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

Ladies and gentlemen, good day, and welcome to Mahindra Lifespace Developers Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. We have with us on this call today Mr. Amit Kumar Sinha, MD and CEO; Mr. Avinash Bapat, CFO; Mr. Sriram Kumar, FP&A costing and IR and Mr. Ravindra Basu, Head Investor Relations. I now hand the conference over to Mr. Amit Kumar Sinha, MD and CEO. Thank you, and over to you, sir.

Thank you, Michelle. Appreciate it. Good morning, everyone, and welcome to our quarter 1 FY '25 earnings call. At the outset, I would like to thank everyone for participating in this call. Let me cover a few things very quickly. Most of you are very well entrenched into the industry and what's happening on the budget side. We're still figuring it out. But let me just cover a few things as we see in the market. On the industry, I think the growth-oriented budget has done good on CapEx allocation, infrastructure and roads, good focus on upscaling with physical discipline in line towards the path of Viksit Bharat 2047. So at least at the macro level, it's very progressive. Focus on development across Bharat, across India. It also touches inclusive growth with a strong element of simplification and ease of doing business, implementation, we'll see how that gets done. Budget has focused on enhancing value in the agriculture sector, as you all noted. For the real estate sector, I think one of the big things that we are trying to understand is the impact of indexation and maybe we'll learn from you as well as you -- some of you have shared thoughts with me personally. On the real estate market side, Pan-India we continue to see sales momentum in quarter 1 FY '25. Overall, if you see how the recovery has been in the sector over the last 3 years, so compared to quarter 1 FY '22, '23, it's been a 27% CAGR over the last 3 years. So it's a healthy growth. Premium housing and mid-premium segments, which is our target segment, they now constitute over 70% of the market. So we are playing in the bulk of the market, and we'll continue to push our presence in a few specific markets that we are operating, especially the MMR, Pune and Bengaluru. Pricing continues to be healthy, driven by notable market shift towards premiumization, Dil Maange More and all those things that we have talked in the past. The inventory overhang as we track that has actually reduced in the last 11 or 12 months since quarter 1 FY '24 to currently 30th June 2024, there was 15 months, now it's 11 months. So that's a remarkable statistic for us to understand. With respect to MMR, Pune and Bengaluru, I'll quickly cover MMR continues to thrive as micromarket like central suburbs, Thane, and now we are seeing good traction. This is at least from an organized sector point of view, it's largest market with annual sales of INR 150,000 crore sales. Inventory overhang reduced here as well from 16 months at the end of 30th June last financial year, 30th June 2023 to 30th June 2024. It came down from 16 months to 11 months, something that we track very carefully. In Pune, strong sales growth due to proximity to manufacturing, IT and infrastructure. So Pune continues to be a vibrant city and good momentum there from inventory also. The inventory overhang has come down from 11 months to 8 months from the -- for the equivalent period. And Bangalore, which is a very, very exciting market for us, Bangalore maintained its dominance with a strong end user base for the mid-segment, even plotted has emerged as a preferred investment choice. High rise continues to be the well weather. But plotted in the last 18 to 24 months have gotten a lot of traction. The inventory overhang has come down from 10 months, 30th June 2023 to 8 months now. So that's how we are seeing the market impact of indexing on real estate, which was announced 2 days ago, we're still trying to figure that out. But that's something hopefully will affect less of new launches, especially for end users, but we can talk more later. In terms of our business, let me just cover the highlights for sales launches, business development and IC & IC and then I will request Avinash to cover the financials. So on the sales side, we achieved a quarterly presales of INR 1,019 crores, which was the last quarter 1 last financial year was INR 345 crores. It reflects a healthy jump 3x, but you know this is a lumpy business. This will have ups and downs as they are linked to RADAR and new launches. In quarter 1, FY '25, our new launch sales contributed 71% of INR 1,019 crores and remaining 29% were from sustained sales from the projects launched in the past. So it's launch driven. And many of the launches did happen in the month of March, which we got the benefit in the first quarter of this year. We have a healthy sales pipeline from the launches that we had in the past, but also the new launches that we are planning for the current financial year. So hopefully, our sales -- presales would continue to be on a healthy track record. I just want to highlight that it will not be 4x 1,000 because this has ups and downs, given the seasonality and the lumpiness of this business. So that's a quick summary of the sales side. On the launches, as I mentioned, the Q1 FY '25 sales were driven by many of the launches that we saw towards the middle and end of March 2024. So Mahindra Crown, Codename Crown in Pune, Mahindra Zen in Bengaluru and Green Estates plotted in Chennai. This drove a big part of the momentum. Mahindra Zen in Bengaluru launched in March 2024, received a phenomenal response for us. 81% of the inventory is already sold out. It's a smallish project, I think INR 470 crores, but 81% is already sold out. Mahindra Crown in Pune launched in March '24 received a good response. This is the first time we had moved to Eastern part of Pune. We have -- 40% of inventory is sold out till date. Our second quarter development launched in March '24 in Chennai called Green Estates, also received a strong response, but this is the second launch we've done in the same location. So we are trying to make sure that the pricing and momentum continues. We've launched a new tower, Tower A in the Tathawade Pune along with the retail space in the first quarter, and we are seeing good traction, but more of the momentum will come through in the second quarter and the following quarters post that. Kalyan2 Phase 2 was launched. It was launched after June 30. So technically, in quarter 2 of this financial year. This had a GDP of INR 225 crores. We will see a busy FY '25 with a number of upcoming launches. We are accelerating the launch of Vista Phase 2 given the response that we received and maybe which was our society redevelopment is going through the final stage of approval. We hope to launch it ideally in quarter 2. But given the issues and delays potentially with approvals it may extend to October. But I think we are gearing up for that launch aggressively. We have acquired another 2 acres of land, which I'll cover in the business development side next to Zen. So that also will be launched in this financial year. Citadel Phase 3 -- Citadel Phase 1 and 2 were launched in the last 2 financial years. This financial year, we're going to launch Citadel Phase 3. Crown Phase 2, we will decide at the end of quarter 3, given we've launched quarter -- the Phase 1 last quarter -- quarter 4 of last financial year. We'll see how the inventory and momentum is and how the pricing is, and we will move it up by 1 quarter by launching in Q4, or we'll see whether we need to stick to our original plan of Q1 of FY '26, but that's something that we are aggressively tracking. WestEra is the other society redevelopment project. We will continue to track that. It is amalgamation of 2 societies. So it takes a lot of time to actually bring everybody together, but that's also part of our current year launch. We are also looking to launch our first plotted project in Jaipur, Project Pink, and we are waiting the final set of approvals. So our rest of the year is filled with exciting set of launches. And hopefully, we'll continue to have momentum driven in our sales driven by new launches. Covering business development next. GDV additions in quarter 1 was INR 1,400 crores by true destination of quarter end. So we signed a deal on 29th of June, but we waited to announce it because we were closing 2 more societies within the cluster redevelopment, which happened a week later. So overall GDV of the Borivali redevelopment Sai Baba Nagar is INR 1,800 crores, INR 1,400 of that happened by end of quarter 1 and INR 400 crores happened in this quarter. So that's total INR 1,800 crores. We also -- post quarter 1, we also acquired the Mahindra, the plot next to Mahindra Zen at 2.37 acre plot, which has GDV potential of INR 250 crores. So far, in this financial year, including quarter 2 closures, we've added more than INR 2,000 crores in our GDV. And we continue to get many attractive opportunity at our disposal. One of the key things I spoke in our previous calls was how we need to see more and more deals. At least I feel more comfortable that the flow of deals are -- is much, much stronger for us. Many times, we are the first port of call. So -- and we have the opportunity to take them forward if meets our financial thresholds. Last one, IC & IC business update. I think a good start to the year on IC business. Manufacturing continues to gain traction in India and hopefully, more and more global companies will find India as their natural home for manufacturing. Our IC business has grown over the years and our industrial parks and cities being a preferred destination of choice to companies, both domestic and overseas are seeking to set up manufacturing operations here. They really love the plug-and-play model. This is one of the few PPP models that has really worked -- working closely with the government. In terms of the performance, we ended quarter 1 FY '25 with leasing or which is a perpetual leasing sale of roughly 19 acres transferred into INR 76 crores with MWC Jaipur taking the lead with 13 acres, INR 50 crores there -- roughly INR 50 crores there and Chennai with around INR 27 crores, which also includes some amount of transfer fee. So that's our quickly the industrial performance. I think I would say, a good start to the year on all fronts, resi sales, GDV, IC leasing, we remain excited about the opportunity that lie ahead of us. And we'll talk more about it. In the meanwhile, I will request Avinash to cover the quarter 1 financials.

