it appears is going to be here to stay for much of this financial year. So to me, the supply side is the bigger worry, and we are working with all our contractors and suppliers to try and mitigate some of these.

Okay. Sir, and just on labor, is there any percentage in terms of how many -- how much labor do you have on-site now after this currently compared to couple of months back?

Yes. So Q4 we were tracking at roughly 80% of our need across all the sites. We've lost about 1/4 of that in the last 1 month. So we're down to about 60%.

Just make one point. One point I wanted to mention on the labor front, post wave 1 the base at which we ramped up was significantly higher and very, very heartening. Say in August, September, October, we saw very good ramp up. And to that extent, right now, we are extremely confident that if this wave 2 subsides, the ramp-up will be equally strong this time as well.

The next question is from the line of Amit Dalal from Tata Investment Corporation.

Congratulations, Arvind, on this heartening note with which you're presenting the results and the fact that you are on target or even better in terms of the land acquisitions. I wanted to know strategically now there was one call which I had attended with the new Managing Director of Mahindra & Mahindra. Is real estate going to remain a focal area for the house? It was something that, frankly, I didn't get a very clear answer from him. And is there capital going to be -- not that you need it right now, but perhaps something that the house would not shy away from investing into? And another housekeeping suggestion I have before you answer my question is, can you, in the presentation, share with us P&L on the Schedule 6 basis because if IND AS, as we all know, has screwed up everyone on kind of figuring out exactly the numbers?

Sure. So Amit, so I hope you're doing well. Good speaking to you in a few months since the last call. On the Schedule 6, I request Vimal and his team to come back to you and others with that, as you said. It's very hard to decipher IND AS accounts in our business these days. Coming to your first question on where is real estate fit in the portfolio of the group, honestly, Anish and the team are the right people to answer this. But let me just share a few indicators, one Anish sits on our Board and continues to sit on our Board. So that is one sign of commitment. Two, we did do the Pimpri transaction with M&M earlier in April, which again is an indicator. I'm not saying it's a commitment, but given what M&M has listed, we have listed, we will have clear arm's length transactions between the 2 companies. But both of these are indicators that the group is supportive of the business. I think the capital allocation discipline that has been brought in, in the group over the last 12 to 18 months is a good thing. I don't shy away from being asked to be accountable for return on equity, and I'm sure all of you would want me to be accountable for that as well. So I try see that as a positive. It kind of keeps us honest, keeps us focused on doing the right things for the business and making sure we deploy capital wisely. At this stage, we've not had a capital need that we've gone back to the group, asking them to put more capital in right now. I think we are quite comfortable from a balance sheet perspective. If we are able to deliver on the hurdles that the group has set out, Anish has been very explicit on that in the public domain. He wants companies to track to an 18% ROE. I don't see any reason why the group would not be supportive.

Excellent. Yes, I should perhaps have asked you first. I hope everybody is all right in the Mahindra Life family, in with regard to COVID.

Touch wood, most are safe. But as I mentioned at the start of the call, we did lose one of our colleagues at the start of this year to COVID, a deep personal setback for me as well as the team.

Sorry, your voice is gone.

Can you hear me now?

Yes. Now I can. Sorry, you said you're saying about a colleague, and I didn't get the rest of it.

Yes. No, we lost a colleague at the start of this week and that was a pretty deep personal setback and for our team as well.

My condolences. That's all I have to ask.

Thank you.

The next question is from the line of Manish Agrawal from JM Financial Service.

So I was just looking at the page for 4Q FY '20 and '21. So there seems to be decline this quarter. So any particular reason? Is it because of timing of project launches or something like that?

Sorry, Manish, I wasn't able to hear you at the start of your question. This is -- what are you comparing from FY '20?

So this quarter, 4Q FY '21 compared to 4Q FY '20. So there seems to have declined this quarter. So is it mainly because due to delay in project launches? So this year, you might have launched in March, last year it was earlier, something like that? Or any particular reason?

