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

Good afternoon, everyone, and a very warm welcome. I would like to thank everyone for joining this conference call. We have with us today Mr. [indiscernible], Managing Director and CEO; Mr. [indiscernible], CEO [indiscernible], Mr. Vikram Goel, CBO Investors; Mr. Sriram Kumar, Chief Financial Officer. Today's meeting will -- I will begin with a brief presentation covering our operational and financial highlights following which we can refer to the question last. I would now like to hand over the conference to Mr. [indiscernible], and Managing Director and Senior Mahindra Lifespace Developers Limited. And [indiscernible], over to you.

So okay. I hope you can all see this [indiscernible] as we go for the next 20, 30 minutes without knowing.

You're fine.

Okay. Okay. Good. So I'll go ahead with key highlights. I think from the presentation, we go the next page. [Presentation]

And this [indiscernible], think we're showing it for the first time. Have you shown this before? No. This is about the Phase 1 of Mahindra for is [indiscernible]. So we are Mahindra Marines contract. So there's a big size, Olympic length swimming pool, lots of amenities, lots of [indiscernible]. Phase 1 is part of the broader residential. The product [indiscernible]recover. It will be a forest that will have enough [indiscernible] acres, and we share the details when we have the day approval for those sales. So let me quickly cover some highlights for us in this quarter. I think I will not spend time, but we continue to have clarity on what strategy we are pursuing across all these themes, portfolio choices, business development engines superior customer experience, making sure the project execution is first time right, excellent, maximizing value from [indiscernible]. And then across all of our efforts, making sure that we have very robust financial discipline. Key highlights, I think resi business, [indiscernible] INR 925 crores successful launch of [ Rain Forest ]. We got maybe 2 to 3 weeks of sale time in this quarter. As you know, this quarter had the impact of Iran war. The obviously, March was practically slow for many, but it was very limited footfall may recovery happened. So our sales and marketing effort really started on May and June, [indiscernible], we started [ netting ] and that's what you see here reflected here. It has done well for us. And we're still in the launch phase. I think we are seeing the momentum continue with us in July. Sustain [indiscernible] sales contributed 42% of sales. So [indiscernible]. Those are our [ sustain ] same contributors. There are 5 more launches planned later this year. [indiscernible] here, we have the final stages of approvals, Lakeport [indiscernible], [ Saibaba and Navratras ] are expected in H2 of this year, second half. We have also received 3 OCs even Phase 2, [indiscernible] phase, the branding number to us Phase 2's first part is building, right? That's the 2.18. Sustained [ BD ] momentum, we had a major deal announcement in candidly roughly 15-acre land parcel INR 5,600 crores of GDV, total GDV of INR 50,000 crores, which is very healthy for us. I see in [indiscernible] side very good news yesterday or day before when we signed a partnership with [ Sumitomo ]. As you know, Sumitomo partnership was signed first phase in 2015, '16, second on November 2024 and now Phase IIb. So they continue to be an important partner with us. We have a strong pipeline heading into Q2. Q1 was a little bit lumpy this business for Q1 was shorter in terms of conversions. We see a significant pipeline for Q2. We are expecting our land aggregation in [indiscernible] and we'll make headway in the medium part of this year. Financials, [indiscernible] will cover them in detail. But overall, between resi and I see INR 966 crores, 70% year-on-year growth at 67% of INR 36 crores, [indiscernible] collections healthy more work for us to do, but because the sales were a little bit back ended in the quarter, big part of sales will come in Q2. And I see collections tend to be a very big contributor for us is also should happen longer. Prudent, robust balance sheet, net debt to equity of minus 0.2%. So we have more healthy task across our subsidiary and our debt, all the debt is mostly ICD with the group some CPs that we have at the back right. So that's the key highlights. So we move to the next page in terms of the [ close ]. Yes, roughly INR 50,000 crores GDV. I'll point to the middle column. Blue [indiscernible] K2 fund has been added INR 5,600 crores. So that's a meaningful addition this year -- many of you have asked us what is our target for GDV this year. I think we have had 2 successful years of INR 15,000 crores each. We want to maintain the momentum but we want to sign the right deals. And I want to make sure that the deals are aligned with our strategic aspiration and the [indiscernible]. So anyway, I expect anywhere from 10,000, 20,000 to happen in this year? Obviously, the lumpier looking for large size but try deal product. So we'll keep hearing about them as we win some of these new deals. Launches, I think you see this is an nice chart shows our trajectory for multiple years. We are hoping to maintain the trajectory a good set of launches plants in the rest of the year, and they will contribute very well to our expectations of presales on the residential side. You have seen this slide in the past, we continue to fine-tune this, especially the new acquisitions in FY [ '20, ] and we expect [indiscernible] project -- we have started the approval process already behind our discussions under way. So hopefully, we'll be able to launch within the next 12 to 15 months. And then you see the rest of the phase, which covers which projects are getting added to our overall new launch pipeline as well as subscriber. I see business, I think we did exceedingly well in terms of last year, a huge growth, amazing profitability. [indiscernible] being lumpy. I think quarter 1 has been I would say, a little bit low, but we have a good healthy pipeline for Q2 closure. So we'll stay tuned with. [indiscernible] and I will continue to provide update on that -- you've seen this slide before. The guidance from IC business is always on INR 400 crores to INR 500 crores of business annually from IC business, which would give us INR 100 crores to INR 150 crores of PAT on an annual basis, our share. So that's our IC business. Then I hand over to Sriram for the financial highlights.

