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

Hi. Are you able to hear me? Yes, great. Thanks, everyone. Thanks for coming. I officially welcome everyone to our Q4 and FY '25 earnings update meet. This is the first time actually we are meeting in person post-COVID. So it's good to see everyone live and have a face to face meeting. And at the outset, I would like to thank for everyone -- thank everyone for participating in the event. So maybe I'll quickly start with a, to break the ice, video of ours, recent marketing effort of ours. And then I'll hand it over to Amit for the business discussion. [Presentation]

I welcome Amit to present about the strategic updates [ for us ].

Can you hear me back there? Just raise your hand if you can hear me, right? Very good. Any of you bought at Vista? I think Sriram bought, so at least -- he bought in phase 1. So I'll go through the rest of the presentation. We got the presentation out Saturday morning, right? This is something we have done differently so that you have a full glimpse of the things we are doing at Mahindra Lifespace. So I'll quickly cover that, and then we'll have a Q&A. And I'll ask Avinash for you to come and share a little bit more about the financials very quickly, and then we'll have the Q&A. I'll use this mic, is working? I can use this, right? I think this slide should be familiar to many of you. We had a variant of this slide about our ambition to really be meaningful in the residential space and also capitalize on the IC business. So in essence, a strong, bold mission to build our business to a relevant INR 8,000 crore to INR 10,000 crore in pre-sales, which will require us to build something like INR 45,000 crores of GDV. And it's built on 6 building blocks. First is the choices that we make on our portfolio. Some of them are listed in terms of cities, in terms of segments, in terms of exiting affordable segment, or sunsetting that part. BD has been an area of focus for us. So that's something we really need to make sure we get the flow of the deals to pick and choose the right one that makes sense for us. Focus on the customer experience right from pre-purchase to waiting to possession. Project execution, getting the first time right mentality there. IC & IC, as you know, there is a huge amount of land parcel that we have. We're not investing to acquire new location, but we have to monetize and bring to market what we already have. And then finally, something that I'm really passionate about is how -- when we run the business, it needs to be done in a very thoughtful, robust, financially sound way, in terms of IRRs, in terms of how we deliver on the timelines, and how do we measure our capital allocation. So those are the 6 building blocks of our strategy. And to do a little bit of clarity in terms of strategic choices, the first and foremost was cities. It was -- it's a tough decision for us to focus on just 3 cities. But I think I've spoken to many of you why not NCR, even though we have a very marquee project that's going on in NCR. It's not that we will not go back to NCR, but we feel that the depth in markets is more important, the breadth of portfolio that we have. What that meant is we have exited Nagpur. We were in Hyderabad, which we have exited. And NCR for the time being we will pull back in terms of new project till we attain a threshold market share in the 3 key markets: Mumbai, Pune and Bangalore. We have focus on premium. Premium defined as more than INR 1 crore to INR 10 crores in NCR and Mumbai. That's INR 10 crore market is a threshold for luxury. But in other markets like Mumbai and Pune and Bangalore, INR 1 crore to INR 5 crores is mid-premium and premium. So that's what we want to focus on. Affordable hasn't done well for us, and that's what something we want to sunset over a period of time. We have to fulfill our customer commitments, which we'll do that over a period of time. You see the products sizes, I think we are really focusing on sizable project. A key example was the Bhandup deal that we did. It was one of the largest, and we -- many of us really were worried can we do this kind of a deal, and then can we actually execute on the deal. So at least we have done the first part. Not only us, but our competitors were also quite surprised that we could do such a deal. It took us 19 months to close that, but finally we are able to get something like this in our bag. And then, we are doing outright land purchases, JDA, society redevelopment. We are not yet venturing into SRA. Maybe in future. A high risk, high reward business, but we'll see if we can execute well on these deal that I already have -- that we already have, then we'll look at SRA. And deprioritize for now, as you saw, SRA, affordable, pure commercial, retailer malls for the time being. Those are the guardrails that we have for us to build the business. To build a business, you need to have a strong track record. And as we look back on what we have achieved, we were very small. FY '20 is not far away, but we had INR 670 crores of pre-sales. In this financial year, we finished with INR 2,804 crores. And I was having some discussions with a few, we could have done more if we wanted to. But we also want to maintain a pricing discipline to make sure that at the end those projects are rewarding from an IRR perspective. GDV was just under INR 1,000 crores in FY '20. This year alone was INR 18,100 crores. The previous year, which was my first year, we did INR 4,400 crores. So we are significantly scaling in the GDV aspect. The free cash flow, as you know, is after all expenses, all construction spend is a key indicator of health of the company, given the accounting issue that we have to abide by. If we have very strong cash flow, it helps you build a strong foundation for the firm. It went through almost 5x over the 5 years. And then, we have been able to do that by keeping a keen eye on our net debt, which is slightly higher, but nothing in compared to the x, 5x, 2x, 18x that you see on the other dimensions. So we have been able to be fiscally prudent in our balance sheet. We finished this financial year at 0.39 in terms of our debt-to-equity ratio. GDV, let's talk about GDV. FY '17 to '23, we added INR 10,000 crore worth of GDV. So 6 years we did that -- that much of GDV. And in 2 years, we have added INR 39,000 crore. This includes the INR 18,000 crores of this year. It include the INR 4,400 crores. It also includes the Thane land parcel -- 3 land parcel, actually, which we already had in our portfolio, but they were not ready from an approval point of view. So we have pushed a lot in the last few years to get the approvals. And in case of Thane, which is very large, INR 7,500 crores, there are 3 kinds of approvals needed: first one was 63-1A exit, which is achieved; second one is getting it in our zone, that process is on; and third one is RERA-related approval which will start after we get the second one. So I think we are making progress. So that is a huge amount of land bank that we right now have, which gives us the confidence and comfort to scale our business in a systematic way. We shared this data, so I'll not dwell too much. 70% to 80% of land that is required to reach our INR 8,000 crores to INR 10,000 crores aspiration is already with us, which is a big change because in the past, I -- when I joined the analyst call roughly 1.5 years back, the question that I used to get asked is, you don't have enough GDV, and we would do -- we at times could be desperate to do deals and we may end up doing the deals which were not really meeting our thresholds. I think we have really passed that point. We are at a point where, if the deal does not meet our higher thresholds, we've increased our thresholds higher, we will not do the deal. We have seen probably 300 deals just in last 12 months. Vimalendra is here. The BD team works really hard. And we clearly say no or yes at the first stage. We don't waste each other's time. But the more important thing is, many times we are the first port of call for receiving new deals, and many of the IPCs, other brokers, other participants from market, they say, "This is the -- you are the first client we are showing this deal," which is a sea change from where we were probably 2 years back. This just lays out how that INR 39,000 crores actually stacks up. Some is current inventory from the current phases, which is like Vista and all is there. Then you have future phases of current projects. The pipeline projects we've classified them pre FY '24, FY '24. FY '24 we already launched IvyLush, so that has been subtracted. Then FY '25++ means we have Lokhandwala deal that we have announced in April, that is also captured there. And then there are other key projects that I -- 3 projects that I mentioned, Pune -- sorry, Thane, Pink and Murud. Those are all captured. We have been very conservative with each of the GDVs. We're not trying to give you the max possible. We're trying to give you a realistic number for each of those. So 70% to 80% of required land is with us right now for us to achieve our aspirations. When you have the GDV, your ability to scale up becomes possible. So the first phase, F '20 to F '25 was roughly 4x. It includes the IC business as well. And then from INR 3,299 crores, which was this financial year, to INR 10,000 crores is a similar 3x scale up. As you can see, IC business will stay flat because you're not investing to acquire new land parcels. What we have is something that we want to capitalize on, if we want to bring them to market. But the biggest growth is in the residential from INR 2,800 crores to INR 9,500 crores. In the past, we talked about INR 8,000 crores to INR 10,000 crores in FY '28, we've taken it to 2 year hence. I think Parikshit, you had a point that have we delayed? What you said is your INR 8,000 crores as the one book shelf -- book end of the shelf. Why don't we get to INR 10,000 crores and say, hey, take -- let's take another 2 years to actually get revenue you become bigger. 