Macrotech Developers Ltd

NSE:LODHA

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to Macrotech Developers Q4 FY '23 Earnings Conference Call, hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Biplab Debbarma from Antique Stockbroking Limited. Thank you, hand over to you.

[Biplab Debbarma]

Thank you, Ryan. Good afternoon, everyone. Welcome to the Q4 FY '23 Earnings Call of Macrotech Developers hosted by Antique Stockbroking. Today, we have with us the management of Macrotech Developers represented by Mr. Abhishek Lodha, Managing Director and CEO; Mr. Sushil Kumar Modi, CFO; Mr. Prashant Bindal, Chief Sales Officer; and Mr. Anand Kumar, Head IR. Without further ado, let me hand over the call to Mr. Lodha. Over to you, sir.

[Abhishek Mangal Lodha, executive]

Good afternoon, everyone. Thank you for joining us for our earnings call. I hope all of you and your families are well. Exactly 2 years ago, we got listed with the company in a fragile state amongst the uncertainty of the second wave of COVID. Over the last 2 years, we have seen the pandemic. And hopefully, that's now behind us, we have thereafter seen the consistent recovery in the Indian economy. We have also seen interest rates rise. And most importantly, we have seen good momentum in the housing sector in what seems to be a multiyear uptrend which started a couple of years ago and the long duration of which I have been highlighting from time to time.

Amidst all this global uncertainty and volatility. There has been the stability of the Indian economy driven by a development-oriented government and a prudent Central Bank. The Indian economy has exhibited high growth rate, contained inflation. We have an improving current account balance strong ForEx -- and strong ForEx results. This has enabled the Central Bank to hit the pause button on interest rates and start supporting job creation. The balance sheets of Indian corporates as well as banks have improved significantly over the last few years and are perhaps in one of the best ever shapes. While we may not be able to decouple ourselves completely from what is happening in the globe, the overall situation is such that we should not get impacted in any significant manner from global factors. This is seen in the encouraging high-frequency data, including the direct tax collections, GST, PMI as well as IIP growth numbers.

The strong sense of growth in the economy is also translating into optimism on the job front. Let me touch upon a few factors which makes me believe that robust job sentiment and wage growth outlook is likely to remain the case for the next several quarters. As per the survey conducted by EON, a leading HR consultancy firm, India Inc. is likely to deliver salary growth of about 10%. IT hiring at the aggregate level has remained in a positive territory, though, of course, at a much lower level than in the years right after COVID. This has been supported by the global capability centers, GCCs, which have ramped up hiring and are continuing to expand their presence in India. Private CapEx in India has also started looking positive. And with the rollout of the PLI schemes, we have started seeing the manufacturing, which has long been a laggard in the contribution to the Indian economy is likely to start picking up.

All of the above endorses a very fundamental hypothesis that robust job creation and sustainable wage growth is likely to be the hallmarks of the Indian economy for the next several years. Employees in most sectors remain optimistic on their job prospects, which keeps consumer confidence quite robust. As a consequence of all of the above, we are about to enter a once in the lifetime of this country's transition where more than 100 million new households will become homeownership capable over the next 7 to 10 years. It goes to say that this level of home creation has never been seen in the free world ever. And this presents an opportunity of a size, which most of us cannot even contemplate at this stage. Our performance over the last 2 years has to be seen in this context. It is a long cycle likely to last several years and as India's largest housing developer with a focus on attracting and retaining the best talent in the industry and developing strong processes, we believe we are the best placed to catalyze on this long structural upcycle, which we see ahead of us.

Over the last 2 years, after our tepid listing, we saw a good recovery, 2 capital raises a primary and a secondary, significant debt repayment, strong cash flow generation, the acceleration of the process of winding down our U.K. exposure and good momentum and visibility in our progress. With these achievements behind us and the confidence of a rock solid balance sheet and a strong bright future ahead, we are in a position to reward our shareholders with a 1:1 bonus issue indicative of a strong balance sheet, and we are taking the first step on the path to consistent dividend payout reflective of good visibility on cash flows. Starting with INR 2 per share this year. Our aim will be to maintain this amount in absolute terms at worst and over time, we will endeavor to steadily increase the payout as our balance sheet continues to get fortified with strong cash flows. We would like the company to continue to provide consistent growth over the rest of the decade, with strong operating cash flow generation, strengthening the balance sheet every passing year and improving return metrics through our prudent capital allocation.

We continue to see strong momentum in potential deals available by the way of JDAs or joint developments and demand which is strong enough to keep utilizing our own existing land bank as well. There are 3 areas in particular that I would like you to take note of. Last year -- number one, last year, we had operating cash flow of about INR 5,660 crores. And after interest and taxes, we had capital available for growth investments as well as for rewarding our capital providers of INR 4,600 crores. Out of that INR 4,600 crores, we utilized INR 2,400 crores towards growth investments and INR 2,200 crores plus towards reducing of debt. This ability to both invest in growth as well as delever at the same time, we believe, is unique to LODHA in the Indian real estate space and that is driven by the significant size of our operations as well as our very strong efficiency in converting land to cash through operational excellence. The second factor that I'd like to highlight is the fact that in FY '23, our INR 12,000 crores of presales came from 33 contributing projects, which is set to further increase in fiscal '24.