Good morning, everyone. This is Avinash Bapat here, the CFO. Let me just take you through the financial section. As all of you know, pretty much that many of our operating entities from the residential business, including Mahindra Homes or Mahindra Happinest, for example, or even IC & IC business like the World City Jaipur and World City Chennai are not consolidated on a line-by-line basis. So that also -- that only gets reflected in the financials as share of profit. So to that extent, some of the numbers would not exactly reflect the entire true nature of the business that we are handling. But whatever we reported based on Ind AS, we saw that our consolidated total income stood at about INR 206. 7 Crores in Q1 of FY '25. And this is a better performance as against the INR 110.1 crores that we saw in Q1 FY '24. The numbers for this quarter was mainly driven by the revenue recognition that we did in our project, Vicino Tower A3 and A4. As a result of that, the consolidated PAT, which is after all the noncontrolling interest, et cetera, stood at INR 12.7 crores as against a loss of INR 4.3 crores in Q1 of FY '24. Our cash flow position was healthier. The net operating cash flow, which is excluding the land-related outflows and all was about INR 287 crores. This was supported by strong collections during the quarter as well as the IC business, which generated good amount of revenue. So based on that, we have a consolidated debt of INR 398 crores on a full consol basis. So let me just chip in here with respect to some clarification. The net debt at consol level as per Ind-AS would reflect INR 570 crores, but when we do a complete consolidation of debt as well as cash, the net debt would stand at INR 398 crores. So that's a reduction as compared to the previous quarter. Our cost of debt, in fact, on a fully consolidated basis, the net debt to equity rather -- let me put that as first, the net debt to equity actually stands at 0.21 on a full consol basis. The cost of debt stands at about 8.6%. And again, if I translate that to a complete consol basis, it would actually jump up to 8.96%, but that would -- that's a small reduction as compared to the prior quarter. We were at 9.03% and that has come down to 8.96%. So based on that, what we would like to report is a healthier consolidated income, better PAT as compared to last quarter and a better cash flow resulting in a good quarter for the company. So that's a small brief on the financials. We would like to conclude and then we would like to take questions.

That's good. Thank you, Avinash. So I think that's a quick summary from our side. We'll open the channel for questions and discussion. So Michelle, over to you.

