Lodha Developers Limited analyst Q&A

Thank you very much. The first question is from the line of Gaurav Khandelwal from JP Morgan. Please go ahead.

I just wanted to better understand this guidance on moving to gross debt zero and prioritizing free cash flows. Is it going to be more operating cash flow driven? Or we will be pulling back on capex to an extent because we've already done a lot of BDs and hence, the capex need in the incremental years in FY '27, '28 will be lower and hence, we see positive FCF. So, what's the kind of combination on OCF and capex on how we get to a positive FCF at some point? And my second question is, I don't see a guidance for OCF for FY '27. Is there a specific reason for that?

Gaurav, thank you for your question. The focus of the business is obviously to deliver sustainable, predictable growth on account of the significant success in business development in fiscal '26 on the back of some stronger years previously. We now have sufficient visibility on our supply side for quite some time and therefore, can afford to be a lot more choosier in terms of the new business development that we do. As a consequence of that, we expect that the investment into new business development will be muted over the next 2 years. And as a consequence, we expect the FCF to be therefore, higher. In terms of OCF, we believe that overall, with our very clear guidance on PAT growth, all other contributing or linked factors are then not relevant in guidance terms. Having said that, we expect OCF to grow in line with PAT growth and therefore, grow at about 20% or thereabouts per annum fro m the current base of about INR 71 billion, which we delivered in fiscal '26.

The next question is from the line of Murtuza Arsiwalla from Kotak Securities.

Just on the launch pipeline of FY '27, INR218 billion, 5 new projects, about 14 new phases for existing projects. If you could give some colour on how ready this pipeline is in terms of being able to launch? Which are the key projects which would make for a chunky part of the contribution? Where are we in terms of RERA approvals, et cetera? So just some colour on how sales ready is this launch pipeline? And which are the key projects which would contribute?

Murtuza, in terms of the launch pipeline for fiscal '27, the first thing to note is that last year, our new launches contributed around 1/3 of sales. And this year, that number will become even slightly lower than that. What it's really telling you is tha t the inherent predictability of our sales is increasing and improving each year and the dependence on new launches is becoming lower, which is really where we find ourselves as more predictably placed internally as a business. In terms of the new launches for the year, these are all launches where the land acquisition was completed in the last fiscal or before that. The design has already been completed and the approvals are either already available or well under process. Of the se, we have launches in Pune. We have launches in Bangalore. And of course, we have launches in Mumbai. We haven't included the potential 2 launches in NCR in this launch guidance because we expect to start construction in the next quarter. And we expect to launch either in Q4 of this fiscal or early in fiscal 2028. So, we've just been conservative in keeping that out. So, it's a very broad -based basis of launches. The visibility, in our opinion, is quite high. And unless there are some extraneous factors, for example, that environmental clearance issue, which affected last year, we don't see any risk to these launches.

Abhishek, if I could follow up since you bring up the environmental issue, is that largely behind us for both MMR and larger MMR market? A nd we're seeing clearances coming at a steady sort of pace now?

Yes, Murtuza. The Supreme Court brought the situation to where it was in late 2024 back in August 2025. So, we all lost about 9 months in getting back to the same starting point. And the clearances then started getting given by, I think, sometime in November 2026 - sorry, November 2025. So, we are very much that issue is behind for the entire market, including for Lodha.

The next question is from the line of Abhinav Sinha from Jefferies.

A couple of questions. So firstly, on data center, can you give us some milestones to expect such as when do we see the first announcements on the build-to-suit? And when do you start seeing lease income from that? So that's the first question.

Abhinav, it's a question which I would love to give you a very precise answer to, but I can tell you is that we have good and strong advanced discussions on the first set of BTS boxes. Things we expect definitely for the announcements to happen this fiscal. We are hoping sooner rather than later. And income from these, we expect to start coming in fiscal '29, which is about 2 years after the sign-up.

Okay. Sir, secondly, on the guidance that you have given of 17% growth this time. So , I understand that there's a Middle East conflict likely impact. Can you tell us how, say, April is shaping up versus March? And do you think it can be like similar to the last time in first half where we had single-digit growth and then second half was much stronger?

So Abhinav, difficult for us to predict how this whole Middle East thing will pan out, etcetera. As I mentioned in my remarks, we have assumed that this Middle East situation settles down, i.e., stop being something which affects in a significant manner, energy flows or economic impact by the end of this quarter. I also mentioned, we expect sales in the first half to be about early 40s of the overall guidance and the balance to be in the second half. This number was similar in the previous fiscal. And therefore, in growth terms, probably the first half growth will be in line with that 15-ish percent growth compared to last year. However, I would urge you and all the others attending the call to look into our focus on PAT growth. As the primary way of measuring our business, this is the actual PAT in the P&L, not a number which is a derived number or an unaudited number. We believe this provides a lot more clarity, a lot more visibility in terms of how the business is likely to perform going forward. And ultimately, as they say, cash is king, and that's really where now as a business, we expect to focus on. So, while we have a presales guidance, which is sort of in the mid-teens, our medium-term PAT guidance is at 20% or thereabouts.