This large number of operating projects means that we are not dependent on any one location or segment for our sales and our growth, which in turn provide granularity and predictability to our business. The third factor, which I'd like to highlight is the strength in our Townships business in which presales rose by about 16% from INR 1,900 crores to just under INR 2,300 crores in fiscal '23. With significant infrastructure projects, which have been long under construction now getting completed in fiscal '24 and fiscal '25, we believe that this attractive part of our business with strong underlying cash flows and margins is set for a comprehensive re-rating over the next few years. Adding all of this up, we see clear visibility of 20% growth in pre-sales for fiscal '24 and a nice path to INR 21,000 crores of pre-sales by fiscal '26 on the base -- on the back of significant growth headroom in our core markets of Mumbai and Pune which will be evident through continued business development momentum as well as new launches in these 2 markets. In addition, as you are aware, we are in our pilot phase in Bangalore, and we expect to have 2 launches in the course of fiscal '24 in Bangalore.

While the operating cash flow growth for fiscal '24 is a tad lower than the presales and collections growth that is because we also want to build up a strong annuity portfolio in the direction of having sustained cash flow in case of downward cycles. We are working towards net annuity income of INR 500 crores per annum by fiscal '26 and INR 1,500 crores per annum by the end of the decade through 3 strategies: our warehousing and industrial parks platform with Bain and Ivanhoé being #1. Second, our Facilities Management business serving our large residential base; and third, creation of a selective high-quality commercial asset portfolio.

And finally, on the much maligned 4-letter word called debt, we are now extremely comfortably -- comfortable with the capital structure of the company. We have missed the INR 6,000 crores debt target for fiscal '23 by 1,000 crores, having ended with INR 7,000 crores, but that is on the back of much larger business development i.e., INR 20,000 crores actual versus INR 15,000 crores of guidance and the decision not to sell certain high-quality commercial assets, both drivers of future growth and balance sheet strengthening.

In the current year, we not only intend to get our net debt below our stated ceiling, which is 1x operating cash and 0.5x equity. But in this year and in future years, we intend to continually aim to reduce debt below this ceiling with an endeavor to have the highest quality balance sheet. The underlying -- as an update on our U.K. business, we repatriated INR 550 crores in the course of the last 3 quarters, and we intend to expect to repatriate another INR 550 crores in the course of fiscal '24. With that, the entire repatriation from the U.K. will be complete and we will divest our equity ownership in the U.K. subsidiaries, in the U.K. companies and will have no longer have any international exposure. As we have stated in the past, Macrotech is solely committed to making all investments in India and growing strongly within this country.

As you are aware, on account of the accounting nuances, the P&L that we report is linked to the occupation certificates received in a given period. However, we are also, as you are aware, reporting the embedded EBITDA of sales done in each quarter, and we have also presented the pro forma P&L for this fiscal, which will give you a true picture of the underlying cash flow generation and profitability of our business. As I mentioned earlier, on the back of our strong operational excellence and our very efficient land to cash cycle, our ROEs are now touching 16% plus for fiscal '23, and we expect to be close to 20% by fiscal '24.

I will leave the details of project launches, growth, et cetera, for the Q&A session, but I would like to conclude my part by saying that we are in a strong momentum in residential as well as our annuity businesses. Price growth in the sector is optimal. We have got a further tailwind with peak of interest rates probably behind us. Costs are under control. Consolidation in the sector continues unabated. These flow and opportunities are massive enough for us to be selective. These signing and launches will happen with consistency and prudence and in a summation of all of the above.

I reiterate that we will have a strong balance sheet -- the strongest balance sheet that we've ever had and a consistent growth in sales and cash flows. Given that there have been questions on sales growth on the back of the increase in mortgage rates of over 200 basis points over the next -- over the last 12 months. We have our Chief Sales Officer, Prashant Bindal, to give you an update on the current environment as we continue to showcase our management bandwidth. And of course, our CFO, Sushil Modi, is also available to address any questions on the financials.

I now hand over to Prashant for a quick update on sales, and then Sushil, and then we will have Q&A after that. Thank you.

[Prashant Bindal, executive]

Good afternoon. In terms of the overall numbers, on the sales numbers, we were able to deliver a number of INR 11,500 crores -- INR 11,400 crores to be precise. And out of that, INR 11,400 crores was clearly driven by the fundamentals that we have been working on the ground. The 2 fundamentals have been, what is the number of customers that visit our sites and what is our conversion ratio. So in terms of number of walk-ins, we were able to take the numbers for the first time beyond 1 lakh mark. In fact, 115,000 customers visited our site in the year, in 33 sites and the conversion rate, which was almost a 16% increase in the swing over last year, and the conversion improved from 6.8% to 7.5%. So 7.5% conversion for the first time, we crossed a 7% mark. So eventually, almost an 11% -- 15% increase in the walk-in and 11% increase in the conversion and the balance increase coming from the price increase that we were able to take. So that led us to almost a 54% increase in the overall business.

