LODHA - Macrotech Developers Limited Share Price

In the Q3 FY26 earnings call, management of Lodha Developers, led by Mr. Abhishek Lodha, expressed a positive outlook for the company and the Indian real estate sector amid improvements in the economic environment. They highlighted a robust quarterly presales performance of INR 56 billion, up more than 25% year-on-year, leading to a 9-month total of INR 146 billion "” 70% of their full-year target of INR 210 billion. The embedded EBITDA margin for the quarter was approximately 32%, with a pro forma PAT of INR 12 billion, reflecting a PAT margin of around 21%.

Management indicated confidence in the future despite concerns regarding overall inflation and nominal GDP growth. They anticipate strong demand fueled by job creation and wage growth in key markets like Mumbai, Pune, and Bangalore. Major infrastructure projects, including the operationalization of the Palava-Airoli-Mulund Freeway and the Mumbai-Nashik Highway, are expected to boost sales and enhance property values in the extended Eastern Suburbs.

Lodha Developers also reported that their pipeline of projects exceeds INR 2 lakh crores, marking significant long-term growth visibility. They added approximately INR 340 billion worth of GDV through new projects during this quarter.

Looking ahead, management expressed optimism about achieving their annual presales guidance and maintaining an ROE of about 20%. They remain committed to disciplined pricing strategies, targeting price growth of 5-6% for the fiscal year. Addressing environmental initiatives, Lodha emphasized their ongoing efforts in decarbonization and community support, aligning with their broader "Do Good, Do Well" philosophy. As for the collections, after an expected slowdown due to environmental clearance delays, they project a rebound in collections over the next year as construction gains momentum.

1. Question: "Sir, my question is primarily related to your thoughts around the demand in Mumbai. How are you seeing the footfalls and conversions right now? And has that view changed from the beginning of the year when we were thinking about footfalls and conversions?"

   Answer: In terms of demand in Mumbai, footfalls and conversions have remained consistent with our expectations from the year's start. Despite pockets of redevelopment creating potential oversupply, our sales performance reflects the strength of our brand and our ability to execute quality projects on schedule. The demand for top-tier products and lifestyle standards we offer continues to be robust, suggesting our market consolidation toward better-quality offerings will persist.

2. Question: "If you can talk a bit about how are you thinking about potential construction-related issues given that everybody is ramping up construction and there is noise around slowness in construction activity?"

   Answer: We are very focused on construction-related challenges. Our strategy includes leveraging advanced construction technologies and maintaining strong relationships with our contractors and vendors. This ensures they can pay competitive wages to laborers, which is critical for timely project delivery. We measure our success by the percentage of units delivered within six months of the agreed timeline, achieving a high success rate.

3. Question: "Can you talk a bit about what's really changing, which will allow you to increase the pace of collections?"

   Answer: We believe the sales momentum in the latter half of the year, combined with enhanced construction efficiency, will significantly improve our collection rates. Recent environmental clearance issues that previously stalled construction have now resolved. With that behind us, we are ramping up construction and expect substantial catch-up in collections over the next 12 months.

4. Question: "On your Palava and Upper Thane, you talked about potential 4,000 acres, of which you now want to allocate 400 acres for data center. Would it be fair to assume the rest is now for residential? Or do you also have plans for warehouses and office space there?"

   Answer: Our land is zoned for multiple uses. Currently, we see the best value in residential developments and data centers, which account for our focus. While some land is allocated for warehousing already, we don't anticipate expanding that segment due to unsupportive land values for further warehousing developments.

5. Question: "As you're looking at some cool off in the pace of price increase in the sector, but land values have probably stayed stubborn... Could the next set of projects that are being signed up have lower profitability versus the last 3 years?"

   Answer: Our focus is on modest price growth, typically below wage growth. We anticipate that the land market could turn more favorable for us as competition eases. Given our disciplined approach to land acquisition and our scale, we believe we can maintain our targeted margins. We remain focused on generating cash flow and strengthening our balance sheet using our available GDV.

6. Question: "So how do you plan next year? Or are you looking to moderate the pace?"

   Answer: We have significantly front-loaded our business development this year, allowing us to be more profit-focused over the next 24 months. We anticipate that our business development expenditures will reduce in that time, enabling us to bolster our balance sheet while still focusing on margin enhancement with future developments.