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

Good morning, ladies and gentlemen. Welcome to Mahindra Lifespace Developers Limited Q3 and 9M FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Arvind Subramanian, MD and CEO from Mahindra Lifespace Developers Limited. Thank you, and over to you, sir.

Thank you, Lizan. Good morning, everyone, and welcome to our quarter 3 FY '23 earnings call. I'd like to thank all of you for participating in this conference call. A reminder, once again that, as you know, many of our key operating entities from the residential business like Mahindra Homes and Mahindra Happinest, as well as from our IC & IC business like Mahindra World City Developers Limited, Mahindra World City Jaipur Limited and Mahindra Integrated Park Chennai Limited are not consolidated on a line-by-line basis. I'd like to take you through some of the highlights for the quarter and the year and the year so far, the 9 months of the year. Let me start with the residential business. We've had a strong quarter with about INR 451 crores of presales, bringing us to INR 1,452 crores for the 9 months. You would remember that the full year FY '22 was INR 1,028 crores and the corresponding 9-month period in [ FY '21 INR 709 ] crores. So on a like-to-like basis, it's 100% growth. This has come on the back of 4 launches. We launched a new project, Mahindra Citadel in Pimpri in Pune. This was the land that was acquired in April, and we launched it in November. So within 7 months, we've been able to get the designs completed, approvals in place and been able to launch it to the market. We also launched the second phase of Mahindra Eden in Kanakpura in Bangalore. Again, the first phase was launched in Q1 of the financial year, received an outstanding response. And that encouraged us to bring forward the second phase by almost a year. It was originally slated to be launched in the next financial year. But given the response to the first phase, we brought it forward. We also increased prices quite significantly by almost 14%, and even at those higher prices, we've seen an excellent response in Mahindra Eden. We did a formal launch of Mahindra Happinest Kalyan 2 . This is a project that was prelaunched in February last year. The main launch happened in December, and again, we've seen a good response there. And the fourth project that was launched was the second phase of Mahindra Happinest at Mahindra World City, Chennai. Again, very successful first phase, which was launched a year back, 100% sold at that stage. We brought the second phase in -- towards the end of Q3. Once again took the price up quite significantly, more than a 20% increase in price and have brought it to market. In the coming quarter, we expect to launch 2 new projects, new activations, the second phase of Mahindra Nestalgia and a plotted development in Mahindra World City Chennai. A lot of our management, time and effort this quarter is going to be on preparing for new launches for the next year, particularly for the first half of next year, we would like to bring Kandivali project to market in the first half of the next financial year. We would also like to do a full-fledged launch of Mahindra Citadel. What we did in Q3 was a prelaunch, but we'll do the main launch in H1 of next financial year. Within H1 of next financial year, we are also bringing -- intending to bring our new acquisition and Hosur Road, which we had announced last month to market. And we'll be looking at later in that year, bringing both the Dahisar project as well as the Santacruz redevelopment project that we had announced to market as well. So we are looking at a busy FY '24 from a new launch perspective. Turning my attention to business development for the residential business. As you would have seen, we've announced 2 new transactions in January. One was in Bangalore of Hosur Road and the second was a society redevelopment project in Santacruz. Both of these are very attractive new opportunities for us. Bangalore is a market that we continue to build a presence in and society redevelopment, as we had discussed, is an area that we have been keenly pursuing for almost a year. So it's very heartening to see our first breakthrough in the society redevelopment space. We are very excited about the prospects and opportunities in terms of bringing in premium products in fully built-out neighborhoods in the city of Mumbai. And hopefully, with this win under our belt, it should open the doors to many more wins in the quarters to come. Our overall BD pipeline, last -- in the last call, we had talked about pursuing a pipeline at various stages of maturity of about -- in aggregating about INR 5,000 crores of GDV. Out of that, around INR 1,000 crores has got converted. Roughly INR 1,500 crores has either been dropped or we've lost, and we've added back about INR 3,000 crores of new deals in the pipeline. So today, we are working on a pipeline of about INR 5,500 crores. Again, these are in various stages of maturity. And we are hoping that a reasonable proportion of these will get converted in the next 2 to 3 quarters. In this last quarter, we've also completed the conveyance of the Kandivali land, which we purchased from M&M as well as our planned 60 plus acres of land at Thane of Bunder Road. As I mentioned, we will -- we are working towards bringing Kandivali to market in H1 of the next financial year. And Thane, we continue to be on track to bring it into the market in the early part of FY '25. Turning our attention to the industrial business. In the quarter, we did INR 69 crores of industrial leasing. It's great to see the pickup in Origins, Chennai and Mahindra World City, Chennai. The last several quarters, much of our leasing has happened in Jaipur, but I have been mentioning that we've had a nice pipeline building up in our 2 Chennai past as well. And it's good to see some of those deals coming to fruition in the last quarter. We continue to have a very active pipeline. And are looking at roughly 50 acres of advanced pipeline to be converted over the next 2 quarters. The INR 69 crores of leasing in Q3 takes our year-to-date leasing to INR 255 crores, and this compares to INR 297 crores for the full FY '22. So again, we're looking at a strong growth momentum in the Industrial business as well. Let me turn it over to Vimal to take you through the financial highlights.