Thanks, [ Amit ]. I'll take the financial highlights. On the residential side, we did about INR 925 crores of sales, as Amit highlighted. That represents almost 106% growth over prior year. On the IT side, it's been a little [indiscernible], but Q2 is expected to be -- is where we are [indiscernible] has really helped us to get to about INR 5,600 crores of GDV in this quarter. Residential collections have been at INR 527 crores is healthy. Here, there are -- given the [indiscernible] for us launch in terms of the CP and happened towards June, we had little time to collect. So all the rain forest collections will -- is expected to come in Q2. And you will see that reflecting in the next quarter. The net debt to equity continues to be [indiscernible] negative 0.2%. So our cost of debt is at 7.5% compared to 8. 1%. Moving on to the financials. This is the segment reporting that we do on the resi and the IC side. On the residential side, we -- of the INR 86 crores at for the year. The residential side has contributed to INR 76 crores and I see 10 cars. A lot of questions last time on the margins of the completed projects. So this year, on the residential side, we had OCs for [ Eden Phase II and Lumina ] which contributed to the overall profitability. Happy to report the PBT margins from these 2 projects are at around 26% which is one of the questions that we [ feel ] that in the last call. On the IC side, it's expected to pick up as we move into Q2. On the cash flow side, a healthy cash position is over almost INR 1,100 crores of company-wide cash available. The operating cash flow, we are at INR 134 crores, which is expected to pick up as we see more residential collections and the action from IC happen in Q2. On the cash flow from projects, I think last time when we reported, we were at around INR 14,500 crores. This time, we added [indiscernible] many deals that we just announced. And you have some projects that move out of the system, like [indiscernible] and [ Lumina ] moving out of the system. So you will have the connections and kind of construction costs [indiscernible]. So effectively, a INR 15,300 crores of cash expectations from our current project portfolio. And this does not include [indiscernible] residential and [indiscernible] land available. On the financial comparison, as we reported in Q1, we had revenue from operations of INR 962 crores basically reflecting Eden Phase II and [ Luminar]. And PAT level, we are at INR 86 crores compared to INR 51 crores last year, roughly a 67% growth over prior year. And the profitability even in Q4 was about INR 90 crores. So we are maintaining that trajectory. And in FY '26, we reported INR 298 crores of overall tax. On the balance sheet side, no significant movement. It reflects in a very healthy position across our assets and liability side. On the inventories, you will notice that the inventory sort of balance has come down a little. That's primarily reflecting the completion of the projects where [ Luminare ] has moved out, and that needs to be taken out of the inventory and otherwise, from a balance sheet position, it is reminding [indiscernible]. Maybe we'll take questions now.

The first question is from Mr. [indiscernible]. The question is about the projects which are completed in Q1. And what are the margins which are booked for those projects in Q1?

Thank you. I'll request Sriram to jump into that.