Which parameter are you looking at when you say these?

Sales value. Sales value.

Sales value, look, I think for -- in our business, as you know, it's fairly lumpy from a launch perspective. Overall, this year, our fourth quarter has been a fantastic quarter for us. Half our annual sales have been done in the fourth quarter. If I were to try and understand the reasons, fourth quarter last year, we had the Kalyan sales getting logged in. Fourth quarter this year, we have Tathawade and Alcove as new projects, which were smaller than Kalyan so that could be one of the reasons. But our sustenance sales has been very strong right through the year and also in Q4. So that has partially offset that.

Okay. Understood. And secondly, in terms of land inventory, which you've given in the presentation for forthcoming projects. So it seems that you have reassessed that. So this quarter, the presentation shows 5.74 million square feet while earlier presentations used to report 10.44 million square feet. So any particular reason? And which land parcel is this specifically?

So this is in our Mahindra World City, Chennai. And our thinking is that we will repurpose some of that land for industrial because we've run out of industrial land in Mahindra World City, Chennai, and the demand continues to be strong.

Okay. And what sort of realizations can you get this? So this will be normal, the realizations which you're currently getting around INR 3.5 crore per acre. So it will be converting to that kind of plan?

Yes. The expectation is at or higher than that.

Okay. And any broad metric as to how much acres it can be converted into? So this was in 2 million square feet?

My understanding is it roughly [ 50 acres ] made available still converted into industry. And I can be flexible about that, to be honest. So as the demand picks up, we can choose 1 asset class or the other in that land parcel.

And specifically, last question is related to Ahmedabad. So are we planning to launch it anytime soon? And what sort of demand should we expect in terms of leasing acres?

Yes. So we are -- again, we have, in fact, with a reasonable pipeline of inquiries there. So hopefully, within this financial year, we should have our anchor clients and more than just our anchor clients, probably 2 or 3 clients is the target for this financial year. From an infrastructure readiness perspective, it's fantastically developed the access to the highway is well clear. So it's well-located and great infrastructure.

And realizations would be closer to Jaipur or Chennai?

Realizations will be similar to origination.

The next question is from the line of Susmit Patodia from Motilal Oswal Asset Management.

Accept our condolences. Sorry for the loss. My first question is your -- if I look at the cash flow statement, your spend on the land is INR 3.7 crores only, right? Is that correct for FY '21?

Susmit, I cannot hear you well.

The spend on the land in your cash flow statement shows at INR 3.7 crore.

So Sumit...

Are land investment actually form part of working capital movement in inventory? And to the extent, the expense are definitely in 3 digits. I just need to check it again exactly how much it is, but it's definitely much higher than INR 100 crores in total. Okay. Got it. And the second question is, you have put a water flow chart of the INR 2,500 crores estimated cash flow. This is net of costs that you've projected?

Yes.

Net of the -- it is Net of the construction cost, Susmit. So sales minus the construction and other direct costs, like approvals and all.

Got it. Got it. Also, the -- just -- this is the last question. Since most of your land payments may happen in FY '21, what is the planning on debt? Or will you just go the debt way? Or would you do further equity dilution?

Our experience in F '21 is there was this COVID. We do had slow pace of construction. But if you look at our collection number, those continues to be as strong as ever. What it means is that our ability to use the cash, which is internal accrual is very high. Second, just to give you a couple of example, our -- in MLD, our cost of borrowing right now is about -- average about 5.9% or 6%. And therefore, it's a question of optimizing between the 2, which is internal accruals and the borrowings. And the third point is, if there are opportunities, which we're evaluating actively right now is to create platforms. And whatever works out well is what we will do. And I just want to specifically call out and Arvind also highlighted, the plan or the focus is not only the next 3 quarters or 4 quarters, it's definitely midterm, which is, say, next 2 to 4 years.

The next question is from the line of Mahavir Mehta, an individual investor.