And in terms of consistency -- and for the first time, more than 1,000 channel partners did booking for us, which is a landmark for any real estate company that more than 1,000 channel partners were able to do booking for us. In terms of the consistency of the business, we had a consistent flow that almost 33% of our business came from the ready-to-move-in business. Almost 32% of the business came from the under construction business and 32% of the business coming from the new launches. So extremely consistent business, whether from RTMI, non-RTMI and under construction and new launches. And I think this gives 33 projects and the projects and the business coming from ready-to-move-in, under construction and new launches almost consistent, gives a lot of consistency and predictability to the business.

In terms of new launches, we had some very good success across the segments, the biggest success, of course, was, as you would have read in the luxury segment within Lodha Malabar, we were able to grow INR 1,000 crore mark and the largest value deals happening in that segment. We also had very good launches in Pune. Pune where Hinjewadi and Kharadi the markets, we were able to do business in excess of INR 300 crores. So all the launches and in the affordable segment, we have had a consistent walk-ins and the business. So as far as the mortgage rates is concerned, yes, some change in the business movement has happened. Like earlier, the absolute entry segment of 1 BHK, that has been one segment that there has been an impact of the mortgage rate, but that has been shown by the shift of movement towards the higher segments in case of 2 BHK and 3 BHK. So this is the overall idea.

And we hope that in the coming years, we hope to have a similar consistency of business improving in terms of walk-ins. When we are looking at almost a -- we have given a guidance of 20% swing this year. We hope to have another 10% to 12% swing in the walk-ins and another 6% to 7% swing in the conversion, leading to a 20% growth. And also, we hope to maintain the same momentum of 30% to 35% business in ready to move in, 30% business in under construction and 30% business coming from new launches. So this is the basic thing. And any questions any -- are most welcome.

[Sushil Modi, executive]

Hi. This is Sushil Modi. So I think you all have heard around the business as a whole, how positively we are moving towards and have moved weathering last 2 years and the trajectory going forward continues to look even more optimistic vis-a-vis whatever we have seen in last 2 years, and this is what you should be expecting from LODHA moving forward, while the question on mortgage rates will always be there in everybody's mind, I know no point taken. But the fact is the reality of life in terms of demand for housing is so robust. Some of these perhaps are more -- would continue to be on the sidelines but as far as the right brand with the right commitment and the right quality product when it comes to all of that, I think these things are -- does not becomes of any paramount importance and which is what you heard from Prashant.

Be it any of the launches that we are doing more so into -- in particular micro markets where we were not there, and that is what was the basic hypothesis of our business in terms of growing, the growth strategy, that has played out pretty well. Just take Eastern Suburbs where we were completely missing, we have achieved sales of around INR 1,200 crores, which is -- effectively it becomes 10% of our total sales for a year. So it is Pune where we -- our delivery was more to the tune of around INR 250-odd crores. This year, we have achieved INR 1,200 crores there as well. So means as we continue penetrating with more and more projects and which is what we call our supermarket strategy to ensure that we bring our product into each and every neighborhood, right, to cater to the demand sitting there because we do consider this demand is pretty much nonmobile in -- to a reasonable extent, every neighborhood has a particular set of demand, which needs to be catered only by bringing in the product there.

Just to add on beyond what Abhishek and Prashant said, in terms of margins, as you would have noticed our EBITDA margin on the sales that we have achieved in the current year stood at around 32%. In the next year, as you would have noticed in our presentation for the next year, FY '24, we have indicated 30%, which is basically just a function of more and more newer projects coming in wherein the modalities of our raw material acquisition has been under the joint development arrangement route, where typically, the margin happens to be a bit lower. But nonetheless, this is our own estimates, we feel confident to deliver 30% handle of margin on an ongoing basis even as we -- as the JDA proportion in the overall mix continue to increase.

The dividend that you all have noticed, effectively endorses and suggests the kind of confidence we have in our -- not only just the top line but the cash flows, like the extent of the cash flow that we continue to see month after month, quarter after quarter, and while on the one hand, that cash flow enables us to continue reducing our debt, leave aside the threshold that we have set, which is -- which, in some sense, becomes more of a theoretical I know threshold or a cap. We continue to work towards going and creating far higher cushion, with the thresholds that we have set. And as we see that happening on an ongoing basis, we clearly saw a merit in commencing the dividend distribution and which is what you see this being the first year that we commenced this early.

With this, I will -- I would like to request you to open the Q&A.

[Operator]

[Operator Instructions] Our first question comes from the line of Murtuza Arsiwalla from Kotak Securities. [Operator Instructions]

[Murtuza Arsiwalla, analyst]

Yes, sorry. Just wonder in a sense, I know you talked about the annuity piece of the string. Any color, Sushil you could give us on what the management business looks like in terms of size and margins? And how big this could become?

[Sushil Modi, executive]

Murtuza, I presume your question relates to the facilities management business?

[Murtuza Arsiwalla, analyst]

Yes, the facilities management.

[Sushil Modi, executive]

Yes. The facilities management business, as you're aware, we manage for different periods of time, all the developments that we complete. We almost have now 60,000 units, which we have completed and handed over to customers. We are now also starting to see a trend that even when we hand over the management of the buildings to the individual societies, people are coming back and asking us to come back and do the -- and continue with the management because these are large complex buildings with systems which require a particular expertise and more importantly, our expertise in hospitality and the ability to add value beyond just the standard property management are all being valued by consumers. This business generates a net margin of about 10%. We expect that this business will scale up to net income of about INR 100 crores by fiscal '26. And we believe that along with the digital app that we have just started rolling out we will scale up to a much larger number by the end of the decade. It could be as large as INR 400 crores to INR 500 crores of net income by the end of the decade.