Thank you, Arvind, and good morning, everyone. Moving on to financial performance for Q3 F '23. Here are the key points. The consolidated total income stood at INR 198 crores against INR 74 crores in Q3 FY '22. The consolidated EBITDA, which includes other income as well as share of profit from JV stood at a profit of INR 5.5 crores against a profit of INR 20 crores in Q3 F '22. The consolidated PAT after noncontrolling interest stood at INR 33 crores as against a profit of INR 25 crores in Q3 F '22. Your company has debt of to INR 280 crores at a consolidated level, while cash in hand and bank balance was about INR 228 crores. The cost of debt is 7.76% on a consolidated basis. [indiscernible] cost was also almost similar at 7.72%. These are the key highlights on the financial front. I now request if the floor can be opened for questions, please.

Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Parikshit Kandpal from HDFC Securities.

Congratulations on business development and strong presales for the 9 months and the third quarter. First question is on the business development pipeline. Now I wanted to understand that typically you said this quarter, we have added INR 30 billion of new -- INR 3,000 crores of new BD pipeline. So what is the time line of closure of this INR 3,000 crores of -- typically how much will be the closure time line where take some decision on this?

So typically, I would say 2 quarters is what we would see as the maturity time line for this pipeline. So between this quarter and next quarter whatever gets converted. Our experience is it gets converted within 2 quarters then -- if it doesn't get converted in 2 quarters, it gets dropped.

Now coming back to the last quarter, you had INR 5,000 crores of BD, you said INR 1,000 crores got converted, INR 1,500 crores got dropped and INR 2,500 gets carried over to this quarter. So do you expect it to close by whatever decision-making happens and happens by this quarter end on that INR 2,500 crores?

Yes, a lot of it should either one way either get converted or dropped by the end of this quarter.

Okay. So if you can also give a breakup of this INR 5,500 crores of BD in terms of JDA, JVs and redevelopment and also geography like Pune, [indiscernible] and Bangalore?

Yes. So roughly, rough split about INR 2,500 crores in Mumbai, INR 2,000 crores in Pune, INR 1,000 crores in Bangalore. And outright, it is about -- out of that INR 5,500 crores, roughly INR 3,500 crores is outright, INR 1,000 crores is JDA and another INR 1,000 crores is between redevelopment and plotted.

Question on the BD addition over the last 3 years. So we have added INR 3,800 crores in FY '22 and now financial year-to-date, we have added INR 2,600 crores. So what will be the total value of the land acquisition cost of this entire INR 3,800 crore plus INR 2,600 crore. So if someone can answer that.

The acquisition costs outlined for the INR 1,300 crores plus INR 2,600 crores.

Yes, INR 6,400 crores, which we have added.

An update on that, Parikshit, you may have picked it up in our release yesterday. This year, Pimpri land that we acquired to enhance development potential there. So the value of GDV value has gone up from INR 1,700 crores to INR 2,300 crores.

So another -- you added to this year's number, right? INR 1,700 crores to INR 2,300 crores is roughly about INR 500 crores, sir. The INR 2,600 crores become INR 3,100 crores now. So INR 31 crores -- so roughly INR 5,900 crores in the last 2 year's GDV addition. So what will be the land acquisition costs, hard costs, which will be incurred and how much has been paid until now?

So overall operation, the way it will operate and for example, it has got [indiscernible] where the payment is staggered. At an overall level, what has been assumed, if it's not a JD or a redevelopment, usually the cost will vary between 15% to about 23%, 24%, depending on the geography in which we are operating. That's what I will, sort of, stay with so far as the [ accessory ] numbers are [ separate ].