I would like to ask you 1 thing. In IC & IC, we have sold 27.8 acres in this quarter, how much profit we have earned on it and why there is no effect of it in consolidated profit and loss account? Second one, in 2019, we have launched 15 lakh square feet of project. Which are those projects and when they will be completed? Third question, at what EBITDA we are currently looking to buy land parcel. And last fourth -- for the last one, at what rate we are selling SEZ and DTA in Jaipur?

Vimal, do you want to take the first couple of questions?

Yes. So far as our profitability is concerned, by averaging on a blended basis, our profitability will be also contribution margins in our IC business will be upwards of 50%. And to that extent, if we have done a transaction of, say, INR 28 crores, INR 29 crore, we would have made about -- average realization would have been, say, INR 2.4 crore per acre, very rough numbers. INR 2.4 crores, INR 2.3 crores. And to that extent, 50% is the gross margin, which we make. Now why is it not reflecting the profitability is largely driven by two things. One is IND AS, which is you have to make the investments upfront, just to give you an example, the marketing, where you spend the money and you hope to get -- reap the benefits once you get into closer to completion of projects. The second is also COVID to some extent. There -- and we follow, as you know, very prudent accounting. There are instances where we have gone ahead and charged some of the interest costs, which in a normal year, we would have gone ahead and inventorized into the P&L. Arvind, anything else you one want to take?

No, that's it. Okay. In 2019, we have launched 15 lakh square feet of project. So it's almost 2 years. So when these projects will be completed? And which are those projects?

Sumit, do you have those information for 2019, I'm guessing is gross and...

So last year, in 2019, Mr. Mahavir Mehta, we reporting to 1.55 million square foot of projects that we have launched. These include Kalyan -- the large part of this 1.55 is the Kalyan, which is the 8 lakh square foot.

No. Last 2 -- last year 2019.

FY '19. Oh, FY '19.

I think it's Roots, Lakewoods and...

Yes, its Roots, Lakewoods and Centralis. These 3 projects were there in that year. So I think we, all these 3 projects are expected to complete between this fiscal -- coming this fiscal and next fiscal year.

Okay. Within 1 and 1.5 half year, right?

Yes, within these 2 fiscal.

Okay. And what EBITDA we are currently looking to buy land parcel, like 20%, 25%, 30%?

So we look at margins in excess of 20%. As I mentioned earlier, margins, PBT margin in excess of 20% and project IRRs are the high teens.

Okay. Okay, sir. And at what rate we are selling SEZ and DTA in Jaipur, like SEZ that must be actually much more costlier than DTA, right?

Yes, that's right. So effectively, right now, see, one way to look at it is the same World City. Right now because of certain tax incentives and benefits which are not there and there is a bit of confusion, we are seeing our Domestic Tariff Area was better at about maybe INR 2.7 crore versus the SEZ, which is, I think, 20%, 25% lower or may slightly -- maybe 30% lower as of now. But our sense is that once the overall economy picks up, there'll be demand which will come back for DTA as well as for SEZ realization, and therefore, the gap between the two should drop to [indiscernible] over the next 2 to 3 years,

The next question is from the line of Prem Khurana from an Anand Rathi Share & Stock Brokers Limited.

Most of my questions have already been answered just 2 from my side. So one was on this development. So basically, what I want to understand was, I mean, whenever you kind of get into a transaction or evaluating a transaction. So do you go with a preset mind as to and which product category are you kind of evaluating this land parcel for? And why I ask this is essentially because I think when we bought Tathawade we were under the impression or we were made to believe that it would come at a mid-premium, but then now it has been launched as a Happinest product. And so the idea was to try and understand how easy or difficult is it to kind of switch between products because the dynamics tend to be different, right? So Happinest would be more -- I mean, better sales velocity versus mid-premium, which would be better value product?