10% to 12% growth rate is not uncommon. So that given a path to INR 10,000 crore. Our sales mix is also changing. The affordable, we have a lot of commitments. We have Palghar, Kalyan, some in Chennai, that will all get done over the next few years. Some phases will take some time. And that's why by F '28, F '29, all of those commitments would be over. So our mix in F '30 will have 0 affordable, and we don't have plans to participate in any more affordable for the time being. Premium projects, which were pre FY '23, are very different in terms of the return profile, the IRR profile, are also going to be a smaller part. So this is going to be the new set of project that we have acquired. And I'm hoping the kind of conservative modeling that we have done for each of the project takes into account all the ups and downs that are going to be taking place in the industry in the next 5 years. Because you're already seeing the industry slowing down, especially on the luxury side. So when that happens, your IRRs get diluted because the time gets extended, the velocity changes, the pricing increase doesn't come through. But we've done rigorous scenario analysis to say that, "Hey, what we say is something that we should be able to deliver in 60%, 70% of the scenario." The right hand side shows you the critical change. Hunt, kill and eat was our philosophy in the past. You hunt in the same year. You kill same in the year and eat from that launch. But what happens is, when you have a slew of launches that have happened over a period of time, they accumulate. So for us, the sustenance sale will become very important. We would have done 10 launches, and each launch even if you choose INR 500 crores or INR 5,000 crore, right, on a sustained basis. And that is a profile of business that you will see changing by FY '30. This is a slide that we had lot of debate how much to share and what not to share, but at least given this is an important update for all us to share with you transparently, we thought, why don't we show you everything that we have, except for one thing that is not at the top of the some of the columns, and you can extrapolate. You can take a simple CAGR. But this is the plan that we have from INR 2,800 crores how we want to grow to INR 9,500 crores of residential business. And for each year in the new launches we have put the top 5 project and sustenance the top 5 project for that year. So this is the build-up that we have. And interestingly, if you see FY '28 has 2 new project, new project 1, new project 2. And then FY '29 has new project 3, and then '30 has 4 and 5. These are the gaps that we have right now based on where we stand. Even though GDV is there, but not all GDV of Bhandup or Thane can happen in 2 years, 3 years, 4 years. You need the flow of projects to actually give you the sales in that current year. You'll also question why Thane phase 1 in FY '28. While we're saying that approval 2 is almost there, but fingers crossed we should have it. But the Thane metro station would be ready by that time. So from a social infrastructure point of view, you get a better pricing realization by waiting 6 to 12 months. So we have that in mind. We also are carefully watching the Borivali-Thane tunnel construct. That is also supposed to finish by that time. And if waiting 6 months gives me a 10% price increase, is something I will take any day for Thane. So those are the reasons we have put them in FY '28 for the time being. If reasons allow us, if there are good news, we can move it upfront, but at least from a land bank point of view, that land would be ready with us sooner than later. So this is our build-up that you have. We will not take our foot away from the GDV addition. Like in INR 18,000 crores, INR 12,000 crores was -- INR 12,400 crores is actually Bhandup. So roughly INR 6,000 crores is coming from other projects. Our belief is that if you want to build a sustainable business, INR 5,000 crore to INR 10,000 crore of GDV every year would be required for us to keep the engine running as we march towards our INR 10,000 crores aspiration. In fact, internally, we've been talking about INR 1,00,000 crores -- INR 1,10,000 crores of GDV that we need to be thinking, because we have to think beyond FY '30. We have to think about '35 and '40. And this is a business, once you lock in your land parcel, it allows you to actually benefit from it over a long, long period of time. And I've seen that some of our peers have done really well. They've done it much earlier in time. We have to do it in this time frame. So we are actively looking to prepare our balance sheet, to prepare our aspiration to achieve that. Do we make money? And how do we make sure that we are moving in that direction? So we did this for ourselves to understand what is the IRR of the project that we have ongoing by vintage. So you see the first bucket has projects up to FY '18, 6 projects, cumulatively INR 3,000 crores, plus/minus a little bit. The IRR that we are seeing because of delays, construction, the way they were designed, COVID, is at 3%. There were 6 projects launched between '19 and '21, INR 2,500 crores sales, 10% IRR. F '22, we didn't launch much, but INR 1,000 crores, 10% again. INR 4,000 crores in F '23, that's where we started to pick up momentum, 21%. And F '24, INR 5,000 crores is at 26%. So you can see that there is an improvement in the IRR. Obviously, one is mechanical because you have low duration, you've not lost time. So automatically, you will see the IRR enhancement. But also we have changed a few things in terms of how we do the costing. We have a dedicated costing center of excellence, which has come up in the last 2 years, to make sure that we are not ultra aggressive on the cost. We are conservative on the cost. What that means is we are accounting for more cost in our business case in IRR than we were doing in the past. That gives us cushion to absorb, let's say, shocks in the commodities. It allows us to absorb any kind of rate change on the labor side by state. All those are very healthy things to keep in your kitty because that can affect your business case significantly. So once you are conservative and then you do your IRR target for the deal, then at least you are -- you don't have a downside. You hopefully have some upside. That's how we've done the IRR analysis. And we've gone back for each of these projects to say what's the true IRR given all the adjustments that we need to do. Similarly you can see the affordable and premium. Clearly, it's a reason for you to pursue premium projects. Affordable, they are tough from a customer experience, but also financially it doesn't give us -- it doesn't cover our cost of equity. So that's something that we need to watch out for and we've taken account in our strategy going forward. This is -- we try to really hide a few things. And these are 23 projects. I think you can guess some of them already. But I just want to highlight 2 things from this page. One is the rigor that we have. We're tracking how is -- how was the performance of sales in pre -- internal discussion, let's say by 6 months. These are March '24, September '24, December '24, March '25. We're tracking that on a quarterly basis, every time we share with the Board also. How are the cost changing? How is PBT changing? How is the PBT percentage and how is IRR? There are a few other dimensions that we have. We've not shared that. But if you see the blue part at the bottom of the screen, our current portfolio IRR is close to 16%. So including the 3% and including the 26% if you were to take a snapshot of all our projects, that's 16%, which is healthy, right, which is healthy, but it has to get healthier for us to absorb the cyclicality of this industry. And that's where we are moving in our efforts, in our project execution. I think this is -- this slide is a little bit of work in progress. It has the total operating cash flow net of all expenses that we'll generate from the project, but it has 3 projects which are missing: Thane; Pink, Jaipur; and Murud. And we were just doing back of the envelope. That INR 10,550 crores will become INR 13,000 crores if we were to bring all of them to market in the stipulated time frame. So the current project, INR 39,000 crores worth of GDV, that you see, has the potential to give us roughly INR 13,000 crores of operating cash flow as we stand today. It's a estimate. Estimates will change based on the pricing, velocity -- not velocity as much, but if you look at selling more at a lower price versus delaying it, it has an impact on your sales as well as the costing. Costing has been redone for most of the projects, but you know there are changes that happen in the industry, approvals, TDRs and many other things. IC business, not to be forgotten. If you've seen our financials, IC is a big contributor for our profitability, right? And will continue to play that role. The land was acquired 20 years back, 15 years back, that's giving us the results. We also have marquee partnership, Jaipur with Rajasthan government, Chennai is with Tamil Nadu government. Origins 1 and 2 is with Sumitomo. Origins Pune is completely with us right now and Origins Ahmedabad is with IFC. Pune is something that we are putting a lot of effort to bring contiguity and connectivity to make sure we are able to market it at the earliest. We had 63-1A issue, which has already been resolved. Interestingly, this business, even if we don't acquire new locations, we call this strategy as EN strategy, existing land parcel, land location and new land parcels, to address the contiguity, EN. We will put money behind it. We will not do NN. New location, new land parcels we will not do anything. Despite that, the size that we have has the ability to give us INR 1,500 crores worth of PAT, our share because we have partners. So if you take out their share, we have the ability to get roughly INR 1,500 crores. So that's the kind of potential that this business has. We want to make sure that, that comes through sooner than later. But the more you wait on land, your profitability goes up. So you always have to balance lower price now versus wait 1 year or 2 and get slightly higher price. So that's the balancing act that we have in our IC business. Balance sheet. Having the Mahindra legacy, we are always very conservative, right? The 0.34 to 0.39 is something that is one of the lowest in the industry. Many of our peers are very high. And as we go through with the rights issue, the immediate thing is we'll cut down this long-term debt as much as possible and keep a lot of money remaining for us to fund our growth aspiration. And if we need to go back to get debt, we will do that. All our GDV acquisition, if you have seen, are very capital efficient, JDA, society redevelopment. Outright is a fair percentage, but that's something we have done consciously. And then finally, you saw the middle part of the video. I think we are doing a lot to pursue our customers aggressively. This premiumization journey that we are going through is something that resonates very well with our customers. And then, our employees are quite excited. We have a new office. We are -- we play a lot of -- we have a lot of -- we have a culture of work hard, play hard. We had a cricket tournament recently, second time. 400 -- more than 50% of our colleagues actually participated. So work hard, play hard culture starts from office, but ends in the playground. So that's it from our side. Let me hand over to Avinash.

