MAHLIFENSENovember 9, 2022

Mahindra Lifespace Developers Limited

10,439words
100turns
11analyst exchanges
1executives
Management on call
Arvind Subramanian
MANAGING DIRE
Key numbers — 40 extracted
INR 400 crore
ru Paksh. Despite that, our residential sales has been extremely strong. We've delivered close to INR 400 crores, taking H1 to just above INR 1,000 crores, which is an important psychological threshold. I did
INR 1,000 crore
sales has been extremely strong. We've delivered close to INR 400 crores, taking H1 to just above INR 1,000 crores, which is an important psychological threshold. I did tell the sales team that the difference be
INR 990 crore
mportant psychological threshold. I did tell the sales team that the difference between ending at INR 990 crores and INR 1,000 crores is not just INR 10 crores. It's a lot more than that and I'm glad that they
INR 1,000 crore
cal threshold. I did tell the sales team that the difference between ending at INR 990 crores and INR 1,000 crores is not just INR 10 crores. It's a lot more than that and I'm glad that they took up the challeng
INR 10 crore
sales team that the difference between ending at INR 990 crores and INR 1,000 crores is not just INR 10 crores. It's a lot more than that and I'm glad that they took up the challenge and were able to get us
INR 1,028 crore
ross the INR 1,000 crores psychological threshold. As you might recall, the entire FY '22, we did INR 1,028 crores. So seeing with that perspective, doing INR 1,000 crores in the first half sets us on a very str
70%
er, we launched one new project, Mahindra Nestalgia in Pune. It is very well received, just under 70% of the units were sold within the quarter itself. And it's contributed roughl
35%
f the units were sold within the quarter itself. And it's contributed roughly 35% of the presales for residential for the quarter. The rest of the 65% is a broad-based sustenance
65%
roughly 35% of the presales for residential for the quarter. The rest of the 65% is a broad-based sustenance contribution across projects, across locations. And this is a discipl
6%
y meaningful price hikes that we've been able to take within quarter 2, in some cases, as high as 6% to 8% within the quarter itself. And even in recent successful launches like Mahindra Eden and Lu
8%
ingful price hikes that we've been able to take within quarter 2, in some cases, as high as 6% to 8% within the quarter itself. And even in recent successful launches like Mahindra Eden and Luminare
INR 1,000 crore
results. We are lining up for a very strong second half of the year. We will be bringing roughly INR 1,000 crores in GDV to market. This includes both new project launches as well as new phases of existing proj
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Guidance — 20 items
Arvind Subramanian
opening
“In this quarter, we launched one new project, Mahindra Nestalgia in Pune.”
Arvind Subramanian
opening
“We will be bringing roughly INR 1,000 crores in GDV to market.”
Arvind Subramanian
opening
“This includes both new project launches as well as new phases of existing projects.”
Arvind Subramanian
opening
“This has -- you know with India's first net-zero energy project launched in Bangalore in the first quarter.”
Arvind Subramanian
opening
“We sold about 90% of the inventory that was launched, and that has encouraged us to bring forward the second phase, which was originally planned for launch next year.”
Arvind Subramanian
opening
“And we will be bringing that to market this quarter, this weekend itself.”
Arvind Subramanian
opening
“One of the completions we were expecting in Q2, which slipped into October was our project, the first tower of our project Vicino in Mumbai, but we received the OC in early October.”
Arvind Subramanian
opening
“This will be a mixed-use development, and we will be looking to bring a partner in for the commercial assets within that next year's development.”
Arvind Subramanian
opening
“We are targeting 15 to 18 months to launch this project.”
Arvind Subramanian
opening
“We expect to be able to submit our drawing for approval by the end of this quarter and should be able to launch the project within six months thereafter.”
Risks & concerns — 11 flagged
It's a lot more than that and I'm glad that they took up the challenge and were able to get us across the INR 1,000 crores psychological threshold.
— Arvind Subramanian
There's no concern, per se for the deal.
— Arvind Subramanian
And what is causing the delay because we have had like one lumpy quarter and, again, that was slowdown almost six, seven months.