[Operator]

Our next question comes from the line of Pritesh Sheth from Motilal Oswal.

[Pritesh Sheth, analyst]

Congrats on a good FY '23 performance. Firstly, just on the inquiries and customer visits plus conversions that you highlighted how has been the trend on -- I mean, throughout the year, as in has Q4 on an average also clocked around 30,000 customer visits and conversions being at around 7.5% or is there some difference in terms of that quarterly trend as we moved on to the end of the year?

[Prashant Bindal, executive]

Thanks, Pritesh, actually, if you see our business, the hallmark has been the consistency across the quarter by quarter, the number of walk-ins and the conversion has been more or less the same. The average for the year is 7.5%. The shift could be 0.1% or 0.2% here or there, but the consistency in the walk-ins and the revenue has been almost similar across the 4 quarters. In fact, the surprising was the quarter 2 piece. Because generally the quarter 2 is the weakest link, but there also the walk-ins and the percentage were almost similar across all the quarters. Not much any differentiator -- and even across categories whether it was affordable or premium, the consistency was there almost all across.

[Pritesh Sheth, analyst]

Sure. Sure. That's helpful. And secondly, on the digital infra business I think apart from the signing of the platform this year, we haven't seen much traction. So is it like welding up for a very strong year this year? Or if you can highlight something on digital infra where we are?

[Abhishek Mangal Lodha, executive]

Pritesh, I'll just add a little bit more color to -- in terms of numbers to what Prashant just answered in terms of walk-in. Our approximate walk-ins for Q3 were 27,000. And for Q4, it was 31,000. So as you'd see, while it is broadly consistent from quarter-to-quarter, there was a modest pickup in the number of walk-ins in Q4. That's the data set. In terms of your questions on digital infrastructure, as you know, this is a platform which has been put together in the middle of last year around -- it started operating from the middle of the last -- fiscal '23, which -- along with Bain Capital, and Ivanhoé in Cambridge. And we expect a significant ramp-up in terms of the 2 projects which the platform already had, which is a 110-acre parcel in Palava, as well as in-city warehousing site in Kurla.

The platform is also now as the team has built up, we have the new CEO of the business. Mr. D.S. Rawat, who used to be CEO of Bharti Infratel for a long period of time. So with all of those things coming in, we expect the business to grow with higher -- at a higher level in the current fiscal. It's a -- overall it's business which has an investment period of 3.5 to 4 years, and then we expect it to be a mature business within 6 years from the start, i.e., from June '22 to June '28 is the overall period that we're looking at making these investments and scaling up the business sufficiently enough for it to be at a point where it can go to a REIT or a similar kind of an exit.

[Pritesh Sheth, analyst]

Sir, my question was apart from the platform where are the exit sales for the large netbacks that we have on that digital infra itself, right, I think that velocity in FY '22 was much better. We have seen good chunk of deals. But this year, it was kind of muted apart from the platforms that we had. So any comments on that?

[Abhishek Mangal Lodha, executive]

Yes. I mean, I think the land monetization piece that you're referring to -- I'm sorry, I did not understand your question with clarity earlier. The land monetization piece that you're referring to is something which happens for different kinds of activities from time to time. We've, of course, given the details in the quarterly presentation. And we expect to see the same level of monetization of about INR 500 crores per annum coming from the land side in the current fiscal too.

[Operator]

[Operator Instructions] Our next question comes from the line of Sameer Baisiwala from Morgan Stanley.

[Sameer Baisiwala, analyst]

My question is regarding the cash flows for fiscal '24. If you can just highlight what would be the construction spend and what would be the money that you need to spend for new project acquisition?

[Abhishek Mangal Lodha, executive]

Yes, Sameer, we are contemplating our construction expenditure to be in the order of around INR 4,500-odd crores for FY '24. And from a growth CapEx standpoint, the numbers would be somewhere around in totality, both the new projects as well as some of the projects that we have already signed up, but we'll be coming in the current year, all combined potentially INR 2,500 crores roundabout.

[Sameer Baisiwala, analyst]

Okay. Great. And if I then connect this with the OCF guidance of INR 60 billion for next year, that should leave at least INR 2,500 crores for your net debt reduction. Is that math correct? And that actually takes you much below your -- the ceiling targets that you have given.

[Abhishek Mangal Lodha, executive]

So Sameer, your math is definitely in the right direction. And yes, that is our endeavor, is to consistently reduce debt well below the ceiling and which is the reason why we are using that term of ceiling for the debt of 0.5x of equity and 1x of operating cash flow and we hope that we will be able to continuously go below that ceiling. As we saw last year, the growth opportunities are exciting, and yet we were able to reduce debt significantly and we will continue to walk down the same trajectory.