Yes, I think great question, Prem. So yes, at the evaluation stage, we do have a point of view around the positioning of the product. But as was the case that you pointed out in Tathawade, we are also flexible enough to take smart calls closer to the launch. In the case of Tathawade, when we reassessed the market, we felt that the more compact sizing and a smart product, which is essentially our Happinest sweet spot, would work better for that market, and the launch has proven us right on the time response here.

And sir, would it be possible to share the way your IRRs would have changed because of change in the product type? I mean when we entered into the transaction and the way the things are now? So I understand ROC would be higher for your the Happinest product because sales velocity is better, which is where revenue collections could slightly be faster, but there would be a situation wherein the margins could slightly be lower than what you would have been able to make with mid-premium. So possible to share how has IRR changed after this change in the product?

Yes, Prem, it would be safe for you to assume that given what you've heard me talk about over the last several calls and conversations, we are extremely IRR focused. So at no stage will we take a decision that will compromise IRR. Any changes that we make of the kind that we made in Tathawade, any tactical decisions we make will always be driven towards trying to get incremental IRR. So in this case as well, the whole thinking about repositioning the product, and we actually went back to the drawing board, redesigned it, got approval again was to improve the IRR. It is debatable whether the margins will be lower because the idea is to drive high early velocity but then recover margins over a period of time. And we've shown that in Kalyan, for example, where over the last -- since the launch over the last year, we've been able to take price up almost 8% in a market which was in lockdown and the pandemic and there was lots of commentary about distressed pricing in real estate, but we've actually taken price up by 8% [ in that market ].

Sir, second question was on the transaction that was done with our group entity wherein we're planning to buy this land parcel in Pune. And we have seen you do these kind of transactions at the group entities earlier as well. But for some reason, I mean, all of these transactions have been kind of outright, does it mean that the group is not open to JDAs or still as when we were still kind of making them understand that there will be beneficial to both of them as you get into a JV as well or it will be a little lower capital intensity, but they also stand to benefit from the development margins that you would be able to make on these land parcels?

Yes. Prem, honestly, you're perhaps reading too much into this. These have been small transactions. So the Pune transaction was 2.5 acres or so getting into the overhead hassle of a JDA for such a small transaction makes no sense. So as we get into some of the larger transactions, the JDA model is certainly on the table, both JDA as well as other constructs around that would certainly be on the table.

Sure. Okay. Sure. So just one last for me, sir. I think our net debt -- I mean, it's kind of bookkeeping only. Our net debt has gone up by almost INR 40-odd crores during the quarter sequentially. [indiscernible] essentially because of Kanakpura transaction because, and as you mentioned in your opening remarks that you still to make the payment because it is linked to approval. And the fact that this year, we've done seriously go in terms of inventory liquidation, we saw -- I mean we've completely exhausted the entire inventory of Luminare, which was a higher value, wherein the costs were already taken care of. We have sold wind chimes as well. I was under the impression the cash flow should ideally be better than generation to have been ideally better than what we've been able to kind of manage. So does it mean, I mean, there are some projects or there are some delays in milestone payments or do you have extended additional time lines to your customers to make the payment because of COVID issues?

Yes. So I'll give you a couple of numbers, which is at overall all entities, simple consolidation level. 31st March, 2020, we had cash in hand of about -- roughly about INR 220 crores, INR 225 crores. March 31, '21, that cash in hand went up by about INR 20 crores, INR 25 crores to roughly say INR 240, INR 250. And therefore, overall cash availability in our sector entities has gone up. What it means is that we are holding on to the cash and hoping that we'll be able to deploy that cash much efficiently. And all these numbers are including partner shares and all of that. That's one. Second, more specifically, we did had some good negotiations with the financial institutions in quarter 4. And therefore, we partially funded the Kanakpura deal through that because once you have completed the negotiations opened up the line, you're expected to at least start using that line. And that was the expected and why we used it. [ And we are ] used to that. But overall cash flow, our internal accruals continues to be extremely good. And one of the sort of best year we have seen in COVID. So no worries at all on that front.