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

Mr. Sinha, congratulations on the second consecutive quarter of clocking INR 1,000 crores plus of presales. So now I congratulate you, but my bigger worry is now that you maybe the presales run rate now though I'm not analyzing it, but it seems to be now running ahead of business development efforts in business development. So I mean, you have been last years, almost accruing to about INR 4,000 crores of new business development. So now how do you look into your guidance of INR 8,000 crores to INR 10,000 crores by FY '28, which implies 50% presales CAGR even if I take the midpoint of that guidance of INR 9,000 crores from, say, this year, INR 2,700 crores, INR 2,800 crores on my assumptions. So how -- given that kind of a growth which you need to deliver to achieve that, so how do you think on the business development side, you need to step up though you have given INR 2,000 crores financial year-to-date. So do you think that now this year is like, I mean, going to be a transformational year where we will see these efforts over the last 3 years, 4 years or INR 4,000 crores now going to maybe INR 7,000 crores to INR 8,000 crores and then going ahead further into the coming years. That is kind of a quantum you need to do to achieve these numbers.

Thank you, Parikshit. Let me -- that is a critical question that you have asked, probably the biggest one that we are carefully analyzing on a daily basis. So let me answer this into three parts. First part is I now -- it's been a year for me here. I now feel much more comfortable with the flow of deals. The kind of deals that we are seeing is quite healthy. So it's up to us for -- it's up to us to close those deals if it meets our financial and other thresholds. So I think that's first part, important one. In the past, I felt that we were not seeing the deal that are -- where we were first port of call there. It was rejected by others, potentially less interested used to come to us. So I think that's starting to change. It's not changed, but we are starting to see movement on that. So that's the first part. The second part is just want to highlight to you what does our full GDV looks like. We have signed between quarter 4 and quarter 1 roughly INR 4,000 crores, so Alembic, Sai Baba Nagar, and a couple of other small deals in Bangalore, Windsor and Goodhouse, that's INR 4,000 crores. I have unsold phases of roughly INR 4,000 crores from Vista, Citadel, Wagholi and a few others. I have unsold inventory of more than INR 1,000 crores, so INR 4,000 crores, INR 4,000 crores and INR 1,000 crores, so INR 9,000 crores. I have land in Project Pink that we are first launching significant land in Jaipur. We have in Chennai, which we're doing plotted and we have a new, which was known to all of you in terms of Murud, we are thinking of launching it at the earlier. So across all these 3, it's somewhere around INR 3,000 crores full potential value of those. So INR 4,000 crores, INR 4,000 crores, INR 3,000 crores and INR 1,000 crores,000, so that's INR 12,000 crores. In Thane, we have applied for IITT policy after 63-1A exit, that's INR 8,000 crores. So that's INR 20,000 crores of GDV that we currently either own or have a path to lift the launching. Obviously, concentrated GD like Thane doesn't get materialized in the short term, it will have a multiyear effect. So we are sitting on a decent GDV, but our work is cut out, that's the part 3, in terms of what we intend to do. My goal is to sign the right deals at the fastest speed. But if you know, the land owners expectation in these markets are very, very -- they vary a lot. They look at the pricing in the market and say that's how the land should be priced. And it's our job to make sure that those deals are set up really well. If you buy the land at or do a JDA or do anything that is assuming price of the land and if markets slows down 2 years, 3 years, 4 years, 5 years later, then we'll be sitting on a project that will not give us the bottom line that we are seeking from a financial point of view. So efforts are -- so we have a good flow of deals. We have a strong base of project that we have to bring to market at the earliest and our business effort on the GDV addition side will continue. That's something that I personally look after and I pursue that seriously. And that's something we will see more action coming out, but it will not be chasing growth for the sake of -- chasing deals for the sake of growth. But it will be the right deals for us for the future of this company. So those are the 3-part answers I just wanted to give you Parikshit.

By any percent, directionally like how does the INR 4,000 crores number look like from the mid point of view? Beyond the land costs that you exist -- hold existing and possibly hold. So how do you think this year it could maybe -- look at this number growing, the INR 4,000 crores and what additions?

Parikshit, you're talking INR 4,000 crores GDV or sales we are talking?

GDV, GDV, I am talking about GDV.

So last year was like INR 4,400 crores, right? So our goal this year is to definitely go beyond that, but we'll be measured about it because that's what I just want to -- I don't want to give a number and then say, "Hey, you said something and then you didn't score well against that." I just -- my goal is to scale this business to -- for us to achieve INR 8,000 crores to INR 10,000 crores, that's the raw material. So we're not going to stop, but we're going to be cautious about it rather achieve -- let's say, instead of INR 8,000 crores to INR 10,000 crores, let's say I achieve INR 7,500 cores but good quality deals, that is more value, which gives us bottom line is much more valuable to me than trying to do INR 10,000 crores, which doesn't give me bottom line. So that's what I'm trying to optimize. My goal is definitely do more than INR 4,400 crores that we did last year.

So we should be looking at something INR 7,000 crores to INR 8,000 crores to get profitable deals than rather chasing INR 9,000 to INR 10,000 crores you may see some dilution, right?

You know, Parikshit, I can't answer that question. I mean you're modeling. I'll keep it a little open from my side.

Okay. So the next question, the last one is on the delivery. So I mean we have seen EBITDA being negative for quite some time. I understand that these are historical projects coming up for recognition and period costs seems to be much higher than the projects which are in to recognition. But if you can give some more color on FY '25, '26, '27, so wherein our own projects will start moving into a recognition? And when do you think will be a time where we'll start seeing EBITDA at least turning positive? Because I think you will have some sense on delivery. So at least if you can give some color at least on the deliveries, the quantum of deliveries and 1 million square feet coming up in the next 2, 3 years. That will be helpful for us to model profitability on the EBITDA side?

Let me ask Sriram to answer that question.

Parikshit, this is Sriram. From a resi profitability perspective, as you know, like the launches we've had in the recent past and the year before, will technically come for completion over the next sort of 1 to 3 years. So you will see the resi profitability picking up as and when we have these completions as per our standard plan. And the one thing I can assure you is we are well on track as far as the completions and as far as our -- the resulted revenue recognition and profitability is concerned. So you will see that over the coming quarters on how the revenue recognition, the profitability improves on the residential side.