How much of this will be like paid off? What is the pending cost on this GDV you have to rewrite incurred from the balance sheet?

We would have incurred almost about INR 400 crores in the last 9 months.

And what is pending to be incurred on these?

Almost similar.

Okay. And how are you going to fund it, Vimal? How do you look at funding this?

The 2 things. So far as operating cash flows are concerned, the company continues to be fairly robust in terms of collections and overall cash flows. We are running ahead of our plans in that sense. That's one. The second important point is that the balance sheet, as you know, is completely sort of unleveraged. And to that extent, there will be long-term borrowing, et cetera, which we will start seeing.

Last question to Arvind. You had the Alibaug plotted land. So just wondering what's response there and how you're planning of doing the Chennai One and WC land plotted. So what's your outlook on overall project development as a overall strategy in the GDV? So do you see this can become big in the coming years? Because with Chennai, you are seeing a depleting [indiscernible], I mean industrial not much inventory is left [ so resi ] is also coming to their end. So how do feel the Chennai market where started up it's part of your business, so how do you see that play out for the residential piece? From the project side, if you can sort of help us understand how the product [indiscernible].

Sure. So Alibaug and Chennai very different. While both are plotted, I mean Alibaug is positioned at the premium end of the spectrum, and Chennai will be a mid-market, plotted market. I'm quite hopeful that we will see success in plotted development. Many of our peers have made attractive successful business in plotted. So I'm hopeful that we will also see similar traction. The Chennai one that we are launching this quarter will be the first and hopefully will be followed up by more such launches. We're also looking at new business development in the [indiscernible] space, particularly in Bangalore and Pune.

We move to the next question that is from the line of Himanshu Upadhyay from o3 Capital.

Congrats on good set of results. And clearly, the visibility is now much more there of business operations improving. I have a question on...

Sorry Mr. Upadhyay, sir, can you use the handset mode while speaking and not the speaker phone? It's causing a lot of disturbance.

I'm on handset only. Is it clear now?

A little better. Please proceed.

Yes, congrats on good set of numbers, and it becomes much more clearer the way the company is moving ahead and visibility is there. I have a question on the employee remuneration and benefits, okay? If we look at the 9 months, and even the quarterly, the employee remuneration and benefits is down around 6% to 7%, okay? So has there been some cost rationalization? Or there was some one-off event? Or can you just give an idea?

Yes. So overall, a couple of things, Himanshu. One is that as we are expanding the number of projects on which we are doing the construction, we do follow a consistent accounting policy of inventorizing debt cost. And that is 1 key aspect. The second one really is that what you are possibly seeing is NDS accounted cost, and to that extent there are costs which are at JV level also which are targeting incurred. At an aggregate level, if you look at consistently in terms of remuneration increase, you'll usually see about 10%, 11% of increase year-on-year on a decent growth trajectory.

And Himanshu we're actually building the organization steadily because as we are growing the business, we are building capacity as well as capability. So there is no manpower rationalization. If anything, we are investing in talent. We believe that's going to be one of our key advantages.

No, I agree because we see last revenue in 9 months what we did was INR 253 crores, including income ir if I exclude other income, INR 231 crores, and in these 9 months, it is INR 351 crores. But the employee remuneration has moved from INR 66 crores to INR 61 crores, okay? So that was a thing and the question was even if when my revenue is increasing, my employee remuneration has fallen by 6%, 7%.

Yes. So as I said, 2 things which are not visible in the numbers, which you quoted. One is the inventorization, for example, Bangalore is a market where the project got launched, Phase 2 got opened up, is leading to higher inventorization in that particular project. And second is the cost allocations, which we do across our projects and across entities. There's a bit of overall optimizations also we would have done in terms of taxabilities from a structuring point of view. In terms of headcount, if you look at annual report, the account would have gone up, levels would have improved and the increments, et cetera, as I have mentioned, have been decent.

Okay. Okay. And see, any time lines for Ahmedabad launch, means the -- what we had or we were looking for a partner for quite some time now. So what is the progress on that Ahmedabad launch?

So continues to be an area which is work in process. Looking, as we had mentioned in the last couple of calls, for the right anchor to create location. Still don't have headway on that.

And this year, Murud, Raigad, 1,291 acres, okay? Is it -- I mean we were going to develop with something like government project? Was that -- is it that land? Or what is this project?