Sure. How much was construction spend during the quarter and the full year? I mean if you could share that number, please?

Roughly, we would have done about INR 250 crores and INR 260 crores in the last 7, 8 months. I'm not be able to tell you the quarter number.

I will take it offline.

The next question is from the line of V.P. Rajesh from Banyan Capital Advisors.

My condolences for the loss of your team member. My question was Slide #15, where we are saying that we have 4.71 million square foot available for launch. How much of that is expected to be in the current financial year?

Sorry, can you say that again? I missed the question.

So in Slide 15, we have indicated that the forthcoming launch here is 4.7 million square foot. So my question is how much of that is expected to come in this financial year?

It will have -- Sumit, you want to take that?

So -- this is Sumit here. I think of this 4.71 million square foot, we are expecting to launch Luminare project, we will open up further phases of Tathawade. We are planning to open up further phases in Alcove during this fiscal. And also in terms of new projects, Kanakpura and MWC Residential, these are the projects we are expecting to launch. Now out of this total area, how much we will open as Phase 1, Phase 2 is something that will be a tactical decision closer to the launch based on the market trading information and feedback. But these are the typical projects we are planning to launch this fiscal. Now Arvind also highlighted that we are -- we have done a few deals recently, like a Kalyan deal as well as the Pune deal with the M&M. The -- working is to -- we are planning -- working towards getting these projects also ready for launch this year and considering the market situation, we will also may come up in the market this year itself. I think in all fairness, out of 4.7 million probably more than 3 million, 3.5 million square foot worth of projects at an aggregate level are expected to come up in the current year. Now how much area will we open up will, as I said, is a tactical decision closer to the launch.

Okay. Okay. Okay. And by when would you have a sense of that, right, that 4.71 million plus whatever you add in terms of your land bank, that -- so out of that, there'll be, let's say, 2 million. Because this year, I think you did about, if I'm not mistaken, I think I saw that number somewhere.

About 1 million square foot of launch.

About 1 million, correct, right. So about 1 million. So I'm just trying to ballpark against that 1 million that we only were working for 2 quarters. What is the likelihood of -- should we assume it will be definitely north of 2? Or should we assume it will be closer to 3? I'm just trying to get a directional understanding of what to think about.

Arvind, do you want to take that?

Yes. My sense is certainly not at 2 would be a very safe assumption. Just to explain why we're not putting a very firm number to it at this stage. So let me take that so here's as an example. Pune was a 1 million square feet project. We've registered the first phase, which is roughly half of that, which is 5 lakh square feet. But our launch was for the -- for about 3.5 lakh square feet over that 5 lakh square feet. And those are very in the moment decisions depending on what is the competitive activity, what is the window of opportunity we see. In Tathawade case, we knew that the stamp duty exemption is getting open by end of March. So we wanted to bring in inventory that most of which will get sold before the end of March so that customers can get this stamp duty benefit. So there are many factors that play into that in terms of just what inventory really is at a particular launch, but it would be very safe to say certainly 2 million plus should be brought to market this financial year.

Okay. And Arvind, my question on the demand side, you said it's very strong. I was just wondering now that the stamp duty benefits are out of the way for customers, what is the read of the situation now? Do you expect it to be coming down a little bit? What's your sense on the demand side?

Yes. So look, if it were a normal year and the second wave and lockdown had not happened, I would have certainly expected that in Maharashtra, Mumbai and Pune, April would have been a slow month because of the withdrawal of the 2% stamp duty benefit. The fact that there was lockdown, of course, accentuated that. But it would have anyway been slower than February and March. But I expect that by June also, things will recover. Again, in a "normal" environment, if nothing else has happened by -- these things typically, these shocks take 2 months to wind themselves down. Eventually, we must understand a house purchase is a multi-year decision. Families have typically been planning for it for 2 to 3 years. They started saving up for the initial payment, so a 2% change in price or total value is not going to sway their decision on whether to buy or not.