Okay. So you've all seen the results. They have already come out in the public domain on the stock exchange. We thought we'll give you a sneak peek of how we look at our financials. Because as you all know, the accounting guidelines that dictate the way accounts are cast for the real estate industry are very tricky. It doesn't really reflect what's kind of happening on the ground. So we thought we'll just give you a kind of small walk down, maybe just couple of slides as to how we look at it. And then, of course, we'll leave it open for questions. So -- sorry, that's the next one. Okay. So I'll actually not dwell too much on to this slide. This is exactly as per how it is cast in Ind AS. It shows that the income from operations is about INR 372 crores versus INR 200 crores. It is following the completion contract method. It is not really reflecting exactly how things are going on the ground. What we've done and this is the balance sheet, it shows a healthy net worth of about very close to INR 1,900 crores. But quickly, let's spend some time on this slide. So what we've done here is that we've not changed the main principle of what Ind AS follows, which is completed contract method. However, this we in our internal parlance call as full consolidation, or management consolidation, okay? So what that means is that typically, you would see an income statement whereby there would be a certain profit attributable to the joint ventures and associates and all that. Now, if you look at it holistically, these are all entities which we are running the business on the ground, we are controlling them from an operations perspective. So we call them full consol, which means that everything is consolidated at the line-by-line level. And then we have a small line there at the bottom, which calls -- which talks about minority interest, okay? So if you look at this, we can say that in F '25, we've sold 3.18 million square foot in residential segment and -- versus 2.47 million last year. We sold 85 acres in the IC business against 119 acres last year. But if you can see the revenue line or income from operations line, they've actually given us a higher revenue, INR 495 crores versus INR 470 crores last year. So that's about 5% to 6% growth. If you look at the total income, we were at about INR 1,000 crores last year, going up to INR 1,400 crores. INR 1,446 crores is the total for FY '25. What is interesting is what's happening on the EBITDA line as well as what is happening on the PBT line. So while the income has grown by about 18%, we've seen about a 26% to 27% jump on the PBT side or on the EBITDA side, which actually reflects health. One small point Amit alluded to earlier, and that's kind of reflected here. On the earlier slide you saw that the IC business has got potential to generate about INR 1,500 crores of PAT over the next 8 to 10 years. If you see what it is doing today, the last 2 years, INR 124 crores and INR 126 crores is the PAT that is generated from the IC business. So the wealth or the importance of IC business is this, it gives a steady PAT over a longer-term period, whereas the residential business has tremendous potential to grow. And with the growth and with how we complete our projects will come the income and the profitability that is associated with this. So that's how we look at our business. There are enough disclaimers there, but we thought we can share with you exactly what our internal metrics are. Well, and last but not the least, these are the highlights of how things have happened in the last year. Pretty much about 20% growth in residential pre-sales. IC revenues have grown by about 5%. We've already talked about GDV. That's about 4x as compared to last year. What has driven our cash flows is the very strong, very healthy collections. We saw on the earlier slide that our net debt-to-equity ratio is about 0.39, still very healthy. So at a point in time if we really need some strategic debt, we can always raise that. 0.39 goes well with our overall guideline. We don't want to really overleverage, don't want to go beyond 0.6 or something like that. So that's how we've kept it under control. And of course, strong operating cash flows. The key highlight is that's highest ever, INR 832 crores is what we have overall operating cash flows, mainly led by the residential collections, which has grown about 30%. Cost of debt has been well under control. We try to do maximum in terms of short-term versus long-term. Any commercial paper issuances, we get pretty good rates there. Overall, we've kept it under 9%, and that helps our overall cost. So pretty much that's it from me. We'll leave it open for questions and then take it forward. Thank you.

So hopefully, you've got a glimpse of the business, how we are trying to build it and a glimpse of the commercials of past financial year. So love to address any and every question that you have. So over to you. I think we'll have the mics go around if there are any questions, and then we'll try to address them. You can direct it to any of us or we'll find the best person from our side.

So my first question is on the rights issue. So what are the time lines of the rights issue? And how do you intend to deploy this for growth? So what will be the strategy on deploying this, whether you'll do outright purchases? Like in MMR, this year you're largely done through the JDA route. So what will be the strategy for MMR, Pune and Bangalore in terms of allocation of this capital?

The first part you want to answer?

Sure. This audible now? Yes, okay. So short answer to your question actually is that when? Well, as early as possible, okay? To be very honest, actually, we had some internal deliberations, and we thought let us first actually declare our annual results. We didn't really want to go to the market with 9-month numbers and then the investing community can have a good impression or a bad impression about what happens on the results front. We thought let's go formally with everything on the cards and then go through with the rights issue. So my short answer is very soon. We haven't yet exactly decided the exact dates and all that, but you should hear something very soon.

Deployment of funds?