So we have 1,300 acres in Murud. And now interestingly, we see 2 axes of growth there. One is the second home market, which from Alibaug will sequentially expand to Kashid and then to Murud. And the second is this land is also in the inter end of the Dighi Port. And Dighi Port is getting expanded, and a lot of investment is coming into that area from an industrial perspective. So both of these are opportunities that we are evaluating quite closely and some combination of that is what we will eventually develop Murud for is the hypothesis, Himanshu.

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

I have couple of questions.

[indiscernible]

Okay. Is it better now?

So sorry.

Okay. I'll come back in the queue then.

The next question is from the line of Pritesh Sheth from Motilal Oswal.

So first question is on the projects that slipped out. Obviously, you did well in terms of business development and added a couple of projects but any specific reason you can highlight on where did we missed out on those projects? Is it just competition and the pricing that was offered? Or just any comment on that.

Yes. So largely competitive dynamics. So look, in any such pipeline, we will have a win-loss ratio. And we lost one society redevelopment project, we won one. So it was kind of a 50-50 in that space. And there was one other project as well, which got dropped because of some concerns on the diligence front.

Okay. Okay. Got it. And second on the Kalyan 2, which we relaunched. We still see not much ramp up in terms of sales but there might be some bookings that would have slipped over to Q4. But are you overall now happier with the kind of response that we have got for the project? And also, I think I noticed even we have a higher area available for development in Kalyan 2. So just comments on both.

Yes. So look, as the CEO of the business, I'm never happy until it is 100% sold out, right? But that being said, I think there's been good traction in this launch. We are -- I must kind of openly state that we are starting to see some construction of demand in that segment of the market. That's a 40 lakh kind of segment. That being said, we've got a good response to this launch. You will see the numbers coming through in Q4. This was launched in December. So much of the bookings will come through in Q4.

Got it. Got it. And in terms of launches, while we have highlighted about the new project launches that can happen in FY '24, that include Dahisar, Hosur and also the redevelopment one. I'm not sure if you also mentioned candidly. But apart from that, any phase launches that are planned in FY '24, maybe early part of the second half?

So as I said, Mahindra Citadel, which we launched in November, December that the main launch -- what we launched in November, December was a prelaunch. And we will have the main launch in Q1 or Q2 or Q1 of next year. Nestalgia, as I mentioned, the second phase is getting launched in this quarter. So again, you'll see some of that getting logged this quarter and some of it next quarter. So those are the new phases. Kandivali, as I mentioned, is certainly on track for each one of next financial year.

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

Congratulations for good set of numbers. My first question was regarding the housing society redevelopment project. So if you can give a little more detail as to why is this business more interesting? Does it have higher IRR and how long does it take to get all the pre-work done to even start the construction. Just wanted to know a little bit more about this new business that we are taking on.

Yes. So a couple of things on that. One, the -- it gives you access to certain markets where otherwise it will be very hard to participate. So markets like the Western suburbs in Mumbai are fully built out. There's no vacant land available. So redevelopment is really the only opportunity to create a presence there. These also tend to be higher priced segment markets. So therefore, a stronger gross margin on these kinds of projects. In terms of time line, we are structuring these deals in a manner where a lot of our costs and investments start coming in only when the site is fully located when all the members have vacated their apartments. So therefore, the IRRs are also looking healthy. That being said, this is our first redevelopment project. I'm sure there will be learnings. We are actively looking at the experience that other developers have gone through and learning from those. But we will go through our own learning curve. But I do believe this is an attractive opportunity space, particularly with the Mahindra brand and the kind of trusted guidance with members of these societies. We automatically -- we've had lots of calls ever since we've announced our intent to be in redevelopment [indiscernible] This is the first win we've had in a long process, but play then sets the tone for many other.

So are you saying that by the -- between the announcement that you did this month or last month rather and the sign you have start working on the project, you are not really going to put any capital into it except some minor fees, et cetera, that you may have to pay for getting the land use change, et cetera. Is that the way to understand it?

Yes. So largely, what happens is, at this stage, there will be some diligence costs, legal costs, we will start doing design because that is important as we get into discussions with the members about their apartment allocations, et cetera. Those are the kinds of costs. So it's much more about service costs rather than any land or development costs. Those start kicking in only after the site is fully vacated.

