Focused Growth Strategy to Unlock Realty Potential

Despite being in the property business for nearly three decades, leading real estate developer, Mahindra Lifespaces Developers Limited (MCDL) has shown stagnant pre-sales of Rs 7-8 billion over the last 7 years. But now with the industry’s shift towards branded developers, Mahindra Group is gearing up to unlock the growth potential in its real estate vertical- MLDL, with a target to grow pre-sales by 2.5X to Rs 25 billion in the next three years i.e FY25E. 

MLDL’s focused growth strategy, according to a report by Motilal Oswal Financial Services , revolves  around scaling up launches and project additions. The company has already added  9msf of projects over the last three years in its core markets and is further evaluating projects worth Rs billion .  

The company  has robust cash flow potential from both residential  and IC & IC (Integrated City and Industrial Cluster)  businesses. Mahindra Lifespaces currently has 9msf of inventory across ongoing and upcoming projects, with a revenue potential of 90 billion. It is also looking to unlock 68 acres on Ghodbunder Road(Thane) which should add 8-10 msf to its project pipeline The company aims to launch the first phase  in FY1 24 E.The IC & IC segment is likely to generate cumulative surplus cash of Rs 20-22 billion over the next 10 years. 

With its excellent execution track record and strategy to strengthen key management with the appointments of a new  MD & CEO Arvind Subramanian and new heads across marketing , sales, project execution and legal, MLDL is seeing a strong growth opportunity. The new management with its aligned growth vision is targeting to boost its pre-sales by scaling up launches and augmented business development.The company aims to add projects with a gross development value (GDV) of Rs 20 billion annually for the next 2-3 years.With boosted pre-sales, project additions and timely launches, MLDL is likely to achieve its targeted pre-sales of Rs 25 billion by FY 24. 

The residential segment is expected to generate cumulative operating cash flows of Rs 14 billion for its existing pipeline over FY 23-25E. The IC& IC segment will be the growth enabler for residential business.. There has been a strong pick up in leasing in the IC & IC segment., with a leasing volume of 110 acres in FY22, compared to 46 acres in FY 21, generating an income of Rs 3 billion. With 990 acres of inventory at its existing locations in Chennai and Jaipur and 1000 acres in Ahmedabad, Pune and Chennai phase 2 to be monetized under IC & IC segment, the company aims to clock leasing income of Rs 5 billion by FY25E. As a large part of leased and supporting infrastructure is already paid out, it will lead to healthy annual cash generation of Rs 15-20 billion as leasing further scales up. These cash flows will take care of growth capital requirements for the residential business.