Okay. Okay. All right. And on the IC side, I was just wondering if the international travel is so minimal, are we just closing these deals online? Or how is it that happening that we are consummating these deals on the IC side?

Yes. So a combination, actually. So we have closed certain deals remotely with some of our clients in Taiwan in particular, but several clients have also been domestic clients who are either seeking expansion to some international or presence in India and seeking expansion and therefore, are able to take decisions locally, but also Indian companies who are setting up facilities. And I think that has been one of the -- as I said, in such a challenging environment for our team, to close these deals remotely. 6 months back, we were all wondering, can homes be sold online, and we showed that we can sell homes online with our Palghar launch, where it was entirely [ detached ]. The fact that we are also able to, in a limited way, but still able to sell industrial land online without them visiting the site is actually quite amazing.

The next question is from the line of Rohith Potti from Marshmallow Capital.

First, my condolences for you and the team for the loss of your colleague. My first question is on the 2 mid-premium projects that we launched in Mumbai, Vicino and Alcove. Given the tailwind and the stamp duty, are we happy with the sales that we have registered so far? Or has some of them being like some of it overflow into April and it was not registered for the previous quarter?

Look, when you ask a CEO, are you happy with sales, I can never be happy. I would always want more sales. So I think it's still under the circumstances, these are very different products, which attract an audience which is a bit more spread out geographically, different PIN codes in Mumbai. Alcove is a very targeted product that attracts, geographically, a very concentrated market. It's people generally who live within a few kilometers from that project site who are interested in buying there. So the velocities will inherently be different. I think Vicino has done more volumes over the year than Alcove only came in March. So it's premature to judge based on 1 month. We are seeing pretty good walk-ins on both the sites. I think Vicino has a longer track record. It's also further in its construction cycle, therefore, has a different set of demand dynamics playing there compared to Alcove. So not unhappy with either of them. Of course, I would want more sales in both.

Yes. That was helpful. My next question is on the slide. So it's on the management team. So over the last couple of quarters, you mentioned how -- I mean you're happy with the team that you've created, and we are set to scale to the next level and maybe beyond as well with the team that we have. But I just wanted to hear your thoughts on how you're incentivizing the team because if I -- in my observation is that most of them have come from -- I mean including yourself, have come from organizations which are much larger in scale in comparison to where Mahindra Lifespace is today. So how are we motivating and incentivizing them and aligning them with the shareholder return over the long term?

Yes. So I think there are two things. One, this is a team that has come together with a certain sense of purpose. And that is always the starting point to create a leadership team and then to create the culture down the organization. In almost no case have I had to attract these people by throwing a lot of money at them. In many cases, they've actually taken slight haircuts in compensation to come and join us because they believe in the cause that we are trying to build. This is a company that is trying to seek its space, its legitimate space, its rightful space in an industry which is rapidly consolidating and formalizing. And I think many senior professionals are excited by that phase of the journey that we are on and what we are seeking to create. But that being said, I mean, that alone is not enough. And as you rightly said, there needs to be a financial incentivization. So we do have a stock plan, which the senior leadership team is part of where their incentives are very clearly linked to share price performance.

Understood, sir. That was helpful. My last question is again, on the medium-term target that you have mentioned in this call and the previous calls, internally, is there anything that you think that needs to be done? Or is there anything that more that needs to be done for us to reach the target or the only hurdles we think that can come are external, and internally we are all set to meet that goal?

No, no, it would be foolish of me to believe that everything is hunky dory. I think there's a lot of work for us to do internally as well to be able to scale up and deliver year-on-year, 4 million to 5 million square feet of both sales as well as delivery requires us to invest in capabilities, invest in systems, processes, teams, all of that. So that is not a story that is behind us. That is still a story that consumes a lot of my time.