Okay. Okay. And then just on the balance sheet side, you mentioned that you will start to think about the long-term debt. So any idea of what the size could be because, obviously, your cost of capital is very, very low and that's a big competitive advantage. So I was just curious like how much bet are you planning to put out the balance sheet?

Look, I think we'll hand this over to Vimal but in general, we will continue to be very prudent about leverage. But Vimal, if you want to share any guidance from what we're looking at.

So conceptually the same point. As in going by the land pipeline and assuming that you will have a 15 to 20%, 22% of land cost, if it's a greenfield acquisition, there will be upfront cash payout, which will be required, 2 sources, operating cash flow, up-streaming of cash from internal joint ventures, et cetera. And the third one will be the long-term borrowings. And all 3 right now are going all -- the first 2 streams which we are operating as well up-streaming of cash are going fairly strong. And the third one will be borrowing. Our debt equity right now is extremely low, and therefore, we don't have any challenges in terms of raising it at very, very competitive rates.

Right. But you don't have any particular figure in mind that you are about, what this term loan will look like?

So our going-in position, say, from, especially from a finance point of view, is that, that will never be the constraint so far as we are getting good land parcels we'll go ahead and invest.

In addition to what Vimal said about internal cash accruals from collections perspective as well as up-streaming from the JVs. We also have forward visibility on cash because of the strong presales. So many other projects, it's only a matter of time as long as construction progresses is there, the cash will come in. So in that sense, there's a lot more predictability on the next few quarters of cash flow as well.

And then talking about your GDV pipeline that you were discussing earlier? So what is typically your win ratio in these type of [ big joints ], not win ratio, but how much of that actually materializes in your experience over the last 2, 3 years?

Very hard to say, and it's early days. Calculating ratios on a small basis is fraught with risk. So I won't venture into talking about win ratios. But as -- when I think Parikshit asked this question, typically 2 quarters is what it takes for these deals to either convert or get dropped.

Right. I was just curious because you have had the experience for the last 2, 3 years now. So you would have some sense of how much are you going to convert into a potential pipeline versus then dropping off or whatever reason.

And look, 2 years back, we had said we want to do about INR 2,000 crores of annual GDP addition we are well above that. We will continue to build on top of that. So anywhere in the INR 3,000 crores to INR 4,000 crores range of annual GDV addition for the next year or 2, I think sets us up very well.

Okay. Great. That's all I have and all the best.

The next question is from the line of Prem Khurana from Anand Rathi Shares.

Congratulations on a good set of numbers this quarter. Sir, I mean the idea was to try and understand our business development activity, a little better, a portfolio augmentation side a little better. So when I look at the numbers, I mean essentially, over the last 2 years, we've done almost around 8-odd transactions with GDV potential in excess of INR 8,000 crores. But when I look at the split, so there are 2 projects, in Kandivali and Pimpri where in it is in excess of INR 2,000 crores each. So these 2 in itself are almost 60% if I include Dahisar, the three projects make up almost around 70% of the total potential that you have on books now or what you've been able to add over the last 2 years. So the idea was to try and understand. How do we earn and think about the sizing of these projects because I mean Kandivali and Pimpri seems that I'm going to create value over a longer period of time? I mean with each phase, you would want to raise prices and generate more value for the shareholders. And you have something like Kanakapura, some of these recent additions where it's around INR 400 crores, INR 500 crores quick churn kind of project. So do we go with any thought in mind that you want to have this kind of balance between quick churn and long-term value creation or it is as the opportunity comes and we evaluate and then we go ahead with the opportunity?

Great question, Prem. I think we had talked about this maybe 3 or 4 quarters back. I believe we would like to be in the, let's say, INR 500 crores to INR 1,000 crores GDV range for each of these projects. And particularly in cities like Bangalore and Pune, I think that's a nice sweet spot because it allows you to potentially launch in a single phase or 2 closely spaced phases, construct quickly and get out. And given our focus on IRR, it's important that the overall project schedule in terms of land acquisition to completion is kept as short as possible typically within 4 years, 4.5 years is what we target. That being said, as you rightly pointed out, there are strategic opportunities like Kandivali and Pimpri where we've taken a call to flex that upper limit. In the city of Mumbai, we will typically see deals which are north of INR 1,000 crores, just given the price points in the market and the kind of land supply-side dynamics that exist. In Pune, entry was potentially an exception at INR 2,000, now INR 2,400 crores, INR 2,300 crores GDV. Again, there, typically, we would do INR 500 crores, INR 700 crores kind of GDV transactions. But in certain strategic markets, Pimpri this is a market that we have had significant presence in. This is our fourth or fifth project in Pimpri. Similarly, we will look at other markets like Kharadi and Hinjawadi, et cetera, which are very important micro markets in Pune, where if the right opportunity comes across, we are open to looking at larger GDV transactions.