Yes, I thought you are taking that.

Okay. I think we have roughly INR 900 crores of long-term debt. And with this INR 1,500 crores, I think it will help us to be prudent about reducing that as much as possible. So that's our first. We have -- from a deal point of view, we don't have an allocation that we will put this much money towards outright, this much towards Pune, this much towards Bombay and Bangalore. I think we have done a lot in Mumbai, to be honest, in terms of the deal pipeline. So our focus is a lot more bringing that GDV into market through sales approval. So we have got enough right now. Even in Bangalore, we have couple of marquee projects that are coming up. So we're not in a rush to put more money in Bangalore because we've got the next 3, 4, 5 projects lined up. Pune is something that we think we were -- we almost closed 2 deals last financial year, but for one reason or the other either we didn't feel comfortable or didn't work out with the other party. So those didn't happen. So I think Pune will need some focus for this financial year. But at the end, we look at this as a pool of money that's available to the best project that we have. And if there is an outstanding project opportunity that comes in Bangalore, funds will go there, right? And good thing is everything rolls up to Vimalendra, so he's able to actually prioritize, say, "Hey, here are my top 5 projects." And there are different stage of term sheet and due diligence and first come first serve, but it has to meet our financial discipline. And we also have support from the group in terms of, hey, if this INR 500 crores, INR 600 crores which is net of debt payment, if that is exhausted, we will be able to go to the market and raise debt again if need be, because our debt to equity at that time will be 0, practically 0. So we have the opportunity, but we run a very tight process with the corporate to make sure that we're getting the best deal. Divya is here. We get the best deal on the debt side so that we are always maximizing the financial returns from any investment that we do.

My second question is on the GDV addition. You have done phenomenally well last year and the year before that. So now the question is that sales effort now goes into it and to cure these deals and get it on the ground up and running and sales -- and do sales on that. So in terms of channel partners, in terms of execution capabilities on the supply chain side, so how has been the ramp-up there given that we will have a slew of launches coming up in this year and the year after that and when we move towards the INR 10,000 crore target, so how are you building the organization, the entire channel partners network? So how has that number been now for you this year? What has been the conversions now at the site? So what kind of velocity you're looking at the new launches given the current condition of the market? So how do you see all these things?

Vimalendra, you want to answer that, I think...

Thanks, Parikshit. So it -- let me address this question point-wise. First is in terms of the sales capacity, right? I think like the business development deals where there are financial guardrails, we have to ensure that we meet those financial guardrails. In terms of capacity building, it's very easy to build capacity. But then if suppose you don't have enough projects on a particular line, right, what do you do with that excess capacity. So it's a very dynamic process where you build capacity at the right time in a way that people are completely engaged in the sales process. So as of today, I think we are very well capacitized. We can take care of all the projects that we spoke about, and which was shown. And then at the right time, obviously, we will add capacity depending upon which project is going to come at what time. So not a worry there. In terms of channel partners, I think we have a dedicated channel partner team. So let me just explain that business briefly to all of you. In -- Within the channel partners, we have got effectively 3 sourcing verticals, right? One is your retail channel partners, which are all the people on the ground in a particular micro market. You have institutional channel partners, what we call as the larger players, right? They have got this 500-member team, 300-member team. So they work at a very different scale. What we have also started last year is we've got something called as the Rest of India business, because the markets that we focus on like Mumbai, Pune and Bengaluru, have people, say, from NCR, people from Jaipur, people from Madhya Pradesh, who are also interested in investing in these cities for various reasons, right? So the third one is the Rest of India model or the channel partners model. Happy to share that in terms of distribution, we are one of the biggest in all the cities that we are operating in. We have a very dedicated channel partner team across these 3 sourcing verticals. It's effectively like a wealth management or a private banking model where you have X number of customers allocated to a particular relationship manager and that relationship manager has to nurture that relationship. And the objective being, hey, if a channel partner has a customer, he should think about Mahindra Lifespaces because his relationship has been effectively managed by this particular person. I guess that's where you need to have that share of mind, which is very important. That's how we are approaching this in a very meticulous way. And we are happy where we are. We have -- I'll not get into the number, but a significant number of channel partners who are already empaneled with us and the engagement is round the clock with them.

On the execution side, supply chain, construction teams and the capacities there, moving to reputed contractors, focus on quality. So what -- how are you tackling this? Because this has been one of the major issues in the sector.

Yes, yes. No, that's a great question. I think there are 2 parts: internally how we're scaling up and then externally how we are thinking of the right partners. On the internal side, we have significantly enhanced our procurement team -- procurement and contracts team. It's -- we've hired somebody from another very respected peer who -- individual who had done well and then we rebuilt the team. And I think the key part in our procurement contracts is how do you actually have enough control, cost focus, but also have agility. Because cost will allow you to bring negotiation, et cetera, to bring your cost down. But if you're not agile, you lose time and it affects your IRR because it used to take 6 months to award a contract. So what we are trying to do is build that system as well as mindset in our procurement and contracts team, working with Sudharshan, who's sitting here, to make sure that his needs at the site are very well addressed. So that kind of internal capability building is happening. Procurement is one key area. At each site, we have a very strong local head. For example, in Pune, we have a very strong guy who came from capacity. He runs all the 4 projects. In Bangalore, we have another gentleman who came from here are a few years back. He's one of our stars in terms of delivering before time. So we have Chennai somebody else. We have -- Mumbai, we have somebody else. So we are building that. And then below them, we have the next level of people, we call them DH Band, that's been built over a period of time, almost 80 of them who are part of our next level of leadership, as number two to each one of them. So that's something that we have really worked towards. We have brought down our -- this industry has an attrition of 30% to 35%. Our attrition is less than 20%. Why? Because we are investing in our people, talent development, the right kind of opportunity, rotation, many of these things. We have done an industry-leading training program with IIM Ahmedabad, which is 30 people went from our mid-level team with S.P. Jain locally. 60 people attended it last year. So it's a lot of investment in our people to make sure that the right people who have the right set of capabilities stay with us. So that's on the execution internal side. Externally, it's a balancing act. I think many of the projects, we have some cushion, and that's why when we have higher velocity, it improves the IRR. It gives us a little bit of cushion to actually go to better contractors. Now we are creating that cushion and working with our projects to say, "Hey, if you can't go all the way to 1, can you do to 1.5." Like somewhere better than Tier 2 or Tier 3, but at least who's got very good strength in people, the sourcing of people on the projects at the site and also compliances, which for Mahindra is a very big thing, safety and other compliances. So it takes -- that adds a little bit of cost, 10% sometimes. And for us to absorb that, we have to be very careful and thoughtful. So we are almost there in terms of creating budget in each of these projects, but that's something which I would say is a balancing act for each and every project.

And just last question to Avinash. Avinash, you showed us that slide on recasting of the financials, which you do internally. So was it POCM accounting? Or is it just...

No, it is not POCM. It is still completed contracts, but at a full consol level as we call it, which is everything consolidated line by line.

So even associates are consolidated on a full...

That's right. Exactly.

So the question is now on the next year. I think we've been in the past saying that we'll move to the path of profitability even on CCM basis on the residential business. So when do you see the light of the day? And is there any thought of like moving towards more like POCM-based accounting where -- which other Bombay developers are following now and they've moved to, because it is a more correct representation of your current profitability. So how are the thoughts there?