Let me add something, if I may, Sriram. I think we are trying to change the portfolio of our projects, right? And that transition will take time, right? Right now, we still have many of the projects that were pre-, let's say, 2020 -- during 2021 as well as pre-'20, right? And those projects are either, let's say, affordable or projects that have gone through many challenges, approvals and many other issues, right? And as long as they are there, they will create a drag on our profitability. And that's what we see because of -- those are the projects that are completing right now, right, and they're creating a drag. My feel is from the next financial year, not from FY '25, but FY '26 onwards, you'll start to see the new portfolio of projects start to kick in, which will try to absorb the drag a lot more than right now what we are seeing in our balance -- in our P&L and balance sheet. So Parikshit, I think -- and we're also seeing that -- but the health of the business is reflected in the operating cash flow, like net of -- ideally, you can net out construction cost you need, you can see how well our operating cash flow -- how good is operating cash flow, right? And that's something that we track very carefully. So it's a long-winded answer to your question, but hopefully, you will see more and more improvement on the profitability side than you have seen in the last few years.

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

Congratulations on a great performance again for this quarter. First, just a housekeeping question on what was the quantum -- GDV of the launches we did in this quarter? And how much would be the sales contribution from that for the quarter? And secondly, for the launch pipeline you have highlighted for rest of the year, I think it's one of those -- includes one of the society development projects. Could you just quantify the expected GDV value of these launches for the rest of year?

So let me answer the second question, and then I'll request Avinash or Sriram to jump in with the first part of the question. The rest of the year, we will have -- the Navy is a big one, redevelopment that you touched upon. It's roughly INR 950 crores to INR 1,000 crores GDV. But that's not the only launch we are planning. We have Vista Phase 2, which is going to be close to INR 1,500 crores. We have Citadel Phase 3, which is another INR 1,000-plus crores, and we have likely WestEra, which is just close to INR 500 crores. These are the 4 large launches that we have planned in the second half of this year, obviously, awaiting approvals and few other things. And there are some other minor launches also that we have in terms of size, which is Pink in Jaipur INR 200 crores, plotted that we have already seen. In Chennai, there will be more plotted that will come out, and there will be couple of other launches here and there. So that's -- if you add all of them together, it would be probably INR 3,000-plus crore worth of launches that will have minimum for the rest of the financial year. So that's a quick answer to that. What we have launched in quarter 1 is actually small. I think it's only Tathawade, right? Tathawade is roughly INR 100 crores to INR 200 crores, right? But Adhidev, I think the biggest thing is the launches that we did and the -- let me call it, for us, the launch is when we get there we call it a launch. But most of the launches happened in April. So that was roughly INR 500 crores, INR 475 crores of Zen. That was the biggest one that we had. Then we had Crown, which is the new in eastern part of Pune, which was, I think, INR 500 crores. We sold INR 300 crores of that. That was the second one. And then we had a plotted. Again, we got the RERA in March, but we did all the launch events, everything in the month of April. So all those things, if you add all of them combined, it will be, let's say, close to INR 1,000 crores across all the 3 launches.

Okay. So to understand correctly, most of the sales would have -- for this quarter would have come from the new launches itself, right, which we have done in March and...

The split is 71:29. Of the, INR 1,019 crores, 71% is new launches, 29% is sustenance.

Okay. Including the Q4 launches, obviously, which have a spillover effect.

Correct, correct. Exactly, yes.

Okay. Now the next question, sir, is on -- more broader question is on our BD and operating cash flow, right? Based on whatever launch pipeline, right, what is the sort of operating surplus you would see going ahead yearly, right? And compared to that, how would our land spend compare? I'm just trying to understand how we are looking to manage the funding part of our growth plans over there between equity, debt and using our own cash flows, yes.

In terms of cash flow, let me explain. Cash flow from operations, which is, let's say, before payments towards land go out. If we look at last couple of years, right, from FY '22 onwards, it's been in the upwards of INR 600 crores plus. In fact, INR 650 crores would probably be the average. Even for the first quarter, we are -- we have -- we are at INR 287 crores, and the target is to be equal to or more than what we have clocked in the last year. That is the starting point. So having said that, obviously, the outflows towards land are one, discretionary; and two, futuristic in nature, obviously, because we wouldn't know right on day 1 as to whether we would be doing an outright purchase or whether we would be doing a JDA or there are multiple models in terms of land-related outflows. If we look at how the activity for land-related acquisitions has been, there was a significant jump in the last year. That was almost INR 800 crores plus or almost INR 850 crores plus towards land. Having said that, in this year as well, depending on the kind of projects that we are undertaking, it could be maybe either equal to or slightly lower than that. If we go into more society redevelopment or JDA kind of projects, this will be a slightly lower number. Other than that, it would probably be a healthy INR 700 crores to INR 800 crores towards land as well. Sriram, do you want say something?

Yes. So just to add, I think the one thing I would say call out is the FCF growth that we are seeing in our business has been very robust. Compared to the last year same quarter, it's about 118% growth over the prior year. And the residential collections for us, which stood at INR 540 crores for this quarter is also close to a 96% jump over the prior year. And as Amit and Avinash alluded to the recent launches that we have had since March, those are also expected to contribute the cash flows heading into the next quarter as well. So overall, we see a very healthy cash position and collections, which also is reflected in our net debt ratio as well, which you see it's come down from 0.34 to about 0.21 in this quarter.

Okay, yes. So that was very helpful. Just one suggestion, going ahead, if you could give some reconciliation of the, what you said, OCF generation and land spends you are doing separately. I understand in society development projects, we'll have some corpus payments and again, rental payments and other things to the owners, right? And if you could just segregate that so it will help us understand the BD spend and the existing business cash flow generation going ahead.