Sure, sure. And on the redevelopment side because now we have experienced dealing with these societies. So how is our experience with them in terms of timelines, let's say compared to dealing with land owners and individuals here, you're required to manage expectational number of people and the society would comprise a number of members and residents as well. So is it fair to assume that the converted timeline would be slightly longer for society versus the open plots or the JDAs that you do?

Significantly longer, not just slightly longer because you got your having to deal with is in a typical land transaction, you deal with one land owner or maybe a family, whether there's 2 or 3 partners or family members who are taking the decision, here you often have 100-plus members taking a joint decision. And it is a highly emotive decision, right? This is their house, they've lived in it for 20, 30 years. Potentially, this is second-generation living in the house. So it is not an easy decision to make in terms of which offer to go forward with, whether to redevelop at all, et cetera. So it tends to be a much more iterative process in the transaction that we won has been multiple rounds of discussions, multiple general body meetings that the society has gone through where we presented. And it's the same case in the one that we lost as well. So there's many reasons when a general body meeting is called for the decision not to be taken rather than for it to be taken. And one has to be patient and walk through that.

Sure. And just one last bookkeeping question from Vimal. In our presentation on Slide #33 which is segment performance. And when I look at the residential vertical, our net debt seems to be up around INR 120-odd crores sequentially. But when I try to kind of reconcile this with the kind of collections that we could have in this quarter and the construction spend that was incurred. There was a large gap. So why would we get to have this INR 120-odd crores of sequential jump in our net debt for the residential vertical. Consol is down, I understand, but in the residential vertical it seems to have gone up.

You see net debt has gone up versus last quarter.

Yes. So for the quarter, it's around INR 94 crore. And if you were to refer to last quarter presentation. It was...

Yes. The position you are seeing is 31 December position, right?

Yes, 31 December, versus 30th September sequentially INR 120 crores of rise.

Yes, that's right. So it's all sort of good is what I'll say. There are, obviously as Arvind mentioned, in our pipeline and therefore, there's funding requirement which should be there.

Okay. But can we...

This is all towards the land acquisition.

Okay. But the Kandivali payments is still not done, right? And it is always reflecting as a part of other financial liabilities, so which is why I was wondering if it was -- if there was any other payments that you would have made during the quarter.

Yes. So 2 things. One is that what you are seeing on the liability side is not a full liability because part of the accommodation has been paid out to group 1. Second is the Thane land conveyance happened last quarter. And towards that conveyance there were payouts, which we would have done to set authority, et cetera. So both of those were also done.

Sure. And INR 70 crores would have gone to the partner as well in the Mahindra Homes the buyback that they would have done. So that again would have impacted all those things right?

Absolutely. So as a data point, and this is not specifically your question, but I do just want to share this -- in the last 9 months, we have shared almost about INR 200 crores with external stakeholders, including, for example, the IFC, World Bank or Actis or other partners, which we have. So to that extent, INR 8000 crores indicate a robust cash flow, which we are experiencing in the last few quarters.

The next question is from the line of Pritesh Sheth from Motilal Oswal.

My question is on. I mean, on redevelopment. So while we are seeing not much competition in terms of outright land. But at the same time, redevelopment does sound a good opportunity even for smaller developers. So what kind of competition we have seeing in redevelopment, especially where you're targeting the group or a group society relevant rather than just one tower. So any comments on that?

So we see quite a lot of competition in the society redevelopment space as well. There are specialist players there, both very local players in particular neighborhoods who have built a strong reputation but also players at the city level who built a portfolio of redevelopment assets. And just like us, there are other developers who are dipping their toes and starting to embrace redevelopment who've traditionally not done the development. So we are seeing a full set of competition in redevelopment, which we also see in outright deals. We are not the only ones who are seeing this as an attractive opportunity. Many other leading developers are also pursuing this.

In terms of the projects we won in Santacruz, did we offer a better growth in terms of area? Or is it a brand which attracted the tenants to choose us as a resultant partner? Because I'm sure there would be competition for that project business.