— Parikshit Kandpal
So do you see any risk of this moving in the second half of next financial year?
— Parikshit Kandpal
And what are our plans to stimulate demand in case there is a slowdown?
— Arvind Subramanian
So for the large deals that we have signed up these Dahisar or Chandivali or even the larger Pune deal and obviously, right now, it's difficult to comment since we haven't seen the demand velocity.
— Pritesh Sheth
So my first question pertains to our Kalyan project, where we already started on a weak note.
— Shreyans Mehta
Just to put this in perspective, when we say it will be weak launch, we still saw a 25% of the inventory in six months.
— Arvind Subramanian
So by industry standards, that is not weak.
— Arvind Subramanian
Just last question on this is from last quarter to this quarter, we saw a decline of around INR 500 crores on the future gross cash flow, right?
— Amit Agarwal
So just if you can help us understand why there was a decline of around INR 500 crores on the gross cash flow expectation?
— Amit Agarwal
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Q&A — 11 exchanges
Q
Congratulations on a decent quarter. My first question is on business development. So the last two quarters from -- or three quarters, our business development pipeline has been around INR 5,000 crores and since April have not seen any conversions from this pipeline. So the first question is, why is the pipeline not growing? And what is causing the delay because we have had like one lumpy quarter and, again, that was slowdown almost six, seven months. So when do we think Q3, you said that is a period where you will see some of these closings. So how confident are you that a INR 2,000 crores nu
Arvind Subramanian
Thanks, Parikshit. So the way to think about the INR 5,000 crores, while the number looks static, I would split it into two buckets. There's roughly INR 2,000 crores, as I mentioned, which is the advanced conversations or high probability, high priority kind of target. That has remained, more or less, stable for the last four or five months, and it's actually the same deals that are in that pipeline. As I mentioned, we've not lost any of them to competitors. We continue to be in a strong position and are progressing well on this. The back part of the INR 6,000 crores, there has been some addit
Q
Yes. Adhidev, as I mentioned in answer to Parikshit's question, there are some policy updates that are expected that are relevant to that development. So it's hard to nail down an FSI, but we do see it being in the range of 5 million square feet plus of development potential. And it will be a mixed-use development, as I said. It will have some commercial assets, retail as well as residential. And we are looking at, at this stage, once the policies are fructified and our mix has narrowed down, we are looking at potentially bringing in a partner on the commercial side. Adhidev Chattopadhyay: Sir
Arvind Subramanian
Yes, I would say between three to four quarters, because some of them based on the confidence we have in the closure, we've already started the design on. So we will be processing in parallel. So I would say anywhere between three quarters to four quarters to get to launch. Adhidev Chattopadhyay: Sir, last question. So again, in FY '24, of course, the two Mumbai launches, right, will happen in FY '24, as you said. So apart from these two launches, any other large value launches we expect in FY '24? So some of these new land parcels, certainly, Kandivali and one or two of the new land parcels t
Q
First is again on BD. So in terms of the INR 5,000 crores pipeline, does it also include any projects that maybe we are looking in Bangalore? And just a follow-up to that, so when we had this INR 2,000 crores of GDV addition as an annual target, at that time, we had only two markets in mind, which is Mumbai and Pune. Now with Bangalore also coming in, do you expect that out of the three markets, at least there would be a deal addition in two markets that would take your targeted GDV addition to maybe INR 3,000 crores, INR 4,000 crores on a constant basis? So just a comment on that?
Arvind Subramanian
Yes. Certainly, Pritesh. I think when I had indicated the INR 2000 crores, it was more than a year back and as you rightly pointed out, it was with a two market focus. So this year itself, as I had mentioned earlier, we are looking at roughly INR 3,000 crores. And every year, we will look to build more on that. So it will be in the range of INR 3,000 crores, INR 3,500 crores, INR 4,000 crores, steadily building it up year-on-year. As you know, these deals are lumpy. So t's not that -- so you could end up being at INR 4,000 crores and INR 3,000 crores or INR 2,000 crores, the each deal is typic
Q
So my first question pertains to our Kalyan project, where we already started on a weak note. And it seems given the quarter, we see the loss in momentum. And last quarter, we were talking about some change in strategy. So just wanted to hear from you, I mean, how is it working now?