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

My question was you highlighted about the residential targets, I mean you were sticking to it. But what about the IC business. So by FY '25, how do you see the leasing momentum moving up there? We are already having about 2,000 acres plus of inventory with our -- this is unleased. So from the current rate, if we take the fourth quarter benchmark over 25, 26 acres of leasing. So how do you see it ramping up annually in FY '25.

Look, I think great question. Again, by FY '25, in the IC business, we need to be at INR 500 crores plus of annual leasing business, leasing revenue. I think that's very clear to us, both from a opportunity perspective and a supply perspective given the land we have and the quality of the land and infrastructure. Anything lower than that would be a shame.

So about 200 acres annually. So that is what your targeting. And then this is achievable in like some '23 or like what is the targeted number?

Similar time frame, '25.

Okay, '25. We have seen in Pune that area has gone up from 400 acres to 500 acres. So there has been an addition during this quarter there?

Which you're talking about, the Pune...

Industrial, yes. That 400 acres is now about 500 acres.

Yes. So the first phase there is going to be about 500 acres. And I think it's always been in that range. As we get more clarity on the availability of land and the [ integrity ], those numbers get revised. So now we have a line of sight to doing a contiguous 500-acre space.

Okay. And when do we launch it, I mean the time line of when do we bring it to the market, and how much of the pending investments should be done for payments -- land payments to be done here?

The pending investments are minimal. A lot of it has already been incurred and the cost of acquisition is quite low. I expect this to come to market in about 2 years' time. So this year, we will stitch up most of that for a phase of land and the access, et cetera, and then go into master planning and launch. So I would say, in 2 years' time is when it will realistically get launched to the market.

Any update on the [ Goa ] land bundle now, sir, because I think we were earlier targeting FY '23 launch. So are we on target there? So if you can update us on what's a status of that project?

Yes. Same as what I mentioned last year -- last quarter. Progress continues to be steady, and we are on target to launch that in FY '21.

Just one question on the Mahindra plant which you acquired. So typically, when there is this kind of transaction. So how does the talks get initiated? So how do you go about doing it? And are there any other land parcels being targeted for this year with the group? Any large land bank that you will buy out or enter into some JV. So some visibility there, you can provide us? And even if you can cover the [indiscernible] as well?

Yes. look, we are in constant touch with M&M on their various land parcels and when they seek to monetize those. So as [indiscernible] in a sense, we have visibility into the pipeline. Given they're a listed company, as I mentioned earlier, we do need to [Technical Difficulty]

Arvind, we are not able to hear you.

[Operator Instructions] Ladies and gentlemen, please stay connected while we rejoin Arvind Subramanian to the call.

Sorry. I got cut off. Yes. Okay. Sorry, Parikshit. So I don't know where I got dropped off. I was saying with M&M, we are in constant dialogue. So we understand the pipeline of land and when they would seek to monetize several land assets that they have. But that being said, as I clarified at the start of the call, they are a listed company, we are a listed company. We do need to ensure that all of these transactions are done in announcement manner with requisite care taken for related party issues, which is very important to both companies and to the group from a governance perspective.

Okay. The last question on this -- your target. So I think in media interview you said that INR 2,500 crores and INR 5,000 crores. So even in the call, you said it to INR 2,500 crores is what you're looking at. So it looks like FY '25 looks to be more a very conservative target of nearing this INR 2,500 crores. So I can cleanly see from your pipeline and even on your [ BD ] initiative. So do you think is a conservative guidance, and we can get that faster?

Well, tough to say. Let's see this year and next year play out. This is a business where I have learned over the years that one shouldn't get ahead of oneself. So let our actions speak louder than our statements.

The next question is from the line of Arpit Ranka from Cowal Investments.