Yes. Good question, Parikshit. So you're right, a few of the developers have kind of not changed or have moved to this. There are a few who are contemplating about how do we do it. In our case as well, we are contemplating, taking a conscious call through our advisers, our auditors, our bankers, et cetera, as to how do we actually transition to that kind of methodology. As we do that, obviously, new guidances, new guidelines are also coming up. Ind AS would maybe allow, maybe not allow. So we'll consciously look at it. We are working on it. In the meantime, we are thinking of how do we kind of bring out more to you. If there is a way where we can cast our accounts in a percentage completion method and that can be displayed to the public. Maybe we can try to do that in the interim. So those are the things that we are all working on. Let's see how we progress on that.

Okay. And any deliveries for this year? Like FY '26 how much do you think you can deliver in terms of area or in terms of revenues? Approximately some ballpark sense there on the resi business? Any major deliveries coming up?

Good question. I can't tell you the exact number, but we have quite a few sizable deliveries planned in this year. A couple of projects which we've started in about 4 or 5 years ago are going to see completion this particular year. We talked about 2 marquee projects. Amit talked about Luminare in the past. We were talking about Eden. So some of these will see completion during this year.

I can...

And we are...

I can share some more.

I'm talking about marquee project.

So 5 plus 1 plus 3, that's our OC. 5 large projects, one which -- plotted, which we are awaiting approval to even launch, which is in Jaipur, but it takes 9 months to -- and then 3 on the affordable side. So that's the 9 on the OC side. In the past, we -- the reason, Avinash is not sharing the numbers because it's dependent on the approval. We can do our job well, but as you know, this industry has some challenges.

Rahul Jain from Elara Capital. So a couple of questions. So first one is on your Andheri Lokhandwala project. I mean that micro market we are seeing a lot of aggressive bidding by most of the grade A players. I mean, when I say aggressive, both in terms of the rental corpus offered along with the area offered. I think plus in all practical terms, nearly half of Lokhandwala today is either under redevelopment or in negotiation. So you will probably see a lot of supply coming in that particular micro market. So having said that and on your slide, if I see the average realization that you are looking at for that particular micro market, it's actually very similar to your Mahalaxmi project. And plus if I look at a near-ready possession inventory, it comes to around at least 10%, 15% premium. So I just want to understand, is that project going to be relatively margin and IRR dilutive relative to other projects that you have acquired? That's my first one.

Thank you for -- A couple of other friends have also asked this question. So I'll tell you, fundamentally, as Amit said, when we look at any project, I mean, obviously, the financial guardrails have to be met. So there's no emotion because I like the area or it's a great area, and we would love to do that. If the financial guardrails are not met, we will not go ahead, and we have said no to many, many, many projects. Now coming specifically to Lokhandwala, it's under cluster redevelopment. And some of you may be aware, and -- so it's a very specific 339 policy. Under cluster redevelopment, there are certain benefits available to a developer, right? Now within the financial guardrails, some developers may choose to pass on those benefits to the residents. Some may not choose to pass the benefits to the residents. I'll give you just one example so that there is abundant clarity on this topic. If you're doing a cluster redevelopment, which is more than 10,000 square meters, there's a certain FSI, which comes by default. It's not dependent on an individual approval, but it is a part of the policy itself, right? Similarly, if it is more than 20,000 square meters, the FSI that you get actually goes up. So as a developer what we do, hey, I can say it comes to me, I'll just keep it or I'll say it's anyway a partnership, joint development. As long as my financial guardrails are met, I'll pass on that extra to the society. They are very happy. Then what happens is, your speed to launch in a redevelopment project where you're actually truly partnering with the residents, is actually significantly faster. And that's what makes a lot of the difference again on the financial side. So I think all the societies that we have signed, great relationship, all very happy. We are working very aggressively for the DA and eventually the design and then the -- and the vacation, right? So I can tell you very confidently that the financial guardrails are there. We have been very transparent, open, and we have actually used the policy very, very correctly and prudently, and that is the reason we have the ability. And as you rightly said, various other developers have also pitched around the same numbers. But I guess that's where a brand also plays out. That's where the relationship with the society also plays out. Practically, every weekend, many a times myself and the teams are there with the society members talking to them and getting this home. So absolutely, we are very, very comfortable, and we look forward to making a very marquee project there. Second, you spoke about the pricing. Again, it's all a function of the financials, right? As Amit said a while back, when we look at our business case, we don't work on the business case thinking that, hey, today these numbers are relevant and what happens 3 years down the line, 4 years down the line. There could be some cost pressure. There could be oversupply, right? There's a -- there are certain assumptions on the prices which are done. If you actually do that well, then you are in a completely safe zone, safe space with respect to, a, delivering the financials; b, delivering the project. So very confident, very comfortable on both the execution and the financials.

Sir, and second one on Bhandup. I mean, it's a very sizable project. So essentially, what is the base case scenario that you're looking at in terms of monetization? Obviously, the depth of the market is still building there. So both from a base case angle as well as the worst case angle?

Can you clarify what do you mean by base case?

Monetization that you're building over a period of time?

Like in terms of years and...

Yes, the number of years...

Right.

That's going into...

This is 6.4 million square foot of saleable area. Right now we have done the design. We also got the first stage of approval for I2R. So that's already done. We are now finishing the design and then doing through the approval process. So it will have 3,000-plus apartments. It will have a good size commercial space. If you've been to Gurgaon Horizon Center, that kind of a complex we are trying to create. It will be -- as our CMO, Chief Marketing Officer is -- Urban Forest, a marquee club, amazing set of facilities, retail. All those things are going to be part of this. 37-acre allows you to do so many things, right? Our -- we have been conservative in our base case, let's say. Say -- if it is INR 12,000 crores, let's assume 8 to 9 years to sell out that. But that's not our aspiration, right? Construction could be a few years longer because the last phase will take some more time. I think we will maximize IRR. Given it's with a partner, we will look at the best interest of both the partners. For our partner, the cash is very important, right? They will want to maximize the cash. For us, cash plus IRR is important. So we will do the right thing in terms of adjusting the velocity price point. But at the end, this allows us to create a very successful marquee project, which will have a premiumness attached to it. And I think we will -- the base case is a starting point for financial, but in real world we'll adjust the business conditions.

Pritesh from Axis Capital. Just a couple of questions. First, continuing on Bhandup. So in general, as per your assessment, what's the market size there? Or by going there, are we going to create a -- or create a whole new market for that ecosystem and gain some share out of the neighboring markets around that?

Thank you. So let me -- and this is -- this market data is almost, say, 6 to 9 months back when we had done our detailed. Bhandup is a micro market, plus the fringes of Mulund, because it is also a captive market. On an average yearly numbers, they actually sell 5,000 units a year. right? So that gives you a sense of how large the market is, right? That's one. A lot of the development has happened towards, say, the Powai side, and they have happened towards the Mulund side, right? So Bhandup to that extent, frankly, has not really seen a spurt in development. Now this particular location that we have, and I'll encourage you if you get time to go and see, there's Bhandup station right behind. There's a metro station right on the road. And this is one of the best locations, one of the last piece of land which is so large. And what we can deliver there is amazing. What we will be delivering there is quite amazing, right? So with respect to market, with respect to the absorption, I -- we are absolutely not worried there. It is also a function of what kind of product you are bringing because it's more like there will be commercial, there will be retail, there are residential. Plus the best is the connectivity. Whether you want to take metro or you want to take an auto or a cab or a local train, I think you are there. One more thing since it is in the public domain, the east-west connectivity is actually next to our plot. If you have to take from the highway, if you have to go towards an LBS road, right, today, there's a -- BMC has already started constructing because we have handed over that land. They've already started constructing the flyover. So by the time our phase is ready, that flyover will be ready. Phase 1 is ready. So that will further add to that particular location. So all in all, it's going to be a great story there.

