Lodha Group aims to reduce debt by more than Rs1,000 crore this fiscal

Bengaluru: Lodha Group, India’s largest real estate firm in terms of sales, plans to reduce its high debt levels by more than Rs1,000 crore and deliver around 11,000 homes and offices to customers in 2017-18, up 53% from the preceding year.

Lodha, which is expected to file for an initial public offering (IPO) soon according to multiple people familiar with the development, has around Rs16,500 crore of debt even as net sales are expected to touch Rs8,500 crore in FY18.

In the last two years, Lodha has focused on reducing the cost of debt, and has managed to do so by over 1%.

“We had said that first we would reduce cost of funds and then reduce quantum. So, from our internal cash flows, we will now look at a meaningful reduction in debt,” managing director Abhishek Lodha said in an interview.

The Mumbai-based firm, which also has projects in London, has a saleable under-construction area of 37 million sq. ft.

Analysts said an IPO would be the ideal way to cut the firm’s high debt and help scale up its growth story.

The real estate sector is clearly moving towards consolidation and better health, and “in a market like Mumbai where you have 1,000 developers, you will probably have 50-100”, said Lodha.

“The (real estate) industry’s problem today is that the consumer’s expectations is not met, or not met in a significant manner. Between 2009-2013, everyone grew their business manifold without knowing how to deal with it. But we understand that when customers get a home or office delivered from us, they will buy more. It’s a simple equation,” he said.

At a time when delivery of homes has been a key factor in differentiating credible developers from the rest of the pack, Lodha says it’s the company’s delivery record that establishes its credibility as a developer.

“Delivery has been always been critical for us. But in the last three years, we have put in more resources towards execution and delivery. We have spent Rs4,200 crore in actual construction payouts this year,” said Lodha.

Till December 2017, it had delivered 9,000 homes and offices and the 11,000 delivery target will be met by March, compared to 7,200 homes delivered in 2016-17, according to Lodha.

Of the Rs 8,500 crore of sales it expects to clock this fiscal year, higher than the preceding year, over Rs3,000 crore will be in the affordable segment of homes.

The affordable housing segment will continue to grow further, Lodha said.

The developer’s pace of launches has not slowed despite a huge dip in project launches across cities, owing to a pile-up of existing unsold inventory.

Lodha intends to continue 2-3 launches every quarter, with around 8-10 new projects in a year.

From Lodha’s luxury collection segment, it is planning to launch townhouses in central Mumbai in addition to the projects it has in Mumbai and London.

The last time real estate firms hit the primary market was in 2010. Pune-based Paranjape Schemes filed for an IPO with the Securities and Exchange Board of India (Sebi) in July, 2015 and the proposal was cleared in December, but eventually the company didn’t go ahead with it.

Since then, real estate firms have brought institutional investors on board in joint ventures or through stake sales. If Lodha’s IPO goes through, it will be a huge confidence booster for India’s real estate sector, said consultants.

“Debt may not be a huge concern and it needs to be seen in context of the company’s liquidity or ability to generate cash flows to service it. Project cash flows essentially go back into the projects, but an IPO, which is equity infusion into the company, will help in both debt reduction and fund growth of projects,” said Shashank Jain, partner, transaction services, PwC India.livemint


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