Thank you, Adhidev. Good suggestion. We are trying to clean up the analyst report also that we -- investor report that we -- so we'll continue to take your suggestions and improve that.

We will take the next question from Puneet Gulati from HSBC.

Congratulations on good numbers. First of all, can you talk a bit about what kind of competitive intensity are you seeing in this new GDV, especially in the light of the fact that you're now saying that you're seeing change in Mahindra becoming the first port of call. What is driving that? And how is the competitive intensity now versus a year back when you joined?

So I think you are referring to competitive intensity on the BD side, not on the land side -- on the land acquisition. I think let me say that if you like a piece of land and it meets our commercial thresholds, we don't lose that land opportunity because of speed or the way we function anymore, right? In the past, Puneet, it used to be -- our decision-making used to be much slower. And as a result, anybody who wanted to sell will know that Mahindra may not take a decision in the next month, 2 months, 3 months, 6 months, and they will naturally go to a faster decision-making organization, right? And at least that's the first thing we have done is, let's say, if you like the piece of land and it meets our financial thresholds, we take decisions quickly. And if you don't like it, we send in the next -- many times on the same day or in the next few days after we've done the due diligence and underwriting, we are able to inform that. So we don't waste each other's time. And that word has gotten around that if Mahindra wants to do the deal and they are saying, yes, they really mean it and they will execute on that, that's something I've seen to -- seen already a few times, 4, 5 deals that I have been part of since I joined. And we also work very closely with our ecosystem partners, the legal team, the accounting team and the financial due diligence team to make sure that the speed at which we want to operate, they also operate with us. So that's something extremely valuable. Now in terms of the competition, competition is always there. But there are certain elements that allow the competitors to work with us. Many times, it's a corporate-to-corporate deal, like the Alembic deal, it's much easier because of our brand, our governance, the way we work, they are much more comfortable dealing with us. Even the society redevelopment, if you see, they're very comfortable dealing with us because we will not do something that is wrong by them and by us, right? So those are things that allow us to create a little bit of, I would say, differentiation compared to what we were doing in the past. Are we there in terms of getting the same -- exactly the same set of deals and same risk/reward profile? I had reminded myself, I keep reminding myself and my colleagues is that we are -- I'm a corporate CEO. I'm not a promoter CEO and the risk/reward profiles are very different. So which deals they will pursue versus which deals I will pursue, it is very different. And I will take different kind of risk, they will take different kind of risk. So those are some of the things that we are seeing and that's how we are able to convert some of the flow of deals in our favor. Many times, we also lose, that's a good learning for us, and it's never -- you always learn something out of it.

That's very useful, very good color. And just on the same side, so versus a year back, are you seeing more people on the table discussing or competing for the same land parcel or has that remained largely static?

Yes, so, mixed bag. I think Bangalore, I see a lot more. It's like if you don't move fast or if you're not giving a competitive deal, I think the deal goes away. And then as you know, Bangalore is a lot more corporatized from a real estate perspective, than let's say Mumbai or Pune might be. So Bangalore, I see that what you said exactly. But in Mumbai and Pune, I think there are other local players, regional players also that play a very big role. So I see the relationship, your proprietary nature of your deals. So I believe the best deal is the one where it doesn't go to others. You are the first port of call, you will talk to the land owners and then you craft a deal that works for both you and the land owner. And I think we're trying to crack that piece of market, especially in Mumbai and Pune.

Okay. That's very useful. Secondly, you're talking about taking your sales potential last year INR 2,700 crores to INR 8,000 crores to INR 10,000 crores. How are you scaling up your organization? And are you seeing any potential bottlenecks in terms of availability of construction partners, contractors, et cetera?

I think I would say it's like India's cricket team. You'll always have constraints everywhere, right? You'll have to -- the pitch is not good, the conditions are not good, sometimes swing is troubling you. But these are part and parcel of execution. And I think as long as we are solving it together as a team, we are getting there. We see our attrition came down last year, and we continue to focus a lot on our immediate leadership and the broader organization. We are investing in talent, career development, new programs have been launched. There are fun events. This is the first time the whole company went to an annual off site ever, at least of this size. So we're making everything to make sure that the -- our associates, our colleagues are excited, they are engaged, and they are able to get career enhancement through their relationship, their exposure to Mahindra, not Mahindra Lifespaces, Mahindra, and we have created many transfers in and transfers out opportunities for them as well. So hopefully, this new Mahindra Lifespaces on the talent model also will see excitement, but we have to work with the constraints and conditions that we are operating. And there'll be some good days, there will be some bad days, but hopefully, we'll deliver what we have promised to our customers and our shareholders.

Lastly, on the plotted development, you talked about making that a big part. Will that be a focus area largely for the IC part or even for normal residential business, you would enter into plotted development as a business opportunity?

I think we are trying to monetize land wherever we have. So IC is a starting point. Land was available, was not giving us returns, so why not we move forward. So we've already done 2 and on the cusp of doing the third one and Jaipur is the third one. But in the resi also, we are looking for land parcel like Alibaug Meridian where we plotted last year. Of the 26 plots, we have sold 22 already. So it's part of both, monetizing IC land that is there, which could be used for resi as well as new land that we can acquire for plotted. It gives very good returns. The lead time is less than 12, 18 months. We like plotted quite a lot.

[Operator Instructions] The next question is from the line of Rakesh Wadhwani from Monarch AIF.