Arvind Subramanian
Yes. So Shreyans, as I mentioned, that is one of the launches we've lined up for this quarter. Just to put this in perspective, when we say it will be weak launch, we still saw a 25% of the inventory in six months. So by industry standards, that is not weak. By our own high standards, we would have expected more. And as I mentioned in the last call, there have been some learnings about the hits and misses in that. We've incorporated those learnings and we will doing a full-fledged launch of that project in this quarter. Sir, second question pertains to our region, Ahmedabad. We had indicated t
Q
My question is that over the last couple of years, we have been outperforming on the business development. So this year also – we may end up somewhere close to INR 4,000 crores. Just doing the one as presales projections into -- at the same when there into H2, we do exceed about INR 2,000 crores of presales. It seems that favorable we reach almost INR 2300 crores, INR 2400 crores, much ahead of your timeline of FY '25. Next year, we have a very strong launch pipeline on the starting put together, Dahisar and Kandivali close to about INR 4,000 crores of GDV, which may lead definitely in phases,
Arvind Subramanian
So Parikshit, firstly, trust you to always take the upper end of any range that I mentioned. So I do want to reiterate that this year we are looking at INR 3,000 crores GDV and not INR 4,000 crores. I mentioned that because it's lumpy one to end up in INR 2500 crores to INR 4,000 crores is. And on your comment on presale, yes, first half of this has been INR 1,000 crores. I don't expect it to double for the second half. So don’t do arithmetic summation. The deeper question you've asked about how we are gearing up the business development is important. We've actually added strategically to our
Q
This is for Vimal. So Vimal, in the last four quarters, in the residential, we have booked around INR 566 crores of revenue. And against that cost of sale is INR 520 crores. Just wanted to understand what all costs we included in cost of sales. And implied gross margin is 7.4, which is a bit different from the number that we typically give out. So if you can just help us reconcile those numbers?
Vimal Agarwal
So Amit, at a broader level, usually gross margin will include all the direct costs including prepaid expenses like brokerage, etcetera. See, it's important to, in a way, understand this last two quarters, the completions have been sort of very -- maybe the last phase or the last building or the last tower. And to this extent, the gross margins are lower than what we expect it to be. The other thing really is that for example, this thing in our Nagpur project, we have taken one charge which is related to royalty payout with the local authority demanded, which we have gone ahead, paid, taken ch
Q
Congratulations on good set of numbers. I have two questions. One was on the IC business, okay? One was on the leased area, okay? We've seen pretty -- the growth has slowed down from last year. What is the buildup of or inquiry levels you are seeing? And what is expected once the economy starts opening a lot more conversions to happen, okay? Some thoughts on that, if you can give on IC and level of inquiries and what is happening there?
Arvind Subramanian
No, I think IC is on a very strong footing. I would encourage you, don't look at it necessarily quarter-on-quarter because these are long sale cycle businesses. So look at kind of trailing -- or a moving average of fourth quarters or something like that. So that would be more representative. We are on a very solid growth trajectory there. Last year itself was a record growth on a record leasing in our IC business. This year, we will look to match or exceed that. And one thing is what are the corporate costs overall for the company? Just to understand what is our recurring revenue, which you ne
Q
Congratulations for the good numbers. Sir, my first question is on MWC Jaipur. So if I look at the numbers, we have been very well in the domestic segment, but SEZ is sort of being much slower. So with the current pace that we are going, we might exhaust the domestic part in next few quarters and then SEZ might be left. So you also referred to some policy change which might happen. So what are your thoughts on this?