The next question is from the line of Pritesh Sheth from Axis Capital.

A couple of questions. First one, just trying to understand which segment would have been impacted most by this Middle East. We had a INR500 crores shortfall from our guidance last year. And again, if I assume ideal guidance would have been 20%, we are at 17%, again, a INR500 crores shortfall. So which segment was impacted and which one has remained kind of immune to this conflict? Yes, that's my first question.

Pritesh, we'd like to say that March, obviously, was more driven at individual level. We had some shortfall in sales from NRIs, who are based in the Middle East. We had some shortfall in closures in the luxury segment because everybody was just grappling with what had suddenly happened. We don't expect any persistent sort of single segment impact of this war, and we think it was just the shock of the event, and we expect things to normalize unless there is a persistent energy shock. So that's really our view on the Middle East crisis. In terms of the pre -sales guidance question and its linkage to the Middle East situation, our view is that presales as a guidance tool has been something, which is probably less reflective of the underlying health of the business. And hence, we have now chosen to focus in terms of our guidance on PAT in a more specific manner. We think that the underlying health, which comes from a contribution of margin growth as well as presales growth, ultimately leading to a delivered profitability is the better way of looking at the health of any real estate company.

Sure, sure. Makes sense. Makes sense. And just on Palava, I think we ended quite well in Q4 with almost INR800 crores of presales. What would be your outlook for Palava's residential segment next year, given that we are on the verge of seeing completion of that Airoli -Katai Naka. Even Upper Thane developments that are in progress would also be on the verge of completion. So , what's your thought process on where would we be in FY '27 for Palava Residential, if you have any numbers, you have thought about? Yes.

Pritesh, we are very excited about the infrastructure in both Palava and Upper Thane now becoming operational. It's expected that the Palava-Airoli-Mulund freeway will be operational imminently, i.e., next 2 to 3 months unless the monsoon pushes it to pos t monsoon, but we hope it's pre-monsoon. And the completion of the Mumbai-Nagpur Super Highway, the Thane portion of it is a key priority, which is being monitored at the highest level of the state government, and we hope that, that will also be completed before Diwali. So, both of these make us very, very excited about the potential for the impact on residential sales, particularly in these 2 locations. And we expect strong growth ahead of our average pre- sales growth for this fiscal. Once the exact timing of these openings is known, we may be able to give even a more precise number. But overall, we expect presales growth in the Extended Eastern suburbs to be ahead of our company level presales growth for this fiscal.

Got it. Got it. That's helpful. And lastly, on the cost side, if you want to quantify on how much has been the impact? And I mean, we follow the disclosures that you give towards the end of the slide presentation. But overall, how much has been changed since last 2, 3 months because of these concerns and the inflations that we see around?

Key and important question, Pritesh. Our assessment of the impact of construction cost increases has been currently running at approximately 3% to 5% of overall construction cost. The highest affected categories are the ones which are gas dependent. This includes tiles, paints, PVC pipes, aluminium formwork and certain waterproofing elements. There has been a more moderate impact on windows and facade systems, gypsum and steel. And then there is sort of a little bit in other categories. This impact of 3% to 5% on construction cost, if it was to persist through the entire construction cycle of 3 years, it would give an impact on margin of about 1.7%. If it was to run for 6 months, which is, I would say, probably the more conservative view right now, you are talking about a very modest impact of roughly 0.35% of the sales value for those given projects. So right now, our assessment of the impact of the Middle East crisis on construction cost is that, yes, there has been some impact in selec t categories, but the overall impact on margin is very, very nominal. The other aspect which people have spoken about is labour attrition. Labour attrition in March, April is running at about 5% to 10% over seasonal norms. Part of it is obviously things which may be linked to the war like LPG or general sentiment. But there's also the state elections in various parts of the country and therefore, w e don't see anything significant in terms of this labour attrition being abnormal. Obviously, we've made a lot of effort over the long term to have our labour think about working for us in a very different manner from normal construction workforce, and that's helped keep the attrition low. And we've, of course, also made special efforts to make sure that the LPG issue does not affect their day-to-day welfare. So overall, an issue to watch, but nothing which is worrying right now.

Sure. That's it from my side. Thank you for the detailed answers. Thank you. All the best.