First question with respect to the launch pipeline, to the earlier participant, you mentioned that the number of projects and the GDV, that is coming around INR 4,000 crores worth roughly. So I just want to know like we have a good number of projects that are there in the pipeline. So what will be the number that in the FY '26 also, like from the -- I hope there are -- every project is not getting launched in FY '25 from our own pipeline.

Yes, so you're right -- let me just make sure I understand your question well, Rakesh. You are saying that what the FY '26 pipeline look like, given what I explained was for FY '25, right? Is that what you asked?

Yes, sir.

So I think this is a great question. And I think for us, we worked hard last financial year to set up this financial year well from a GDV perspective, right? And I think Parikshit mentioned upfront, our GDV always has to lead the sales. So you have to always do more on the GDV so that you get your sales to happen. So now I'm working towards the GDV for FY '26 now, right? And the first step is getting INR 2,000 crores with Sai Baba. If you launch it, you do not get INR 2,000 crores in the same year. It will take maybe if you are very -- if the market conditions are favorable and it's a very successful launch, you'll get maybe 30%, 40%, 50%, right? So I need to do -- to achieve, let's say, a handsome growth on my FY '25 presales into FY '26, I need to do a lot more GDV. That was a question that Parikshit was asking and some of you also touched upon. And I think so I'm working towards creating the additional headroom in GDV that will ensure me at least a 30%, 35% growth on an annual basis, so that I get to my 5x aspiration, right? So that's what we are working towards. I don't want to give a very specific number because these are lumpy deals, sometimes you will hit a home run, sometimes you'll be doing a single -- boundary versus single, cricket analogy again. So I think -- but 100% aligned with you that to set up FY '26, I need to lock in more and more GDV because the GDV that I currently have will get depleted in the current financial year. And then it will have not enough fuel left for the next financial year. So that's where we are working towards.

Okay. Second question with respect to the profitability. Just now -- in the past, we have most of our own projects where we are the land owners. Now we are looking into the redevelopment purchase also. Just wanted to understand how the margin profile in that product segment works? Like what will be the gross margin and EBITDA margin? And is there any drastic change in both the business -- like both the product segments?

So I think in the past, when we talk about our land, I think it was mostly in world cities that we had done. In all other places, we had to buy land and do the development like Luminare or Alcove or Vicino even, let's say, Kandivali, we see -- we had to buy from M&M, right? It was a very painful negotiation with them because both sides are on -- we're on opposite sides, right? So we are always buying land, but what helps is your -- you have to do underwriting really well. We run our company now internally based on IRR, right? Both it captures the cost, the pricing as well as the time line, right? And we look at each of the land parcel from that angle, does it give us the IRR that allows us to make money? And we have threshold IRRs, which are high because we know there will be dilution that will happen as a result of adverse conditions. And from a growth perspective, we want to make sure that we don't sign deals that will give us pain in future years, right? That's very important because you'll say, "Oh, the accounting profit will come later. IRRs seem healthy." But in the last year, we have cost over, and IRRs came down. I think that's something we're really trying to avoid as we build a new Mahindra Lifespaces. So from a profitability point of view, you will see the impact of project that we have launched in the last financial year and current financial year and we will have 3 year, 4-year lag effect in terms of when they reflect. So next year or two are going to be the tricky where we have the, let's say, drag of the previous project that I mentioned earlier, which will hurt us. But from the next financial year, so FY '26 onwards, you'll start to see the impact of some of the nicer projects where we have done the IRR and design and everything well. But '27, '28 will only improve from there on.

Okay. Sir, one last accounting question. In the PPT, the investor PPT, Slide #17, the cash flow of the residential business is given. So it is like INR 6,035 crores, so the bifurcation you're also giving, like how much are we expecting from the ongoing projects, future spaces, new projects? So the new projects amount to INR 2,008 crores. Just wanted to hear what is in that new projects, does that include timing also or the new project includes only the projects that are already locked in and we are supposed to launch?

Sorry, your voice wasn't clear, so we couldn't understand. Could you just ask the question?

Okay. Sir, in the investor presentation, Slide #17, there's a slide, which says the residential sustainable future cash flow. Under that, we have mentioned we expect INR 6,035 crores estimated cash flow from all the projects that we have. So we have bifurcated that on the cash flow from ongoing future spaces, new projects. So under new projects, the cash flow expected is INR 2,008 crores. Just wanted to understand what does come under new projects? Does that include Thane project also or the projects, which are we have already locked in but not launched?

No. So this does not include Thane because we want to be conservative in our projections. Thane will take some time because the IITT policy is a very arduous long process, and we have started this thing -- this process, but it will take some time. So in the current, the Slide 17 that you see, we have not factored Thane as of now. But it has factored some of the land acquisitions that we have done. Let's say, Alembic is there. It has Windsor, which has -- I don't think Sai Baba is factored in. Sai Baba is factored in there. So it includes INR 4,000 crores GDV that we won in quarter 4 and quarter 1. It has unsold of INR 4,000 crores, which I mentioned at the start. It does not include Thane. It does not include Murud or any of the other subsequent phases, and you'll see the unsold or ready-to-move inventory there. So it's a more conservative view that I've given you there.

The next question is from the line of Vaibhav Saboo from Nippon AIF.

Congrats on a good set of numbers. Firstly, during the last quarter call, you had mentioned that we would be requiring around INR 7,000 crores to INR 8,000 crores for expansion and while half would be funded through internal approvals, half, we would be looking to raise funds even on a platform level or at a promoter level. So has there been any progress on that particular piece?

Yes. So there are, I would say, 3, 4 discussions that are going on, given they are internally at Mahindra level, externally with some of the other fund houses as well as some of the global partners who have interest in pursuing India opportunity and India real estate opportunity with a credible responsible players. So discussions are underway at each of these, let's say, conduits. My sense is given the confidential nature of this discussion, et cetera, we'll be able to share at the very -- whenever it's concluded or close to conclusion, we'll be able to share the details.