[Sameer Baisiwala, analyst]

Okay, sir. And one final from my side. And that is, what's the pricing outlook for fiscal '24. So I think, Prashant, what you mentioned, the footfall and the conversion imply that your total 20% growth is going to come from there and almost no price increase. So if you can just clarify on that.

[Prashant Bindal, executive]

No, no, no. Actually, if I -- as I said that if we are looking at about 30% increase in the value terms, so we expect 5% to 6% increase coming from the price and the balance 14% to 15% coming from the value from the footfalls as well as the conversion.

[Sameer Baisiwala, analyst]

Okay, okay, my bad, yes.

[Operator]

Our next question comes from the line of Parvez Qazi from Nuvama Group.

[Parvez Qazi, analyst]

So my question is on the township business piece, we have seen a nice jump that year. Some part of it obviously has come from the improvement in launches. But apart from that, what are the -- some of the steps that you would have taken, which would have resulted in this kind of growth? And what is our outlook on this segment going ahead?

[Abhishek Mangal Lodha, executive]

Parvez, the Township business is a core, I would say, strength of our larger business. This caters largely to the mid-income segment. We have, over the last 10 years, built a huge moat around this business in -- because of the large investments made, the quality of the infrastructure created as well as the hard and soft factors which compel people to see this as by far the best location to live in, when they're looking at mid-income housing in the MMR. In terms of the drivers of the move up in this last year, I would say that it was driven by the launches as well as by the fact that there is a good sense of demand in the mid-income segment. We also brought in some new categories, for example, for-sale offices as well as for-sale retail. We also started plotted development in a part of our Townships business, and all of this helped contribute to the sales. Going forward for fiscal '24, and I would even go on a limb to say fiscal '25 and '26, we see that this segment should outperform. Our Townships business should outperform on the back of some very important infrastructure projects, which are now getting completed.

Actually, this morning itself, I was at Upper Thane and saw the bridge, which is connecting now Upper Thane to the Dombivli railway station, which makes Upper Thane just 10 minutes away from Dombivli railway station. I saw the massive works which are progressing on the Mumbai-Nashik Highway, which will connect to the Nagpur superhighway which in turn will make Upper Thane very much the entry point into Mumbai for everybody who's using the Nagpur expressway. Similarly, I understand that the tunnel from Airoli to Palava is now almost ready and should be opening some time in the second half of this year. And there are the metro -- the tender for the metro works, which will have multiple stations in and around Palava for Metro Line 12 has also been released by the government authorities. So there is a very significant amount of infrastructure uplift now and in the coming years, which is we are going to see, and we expect to see about a 20% year-on-year growth in our townships business for the foreseeable future.

[Prashant Bindal, executive]

Just to add in terms of the parameters in township, we had 45,000 bookings happening in the township business which was almost a 13% swing in the number of walk-in. And for the first time, we touched 10% conversion in the township, which is very significant. So I think these 2 and we had a 5% -- 5.7% price increase leading to the overall business. So I think the overall fundamentals of the township business look very significant, and we look forward to -- a 10% conversion was a very significant change because we were -- this we were trying for many years, and we finally touched it this year.

[Operator]

Our next question comes from the line of Abhinav Sinha from Jefferies.

[Abhinav Sinha, analyst]

Firstly, on pricing bit again so we saw a slightly higher 8% increase this year as compared to 5%, 6% which were postings last quarter. So is there a delta among the geographies and what has driven this increase?

[Abhishek Mangal Lodha, executive]

So the price growth that we saw for the full year at about 8% was higher than our expectation and guidance for around 6%. We do feel that it is a healthy price growth because it is still below wage growth. At the same time, our target price growth for the coming year, as Prashant mentioned, will be in that 5% to 7% range, so that affordability keeps getting better. In terms of FY '23, where the price growth was strongest we saw good price growth in the ready segments in the ready-to-move-in inventory. We also saw good price growth in select projects which are in Pune as well as in the Eastern suburbs. So overall, it's not a particular segment. It's not a particular project driving that price growth it is broad based. Yes, you would have a range some cases would be like around 5% to 6%. Some cases, would be 9% to 10% and the overall blending at about 8%, but there's not a wide divergence that we are seeing.

[Abhinav Sinha, analyst]

Okay. And sir, secondly, on the sales guidance front, last year, you had given us some dense granularity on the various micro markets and geographies. So can you help us a bit among how much can we see from the suburbs and South Central, I also see Bangalore projects in pipeline this time. So when are we expecting that to be launched?

[Abhishek Mangal Lodha, executive]

We would prefer to give our guidance at the aggregate level, and that's what we had kept last year too. We are working towards 2 launches in Bangalore, one should happen in the next 3-odd months and the second in the second half of the year. Bangalore will contribute a modest amount to growth this year, probably in the range of INR 700 crores to INR 1,000 crores of sales from Bangalore. And the rest of the growth is expected, of course, to come from Mumbai and Pune. In terms of Pune market, you can definitely expect to cross INR 2,000 crores of sales. So out of our INR 14,500 crores, if you wanted to break it down at a city level, you would see INR 2,000 crores plus from Pune, about INR 700 crores to INR 1,000 crores from Bangalore and the rest of it, which is over INR 11,500 crores coming from Mumbai. I would like to point out that compared to fiscal '23, Mumbai was already quite strong, running at about INR 10,500 crores plus of sales. So if you look at each of the 3 buckets, the kind of sales growth that we are projecting and are guiding to is quite prudent and comes off a solid base of fiscal '23.

