Lodha announced its financial results for the quarter that ended September 30, 2022. In the seasonally weakest quarter, the company reported its best-ever Q2 pre-sales performance showing 57% YoY growth and 24% YoY growth in collections compared to Q2FY22. The Pre-sales are Rs 3,148 crores up to 57% YoY. The collection was Rs 2,375 crores up 24% YoY. It recorded the best-ever Q2 pre-sales at Rs 3,148 crores (+57% YoY) adding four new projects across MMR & Pune.
Commenting on the performance, Abhishek Lodha, MD & CEO, of Macrotech Developers Ltd. said, “We achieved our best ever Q2 Pre-sales performance at INR ~3,148 crores showing 57% YoY growth. With this strong performance, we have achieved pre-sales of Rs 6,004 crores in H1FY23, our best-ever 1st half in terms of pre-sales. It is even more heartening to note that we achieved our second Rs 3,000 crore performance within the 2022 calendar year despite this being the seasonally weakest quarter due to monsoons and an inauspicious period (Shradh/ Pitru Paksha). What is truly remarkable is that our strong performance in H1FY23 has been achieved in spite of rising home loan rates. This evidences the strength of housing demand from Tier-1 developers in India and indicates the start of a long-term upcycle for quality housing in India. The festive season has begun strongly and the early trends suggest a robust 2nd half of the year.”
He further added, “We are taking one more step forward starting this quarter, by providing an estimated EBITDA margin on the pre-sales done during the quarter. The same for this quarter stands at ~33%^. We believe this will bring much-needed transparency for stakeholders and provide a high level of understanding around not just pre-sales but also the underlying earnings from these pre-sales. During the quarter we have added four projects for a 2.2 mn sq ft area with a GDV of INR 3,100 crores. With this, we have added ~INR 9,300 crore of GDV which is ~62% of our full-year guidance of ~ Rs 15,000 of GDV addition. The consolidation in the market continues at an accelerated pace providing us with significant JDA opportunities across all our markets of interest. On the back of the strong attractiveness of our brand to land owners and our ability of faster turnaround of land assets into cash, our robust business development pipeline continues to strengthen with each passing quarter.”
Lodha continues to focus on reducing leverage along with strong business development and is on track to achieve its goal of net debt: equity <0.5x and net debt <1x operating cash flow. During the quarter, the company reduced its net debt to Rs 8,795 crores.
The company has also been able to reduce its interest cost to 9.9% - a ~60 bps reduction in H1FY23 in spite of a significant 190bps increase in benchmark policy rates. Recognizing the improving business fundamentals as well as the strength of its balance sheet, ICRA has assigned the credit rating of the company to ‘A+/Stable’ in the month of October which is one notch above our current rating. This should further enable us to better manage our cost of funding in challenging times of rising interest rate regimes.
Further, the company has fully repaid the US$225 million bonds, 6 months ahead of its scheduled maturity, and has no further obligation on the Indian balance sheet in relation to UK investment. In addition, this quarter saw the repatriation of ~INR 100 crores from UK to India. Despite the challenging economic environment in the UK, expect to further repatriate ~INR 1000 crores from the UK to India in CY2023 which will strengthen the cash flows of the Indian business. With this repatriation, we will have no further investment outside India and will solely focus on capitalizing on the immense growth opportunities that we see in India for the next 10-15 years.”
In the real estate business, pre-sales usually convert into revenue with a lag as IND-AS necessitates revenue recognition only on completion. This does create some volatility across quarters. Adjusted EBITDA for the quarter also got impacted due to the same time-lag issue on account of adverse operating leverage due to lower revenue (in spite of best ever Q2 Pre-sales) under the IND-AS framework. One-time provisioning of INR 1,177 crores (no cash impact) against UK investments resulted in lower reported PAT for this quarter. The company would benefit from the tax break on the same over time.
The company has achieved 5-star rating in the very first review in the ‘2022 Development Benchmark’ with a score of 95/100 in the residential category (among the top 3 in Asia) from GRESB - a globally renowned real estate-focused provider for sustainability benchmark.
The company also launched “Lodha Net Zero Urban Accelerator” in partnership with RMI. The accelerator will offer a development template that can demonstrate — to India and to the world — that growth decoupled from emissions is possible, thus, advancing liveability, and staying true to Lodha’s promise of building a better life. Palava will serve as a city-scale living laboratory to solve challenges and pioneer innovations on the path to net zero. Learnings from the Accelerator will be made freely available to the real estate industry at large to help expedite India’s transition to a low-carbon economy.
Further, the company has strengthened its Board by inducting Harita Gupta as an independent director. Harita Gupta has over three decades of global experience in digital and IT Services. She has held leadership positions at globally renowned companies like Microsoft Technologies and NIIT Technologies among others. She is presently leading APAC and Global Head of Enterprise Business at Sutherland Global Services. Being a digital innovation-focused organization, we will benefit immensely from her guidance and experience as we step into the next phase of the growth journey.