So the way these typically play out, and I'm giving you a very general answer. There's often first a weeding out of developers that the society would like to do the deal with. So -- so that is kind of that technical qualification, if I can call it that, from a traditional procurement perspective. And then among that, there is then a pure commercial discussion that happens. So yes, in this situation, we did offer the best commercial terms. But we were also then in a short list, which comprised a peer group, which was very credible. So it's -- we're not then at that stage, competing with just any other developers.

Sure. Got it. And just if you can provide a split of the pipeline that we have right now around INR 5,500 crores out of that, how much is outright land or redevelopment and in particular, the cities that they are targeted?

Yes. I think Parikshit had asked this earlier. So just to reiterate, roughly INR 5,500 crores total split as 2,500 in Mumbai, 2,000 and Pune, 1,000 in Bangalore. And if I spread it by transaction type, roughly 3,500 of outright 1,000 of JDAs and 1,000 of redevelopment in plotted.

Sure. Got it. And just lastly, I don't know if I missed it down, but update on Thane, is it still FY '24 or spilled over to '25?

We've always said '25 -- early part of '25. So it stays there.

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

My question is that last year -- two years back, you have said INR 2,000 crores of GDV addition and INR 2,500 crores was field sales by '25. We've been doing 2x of that, but still I see on the slide, FY '25, INR 2,500 crores. So it should likely have gone up by 2x. So any thoughts there?

Yes. So look, as you kept pushing me and I start with that trend, we would certainly like to do better let land visibility build up a bit more and we can kind of update those [indiscernible] so INR 2,500 is, as I've always said, it is a step in the journey. If we achieve it before FY '25, great, I mean, it just means that the journey is well on its course. It was never intended to be a destination.

So second one is on the spill over of you said, did touch upon that there was some spill over of sales on December launches, which will get reflected in Q4. Between all these new launches which you did in this quarter, Pune, Bangalore and MMR. So how much would be the spill over deals which would have not got recorded under this quarter and maybe will just flip over from December to next quarter?

I think let's wait for this quarter to close, for those numbers to come out. But we've got good response to those launches, Citadel as well as Kalyan. I think Eden Phase 2, most of it has been recognized in the last quarter, there's spill over from last quarter to this quarter. Those are the 2 wins came in at about December. So there was some booking that happened last quarter and some will happen this quarter.

But in this INR 450 crores of sales, how much is the new launch contribution?

I don't have that on the top of mind.

Okay. Maybe I'll take it offline.

We can take it offline.

Yes. And just lastly on this question on the warehousing. So we had a start-up with Actis of 100 acres. So when do you start monetizing this land bank in Jaipur, which year it comes? And lastly, on that operating cash flow of 9 months. So post construction and other period costs follow have been a net operating cash flows for the 9 months.

Yes. So the Actis joint venture is building out nicely. We are in a phase where the company has been incorporated. We are building out the management team and hopefully, in the next 3 months, the key leadership team should be in place. And that's when we will start bringing the line -- the seed assets in as well as look at virgin assets, greenfield assets as well to build out the business. So over the next year or so, I think that business will start getting built out quite nicely. As you know, we are a minority partner in that. So we'll be largely playing kind of a Board and governance role rather than an operating role there in addition to providing the seed assets, Vimal you want to talk about operating cash flows?

Operating cash flows. So overall, for the first 9 months, primarily because of very solid action on the IC leasing side, which has been talked about of about INR [ 250.5 ] crores. Similarly on the collections and sales side. We had operating cash flow positive of about INR 450 crores in the first 9 months. And majority of this has been deployed either towards the acquisition of new land parcels or buying more development potential in the existing land parcels. Or towards payment of our existing stakeholders.

INR 450 crores is after construction cost and after period costs, employee costs and corporate overheads, and so post that is generated 450 crores of cash flows.

Number is after every operating cost line, including corporate overheads.

And pay out of partners. Does it include pay out to partners also which you mentioned about INR 208 crores?

The operating number and to that extent the financing or the investing activity are not included.

The next question is from the line of Ronald Siyoni from Sharekhan.

Congratulations in good numbers. My first question was the details of sales we have done over the last 2 years and say before that. What kind of movement you have seen in terms of the gross margin operating margin and return on capital and such. You know sales done before the 2 years and new sales, you know, over the trailing 2 years?

Mr. Siyoni, we are not able to hear you.

Yes. Ronald you are not clear at all.

Can you hear me now?