Understood. And just secondly, can you just provide you like approx number of how much deliveries and ultimate financials are we expecting for the current year?

Deliveries meaning, Vaibhav, what do you mean delivery -- apartments, number of apartments?

Yes, sir. How much revenue recognition can we expect, just an approx figure just for the year?

You know I'll give you a rough number, if that's okay. I think, because linked to OCs, et cetera, it will be around -- if I exclude the resi -- sorry, the IC business, it would be plus or minus INR 1,400 crores is what we expect for which we are -- either we have completed waiting for OC or will be completing and we'll be applying for OC.

Understood. Just one last thing, what type of launches are we expecting during this quarter?

I answered that earlier. I think there are 7 launches that we are expecting, roughly 7 launches. The prominent ones are going to be Vista, which is Phase 2 of Vista Kandivali. We have Navy in Malad, which is ideally this quarter, but may spillover depending on the approvals. The third one is Citadel Phase 3. We are waiting for some policies that have been approved -- have implemented for our projects. And then there is a Project Pink plotted in Jaipur. So these are the prominent four. WestEra is the other redevelopment society, which we are -- which might be touch and go for quarter 4, but we'll see, and there are a few other smaller launches in Bangalore.

The next question is from the line of Komal Choudhary from Ratnabali.

Most of my questions are answered. Just wanted a small clarification on the completion of the projects this year. I think you mentioned 8 projects to be completed this year. And out of those, how many are legacy projects?

I think 8 were the launches, Komal. In terms of completions, I think it will be -- what's the number of projects. I think if you include the towers and all, it will be closer to 10 because many of them are -- most of the -- actually all of them would be legacy projects, Komal, because only legacy projects will be completing. So these are pre-2020 or 2020 projects.

Okay. And sir, my second question is on the redevelopment that we are doing. What is the IRR we are expecting over there?

So we always look for highest IRR. I think some of this is, Komal, confidential that we but -- let me just highlight something for the benefit of the -- I can't share the one number, but I'll tell you that at Mahindra Group, we have an ROE target of 15% to 18%, a growth business is slightly lower, but 18%. And I think we are -- although this business is not measured in terms of ROE, it's measured more in terms of IRR. But at least from a shareholder perspective, that's the direction we want to go to. And so we've made many changes in our business model in the last 12 months. First of all, we are costing it conservatively, knowing that there's always inflation and escalation and surprises. We also keep contingencies. We also have additional cushions for address any surprises that we might have. So we are doing costing much better. We have DLP separately accounted for. All those things are doing -- done in a lot more conservative way, giving sufficient -- hopefully sufficient room for any kind of challenges. Similarly, on the pricing side, we are a lot more conservative. Obviously, recent success, especially in the boom times has taught us that we can be a little bit more aggressive about velocity and pricing. And we're always learning from each of our launches and experiences. So we are targeting the highest IRR projects. In some markets, it's very high. In some markets, it's close to what we typically see in this business that -- but we continue to push the boundaries on that, while keeping our cost structure and pricing more conservative.

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

Congratulations on a good set of numbers this quarter. So first, I mean, given the fact that we're planning to launch a host of projects, I mean I thought I will check with you. How is -- have you seen any change in approval timelines because we are selling including most of our peers too have been selling seriously goods, which is where. The idea would have been to launch as many products as possible, right, to encash the sort of demand that we have in the market. And it's very difficult to be able to kind of push people at municipal corporations or, let's say, RERA, we are going to work beyond the long working hours. So fair to assume in the approval time lines have changed given the fact that these guys are full of -- I mean there are too many files that must be reaching right now?

Yes. So I think you are right. Resol quarter 1 was, I would say, slower than what we would have ideally liked in terms of the speed of approval, but we understand many of the official -- business was affected because of elections almost, I think, 6 weeks. So we couldn't change that whatever we tried. So we do our best. I think you used the word for launches. I think for us, what matters is successful launch. So not only the launch but warming up the market and making sure our channel partners are well ready. There is a pull created from customers through all the marketing, but you can only do it after RERA. So we are always balancing the needs of the market -- needs of a launch, which to make it successful as well as the regulatory requirements. Approvals sometimes get delayed, and quarter 1 was slightly slow because of election and other reasons. But we'll hopefully make it up in the subsequent quarters.

Sir, I was going through our annual report of the year and what I observe is, I mean, we have created 2 new entities this year, Ample Parks. And I believe this is under the JV that we have with Actis, our understanding that we have for warehousing projects. So we signed this agreement, I think in 2022 and since then -- I mean, the potential still exists, but then the yields have changed. Any thoughts, I mean, how do we intend to approach this now sort of original plan, stages or I mean would you -- would we see some change there and these 2 entities, Ample Parks 1 and 2, would you be able to share more on the these and which locations have you been able to identify land parcel, and the recent denotification that we saw in Chennai, right, on SEZ side, has it something to do with these 2 entities?

Prem, I think, allow us to do a formal release on that because there are still -- there are multiple issues in terms of approval that we are waiting. We don't want to jump the ship and jeopardize anything. So the -- so we'll share the details as soon as we have concrete deals closed, give us that flexibility. In terms of Ample Parks, that's a partnership with Actis. The fundamental principle was we have a lot of understanding of how industries buy, where they buy, what they're looking for. They wanted to build a powerhouse for BTS and warehouse. And naturally, we are partners together. Thumb rule target is 70% for them, 30% from a capital perspective, while the entity will also take that. And it does have a linkage to the places either we have land or we have understanding of the land and industries. So we'll share the details as soon as they are concrete from all perspective.