[Abhinav Sinha, analyst]

That's helpful. If I may ask a question to Prashant sir also since we have him on the call. Yes, sir so throughout last year, particularly later in the year, there was higher pricing as well as impact of higher mortgage rates. So did you see any impact in the product which is being demanded now by the customers?

[Prashant Bindal, executive]

You see what -- the impact that happened was that in the affordable segment, the shift was anyway moving from 1 BHK to 2 BHK and in the aspirational segment from 2 BHK to 3 BHKs. So that shift was very clearly evident because when the -- so this shift was either because of the consumer behavior shift or because of the mortgage raised rates. The number of walk-ins specifically for 1 BHKs in the affordable segment, that plumbed, that came down to some extent. And we believe that with the mortgage rates actually stabilizing in this year, the tailwinds, headwinds behind us, this is one segment, which we expect to grow this year.

[Operator]

Our next question comes from the line of Mohit Agrawal from IIFL.

[Mohit Agrawal, analyst]

My question is on completion. So in fiscal '23, you had 9.5 million square feet of completions and as per the presentation next 2 years, it's about 6 million to 7.5 million square feet per annum. So how should we look at this? And how should we look at the revenue recognition in the P&L. Could you guide a little bit on that?

[Prashant Bindal, executive]

So Mohit, now from a completion standpoint, yes, the data that you see is basically of the project that is going to be completed, but on the same seat, if you see, our revenue recognition even under the current accounting mechanism, which is on completion method comes out of few sources, one from completions as is but equally is what we already have the ready inventory incrementally, right? And then as we keep adding any new assets or the annuity assets that we have, if anything, on that side, the sales that takes place, be it equally coming from land, as you know. So all of those gets added to this revenue number that we recognize. So it's not just a number fully baked in basis only the completion, it is a culmination of few variables all taken together that comes in. But more importantly, perhaps, if I may add we are equally kind of visiting our accounting mechanics and trying figuring out is this the right and the sole method of doing the accounting. We are in discussion with our auditors too, where there is any other way to reflect the true fundamentals of the business and whether the completion method alone is the right method or can there be possibilities of doing accounting basis more as a percentage of completion method, which used to happen in the past. So yes -- but we don't have any conclusion as yet. We are discussing, figuring out. But nonetheless, as I said, revenue number, basically, the completion method will be a culmination of few variables and a few pillars.

[Mohit Agrawal, analyst]

Okay. Understood. So you could be -- so when -- by when we should have clarity around whether you could be shifting to a percentage completion or not?

[Prashant Bindal, executive]

Nothing at this point. I just said that this is something that we are grappling with and thereby we did not have a chance as yet to discuss in detail, but that is something that we would be perhaps commencing to understand. This is basically I'm saying so because this completion method do create confusions and which is where a question like what you just mentioned arise on -- at any given point of time.

[Mohit Agrawal, analyst]

Sure. Understood. And my second question, a data point. So on the land monetization piece in Palava in the digital infra segment, what is the per acre pricing that you're seeing? And has there been a pickup like we've seen a pick up in the pricing of projects has that been to pick up in the pricing in the last 1 year?

[Prashant Bindal, executive]

In fact, obviously, yes price is kind of showing an increasing trend on a quarter-on-quarter basis. We, in this quarter, though the quantum was not big, but the transaction that took place has kind of reached to around INR 6 crores per acre, though the volume was less. So yes, you are right quarter -- and it's pretty obvious, right? Because the more and more mass is getting created. Now this year, we will see a lot many things commencing operation there, the -- one of the land that we have sold to Flyjac Logistics they are in the advanced stage of completion of their parks and thereby, their tenant move in. On our park, we clearly -- the Skechhers, as you recall, has taken into the -- has come in there, and that is going to become operational in this financial year. So thereby, numerous activities that are now going to get commenced and start are going to obviously keep boosting these price points. So -- and price points for us not only at this side, but equally, the demand and the price point for our residential business.

[Operator]

Our next question comes from the line of Prem Khurana from Anand Rathi Shares and Stock Brokers.

[Prem Khurana, analyst]

I have two questions. So one was so essentially when I look at KPIs and the guidance that we've given for next year, we see good growth in terms of presales and I think even in terms of construction spend the number that you gave us over the course of the call seems to be pretty increasing, but for some reason our OCF I mean is at around -- what we are guiding for next year is around INR 6,000 versus INR 5,000, I mean when I look at collections obviously it will function of 2 things so one what you sell during the year, and you would also be able to have milestones receipts from what you sold in the earlier years right? And you've been growing. So ideally I mean even our milestone payment should be higher. So why is this disconnect between the kind of growth that we're seeing in sales and ideally which should translate into similar sort of growth in collections and then in construction. Why this insignificant growth in OCF. Are we missing something there?