Sure. Sounds interesting. Second, on -- we have already transitioned from a journey of being an affordable player to mid-income, largely now getting into premium locations like Lokhandwala, Mahalaxmi. For us, what in general changes, like still focusing on product and that will naturally drive the customers to us or we have to do something different to be -- to call us as a premium brand?

Yes. It's a great question. And I think it's not an easy one let me just tell you because, many times I've been called the CEO of Mahindra Affordable Housing by people that don't know, right? And those who know Mahindra very well. So -- and I keep reminding them. Even today I had given an interview, they were saying Mahindra Life Sciences. So I think we have to do a better job of getting our brand understood, right? And that's why I think we have Abhimanyu sitting at the back chair. He's our Chief Marketing Officer. He spent how many years at the corporate, Abhimanyu? 3 years, right? He helped Mahindra create the brand that exists, especially on the auto side, right, the perception that we have. And we got him especially to Mahindra Lifespaces to make sure that we create a significant amount of brand appeal, which is in line with the Mahindra brand image, right? As you can see, Mahindra -- if you look at Mahindra is known for SUVs, right? Not for small cars, not for luxury cars. And I'm sure we -- you know we have tried both. We even tried 2-wheelers, right? And it has not been very successful. Two-wheeler and small cars are like affordable, right, small ticket size, different kind of customer segment. Luxury is a very different customer segment. So I think we have to do a lot to first change the brand perception. And I think you saw the video at the start. I think we're trying to be a little bit cool, a little bit different to create that brand appeal. So that's the first part that we are doing. The second part is our overall customer experience, right? When you come from an affordable -- when you deal with an affordable customer segment versus a premium customer segment, the kind of touch point, the kind of -- the way you interact with them, that all needs a lot of training. Even the collateral, even the gift that you give changes significantly, right? The role of technology becomes extremely important. So Vimalendra has been driving that, right? The kind of salespeople, how they dress, how they interact, what kind of script they have and there is outbound call center. I think I would not say we have arrived at that, but we have some time, right? We have some time and I have seen tremendous response to Vista. We changed in the -- before we launched Vista, we completely changed that project. There were no 4 BHKs in Vista. We've unfortunately and fortunately, Supreme Court had this RG issue. We had 6 months. So we actually changed the design and got 4 BHK, [ up-speced ] our clubhouse and everything. And then we taught our teams to how to sell this to the right customer segment. It's a work in progress. We will get there, right? It's 25,000, 27,000, Lokhandwala and Mahalaxmi is 50,000 product, right? We will actually get there as soon as those products are ready. And third part is the quality of delivery, right? The finishing, like -- finishing is extremely important, right? If you look at the kind of specs that we provide in our project, the kind of -- I was at -- was it Pune? When I said, okay, we have the concrete blocks, right? I said, show me how much strength it can. So it is an M30 block. So you put pressure on that and it breaks, we were deploying it. And it's required -- it should have stopped at 30, but we made it so strong, it was 44, right? That means the quality of cement and steel and concrete and everything that went into it is 50% stronger than what is supposed to be there. So it's very safe, very comfortable. But by the time you do all these things, you may not have enough money left for tiles and replacing those cracks in the marble, right? And that's why you have to balance like what is visible to the customer that creates a feeling of an up-spec product. And I think that's why we are doing very well now in terms of budgeting for it and making sure it gets delivered and solved for the customer. So those are the 3 things we are trying to do to shift from an affordable to a more premium experience for our customers.

Sure. And just one last on the IRRs. I think it's good to see those IRRs scaling up now. In general, how much does it translates into EBITDA margins or cash flow margins? Because -- I mean, as an analyst, how can we track that progress that hey, we are going right on that path? So what should we be tracking to understand that we are on that right path of improving IRRs and improving margins?

This is one of the toughest problem that we have, right, because of this accounting. So let me have Avinash take a crack and if I need to step in, I will do. Avinash?

So first what we do is, we first arrive at the project IRR, okay? Because your debt-to-equity structuring and all that can have different implications. Equity IRR would be different than a project IRR. So we first have our initial guardrail at project IRR. Typically, over a period of time, of course, there is a good bit of correlation between a PBT margin and an IRR percentage, okay? Of course, the IRR will take into consideration the timing. So we have guardrails on IRR as well as a PBT margin. When we do calculate the PBT margin, we also take into consideration certain allocation towards our corporate overheads and all that so that the cost that is getting reflected for that particular project is well calculated, well estimated and all that. Largely, that 18% to 20% band that we talked about, does get maintained over projects.

That's on the PBT margins, 18%, 20%.

That's correct. PBT. Maybe we'll take 1 or 2 questions, Amit, from the online part. So one question is on the demand environment. How is that shaping up in our key markets like Mumbai, Pune, Bangalore amid the macroeconomic uncertainties? And Vimalendra to you, any thoughts on how we should think about our pricing strategy for the upcoming year?

Why don't you take both. So if you look at the numbers, the -- let's stick to the calendar number –-- calendar year number FY '24, even in calendar year '24, the overall market has grown, the residential market which is measured in the top 7 cities, has actually grown compared to calendar year '23, right? So from -- and I'd like to share our own example, right, what we see on the ground. We had this Vista phase 2 launch, and then we had this IvyLush phase 2 launch in the last quarter. And in the Vista phase 2 launch, we practically had less than 30 days actually after we got RERA and -- but let me give you one statistic, which is not there in the public domain. We had 4,000 people who walked in, in 30 days at our Vista site. 1,000 potential customers who walked in, right? Now that should give you an insight into that -- the demand remains robust. And this is on the back of a healthy price increase that we did compared to what we launched in phase 1, right? And we have seen this across all of our projects, let it be plotted in Chennai, let it be our Bangalore project, let it be sustenance sales. So frankly, we are fairly confident and fairly comfortable. And the market is actually very, very steady. So we have not seen that yo-yo movement. And the markets in which we operate are -- fundamentally have been very stable, very. Now if you look at -- if you just peel the onion a little bit and if you go to, say, a market like Pune in the last quarter of the financial year, yes, there was a decrease in the number of units sold. Even in Mumbai there was a slight softening, but it was because -- predominantly because there were not enough launches because of -- which is good. I think I always tell that people should have all the approvals in place. And sometimes the regulators take us X amount of time to approve. There's a scrutiny which is happening at RERA level, it's significantly more. There have been the certain EC issues. But by and large, the market has held steady. It is fairly robust. And we continue to be very, very optimistic about the growth journey, right? Because all the parameters indicate and our own experience on the ground indicate that the demand continues to be very strong. One more statistic I want to share. If you look at the inventory overhang, which is kind of a gold standard in the market, at a pan-India level, the inventory overhang in these markets is still 13.4 months, right, which is very, very healthy. Even if it remains like this, we are all very confident that you can -- a lot of the developers and the sector can bring in a lot of the inventory in the market will still get absorbed. So not worried on the demand side. I think we need to be able to bring it to the market, right? That's one. The second part of the question is on the...