And just one last, if I may, please. And on Happinest side, and how do we intend to approach that vertical now because after COVID, we've seen a rising preference for larger units, I think which is where when I look at the numbers, I mean, it seems as if Happinest is gradually becoming even a smaller portion of our overall -- I mean, in overall scheme of things for us. I mean only INR 50 crores, INR 60 crores piece a quarter, and we have -- we still have some INR 600 crores, INR 700-odd crores piece of inventory to go and we would have some team in place also for this vertical. And when I look at the BD activity that you're doing at least since 2021, which is when we've start giving out information on BD, we've not done anything on Happinest side. So how do we intend to approach this vertical?

So I think in my strategy I was clear when I -- we talked publicly with all of you on other forums is that our focus is going to be mid-premium and premium. So if you break the market into 4 segments, affordable, mid-premium, premium and luxury, we'll play in the middle two. This segment is roughly 70% of the overall market. Luxury obviously has value-wise significance, affordable value-wise, maybe 10%, 15%. The remaining is luxury, right? So we wanted to play in these 2 segments, mid-premium and premium. And that is reflected in some of our land decisions over the last recent year, 2 years, right? We will fulfill our commitment. And if there is a very large opportunity in affordable that comes, that meets our financial threshold, we will look into it. We're not saying no to it, but it has to meet our financial thresholds every time we do a deal.

Any thoughts on how long would it take us to kind of liquid this existing inventory, the present totally underway and the balance potential?

I think it will be -- we are carefully targeting anywhere from 2 to 4 years. Some of the phases are more recently launched, which are part of subsequent phases of promised projects, right, just been launched. So 2 to 4 years, we'll start to see most of the cleanup that will happen.

We'll take the last question from the line of Ronald Siyoni from Sharekhan.

Sir, I have 2 queries. First was with respect to the recent meet, which we had...

I'm sorry to interrupt, your audio is not clear, may I please request you to use your handset, please?

Now am I audible?

Yes sir.

Hello, is it audible now?

You may proceed now, sir.

So I have 2 queries. First was with respect to the recent meet, which we had. In that there was a takeaway that parent was not investing in Mahindra Lifespaces despite being a growth gem and they have been [ shying away ] from the last 2, 3 years, we can say directly inclusion into the company, despite you're doing strong numbers over the last 3 years. So has that thought process changed because we are 3 years down in the cycle and yet that confidence from the parent is not there, and they are still looking through funding partners or say other partnership or funding. That was the first.

So yes, That's a great question. And I think I used to be on the M&M side till last year, right, a year been since on this side. I think I know M&M, and we are trying to make MLDL also similar to how MLDL thinks about capital allocation. It should be focused on the best returns for shareholders, right? Capital will go where there are best returns for the shareholders. So you see, you can adjust the returns a little bit lower if you see hypergrowth, right? And which is what we are trying to show that we want to grow. I think the first year for me personally as well as for MLDL was to show that we are fully transparent with our portfolio, where our business is, IRR is, all those things. And I think there's a good amount of clarity that's there. And then we are trying to launched new projects that show that there is a promise and delivery execution in line with the plan for good projects, premium projects, mid-premium projects, in line with our profitability. So I think there is a good traction that's already happened. And I think there is already discussions about fund raise. The format, the timing, et cetera, will be something that we'll work with them, but already discussions are underway. But we have to continue to deliver and ensure that we also have a good strong path to healthy returns in IRR or ROE.

Okay, sir. And second was, sir, the execution front you touched upon. So still execution or deliveries have been lagging and you have been outperforming on launches and [ preface ]. So there is a little bit concern here that 2, 3 years down the line, we may end up at the same point where the cost would have increased and we may suffer losses, if not to this extent, but profitability may narrow down, if we do not gear up on execution. So if you can touch upon that, how confident are we on that front?

I think we have brought many changes. This is -- you're asking a question, which is so critical for this business, right? How do we -- because you plan and then you execute for 5 years, right? And how do you keep up to the plan that you made up 5 years before, right, to the final day of OC. And then you have to survive that for another 5 years because you have to give a defect liability insurance. It's a 10-year projection that you have to do for even the midsized project, right? So it's a tough one. And that's why I think we are being cautious, conservative in our estimation that, hey, given all the past experiences that we have had so far of doing projects and dilution of profitability or project which have done well and received better profitability, what is the driver and how do you reflect that in our learning -- those learning into our execution, our action. I think a lot of effort is going on. The teams are geared towards it. Our construction team, our design team, they all are working hard towards solving this. But there is no way I can give you a full confidence, at least I can tell you, we're trying our best with intent and effort, but until we deliver, there is no way for us to prove that we are on the right track. And there will be some puts and takes. My sense is if we are getting there 90%, 95% accuracy, it still allows us to meet our financial thresholds. So hopefully, in the next couple of years, you'll see the impact of what we are doing now. It will be tough to show any earlier because what you'll see in the financial is what was done 3 years back.

Ladies and gentlemen, as that was the last question for today, I would now like to hand the conference over to Mr. Amit Sinha, MD and CEO, for his closing comments. Over to you, sir.

Thank you, Michelle. Again, thank you to all the participants. It was great to have a good discussion on how has been our quarter 1. We are quite excited with the prospects going forward. I also want to remind that quarter 1 was -- INR 1,000 crores is a strong one, but there is seasonality expected in this business -- built into the business for the financial year. We're working hard towards scaling our sales, launches, BD and continuing the extraction monetization of our IC business. You've been a great source of feedback, and many of you have actually helped introduce to some of the land owners, et cetera. So thank you for all the support. We are indebted, and we'll look forward to your feedback and continued support for growing this company. Thank you.

Thank you, members of the management. On behalf of Mahindra Lifespace Developers Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.