Mahindra Lifespace Developers Ltd, the real estate unit of Mahindra Group, will focus on adding more strategic financial partners, besides monetizing industrial parks to fuel growth, said a top company executive.
Sangeeta Prasad, chief executive officer and managing director, Mahindra Lifespace, said the company is evaluating opportunities to bring on board investment partners at the project level or form investment platforms with institutional investors.
“We already have financial and strategic partners, but we are looking for more now. Secondly, we are looking at joint developments and creating joint venture platforms proactively. It is good to have partners who can share risks and rewards," Prasad said in an interview.
Mahindra Lifespace’s existing investors include UK’s private equity firm Actis, World Bank’s investment arm International Financial Corp. (IFC), Japan’s Sumitomo Corp. and HDFC Capital Advisors.
In 2017, IFC invested around $50 million in Mahindra Lifespace’s existing and under-construction industrial parks in Gujarat, Rajasthan and Maharashtra.
The Mumbai-based developer operates a large integrated business park each in Chennai and Jaipur under the Mahindra World City brand.
It is also building an industrial park under the Origins brand each in Chennai and Ahmedabad.
Last year, the company formed a joint venture with HDFC Capital Advisors for affordable housing projects.
Prasad said quicker turnaround of residential projects and monetizing industrial parks to generate faster cash flow are of prime importance to the company, as the real estate sector has started following the new accounting norms since last year.
Under the new Indian Accounting Standard (Ind AS) 115, revenues can be booked only after a project is completed and customers take possession of their dwellings.
Prasad said the company’s recent quarterly results have been “choppy" mainly due to the new accounting norms.
In the third quarter of the current fiscal year, Mahindra Lifespace posted a 21% drop in net profit to ₹20.58 crore.
“Ind AS 115 has impacted the business model. If you can complete the project faster then I can revenue recognise faster...One of the important things we are doing is to look at the construction strategy and how to hasten completion of our future projects," she said.
Instead of expanding to Tier II markets, Mahindra Lifespace plans to focus on having a deeper presence in Mumbai, Pune, Bengaluru and National Capital Region. In the last three-four months, it has signed agreements to purchase land parcels to construct one million square feet of residential space in Pune, Mumbai and Bengaluru.“We want to consolidate and not spread ourselves too thin. For instance, we may not get into Nagpur again...Besides, there are many long pending legal cases, which we have been trying to negotiate. We are trying to come out of it. It takes a lot of management time," Prasad added.
Besides adding financial partners, the company is focused on monetizing industrial parks particularly its two World City projects in Jaipur and Chennai by leasing them and growing overall sales. “What we are focused is getting more customers in our World Cities and monetizing it. We want to improve the sales traction from our industrial parks," she said.