Yes, much better.

So first question was the sales booking which we have done over the trailing 2 years, and before 2 years. So what kind of margin trajectory you have seen before 2 years and last trailing 2 years in terms of operating margins and gross margins and return on capital employed? How we have evolved over the trailing 2 years, the new launches, which we have done?

Yes. So there are a couple of points here, and this is more like a summary of what we have been responding to in the last 4 quarters or so. In general, as the sales numbers first and then we get into the gross margin numbers. We were at about INR 700 crores per year till about F '21, and then last year was over INR 1,000 crores. And right now, closer to INR 1,500 crores as we speak. Now with every passing quarter, there are 2 things which we have done. One is a much stronger control on the cost, and that comes on the very active interventions we have got on the design side as well as costing sides to get our estimations much more accurate closer to reality so that we can ensure the realization -- the net realizations are much superior. And the last 2 launches, which we have done, we had usually done better than our guard rails which, for example, on the profitability side, all costs taken will be closer to about 18% or upwards. And this is about 4, 5 percentage points better than the old projects, which you just talked about now.

So 18% on the operating level, which was better by 4% to 5%, you mean to say?

Yes.

Okay. And second question was in terms of. What we have seen the rise in the interest cost. So have we kind of seen some flatness or sluggishness in the -- especially in the affordable housing side or in terms of footfalls or the closing of sales by customers. So what kind of interest rate impact have you seen, especially on the affordable project?

Yes. So Ronald, I covered this in my opening comments, we are seeing some constriction in demand on the affordable side, particularly less than INR 40 lakh kind of ticket size. A combination of higher mortgage rates and also inflation is starting to pinch affordability in that segment. That being said, it is still a robust market. So while the overall market might be kind of flat or declining compared to the mid-market, which is growing quite significantly. Within that, the stronger players are still seeing good traction.

Okay. And sir, last question would be setting aside of INR 40 lakh categories in the upper categories, what kind of percentage on an average, there is a mortgage lending taken by the customer?

Roughly 60% to 70% of sales in that segment happens through mortgage.

The next question is from the line of Manan Patel from Airavat Capital.

[indiscernible]

Sorry to interrupt Mr. Patel, we are not able to hear you.

I am I clear now?

Your voice is sounding a little muffled.

Yes, you can go ahead. We can hear you now.

Sir, the first question is related to IT business. I hope to understand like last -- this quarter, we had 8 acres of sales in the SEZ and we were talking about some policy change. So has that policy change happened? Or -- how do you think about that SEZ part of the MWC Chennai?

So we're still waiting for clarity on that. So this is the dash bill that was announced in the last budget and the rules are to be formulated around how that will get implemented in the SEZ, which effectively the spirit of that is to open up the SEZ for units that also serve the domestic market. The specifics are still awaited. And we are hoping in the next few months, we will have some clarity on that.

Sir, second question as you mentioned to one of the previous participants that INR 450 crores of operating cash flows in the 9 months. So I understand it would be lumpy in our business. But for a full year basis, in general, should we assume a north of INR 600 crores in cash flows over the next few years?

Arvind articulated it very well FY '25 numbers. So to that extent, directionally, the operating cash flow is going to be sort of reflective of the sales trajectory, which we are on. Yes.

And sir, last question, even though we have very less land left in MWC Chennai but realization came down to some extent. So any particular reason for that.

No, fundamentally, very limited land parcels and the location of those land parcels can be inside the World City, there are a few land parcels, which are residing outside of the World City premises in that sense, what we call as outside boundary lands. And every land transaction to that extent is negotiated and depending on the location, trajectory overall area, et cetera, the pricing gets fixed.

Going forward also, you will see us doing some transactions of what we call outside boundary land, which is beyond the boundaries, the planned boundaries of the World City. Those are significantly lower price. There's fundamentally no infrastructure, nothing None of the world City infrastructure is extended there. So it's a different market altogether.

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Arvind Subramanian for his closing comments.

Great. Thank you, once again, all of you for participating in the call. As we mentioned, we are on a very steady and planned growth trajectory. The numbers are [indiscernible] back on all the operating [indiscernible] its residential green sales, industrial paying cash flow or land acquisition. These are all trending in the direction that has been indicated. And with your support and blessings, we hope to continue on that trajectory. We are seeing a strong cycle in the real estate sector. So there's favorable tailwind as well, which we hope to take advantage of. Thank you.

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