[Abhishek Mangal Lodha, executive]

So the question of the OCF growth being a lower percentage compared to the growth in presales or even in terms of overall cash flows it is called out on Slide 25 of our presentation. You can perhaps also take a look at that later. But to summarize what we've stated over there, that's driven by 2 factors. One is a strategic decision to own and not sell certain high-quality annuity assets which tend to release significant amount of free cash flow because they are fully ready and 100%, therefore, generating cash flow and -- operating cash flow. And the second part is that as we go forward, while the quantum of our ready to move in sales will remain the same or slightly go up, in percentage terms the quantum of ready-to-move in, the ready product sales will go down because a lot more sales are coming from new launches and under construction. And therefore, as a percentage, the ready-to-move-in units tend to release a much higher OCF. So a combination of those 2 factors is leading to this onetime I would say, readjustment, of the OCF as a proportion of presales. And I think we should be back to a more linear equation for -- in subsequent years.

[Prem Khurana, analyst]

Sure. And second question was on sort of the project additions that was done during the year almost around INR 20,000-odd crore, and we feel the spent out almost now INR 17,000-odd crores for these new additions, I'm assuming I mean there are some more pending trials yet to go but if I will consider INR 17,000 it works out to be almost around 8.5% of what we have been able to add in terms of GDV. So is there -- I mean, is there a number that you were working with or it is lower than our expectation or higher than our expectation? What ideally this number should be and given the fact that we're focusing more on rate here, inventory and capital intensity ideally should be on a lower side.

[Prashant Bindal, executive]

So the way we think about business development and business development guidance is to add sufficient land in your N minus 1 which is equal to the sales that we are targeting for your end so by looking at our business development guidance for any year, you can actually extrapolate the sales guidance that we are likely to have in the subsequent year. As you may have noted last year, we gave business development guidance for about INR 15,000 crores. And we are now as you see, our sales guidance for fiscal '24 is at about INR 14,500 crores. Logically, the reason for choosing or targeting at least INR 17,500 crore, we might do higher than that, but at least INR 7,500 crores of business development in fiscal '24 is that we are likely to have sales guidance for fiscal '25, which is compounding at 20% from what we achieve in fiscal '24. So that would be in that range of that INR 17,000 crore, INR 17,500 crore neighborhood. And that's the way in which we think about business development is to add sufficient land in a given year, which is equal to the likely sales in the subsequent year.

[Prem Khurana, analyst]

Sure. And on the cost side, I mean, the number would remain somewhat similar, I mean 8%, 10% of the GDV that we had or...?

[Prashant Bindal, executive]

Yes. So typically, our JDA projects tend to have investments, which is between 5% to 10% of the GDV. And the outright lands tend to have investment, which is closer to 20% of the GDV. So as Sushil mentioned, the total investment that we envisage this year into land is about INR 2,500 crores, which includes all the new land plus any partnership or whatever land we've taken on the JDA in the past years. So we do expect that the ratios for JDAs will remain in that 5% to 10% range and the ratio outright will remain in that close to 20% range.

[Operator]

Our next question comes from the line of Kunal Lakhan from CLSA.

[Kunal Lakhan, analyst]

Abhishek, on your comments, you mentioned that the guidance for EBITDA margin or outlook on EBITDA margin, the EBITDA margin would be about 30% and this will be despite the new projects contributing. I just want to understand because we have been saying that the new projects usually have a 18% as PBT margin, right? So just trying to reconcile I would say, the declining interest costs, the PBT margin should be closer to the EBITDA margin. And so trying to -- and as and when the contribution from JDA projects increase, how comfortable or how -- what will drive this 30% EBITDA margin?

[Abhishek Mangal Lodha, executive]

Kunal. The question is an important one. I think a few things are at play over year. We, of course, underwrite our JDAs at between 18% to 20% PBT margin. In terms of the transition from EBITDA -- from PBT to EBITDA at the current levels of debt or at least what we were underwriting when we took the projects, that's an addition of between 7% to 10%. So typically, the equivalent EBITDA margin will be in the high 20s for a JDA project, and it will be in the sort of high 30s for an outright project. So if you even were to take, say, 25%, 26% for JDAs, and 33% to 35% for outright. You will see that with our target mix of 60% from outright lands and 40% from JDAs, we feel pretty comfortable of blending it at 30% or thereabouts. Actually, our margins for last fiscal are at 32%. And the reason for our muted guidance on the underlying EBITDA margin to 30% is exactly on account of the fact that the contribution JDA projects is likely to be higher this year in fiscal '24 than it was in fiscal '23. And therefore, that downward adjustment of approximately 200 basis points on the embedded EBITDA margin side.

[Kunal Lakhan, analyst]

Sure. That's helpful. Just to follow up on that, if you can share what is the contribution of JDA projects in fiscal '23, and what are you building that in '24?

[Abhishek Mangal Lodha, executive]

FY '23, the contribution from JDAs as a percentage of sales was in the -- was about 26%, 27%. And we expect that number to move up to about -- around 40% for -- or thereabouts for fiscal '24.

[Operator]

Our next question comes from the line of Sameer Baisiwala from Morgan Stanley.

[Sameer Baisiwala, analyst]

Quick question on One Lodha Place, how is the leasing momentum over there?