Thank you. The next question is from the line of Kunal Tayal from Bank of America. Please go ahead.

A couple of questions from me. First one, Abhishek, given the accretion that you are expecting in value of the data center park land, just curious as to what were the puts and takes you were looking at in terms of developing your own data center as opposed to just monetizing it by way of selling the land. From the outside, it seems like it's a strategic call of creating an asset versus maximizing profitability. So, is that the right read?

Thanks. It's a key question. We've, of course, thought of it in multiple ways. We do think that the creation of the long -term compounding steady annuity stream is a strategic gap in our business. We have been working on improving on that front through our warehousing, industrial, retail and offices. And the data center opportunity gives us a significant step -up in the scale of our annuity business, which we think is strategically valuable. Having said that, out of the 400 acres of land which is currently earmarked in our green data center park, about 100 acres will be used for building our own portfolio and the balance will be sold. So obviously, we are monetizing a significant part of that land and using the proceeds from that monetization to build a significant long-term annuity stream. So, it's really a strategic call to take a modest portion and build the long-term income rather than to take all the profit today.

I understand. Got it. On the residential business, you're, of course, exiting F Y’26 with a lot of inventory. And I do understand that's about the reason why you're also saying that the pressure on business development next couple of years will be low, and therefore, they should moderate. But that apart, do you also think it's part of the cycle where carrying more inventory makes sense because the percentage conversion might be lower than earlier?

No, we don't think of it that way. We don't expect that we are likely to see any reduction in our conversion rates or our sales throughput. We've just had a very strong year in business development, and that gives the business a lot more optionality, a lo t more visibility for the long term. And we did some launches in the last quarter of the year, which were deferred from earlier. So, you end the year with a higher elevated level of unsold inventory, but nothing out of the normal. On the contrary, as my colleagues, Akshat and Nishant remarked, we continue to see further development of brand preference in the consumer. And we expect over time that we will gain market share as well as have improved conversions on account of the fact that our product and brand are both compelling.

The next question is from the line of Parvez Qazi from Nuvama Group.

So, one question from my side. I wanted to get your views on 2 parameters. How was our performance on these parameters in FY '26? And what is the outlook going ahead? The first one is on sales volumes and the second one is on price appreciation? Thank you.

Thank you. Price growth last year came in at about 5%, and we expect a similar trend for fiscal '27. It, of course, therefore, implies that the rest of the growth is coming from volume. Last year's volume growth came in, in square foot terms, at about the 11%, 12% mark, and we expect a similar number for this fiscal too.

The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund.

To start with, let me give my sincere appreciation of the Lodha Foundation for the work in theoretical physics and mathematical sciences. And since it's part of your presentation, I thought I'll say that. But the questions which I have are more in line wi th what people had asked. In terms of the sales that you see, let's say, in the Mumbai area, is it linked to something specific like the stock market prices going up and down? And are you seeing any delays in collections for even projects that have been sold? Or for example, in Bangalore, would it be linked to the tech sector and tech sector hiring, which seems to be a bit choppy. So , what will determine your sales? And are the collections from existing projects getting hampered in any way?

Vivek, thank you for your call -out on the Lodha Foundation. We appreciate it, and we hope that the foundation will continue to make some positive and significant contribution to both learning innovation and India's growth. In terms of your questions about how the real estate demand is linked to various factors like the stock market, we don't see any direct linkages between the real estate demand and the stock market. Obviously, for individuals that can vary, but on average, that is not the case. Really, real estate demand is a function of future confidence in one's earning capability. And that really is how people make their choice on when to buy the home. Job confidence, economic growth confidence, sectoral as well as systemic leverage levels, al l of these are determiners of political stability, all of these are determiners of confidence about the future. At the current time, we find that in spite of all the narrative around the impact of AI on job creation in the country, we are going to end up with white -collar jobs incomes growing at 9% to 10% per annum. It's important to emphasize that the median buyer of a Lodha home has an average household income close to INR50 lakhs per annum and the entry -level buyer of a Lodha home has an annual household income of INR25 lakhs per annum. This segment has to be understood carefully because it is not the mass consumer segment. It is really the upper top tier of the consumer segment. And this segment, in our opinion, will of course, be ups and downs, but over time, benefit from the prod uctivity gains unleashed by AI. We, of course, are not macro specialists, but we do expect that the housing demand as it stands right now is pretty strong, driven by a combination of the factors of better lifestyle combined with belief in one's future potential that I mentioned earlier. And in terms of collection impact, no, there is no collection impact that we've seen on account of any short -term aberrations in the equity market. So, no impact there.

