LODHA - Macrotech Developers Limited Share Price

Management's outlook for Lodha Developers Limited for FY '27 is optimistic, projecting presales of approximately INR 240 billion, which is an increase from FY '26's INR 205 billion. They anticipate an embedded EBITDA margin between 32% and 34%. The company is guiding for a PAT growth of around 20%, aiming to move from INR 34 billion in FY '26 to over INR 85 billion by FY '31.

Significantly, during the earnings call, management highlighted several forward-looking points:

1. Market Expansion: Lodha acknowledges the significant opportunities in NCR, having acquired two land pieces in Gurgaon with an expected GDV of around INR 33 billion. They plan to initiate operations there in FY '27, using a pilot and scale approach.

2. Infrastructure Development: The completion of key infrastructure projects, including the Navi Mumbai International Airport and the upcoming Palava-Airoli freeway, is expected to enhance residential sales significantly, with projections of strong growth in Palava's residential segment.

3. Debt Management: The company's net debt is at INR 53.8 billion, with a debt-to-equity ratio of 0.23x. Management is committed to reducing leverage, potentially achieving zero net debt in the DevCo part of the business over the next few years.

4. Data Centers: Lodha is planning to develop an extensive data center on 400 acres of land at Palava, with expectations of generating substantial revenue from land sales and rental income starting in FY '29.

5. Sales and Rental Income Growth: The company expects annual rental income from existing assets to reach INR 10 billion by FY '31, aiming for a 10-fold increase in rental income from FY '26 levels.

In summary, management expresses confidence in navigating macro challenges while capitalizing on long-term structural growth opportunities within the Indian housing market.

Question 1: Gaurav Khandelwal from JP Morgan - Guidance on Zero Gross Debt and Free Cash Flows

I asked how the company plans to achieve zero gross debt while prioritizing free cash flows. I wanted clarity on whether the growth would come more from operating cash flows or reduced capex due to previous investments.

Abhishek Lodha's Answer:
We expect to be more selective with new business development, leading to muted investments and higher free cash flow over the next two years. We anticipate operating cash flow to grow alongside PAT growth, around 20% annually from the INR 71 billion achieved in FY '26.

Question 2: Murtuza Arsiwalla from Kotak Securities - Launch Pipeline for FY '27

I inquired about the readiness of the FY '27 launch pipeline, particularly regarding RERA approvals and key projects.

Abhishek Lodha's Answer:
The new launches are all backed by completed land acquisitions and designs. Most approvals are in process. Key launches include projects in Pune, Bangalore, and Mumbai, excluding potential launches in NCR, which we expect to begin construction soon. Visibility is strong, assuming no extraneous delays.

Question 3: Abhinav Sinha from Jefferies - Data Center Build-to-Suit Timeline

I asked about timelines for announcements and income related to the data center build-to-suit projects.

Abhishek Lodha's Answer:
We are in strong discussions for the first set of build-to-suit developments, expecting to announce them this fiscal year. We anticipate starting to see income from these projects in fiscal '29, which is about two years post-sign-up.

Question 4: Pritesh Sheth from Axis Capital - Impact of Middle East Crisis on Segments

I questioned which segment felt the most impact from the Middle East crisis, linking it to sales guidance shortfalls.

Abhishek Lodha's Answer:
March saw individual-driven impacts particularly in NRI sales due to the crisis. Closures in the luxury segment were also affected, but we don't expect lasting impacts. The sales guidance focuses on PAT, which we see as more indicative of our business's health.

Question 5: Kunal Tayal from Bank of America - Data Center Development vs. Monetization Strategy

I asked about the decision to develop the data center instead of selling the land for immediate profit.

Abhishek Lodha's Answer:
Creating a long-term annuity stream through data centers aligns with our strategy to enhance our annuity business. We plan to use about 100 acres for our development while selling the remainder to fund this long-term income stream, balancing short-term gains and strategic growth.