According to him the new 4000 acre Palava project would garner a bottomline of around Rs 600 crore every year, over the next 5-6 years and a total of around Rs 4000-4800 crore, over 8 years after paying all the taxes.
Palava - the new Lodha project is a 4000 acre township located in suburban Mumbai. Out of that 250 acres have been developed and sold which has over 20,000 units exist. They are now developing 650 acres and expect to have 1 lac units by 2025. Current pricing ranges from 40 lakhs to 60 lakhs for 1 to 3 BHK.
The company has grown by around 27 percent as compared to last year both in terms of topline and bottomline.
Current debt for the company stands at Rs 5600 crore, which is fully serviced by internal accruals, said Lodha.
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Below is the verbatim transcript of his interview on CNBC-TV18
Q: Let us start by you talking a little bit about where you have reached in terms of monetizing that Palava project and how much further you have to go?
A: We have managed to finish the development of the first phase of 250 acres over the last three years which really was what we were doing to try to bring to fore the development of a city in the outskirts of Mumbai.
We are now monetising the next 650 acres which believe will really give entire shape to the city in terms of the social infrastructure, lifestyle living etc. W believe this will get developed over the next 5-6 years and it will bring to life a entire city development at the outskirts of Mumbai both from an economic stand point and from a physical construction perspective as well.
Q: From a revenue point of view this entire project is likely to gain what for you over this extended period of time between now and let's say 2020?
A: Over next 5 or 6 years we expect to make on an ongoing basis a bottomline of around about Rs 600 crore every year from this single asset. So, over the next 8 years we are looking at number in the range of Rs 4000-4800 crore in terms of bottomline after paying up all taxes to be made from this asset.
Q: To extend that interaction to some of the other projects that you have recently done as well, the ones in Pune, Kanjur Marg, Dombivali, etc most of these projects have been sold at a discount. Are you noticing that a lot of the developers will now have to resort to price cuts in order to sell their project because of how poor the demand situation is?
A: What we managed to do and we personally believe we haven't looked at it as a part of being discounted to the market. We brought to the market asset which was available to bring to the market and sell at what was consumable at that point in time.
We believe that most of our consumers ended up making a lot of money when they participated in the early cycle. So, while the launches happen at very attractive pricing, post that the sales have been at significantly higher numbers. The city of Mumbai has seen some slowdown over the last 9-12 months and developers will need to be rational about pricing if they need to bring quality products to the market and get consumers to buy them.
Q: You have admitted to a slowdown and since we have expanded this conversation it is not just a slowdown, you have characterised the slowdown as being one of the worst slowdowns that Mumbai's real estate market has seen. I am looking at property registration numbers, they have their lowest in almost five years says one newspaper report. There is talk of inventory pileup in Mumbai and in other real estate centers' in this country. Can you characterize how bad this has been for the bottomlines of real estate companies like yours?
A: While there has been a slowdown in the market in terms of what the market is seeing I think the Mumbai market has actually expanded in this year, that is what our internal numbers tell us.
We have grown by around about 27 percent as compared to last year both in terms of topline and bottomline. So, while there has been a slowdown in terms of perception of what is moving and not, in reality the Mumbai market continues to do reasonably well. The recent hike in the Ready Recokner values in Mumbai in January also indicate a bit inline with the same. The only thing which has happened is market share has shifted. Where there is credibility on the table people are willing to buy. Where credibility is questionable or people are a bit circumspect they are taking a longer time to consummate those decisions.
Q: How do you explain the sharp drop in registrations?
A: I won't have data around that. Our internal data tells and we benchmark it from month-on-month basis that there has not been a substantial drop in terms of new registrations happening as compared to the number of new launches which are being brought on the table. Because the market has grown, the number of registrations happening is actually increased in the resale part of the market where a ready product is already available or is there to consume.
As the number of launches have slowed down you probably see fresh data depicting a lower number. However, if you look at both of these numbers combined you will see a growth of around 8 percent as compared to last year.
Q: Since you company is not yet a listed entity you can speak to us a little more vocally about a lot of the issues that the sector is facing and the biggest one by far is how highly leveraged this entire sector is and Lodha Developers itself has an extremely high debt, I think second only to DLF. How do you think you are going to manage to reduce your huge debt, if I am not mistaken it stands at more than Rs 8000 crore. Is there a high amount of sales momentum that you plan to achieve to service the debt or is there any kind of asset monetisation that you yourself are looking at?
A: We continue to look at growth of the company and there is no asset monetisation that we are talking about in terms of sale of real estate asset. Our current debt stands at Rs 5,600 crore at this point in time which is currently fully serviced by the internal accruals of the company.
We have annual cash flows in excess of Rs 7000-8000 crore every year from our sales, which is inline with probably what you would see in terms of some of the larger listed companies in India.
Debt in itself is not a problem as long as your large sales are backing it up which is what we have been able to do. So, as long as you are able to bring end product to the market and continue to sell it, we don't see any large issue in being able to grow as an organisation.
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