Arvind Subramanian
Yes, you're absolutely right that there has been a much stronger demand on the domestic tariff area than the SEZ. But this is not peculiar to Jaipur or Mahindra World City. This is what is happening across the country. And it's an outcome of sun set of various incentives that have been given to SEZ 10 or 15 years back. So across the country, there has been a very muted demand for SEZ. The government has also recognized that and proposed what is called the Desh bill, which was expected to be tabled in the monsoon session. We are hoping will come in either in the monsoon or winter session of the
Q
Yes. So my question was with respect to our IC & IC vertical. So what I see is, we've been doing seriously good now in terms of leasing on an incremental basis. But the things that I observed that, I mean, when I look at total number of customers that you have and look at the operational customers that you have, I mean, I think initially we used to have this condition in our contracts with the clients that you would have to come and check operations in a year, 1.5 years. I mean, the customer would start contributing early as possible. But the gap between our operational customer and total cust
Arvind Subramanian
That's a good observation. In Jaipur in particular, given the growth we've seen over the last four quarters to five quarters, its probably 30 or so new clients, what have we added, so one has to factor that in because once they lease the land, it will take them roughly 12 to 18 months to get operation even if they hit the ground on day1. But that backlog is an important thing, and we are actually in the process of reaching out to many of the clients who are not yet operationalized like you mentioned, some of the older leases that were done and finding out what the bottlenecks are trying to rea
Q
Sir, my question relates to more of a strategic purpose of Mahindra Lifespace. So we have been seeing that the proportion of value homes has been consistently declining in our overall portfolio. So sir, how we are strategizing between value homes and mid-premium houses? And what is the breakup of this INR 5,000 crores of BD pipeline into these two parts?
Arvind Subramanian
So Jainam, there's no predefined kind of quota that we have between the value homes and the mid-market segment. We do what is right for a particular land parcel. In some cases, particularly in cities like Pune and Bangalore, the same location could be developed as a Happinest products or as a mid-market product. Because that's the nature of those markets. In a city like Mumbai, it tends to be geographically kind of aligned with North to South. As you go further North, it is more happinesst as you move further. We are not in extreme South Mumbai, but let's say, the Western Suburbs or Central Su
Q
Thank you, Mitchell, and thank you for all your active participation and your questions. As we highlighted there are multiple actions lined up for the second half of this year, which includes ensuring successful new launches, new pre-launches as well as continued momentum on the IC & IC business. We are also extremely focused on driving the business well and hi-fi. We continue to be sharpshooting on that rather than spring and bring. And you will see hopefully some conversions in Q3 and Q4. Thank you, everyone, and appreciate your support.
Management
Speaking time
Arvind Subramanian
35
Moderator
13
Vimal Agarwal
13
Parikshit Kandpal
13
Amit Agarwal
6
Himanshu Upadhyay
5
Pritesh Sheth
4
Shreyans Mehta
4
Manan Patel
3
Prem Khurana
2
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Opening remarks
Arvind Subramanian
Thank you. Good morning, everyone, and welcome to our Q2 and H1 FY 2023 Earnings Call. I'd like to thank everyone for participating in this conference call. As you are aware, many of our key operating entities from the residential business like Mahindra Home, Mahindra Happinest and as well as our IC & IC business, which is Mahindra World City Developers Limited, Mahindra World City Jaipur Limited and Mahindra Industrial Park Chennai Limited are not consolidated on a line-by-line basis, and I request you to view our results with that lens. My team has given me copious notes on commentary on the global macros as well as the sector, which with your indulgence and permission, I'm going to leave to experts on this call. Many of you know that better than I do. And I'm going to dive straight into a commentary on our performance over Q2 and H1. In my opening comments, I'd like to touch upon seven aspects of our performance. The residential sales, our cash position and collections, completions,
Vimal Agarwal
Hi. Good morning, everyone. Moving on to the financial highlights for the quarter end for H1 '23. The total consolidated income stood at INR 72 crores, as against INR 66 crores in Q2 F ’22. The consolidated profit after non-controlling interest stood at a loss of INR 7.7 crores as against a profit of INR 6.5 crores in Q2 F ‘22. The company has debt of INR 331 crores at consolidated level as per INDAS, while cash in bank balance, including short-term investments, stands at about INR 203 crores. Cost of debt is 7.2% on consolidated basis, while standalone Mahindra Lifespaces cost of debt is 6.9%. With this, I'll request if the lines can be opened up for questions, please. Thank you.
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