BackLodha Developers clocks Rs7,800 crore sales in FY15
Firm beats market leaders at a time when peers struggled to meet sales targets because of depressed demand
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Bengaluru: Lodha Developers Pvt. Ltd has clocked gross residential sales of ₹ 7,800 crore in the year ended 31 March, beating DLF Ltd and Prestige Estates Projects Ltd, India’s largest developers by market value, in home sales at a time when property firms are struggling to meet sales targets because of depressed demand.
Mumbai-based Lodha has around 19 projects in Mumbai and the four largest of these will account for nearly 80% of sales in 2014-15, reducing to around 60% in 2018-19, says a 19 March report by Fitch Ratings Ltd.
Bengaluru-based Prestige has generated ₹ 5,030 crore of sales in 2014-15, while Gurgaon-based DLF, the country’s largest developer by market value, is expected to report around ₹ 3,500 crore of sales during the period, according to Adhidev Chattopadhay, an analyst at brokerage firm Elara Capital Securities (India) Pvt. Ltd.
“Prestige has met its sales guidance for the year. In the first three quarters of 2014-15, DLF achieved gross sales of around ₹ 1,900 crore. In the fourth quarter, the developer had launches and will see a rise in quarter-on-quarter sales," he said.
Both Prestige and DLF also have sizeable commercial office portfolios besides residential and retail projects.
DLF and Prestige will announce their fourth quarter results on 20 and 30 May, respectively.
Lodha’s land bank of 25 million sq. metres is among the largest among Indian developers, with the land valued at over $10 billion ( ₹ 63,600 crore) by valuers.
The firm expects its land to support development and sales over the next seven years, the Fitch report said.
“Lodha seeks to have 5-7 years of supply in each of its target micro-markets, which enables us to continuously bring high-quality development to our customers across price points. Our well-located land bank, with clear title and significant approvals, gives us the confidence to continue investing in our capabilities, technology and people. We continue to look at new acquisition opportunistically," Abhishek Lodha, managing director of Lodha Developers, said in an emailed response.
The company’s four largest projects are Palava City in Dombivali, the Park in Worli (including Trump Tower), New Cuffe Parade in Wadala and World Towers in Upper Worli.
Palava is Lodha’s ambitious project, which is spread across 4,500 acres and has 12,000 people living in it. By 2025, it will be home to 100,000 people and will create 350,000 jobs, and have 20 schools.
The price of houses in these projects ranges from ₹ 40 lakh to ₹ 100 crore.
“One-fifth such large projects (with five-year sales potential in excess of $2 billion each) is expected to be added in Thane, on the land purchased from Clariant," said Lodha. In 2014, a Lodha unit bought an 88-acre land parcel from Clariant Chemicals (India) Ltd for ₹ 1,154 crore.
Mumbai as a property market has four segments—south Mumbai, western suburbs, Thane and Navi Mumbai, said Ashwinder Raj Singh, chief executive office (residential) at property advisory JLL India.
“Some developers such as Lodha have a portfolio mix where they have projects in all segments, as a result of which they have a good mix of both end-users and investors. They have high-end projects as well as a high-momentum project like Palava, which is affordable," said Singh. “Sales are strong in end-user-driven markets such as Thane and Navi Mumbai, and Lodha has focused rightly on the right segments."
“We handed over for customer possession 5,500 homes in 2014-15, by far the highest in the country," said Lodha. “Our target for FY16 is 6,000-plus units."
Ahead of a $200 million bond issue in March, Lodha raised ₹ 542 crore through a non-convertible debenture sale to Kotak Realty Fund for a portion of the Palava project.
Vikas Chimakurthy, director of Kotak Realty Fund, said Lodha has one of the best quality management systems in real estate, with not just the promoters, but a second and third line of professionals in all aspects—finance, sales operations, etc.
“Lodha has a well-trained sales and marketing machinery, and knows how to pitch and package a product well. In a huge project like Palava, it has delivered significantly and has, in fact, done more than what they said," said Chimakurthy.
Assigning a “B+" and stable rating to the bond issue, the Fitch Ratings note said Lodha’s leverage, as measured by net debt to inventory less customer advances, is high at 84%, as of end-December.
Leverage has increased from 77% at year ended 31 March 2014 because of expected land purchases and investments in its overseas ventures, as well as a slower-than-expected cash collection from contracted sales.
Lodha said its leverage is less than 33% for the group.
In the last two years, Lodha has ventured into the London property market, and bought two high-profile properties in the city for a total value of ₹ 3,980 crore.
With the real estate market still going slow, firms that were planning an initial public offering (IPO) have decided to hold on. When it happens, Lodha’s IPO is expected to be one of the largest the sector has probably seen, said property consultants.
“In March this year, we successfully closed our international bond offering of $200 million, which is a good start to a long-term source of capital to which our company will have ongoing access. We received large subscriptions from some of the world’s largest, long-only investors. Different levels of providers of finance are required in every evolving market. We might consider an IPO at a suitable time," said Lodha.
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