Yes. So 2 projects, as I said, we had [ Eden ] Phase 2 and Lumina completed -- both these projects are very profitable. And the PBT margins from these projects were approximately 26% and that is reflected in our financials currently.

To be complete, we also had 1 tower of [ Palko ] finished [indiscernible] project site and Motion. So that was also compared with us.

So next question is from Mr. [indiscernible]. The question is, given our guidance of INR 4,500 crores to INR 5,000 crores of presales in FY '27, and we are expecting a sustainable mix of percentage, do we have the inventory in our current projects to achieve INR 3,000 crores of preserving at FY '27?

I didn't understand. INR 3,000 crores? What is meant [indiscernible] but let me address that [indiscernible] question. I think if you look at the launches that we expect this year, roughly INR 7,000 crores, somewhere INR 6700 crore to INR 6,500 crores to INR 7,000 crores. And we didn't sell any of the rain forest last year. So the entire INR 3,000 crores [indiscernible] to us. So roughly INR 10,000 crores, maybe a little bit more with hoping more launches will happen. And of that, we're expecting that plus the inventory we had from prior years, like [indiscernible] and then a few others and [indiscernible], these are big, big projects for us, a decent amount of inventory is there. So between all these [indiscernible] projects as well as current year project, we should have enough inventory to achieve our aspiration of INR 4,500 crores to INR 5,000 crores. And a 1,000 has already happened. So now a little bit less to be achieved in the remaining 9 months. Hopefully, we answer the question, but if you have any more you can probably [indiscernible].

Sir, the third question is from Mr. [ Bhatia ] of [ Sund Management ]. The question is what is the progress on [indiscernible] and when the project is likely to be launched. These are the 2 questions.

Yes. So let me take that. I think -- and [indiscernible], you can jump in. I think [ origin ] may very simple. We are still finishing land aggregation. We are trying to create a healthy size of industrial part. So it will take some time for us to complete that, let -- we'll keep you updated on the progress [indiscernible] is no issue with client aggregation. It's a commercial finding the right commercial client. And I think our desire is not to have first client, which is small. We want it to be the inside anchor client. So that's something that we are awaiting. We also feel that with the new data center policy that has been announced, the land parcel like [indiscernible] become valuable. But this land is a little bit outside the base we are aware of, and we are patient about being the right client, hoping that it will happen in the next few quarters or years, we are patiently awaiting the price pack at [indiscernible]. You had a question on that [indiscernible] likely to be launched. The year has been received. The prelaunch activities have already started sales and marketing. I think we have -- we had our channel partner meet just on Tuesday, right, right [ impact ]. So in a way, we are in the launch prelaunch effort. I think the first sale will start to happen. I think by end of this month or next early days for ports, yes. And we mention August is when we expect to start the selling part to start at [indiscernible]. So that's number tonight.

Yes. The next question is also from [indiscernible]. The question is what is the update on records as it is completed and as it is compared to 100 percentage and [indiscernible] in terms of completion. The second question from [indiscernible]. How is [indiscernible] revenuew recognized in the financials and our revenue from the [indiscernible] project when it will get recognized? There is one more question from them. What is the total residential development residential and commercial risk for the channel?

Okay. So let me cover the first 2, and [indiscernible] request you for the [indiscernible]. So [ Lakewoods ] has multiple phases, right? We have delivered AVC, the 5 towers have been delivered in 2 phases, right? And the edge NI is launched, fully sold out, is being constructed right now. F&G is something that we are likely to launch this quarter, which just waiting for a final set of approvals. So -- and then typically, you can't -- these are not high rise, you are mid-rise. So maybe you can take 2.5 to 3 years for it to be completed.

But you've seen a big swing in the fortunes of reports with last phase and both the towers were sold out in 1 day, entire all the apartments with 1 large customer. How the looking revenue is recognized as the mention of revenue for the [indiscernible]? You want to take that?