I have just one more question. You made a strong statement on leverage. And given the muted business development growth this year, would you expect leverage levels to actually come down in the next year because you're going to be generating such strong free cash flows?

Vivek, yes, we do expect that our DevCo part of the business will reduce its leverage significantly going forward and perhaps might even become net debt 0, the DevCo part of the business over the next few years. So yes, on an overall basis, we would expect that the overall debt levels in the business at the end of fiscal '27 should be somewhat lower than what it is at the end of fiscal '26 in spite of the investments that we make in the build -out of our annuity assets.

The next question is from the line of Akash Gupta from Nomura Holdings.

Congratulations, sir, on a great performance. Just my question on the Extended Eastern suburbs. For the past 4 years, our sales value from Extended Eastern suburbs has been kind of flattish at INR20 billion to INR25 billion. I think we have a guidance of doing INR80 billion by FY '30. Are we still holding on to that number? And when do we see that pickup happening? Would it be this year likely to reach to that INR80 billion mark by FY '30? That's my first question.

It's a very relevant question. We expect that this year, sales in the Extended Eastern suburbs will significantly benefit from the completion of the long-delayed infrastructure projects. That delay in infrastructure projects has definitely impacted sales in fiscal '26. We had expected sales to be stronger than these levels on the basis of the fact that these infrastructure projects should have been completed about 12 months ago. But be as it may , as there's a saying better late than never . So , we look forward to the completion of these infrastructure connectivity pieces now very, very soon. And as a consequence, expect that a significant step -up in presales for the extended Eastern suburbs will be visible in this fiscal, most likely starting fr om the second half. And from thereafter, the compounding engine kicks in. The guidance of INR80 billion per annum was a combination of obviously, residential presales combined with the presales of all other asset classes in the Extended Eastern suburbs. So that number has to be seen holistically, but there is no real change in our viewpoint. There may be 12 months of deferral on account of the delay in some of these infra projects. But overall, we remain very strongly constructive on the potential of the Extended Eastern suburbs to become a key driver, not just of the company's presales growth, but more importantly, of the margins, given the fact that the land has been acquired by us already, and therefore, all price growth leads to significant flow-through into margin growth.

Understood. And sir, my second question is on the slide, we have given that for our 3,900-acre land parcel, we have roughly 600 million square feet of potential. What is the understanding of by when, like in how many decades should we be able to utilize this 600 million square feet number? Because currently, we are selling like roughly 4 million square feet. So , what is the understanding here? How should we think about it?

It's a key question. And as you would have noticed, we have our focus of the development company, the DevCo and the RentCo. Both the DevCo and the RentCo benefit from the land in the Extended Eastern suburbs, and we create value through residential sales, sales of other asset classes and creation of annuity assets like warehousing, data center, retail and so on. The third element of our operating business, what we have now called LandCo, has now been created in order to generate a strategic plan for expedited monetizing of the land, which is not going to be likely to be used by the RentCo and the DevCo in the near term. We expect over the next 12 months to have a clearer strategy of monetization, including potentially monetizing some of the land through third-party land sales so that there can be an expedited monetization of these land parcels. So hopefully, we'll provide a more detailed strategic update on how we can further fast track that monetization at the next annual earnings call.

The next question is from the line of Muralikrishnan from Sundaram Mutual Fund.

Sir, partially, you would have answered my question. So mostly on the launches. So just to understand our logic for having higher existing project launches over limited new project launches. We see Mumbai, I mean, in Western suburbs, there is a new project launch. With the environmental clearances, one would have expected much more launches to come from Mumbai. So just to understand the logic for increasing phase launches over the n ew launches in MMR specifically?

Thanks, Murali, for your question. I think this question goes to the root of how we think about as a business and our focus on cash flow and profitability over any headline sales number. Having established a large set of operating projects where the land cost has already been incurred and where construction is partly underway, that is the most ROE accretive part of our business, and that's the one where we focus most on to monetize and generate both cash flow as well as profitability. The new launches are really a function of where we see gaps in the existing markets in terms of supply, and that's where we bring new launches to the table. So once again, I would like say as I've stated this before in the call and reemphasize the fact that please think about our business as one which is most focused on profitability and ROE resilience and predictability rather than driven by headline sales. For us, the presales are a means to an end. The end is ultimately profitability, and that's what our focus is. So whatever trade-offs we make, our ultimate goal is to deliver the highest level of sustainable compounding in our underlying profitability.

That was the last question for today. I now hand the conference over to Mr. Chintan Parikh for closing comments. Over to you, sir.

Thank you, Iqra. Thanks for joining the call. If you have any queries, reach out to the Investor Relations team. Over to you, Iqra.

Thank you very much. On behalf of Lodha Developers Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.