Lockdowns a big spur for home ownership: Abhishek Lodha, Macrotech Developers


Talking about the lockdowns which have happened recently, they are a big spur for home ownership because when people spend a large amount of time at home, they definitely want bigger and better homes, said Abhishek Lodha, Macrotech Developers. Edited excerpts:

You want to raise around Rs 2,500 crore, which is the issue size. The value of the share has been pegged at Rs 483 to Rs 486 per share. How much of this is going to be via fresh issue and how much is via OFS? And post the IPO, to what extent will the promoters holding in Macrotech come down?

The issue opens on the 7th of April and closes on the 9th. It is a fresh issue of share. There is no sale of shares by any party or the promoters. We are raising Rs 2,500 crores as fresh money into the company which will be approximately 11.5% of the post-issue equity capital of the company. The price band on the issue is 483 to 486 per share.

How do you intend to use the proceeds of the IPO? What are the current debt levels? Give us a sense of what the debt would be like pre and post IPO.
We intend to use the issues of the IPO for a combination of growth capital, as well as debt reduction. Currently, our Indian business has debt of Rs 16,700 crore as of 31st December 2020. After the issue, along with what has happened in the March quarter, the debt is expected to be in the range of Rs 14,000 crore post issue.


Over FY14 to FY20 you had the highest pre-sales of any developer in the country. But nine months in this fiscal, you are trailing a couple of peers. Was it a deliberate plot to reduce the launch pipeline? Another development has been the reduction of inventory, as well across the premium segment.


Lodha has been by far India’s largest developer, almost two times bigger than any other player in the country by our sales over the last seven years. We as a company are very much focussed on affordable and mid-income housing, almost two-thirds of our sales come from that segment. For the period of FY20 nine months, that was a very aberrational period affected by COVID and hence I would not read too much into it. When you see the numbers for the full year, as well as the numbers before, they are evidence of our scale and evidence of how our focus on affordable and mid-income housing is leading us to be the largest player in the industry. We have a very strong outlook driven by our focus on affordable and mid-income housing. We think India is going to have tremendous growth over the next few years.

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As Mumbai is your main market, could you give us a sense of the inventory levels there? Could you also break it up in terms of luxury, premium, affordable and mid-income segment? Furthermore, what is the launch pipeline and inventory like?
As a business, we are largely focussed on the Mumbai region (MMR) as well as Pune. Mumbai is by far the largest residential real estate market in the country; almost one lakh crores of annual sales. And Lodha is by far the largest player within Mumbai. In our mix of sales about 62% for FY20 have come from affordable and mid-income housing and 25% from premium and a very small 13% from luxury.

We expect going forward that our focus on affordable and mid-income housing is what is going to drive our business. In terms of Mumbai, it is seeing very strong performance in terms of our sales on the ground. We had an oversupply in Mumbai which was caused due to a lot of construction prior to the NBFC crisis of 2019. However, after the crisis the market has become a lot more balanced on supply and demand. We are actually in a situation where demand is running ahead of supply and we are starting to see some modest price rises.

What has been the contribution of sales from the township projects: Palava and Upper Thane? What trend has emerged across these important projects?
As I mentioned, we are a very diversified player. We are present across multiple projects and geographies within MMR and Pune. Palava and Upper Thane are two large locations where we do residential development focussed on affordable and mid-income. We are also doing industrial parks development in those locations. In terms of our mix of sales, excluding the industrial part, Palava and Upper Thane contribute in the region of 25% of our overall sales. We also have very strong contributions coming from our mid-income segment in Thane, Mira Road, Andheri, Jogeshwari and various other such sub-urban locations.

We are seeing very solid demand growth in those segments after the reopening in mid-2020. The fact is that we started doing affordable and mid-income housing way back in 2010, when it was not really the flavour of the season. And over the last 10 years we have become the best value producer because our costs tend to be lower than our peers by a significant margin driven by our engineering excellence, our larger scale of procurement, as well as our ability to churn or build the product faster. That allows us to have very good profitability in the affordable and mid-income segment which allows our organisation to grow while focussing on also delivering strong profitability.

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Could you give us a sense of the project completion timelines and cash collection across the key projects? What is the operational cash flows of the company like?
The company has been consistently operating cash positive, though there was an impact during the lockdown period. For FY20, which was partly impacted by COVID in March, but generally we generated operating cash of about Rs 3,300 crores. For FY21, while the full year figures will come out, except for that period when we were lockdown all the way up to July or August, the company has been operating cash positive. As a business, we have reduced a significant amount of leverage from December 2019 up to now and we continue to focus on growing in a sustainable manner while continuously reducing our leverage.

Give us a sense of the London foray. What is the inventory like and what is the finished sales picture?
Our investment into London was done in 2013-14. We have realised that it was a strategic mistake and we are solely focussed on doing real estate development in India. We have made very good progress in bringing the two investments in London to a conclusion. At this time both the projects are physically complete, a significant number of sales have already happened. And there is no linkage or guarantees from the Indian parent to the UK investments, except for one small USD bond. The UK investments will complete and we will get back good cash flow from them over the next couple of years. But as I mentioned earlier, our sole focus is growing in India.

We feel that the opportunities in India are tremendous, especially in affordable and mid-income housing. Look at the pipeline or the land that we have significantly focussed on affordable and mid-income housing in Mumbai and Pune, as well as the large number of projects that we are seeing from a growth perspective in Mumbai and Pune which are coming to us as JDAs and other outright means. We see huge growth in our business over the next three years, solely focussing in Mumbai and Pune. We believe that housing in India is at the start of a structural upcycle. We have affordability, which is at very attractive levels. The volumes in India are much lower than they are in any other part of the world and we believe that in the course of the next seven-eight years, the volumes in India will at least triple, especially in the affordable and mid-income segments.

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Give us a sense of trends across the main markets, especially in the context of last year.
As I mentioned earlier, we are bullish on our outlook for the housing market over the next few years. We believe that supply and demand are quite balanced with wage growth in India between 6% to 8%, we expect price growth in housing to be around similar levels, which is a very healthy balanced price growth; not excessive and not low, this will drive huge amounts of growth in volumes.

Talking about the lockdowns which have happened recently, they are a big spur for home ownership because when people spend a large amount of time at home, they definitely want bigger and better homes. We commend the Maharashtra government for the action taken yesterday. The semi-lockdown that has been imposed is very important because public health is most important. We expect this will benefit with the vaccination take up rates improving and will lead to a sustained normalisation in a few weeks’ time.

India has dealt well with COVID and the benefits to housing from COVID can only be compared to how e-commerce has benefited. The home is today the centre of all our lives. Going forward even if there are more pandemics, we all know that we need a bigger home, a better home, a good quality home and therefore home ownership is something that will take India from being a low-income economy that we are today, to being a middle-income economy. This will have a huge benefit, both for the wealth of the middle class, as well as for employment creation. That is why the government is continuously giving supportive measures especially for affordable and mid-income housing.



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