Pricing strategy.

On the pricing strategy, right? Again, I can share my example and some of the examples that we have seen from the competitors as well. As I said, in March, we launched Vista phase 2, we launched IvyLush phase 2 and both had a healthy price increase. Now at least as Mahindra Lifespaces, we were able to sell the units at a higher price. But internally what we are seeing and in the market what we are seeing is like will the prices in terms of increase, will it continue like what we had seen in the last 4 years? Probably not, right? Probably not. And I think that is where a certain degree of moderation will happen. Last 4 years were great for the sector across the board. There will be a certain amount of moderation as far as the price rise is concerned. But on the demand side, I think the general consensus is it's strong, it will continue to be strong. So for us, 2 parameters that we look at. I think all of you must have guessed very clearly, it is IRR and the PAT, right, or PBT we can say in this case. And both are very important for us. And many times, it's a very dynamic balance. It's a very delicate balance because, hey, if you sell everything fast, yes, you can do that, reduce the price and sell it. But is that the right strategy? Probably not. So you need to be always be able to create a right balance between how much you sell upfront and how much you hold back, because obviously, you will have a price realization over a period of time. And we need to be able to balance both. And we are very conscious of this at any point of time how much inventory we open and how much inventory we sell in the market. So we'll continue to be mindful of that.

One more online and then we'll come back.

Yes. One more question. There are a few questions bunched up primarily on launches. One on, you have an update on how that is progressing and on Thane and Bhandup. Bhandup, I think we talked about, we can just...

Thane also we have spoken about. But on new wins, a project which -- it's in Bangalore, adjacent to our existing project. A small one if you look at the overall size, but happy to share that we have sold very well. I have a CFO, so he can tell the numbers if he allows me. But we have sold very, very well and at a very healthy price increase compared to the adjacent project. So again, both these indicators tell me the market is fairly robust. And so that's all I can say. It's done very, very well both on pricing and velocity.

There's also a question on Pink and Navy as well. If you just want to quickly update...

So Navy, I can talk about, Navy, we hope to launch because it's a redevelopment project -- our first redevelopment project and redevelopment has a certain amount of time line attached to it before we can launch. Because obviously, there's a DA, there's a design, right? You go through the 79A process. The entire PAAA which needs to be done with every single customer, right. There's certain degree of handholding, then there is vacationing which needs to be done, then there is a demolition CC and then RERA, right? Happy to share with all of you that the entire site has been vacated now. I think we are significantly ahead, and we hope to be able to launch Navy this quarter itself. So all on track as far as that is concerned. Pink, we are working through the regulatory approvals very, very closely. In fact, Amit himself has met very senior officials in Rajasthan government to expedite the approval process, and we remain very optimistic. Hopefully, sooner than later we should be able to share some positive news on that front as well.

We come back here for questions?

Yes.

Yes, Parikshit.

A question on embedded margins on your new business development which you did last year. And prior to that what has been the embedded margin, EBITDA margin in the new BD? So how has the trend changed? So FY '24, '25, what kind of margins we are carrying? Embedded EBITDA margins I'm talking about.

So I'll answer it this way, Parikshit. So one, in the past we had some guardrails. What we did is a kind of -- I wouldn't use the word revamp, but we understood the elements which we are either overbudgeting, overestimating and things like that and try to tone that down so that our guardrails process and the process of estimation of those costs remains better off or healthier so that we have enough cushion or enough buffer if there are things that go wrong. We added contingencies. We added some of the escalations that can come in costs and things like that. Over a period of time, what we are doing now as compared to what we were doing last year is we are now thinking of making those guardrails a little bit more stringent. So for example, if we were okay with a required rate of return or an IRR of about, say, between 18% to 20%, we are now targeting things that are upwards of 20%, between that 20% to 22% range so that as we enter into this particular phase of the industry, we can target some more return. That's one. And the kind of GDV scale that we've acquired by now allows us to actually set a slightly higher guardrail than what we have been doing. From a BD process, I explained the correlation between the IRR and the PBT. We still continue to monitor the PBT part of it rather than just EBITDA because we bake in all the relative costs that are for that particular project and then do the project IRR basis. So if we move up the guardrail a bit on the IRR side, automatically it has an implication on the PBT side.

Because the mix of MMR has gone up and especially the premium projects, so when I look at 23%, 24% PBT, so will there be almost a slippage of like -- when I move from EBITDA to PBT, so at least 7%, 8% point could be the shift. So is it right to think that the EBITDA will be upwards of now 30% on the new business development?

Just purely based on the mix? I'm not understanding the question exactly. Just because the mix may change, I don't think it will have an implication on dilution of EBITDA. So it is not mix linked, let me put it that way. It is not even the type of the deal linked, meaning it's just because with the higher number of society redevelopment vis-à-vis outright, it's not linked to that as well. Each project is on its own merit evaluated and then brought into the market.

But will you put any number on EBITDA -- embedded EBITDA margins on this INR 18,000 crores of pre-sales? Or even removing Bhandup if I have to say INR 6,000 crores, INR 7,000 crores, is it right to assume that like your peers are reporting almost 30% to 35% EBITDA -- embedded EBITDA margins when these figures will get recognized as of current cost prices and with some escalation built in. So do you think that when you reach to that 23% PBT, so will that 30% hold? Or will the EBITDA margin...

No, not 30%. Let me try to answer. I think we have struggled with making this comparison or analysis. And here is the reason why. In the project, you have IRR and PBT. At a company level, you have EBITDA. The reason is because you have 3 components of our cost, which is payroll cost, which is not inventorized. You have other non-payroll costs like consulting, due diligence, et cetera. And then you have sales and marketing, right? These are the 3 costs, which are below the line. Gross margins minus these 3 give you EBITDA, right? And then you have interest and depreciation, then you get to PBT and PAT, et cetera. But you can't do this because in the project accounting as you do IRR, you don't have these 3 components captured. What we do to make it more actual is in the IRR part saying that, hey, this is the gross margin minus the corporate allocation, which are surrogate for these 3 components. We are right now at between INR 80 per square foot per year to INR 100 per square foot per year. We load those costs and then we calculate our PBT, right? Because then it gives me a good understanding of whether the profit of the project is going to cover the overhead that we are going to have. But the real accounting for that year -- you can't project the F '29, F '30 when the cost -- the project completion will happen. And that's the problem with EBITDA because EBITDA is a very different way of looking at it. And the project IRRs are very confusing. They don't reconcile together. So what we do is just to create a management reporting, what we have done is take a project like Vista, run it from day when we acquire the land and when we finish the project and get out of the project, do the cash flows. At the end, if IRR is 20%, the ROE should be close to that, right? And that comes only after 10 years, if you don't do any more investment on any other project, which is for the future. So very difficult because it's Ind AS accounting. So we track IRR very tightly, which has a corporate overhead, which is surrogate for EBITDA. And our PBT is roughly 19% to 20%, right? Even though Mumbai project should have a higher, but the approval costs are very high, the land prices, the expectations are very high. So everybody prices that saying that you don't get the kind of 30% that -- at least we have not seen 30% kind of project. There are certain projects we have seen very high IRRs, but those are smaller projects potentially in, let's say, Bangalore, sometimes in Pune. But Bombay is so competitive, if you can get 20%, I will take it any day. Is that -- and you saw from the previous chart, our affordable was 9%, right? Our premium was 18%, right? So 18% could go 19%, 20% for a specific project. So that's how we look at the IRR surrogate for EBITDA.