Yes. So as I said, on Luminare, we bought out our partner in the [indiscernible] Mahindra Homes Private Limited, and we are now consolidating 100% of a -- so 100% of the profits for [ Luminar ] is something will be recognized right now. So this -- in this quarter, we had roughly revenues coming in from Lumina and recognize the profitability. And as I said, it's been a very profitable project. Between [ Eden ] and [ Luminar ], we had recognized close 26% of PBT margins. And I think what you recognize part of that has been even you bought out -- so [indiscernible] profitably reflected in [indiscernible] last year, we had some gains where we bought out access also reflects the higher profit -- the part of the profitability aluminum. And on top of that, we had the [indiscernible], and we got 100% of that. That's what's at --

Yes. On [indiscernible], we are expecting the [ OC ] to come pretty soon. [indiscernible]. [ ACO ] had 5 towers in we received OC last year, and it has been recognized in the profit last year. Two towers we are expecting OC to come very soon.

Yes. The [ ACO ] is a revenue share or area share agreement with the land owners. So that's how it's recognized, right? We recognize our on-forward portion in that project within the [indiscernible] to address the total residential and commercial development potential for signing.

Yes. Yes. So everyone -- so [indiscernible], we are currently at the planning stage is obviously a large bulk for us. In terms of the split, the way we are looking at it is because this location is [indiscernible] road anyway. Roughly, say, 20% to 25% of the [indiscernible] say, commercial given the way a lot of the business opportunities and is also trading in any city and the balance around the 7%, 75% we're looking at residential. So that's the broad level mix. Also, we have multiple options in terms of underway to go for the approval but that we will evaluate prudently and then get back to you.

So I hope [indiscernible] is your question on timing. Value-wise, right now, we accounted INR 7,500 crores. Values currently the GDV is INR 7,500 crores. Yes, but we have more at the site, right?

So it depends on [indiscernible] I just depending on what kind of products we want to do, and we want to do a great job and make it a landmark given that we have a large contiguous land here in a way that -- and the thought is and how can we make that as the most market location of cane. And as you would know, a lot of infrastructure projects currently going on [indiscernible] which are also enhancing the connectivity, which are also announcing the overall visibility and the value proposition of [indiscernible] and the city and very specifically about our location because it's -- it is very close to where the tunnel for [indiscernible] being done. So that will -- that really [indiscernible] well for this particular destination in the future.

Yes. So the next question is inventory month has rose from 13 to 15 months. What is the current scenario? Also, could you share the city price for [indiscernible] separately. And addition to this question is, given the IT cycle [indiscernible], are you seeing any challenges in [indiscernible] conversion ratios or cancellations, specifically in [indiscernible] over last 2 quarters. And this is [indiscernible] on this question. This is from Mr. [indiscernible].

Okay. very good. [indiscernible], great set of questions. I think let me attempt to address them. So you're right, the inventory months have gone up. And especially for last quarter, I think from the analyst reports, research report what we found is that we saw a significant slowdown in March, but it's captured in the previous financial year. But the ones are practically was from most of the real estate players, right? It didn't have a lot of -- it's driven by some of what is going to happen all along the world will last. All those things come into play. Things started to move up in May. But June was, I think, as I learned from one of the reports is that was one of the best months in the last, I think, 1 to 2 years, somewhere around that. So [indiscernible] demand of, let's say, April, May came to like conclusion and [indiscernible]. So that's what we have seen. And that is reflected in the overall inventory month index that you see. And while June was [indiscernible], but overall, you'll see some kind of slowdown until this word situation finds a conclusion. I think every day, we wake up to some new news about [indiscernible] and Iran in U.S. and oil prices and foreign currency and it has impact on our financial market, which has an impact on sentiment, which have an impact on real estate purchases. So I think -- that's how the 13% to 15% has happened, and we think we'll take maybe the quarter or 2 quarters for it to stabilize the right level. As you know, real estate is a cyclical industry. It has always had great years and then it has some tough years. I think we've seen the best years in the last 4, 5. I think the next few months, maybe a few quarters may be slower than past -- but the good news is that the players who are well established branded players as the trust of customers will continue to gain share from less [indiscernible] builders, developers who are less established or we've not delivered great products of literally new to market. So the branded players, listed players are likely to gain share, and we are hoping to be one of the beneficiaries. So that's -- that will -- given the inventory overhang might increase, but [indiscernible] is a flight to quality towards better bidders will help us. For [indiscernible] and Bangalore, Sriram, you have the data, inventory months.