So I just want to understand how well exit we are to kind of protect our profitability across [ site ] sales? You mentioned we underwrite projects typically in early '20 for operating margins. And we also aspire to sell as much as possible at the launch in a way, right? So what I mean to understand, let's say, the 3-, 4-year project cycles, 50% is, hypothetically, say land parcel, which is kind of locked in. But the other 50% is open to inflationary escalation, which we are taking currently. What if they sustain, let's say, during the 3, 4 years, and we've already locked in the customers, but the cost side is still open to negotiations with contractors and all? So even a 20% escalation here to create and eat away into our potential margins. So how do we ensure that we are able to protect our profitability? And I think this applies to industry as a whole launches, but I'd love to hear your thoughts on this.

So, look, I think your question is very pertinent. This is a business that has changed in its economic profile over the last 5 to 10 years. We used to be a very high-margin business. It's now a moderate margin, and it is for most of the organized players, we are running it as almost like a manufacturing factory. That's one of the reasons why I have mentioned in earlier calls and conversations that we don't want to get into very large land parcels which are multi-phase, takes you a decade to monetize, et cetera. We want to get in and out of project quickly within 4 to 5 years on a turnaround, exited. And if necessary, if we find the market attractive, we'll buy a second land parcel in the same market, just like we have done in Kalyan. So that's one strategy to kind of contain the exposure so that we don't get locked into long cycles which are unpredictable and expose us to a lot of risk. The second is, as you rightly said, as costs escalate, one has to go back to the drawing board and we do product, we do a lot of value engineering. So we have built up this capability within the company to continuously sharpen our pencil from a cost evaluation perspective. Even with the same design, how do we value engineer it so that we can shave out 50 percentage points of cost is a constant endeavor and a constant challenge that we give [ each time ].

Okay. That's helpful. So one final question on -- earlier in the call, in your commentary mentioned that on IC & IC, one of the operations like 2025 is to kind of bring out the hidden value, or something like that. Now what do you mean by that? Like what -- of course, one is the growth side of it and but structurally, do you see that that's also part of your aspiration for 2025 for the business? Because I think over the last 15 years, the ROEs for this segment has been at best low teens. It's certainly not around anywhere close to 18% or something, and that's unlikely changed as [indiscernible]. How are you thinking about it beyond just the growth aspect of this, which we may benefit over next year?

Yes. Look, I think you're absolutely right. Over the last 10 to 15 years, this business has been challenging from an ROE perspective. But for all the reasons I mentioned earlier, with the macro climate, the global supply chain realignment, et cetera, I do believe strongly that this business will also have its moment in the sun over the next few years. And we want to be ready for that in all possible aspects. I think we are ready from an infrastructure readiness and site readiness perspective. What we do need to work on and beef up is our go-to-market in this business. And how do we cast our net wider, be much more relevant to customers with the kind of offerings we have, do much more than this land deal business to lay around a bunch of value-added services and property which creates a real constrain, those are all areas that we are working on.

Okay. So is this fair to understand that significant equity is unlikely to be committed to this space and embark on another 10-, 15-year cycle? Or do you think that there's also a possibility that exist?

At this stage, I don't think we have significant equity outlays that we have in this housing for this business. We think the investment cycle is behind us, and we'll need to now ride the value creation.

Ladies and gentlemen, I'll now hand the conference over to Mr. Arvind Subramanian for closing comments.

Thank you, Nirav. Thank you to all of you for your participation and patience and the rigorous discussions we've had. Just to round up, as I said at the start, 3 areas that we are focused on and are committed to deliver to our promise. One, on the residential business, making sure that we get to that first milestone of INR 2,500 crores sales by 2025. We think we are in a perfect storm where we have favorable industry realignment happening around us, and that should enable us to do that with -- and to be able to do that in a sustainable way, so that after INR 2,500 crores we can go to then INR 4,000 crores, then INR 5,000 crores, et cetera. And the IC & IC business, where, as I said, the investment cycle is behind us. We believe the future is about how do we create significant value on top of the pioneering investments that we make. With that, let me, once again, thank you and request all of you to stay safe and stable. These are extremely challenging times, and I wish all of you and our families the best of health.

Thank you very much. On behalf of Mahindra Lifespace Developers Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.