Lodha to seek investor feedback on using surplus cash to cut debt or on new projects

Macrotech Developers, which sells houses under the Lodha brand name, expects to have abundant cash surplus in the current fiscal year and will be seeking feedback from investors whether to use it to cut debt further or spend it on business development.

The company has a goal of reducing its debt-to-equity ratio target to below 0.5 by the end of FY24. The company expects that even after reducing its debt level to its stated target and spending on business development it would have extra cash surplus ₹2,000 crore that can be used for further debt reduction or for new projects. The management of the real estate developer recently interacted with Jefferies at its Asia Forum.

Expansion plans

The company ended the June quarter with a net debt of ₹7,260 crore, a bit higher than the ₹7,180 crore as on March 31, as it took on debt to fund its expansion plans. It had pre-sales of over ₹12,000 crore in FY23.

The management expects to end the current year with ₹14,500 crore of bookings, a growth of 20 per cent from a year ago. It also plans to add projects with a revenue potential of ₹18,000 crore, of which ₹12,000 crore has been already achieved. The company said at the forum that it was utilising business development opportunities to raise the quality of its projects as well as margin profile.

Premium residences

Premium and luxury residences are seeing more sales compare to low-income and affordable housing, where demand has been hit by the higher mortgage rates as well as an increase in housing prices. According to Lodha’s management new launches at the higher end of the market were seeing brisk interest from homebuyers even before the formal launch of the projects.

Lodha has always maintained that it would tread a balanced line between affordability and hiking home prices, with home price inflation lagging wage inflation. The real estate developer is ensuring that its prices in key markets do not rise beyond 6-8 per cent ensuring affordability for those who are interested in buying houses. It observed that while demand was intact, supply was not high enough to cause an inventory build-up.