So one chart you have given in the presentation where we can extrapolate it. So that number comes to like FY '26 sales of about INR 3,700 crores, INR 3,800 crores and then INR 6,000 crores FY '27. So is it the number...

I was warned that you'll ask this question. What's your short-term guidance, right? Parikshit, you know us, we've never given because, I wish I can predict when the approvals will come, right? And as we saw in the past financial year, if we had approvals, I would have been much higher than what we are at today. Everything is ready. Half the work is also done for Project Pink, for example, and even for NewHaven. It could have come easily last financial year. We're just waiting. e-khata issue, BBMP issue, this issue, that issue, 2 months nothing happened, 3 months nothing happened. So we have not. But I think for your modeling and you just take INR 2,800 crores to INR 9,500 crores, put a straight line and say this is what it is. There will be plus or minus. It will come out to 27.6%.

Got it. Just last question on business development. So this year was phenomenal, INR 18,000 crores and we are now almost at the top. And you said in the call initially that INR 5,000 crores to INR 10,000 crores is what you will target on a sustainable basis. Do you think that with the money coming in from rights, this number could be more closer to INR 10,000 crores and maybe there could be some years we'll surpass that? I mean are we geared up for doing that kind of -- both financially as well as the execution side?

I think in the past we always used to say that we'll carry INR 5,000 crore worth of project in pipeline. We right now carry INR 25,000 crores to INR 30,000 crores worth of project in our pipeline in different Stage 1, Stage 2, Stage 3. Stage 4 is when the final document has happened. We can easily do more deals if the deals are attractive. There is -- good news is given the little bit of track record we have now, I'll say a little bit because we have to deliver these projects. I think corporate is very supportive, saying that you guys fight externally, if you need funds, come to us, right? Fund is not going to be a concern as long we continue to execute. So from that point of view if there is a good deal which is INR 5,000 crores, INR 10,000 crores, needs that special attention, we will get that. And many of those deals don't require too much capital because they are typically JDA or some kind of revenue share or some kind of society redevelopment. So we're always looking for capital efficient. The -- what goes away is the time part. Outright has the benefit of -- benefiting from a time. Society development takes 18 months to bring to the market, right, given the point Vimalendra mentioned. So we're always tracking that. I would love to make sure that we are not chasing deals. We are chasing profitable deals. INR 5,000 crores to INR 10,000 crores is the -- something that we will do, and there will be a few years, it will be INR 15,000 crores to INR 20,000 crores if we get a good deal. And we are looking for some good deals, large deals in Pune and near airport in Bangalore. There's a question behind I think, question behind.

Thank you, sir, for sharing the interesting perspective on the IRR of the projects. Sir just wanted to get a sense, sir. I mean, if you can also give us a broader sense, what were the IRR when initially these projects were put at the time or underwritten and where they have slipped to the 3% to 8%? And at the current juncture we are also indicating 28%. So what are the safeguards we are managing so that these are going to remain intact over a period of time?

I think let me just try. I think you sound exactly like my corporate, just by the way. And it's absolutely right question. Because, why is this 3% or 9%, right? Because when the business case was done, they were all 18%, right? And they all came down to whatever reason, some controllable, some uncontrollable, right? But whatever it is, we need to have the learning to deploy for future projects. Now the -- there are a few things that we have to address this dilution -- IRR dilution that typically happens, right? And if you can create a cushion for yourself, it allows you to absorb as much of dilution, right? The dilution could happen on the velocity side. The dilution could happen on the pricing side and dilution could happen on the cost side, dilution could happen on the timing side, right? And in the past, we have classified all those things, how much happened because of velocity. Velocity has never been an issue for us. Let me just -- Mahindra projects, even in the bad -- before COVID when the market was slow, we sell 30% to 40% in 90 days. That is a thumb rule of the -- whatever we launch, 30% to 40% will go away, never been an issue. Pricing was an issue for affordable segment, never was an issue for us for the premium segment. So we've been very careful about how to model pricing, look at micro market. I think the question about Bhandup was asked, how big is the market? What's the equal inventory right now, resale versus new and all those things. We are very careful with pricing. Better to be conservative on pricing and velocity, that we have taken into account. The third part is the costing part, right? And that's where we've taken significant steps. And although in the past the dilution was huge, but in the last -- Sriram, almost 2 years, our cost of those 23 projects have gone up less than 2%, less than 3%, right?

Yes, less than 3%.

Before the latest change that we did. We're trying to do some Tier 1.5, create a budget for those. So we'll take those costs up. So we have been very, very -- and prior to that, so F 2023 budget war room, right, that's F '23, right? So from that point to now almost 2 years have passed, and we have been -- we have seen very tight control on the cost. Our costs have not gone up. The reason they have not gone up is because we created 4 or 5 things to account for the variability in the market. The first is the contingency budget that we never have -- never had sufficiently. And even if we had, we would share it with the procurement team and the project team and that will get consumed. So it's the budget that's given to our market-facing teams are the project budget and contingencies with Sriram and Avinash. So that's one. The escalations that steel, concrete, glass, all those things, escalations are now true in line with what we have seen in the past. Labor costs are actually as per the government mandate, right? 6% in Maharashtra and so on and so forth, we factor that in because invariably, the contractor will take that into account when they're pricing it. There is a corporate environment responsibility, right? CER, right? Corporate SEZ is there. All those 5 components are now baked into our costing assumption. Not only new project, but past projects also because I can't keep showing that past projects are coming down. So there is a huge amount of -- I hate to use the word padding we have done our cost to make it conservative. Now the flip side of that, I become less competitive with I'm trying to bid for new project, but that's okay. If I have a good flow of project, I'll say, "Don't worry, let me take that project that has more upside than downside." And that costing is giving us a lot of comfort because most of the issue in the past where our, let's say, poor estimation on the cost, some new surprises coming up, something happening. And then timing was our other issue because of our inability to manage, let's say, some of the remote locations. The remote location affordable has given us the most pain because very difficult to manage those sites. So actually, we are getting out of that. So the timing part will get addressed. Velocity and pricing were never major issues. Costing we have solved. So that's how we have made sure that the dilution doesn't repeat again for next year or the following year for the future teams to have problems. Hopefully, it gives you some idea about how we have taken.

I think probably we're 26 minutes past our scheduled time. Maybe we can take one last question on, Amit, if anybody has anything.

Online you're done?

Online most of the points are covered.

What's the GDV or launch next year?

GDV of launch, it's around INR 6,000 crores, INR 7,000 crores, between INR 6,000 crores to 7,000 crores.

So look, that obviously will be dependent on approvals and some other things, right? So as of now, that's what we are working towards.

Well, thank you. I'll just do a vote of thank. Thank you from my side for coming over. And we will do this physically going forward. Hopefully, it was useful for you. And some of you asked, will we do the same slides again and again? No, no, we will not trouble you with that much. But at least it's good to meet all of you, take your feedback. And if you have anything else, just let us know. Happy to follow up. Great. Sriram, you want to close?

Thank you. Thanks, everyone. Thank you personally for coming here. It was great seeing everyone, and hope we had an excellent interaction. Happy to address any questions later between me, Avinash and the rest of the team. Thank you.