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business | IST

Macrotech Developers sees uptick in mid-income housing segment; aims to reduce debt to Rs 6K cr by FY23-end

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"While we are focused on deleveraging, we are also getting significant growth opportunities and we are able to balance both because of the joint development model. Over the last six months since our IPO, we have added five new projects with topline of Rs 4500 crores, and we have an equally strong pipeline for the second half of the year as well," said Abhishek Lodha, MD & CEO, Macrotech Developers. He also said that the company is seeing strong pick-up in the mid-income housing segment, while the premium segment is seeing momentum as well.

Macrotech Developers is in focus, Jefferies has a buy call on the stock with a target price of Rs 1,220, raised from earlier Rs 1,068. The brokerage house has also raised their FY23-24 sales target by as much as 7 to 10 percent. They do suggest that the company has demonstrated strength in the residential housing market and its London investments have also started performing well. In an interview with CNBC-TV18, Abhishek Lodha, MD & CEO, Macrotech Developers, shared his outlook.
On housing demand, he said, “The housing sector’s coming out of prolonged slowdown, which lasted almost seven to eight years, largely driven by oversupply, which was created for various reasons. We are at the start of a long-term improvement, where supply is consolidated and on the demand side, we are seeing demand being quite strong across different price segments, especially in the mid-income segment, the premium is doing well; the medium income segment is the one which has the bigger base and that's the one which has the best legs to keep carrying the strength of the housing demand, going forward. Also, for the first time in a decade, with the government and the RBI, we have a fiscal as well as monetary policy which is supportive of growth, we believe that there is a lot of strength ahead in terms of demand momentum.”
On demand for ready-to move-in-homes and under construction homes, Lodha said, “In the markets where there is a ready supply, people of course prefer and want to buy ready-to-move-in-homes. Where the ready supply is running out and that is happening now in a number of markets because clearly, ready-to-move-in home supply takes a long period, that is about 3-4 years, then in that market, people are willing to buy under construction homes as well with the top brands.”
“There are a few brands in every city that have a track record of delivering on time, good quality projects, and there is no risk to the buyers when it comes to completion. Those brands are able to also sell under construction homes, as we have seen with our new launches as well as under-construction projects,” he mentioned.
On the company’s earlier guidance for Rs 9000 crore sales by the end of FY22, Lodha said, “One has to remember that we lost the first quarter of the year to the second wave of COVID, we would always like to say that the market right now is headed in the right direction. Whether we surprise on the upside, that only time will tell. But at this stage, we believe that we can deliver on our guidance of Rs 9000 crore topline and reduce our debt to approximately Rs 10,000 crore.”
The debt for the company currently stands at around Rs 12,500 crore.
He further said, “In the last quarter, our ratings were upgraded to A-minus and we are on a consistent journey of upgrading our ratings, which has a positive impact on our cost of funds. As a company, we are in the cycle where we will be generating somewhere between Rs 4000 to Rs 5000 crore of operating cash and after all operating expenses this year and a higher number next year, with those in place we are reducing leverage as well as the cost of leverage, we expect to end FY23 with debt at about Rs 6000 crore level, which will be in the range of one year of operating cash flow and by FY24, we could be in a situation where we are net cash positive and that really is our medium-term goal.”
Lodha specified, “While we are focused on deleveraging, we are also getting significant growth opportunities and we are able to balance both because of the joint development model. Over the last six months since our IPO, we have added five new projects with topline of Rs 4500 crore, and we have an equally strong pipeline for the second half of the year. So, if things remain on track, we could add as much as Rs 10,000 crore of new topline to our portfolio in the course of this year. So, I think that's really what's exciting for us that we can deleverage and keep on growing, therefore generating improved ROE all the time.”
For the full interview, watch the video