Lodha Group looks to turn its residential business debt-free

Lodha Group, which is gearing up to launch an initial public offering (IPO), plans to make its residential business debt-free over the next few years, mainly through cash flow generated from its affordable and mid-income housing projects, said Abhishek Lodha, the managing director and chief executive officer (CEO) of the group.

The Mumbai-based firm, considered to be India’s largest real estate firm by sales, plans to use proceeds from IPO to repay around ₹ 4,500 crore out of the total outstanding debt of ₹ 18,000 crore, Lodha said at a press meet.

The company has a total debt of around ₹ 2,700 crore from its commercial segment while the rest of the debt is from its residential business. Post the IPO, the company’s debt would be reduced to around ₹ 13,500 crore. Lodha said the remaining debt could be serviced through cash generated from its housing projects and from its upcoming rental portfolio.

“We are consistently working towards lowering our debts...The idea is to reduce debt and move towards being a debt-free company in the development side,” Lodha said.

The company has seen home sales grow by 16% to ₹ 8,100 crore last fiscal from ₹ 6,950 crore in the previous fiscal. Last financial year, it delivered around 11,000 units of which 44% belong to the affordable housing category.

The company, whose portfolio includes luxury projects such as Trump Towers and World One, is betting on the mid-income and affordable housing segment for its future growth. Apart from high-end projects, Lodha is building Palava—an integrated township over 4,500 acres of land in a Mumbai suburb. “Affordable housing is a big chunk of our business and would be the biggest growth driver for the company. We will also focus on building our rental commercial business in future,” Lodha said. The company has earlier said that it is planning to build around 9 million sq. ft of office space, 1 million sq. ft of retail space and a warehousing and logistics park in Mumbai with an investment of nearly ₹ 2,500 crore in the next five years. Earlier this year, Lodha Group received approval from market regulator Sebi to proceed with its IPO plan. This is the second attempt by Lodha Developers to go public. The firm had filed its draft share sale documents in September 2009 to raise about ₹ 2,800 crore but later shelved the plan because of unfavourable market conditions post the global financial crisis.