When FY24 began, Macrotech Developers Ltd’s (Lodha) guidance of ₹14,500 crore bookings for the year may have seemed like a tall order. The base was large—Lodha had exited FY23 with pre-sales or bookings of ₹12,064 crore— surpassing its guidance. Plus, home loans have become pricier now.
But Lodha’s provisional operational update for the first half of FY24 shows that with pre-sales at around ₹6,900 crore, the company has achieved almost half of its target. This, despite no launches at new locations. Impressively, Q2FY24 pre-sales at ₹3,530 crore was its best ever quarterly. Note that the September quarter is seasonally the weakest for Lodha.
The pipeline for the second half of FY24 is strong, with launches slated at seven new locations. The management hopes to benefit from the festive season cheer and is confident of meeting its full-year pre-sales guidance. Further, on the business development front, it achieved around ₹14,300 crore worth of new business addition in the first half, achieving more than 80% of FY24 guidance.
Cash flows during the quarter were up a robust 16% year-on-year, aiding the company’s efforts to reduce debt. In Q2, net debt fell sequentially by ₹540 crore to ₹6,730 crore. For FY24, Lodha aims to cut debt below the ceiling of 1x net debt-to-operating cash flow and 0.5x net debt-to-equity. In simple terms, going by the estimates of Jefferies India, this translates into a net debt target of below ₹6,000 crore. This calls for significant debt reduction in the second half; and for that, timely new launches and sustained sales momentum are critical.
With solid sales, momentum in cash flows and falling debt, Lodha has served a perfect recipe to please investors. So far in 2023, the stock has rallied by 43%.
For now, there is a good chance that Lodha beats its pre-sales guidance this year as well. Ahead of general elections, a new interest subsidy scheme to boost the lagging affordable housing segment could be an incremental positive. On the flip side, lower decline in debt would be a concern.
“Seasonally, the second half is much stronger on project cashflows/operating surplus, though acquisition of new projects beyond the target could reduce the extent of debt reduction,” said Jefferies analysts.
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Updated: 08 Oct 2023, 07:39 PM IST