[Abhishek Mangal Lodha, executive]

Sameer, except for the fact that you all chose to go somewhere else, the momentum is generally good. So we are seeing some very high-quality businesses operate from there. We already have Condé Nast operating from there. We have Gucci, which is starting operations soon. We have Saint Laurent which is operating soon. We have a few law firms as well as financial services firm operating for that. So generally, that building is seen as amongst the best, if not the very best office building in the city, and we are getting a high quality of tenants10x.

[Sameer Baisiwala, analyst]

I think in Q4, the leasing was 0.1 million square feet, if that's right out of 1.75 million, so roughly about 12%, 13%. So how much time you think this will take to get fully leased?

[Abhishek Mangal Lodha, executive]

We expect to be, I would say, at high -- very high levels of lease out by the end of the current fiscal whether that will be at 85% or 90% or 95% that time will tell, but we'll be at fairly close to our steady-state number by the end of this fiscal.

[Sameer Baisiwala, analyst]

Okay. Okay. And second question is on South Central Mumbai. Just what's the outlook over here? Do you think it's a little oversupplied based on all the announced projects, et cetera, do you think there's enough and more demand there? And second is, how is your Mahalaxmi launch going the Solitaire project?

[Abhishek Mangal Lodha, executive]

So Sameer, I think while all of us and a lot of people on this call -- because we either have living or have offices in South Central Mumbai, we do sort of set in to believe see significant supply when the announcements are made. The reality is that in South Mumbai, which is sort of the area south of Haji Ali actually, it's very, very undersupplied or supply staff, especially of good quality development. So South Mumbai truly has little -- limited, very little supply, and it stuff comes up from time to time, but it's not huge. Central Mumbai, there is, again, a few announcements. There are some office announcements, a couple of residential announcements. And we do still like the fact that our project locations as well as our product quality tends to have a very strong followership in this market. The Solitaire launch has started off well, and we continue to believe that we, as the market leaders in Central South and Central Mumbai will continue to have, I would say, good demand for our product.

[Sameer Baisiwala, analyst]

Okay. I guess Abhishek I was referring to Haji Ali to Siddhivinayak, if that's the right way to demarket it. I mean, is this area you think still has enough and more demand. And if you see south of Hinjewadi, then do you think you have enough BD opportunities over there?

[Abhishek Mangal Lodha, executive]

South of Hinjewadi, yes, BD opportunities are continuing because it's very clear, right, when the brand is as strong as ours is in this area, both whoever land, society, whatever, redevelopment, they would like to partner with the best. And so I think we do have decent opportunity to continue to serve that market. I think. In terms of your question of between Haji Ali to Siddhivinayak. I haven't -- we've seen a couple from one of the other listed peers but other than that, it's not -- there isn't anything significant. So I think -- and these projects between acquisition to start, especially if they involve redevelopment or -- do take some time. So we feel -- we continue to remain constructive on this segment. No current concerns in terms of oversupply.

[Operator]

Our next question comes from the line of Pritesh Sheth from Motilal Oswal.

[Pritesh Sheth, analyst]

Just a couple of points. In terms of business development or project addition since last 2 years, I think eastern suburbs, Pune and preferably South Central Mumbai as well we have done a building, while western suburbs there were, I think, 2, 3 project additions how do you see the traction there? I mean considering that market is largely a redevelopment market how is the opportunity there beyond redevelopment that you see? Should we expect some good additions this year in this market as well? Yes.

[Abhishek Mangal Lodha, executive]

Pritesh the Western suburbs is a market where we see room to penetrate further and deeper and you can expect some positive movement to new business development in the Western Suburbs in the course of this year.

[Pritesh Sheth, analyst]

We -- have we been keen to do some society development in this market to capture the market share or we don't have to necessarily get into society development to gain market share in that?

[Abhishek Mangal Lodha, executive]

See, we are agnostic when it comes to the form of how the land is as long as we have vacant land and clear title so quite frankly, whether society redevelopment with someone has already brought to a particular point of maturity, we are okay with that. If there is a vacant land, that's fine. If someone has a slum project, we still cleaned up and there is the pre-sale portion is free. That's also fine with us. So our focus is on -- as I had mentioned earlier in a different context, is on a shortest possible land to cash cycle. And for that, the right raw material, i.e., land, which is clean and buildable in a reasonably good time frame is very important for us.

[Pritesh Sheth, analyst]

Sure, sure, that's very helpful. And just last clarification. On Bangalore, the 2 launches that you are pointing out is 2 phases of same project, right? Or are we also in sight to acquire another project in Bangalore?

[Abhishek Mangal Lodha, executive]

Yes, so we're guiding to 2 launches at 2 different locations. One launch will be of course at the land, which we've already done a joint development for. And we expect in the course of this year that we will at least do 1 more project. So that are the 2 launches that we are guiding.

[Operator]

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would now like to hand the conference over to Mr. Anand Kumar, Head of Investor Relations, for closing comments.

[Anand Kumar, executive]

Thank you, everyone, for joining the call. We remain quite positive on the industry and with the strong growth drivers present in the industry. We remain confident of achieving our medium-term guidance of 20% CAGR in sales as well as 20% ROE. Feel free to reach out to me or Sushil or the IR team for any further questions. Thank you.

[Operator]

Thank you. On behalf of Antique Stockbroking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.