Viewpoint

Macrotech Developers Ltd

Strong Q2 barring deleveraging & repatriation
Powered by the Sharekhan 3R Research Philosophy Real Estate Sharekhan code: LODHA

3R MATRIX + = -
Reco/View: Positive  CMP: Rs. 993 Upside potential: 36-38% 

Company Update
Right Sector (RS) ü á Upgrade  Maintain â Downgrade

Right Quality (RQ) ü Summary

Š Lodha continued to report strong pre-sales booking of Rs. 3148 crores for Q2FY2023, up 57% y-o-y
Right Valuation (RV) ü in a seasonally weak period. H1 pre-sales were up 101% y-o-y at Rs. 5962 crore, which is 52% of its
FY2023 target.
+ Positive = Neutral – Negative
Š The new project additions remained strong with GDV addition of Rs. 3100 crore for Q1FY2023 taking
GDV additions to Rs. 9300 crore for H1FY2023, which is 62% of its FY2023 target.
Š Net debt reduction was marginal at Rs. 60 crore for Q2. It would need Rs. 2800 crore reduction in H2
What has changed in 3R MATRIX to achieve Rs. 6000 crore net debt by FY2023 end. Repatriation of UK projects were muted although
obligations get paid up ahead of schedule.
Old New Š We stay positive on Macrotech Developers and expect a 36-38% upside given strong growth levers
for its residential portfolio and favourable risk-reward ratio.
RS 
Macrotech Developers (Lodha) reported strong pre-sales of Rs. 3148 crore (up 57% y-o-y, up 12% q-o-q)
RQ  for Q2FY2023. The H1FY2023 pre-sales stood at Rs. 5962 crore (up 101% y-o-y) which is 52% of its
pre-sales target of Rs. 11500 crore for FY2023. Strong pre-sales booking for Q2FY2023 was despite
RV  the period being seasonally weak due to monsoon and an inauspicious period (Pitrupaksh/Shraadh).
Hence, collections were lower by 9% q-o-q at Rs. 2375 crore. The new project additions continued with
GDV addition of Rs. 3100 crore during Q2FY2023 taking GDV additions of Rs. 9300 crore for H1FY2023
(62% of full year guidance of Rs. 15000 crore. However, it lagged in terms of net debt reduction, which
was just Rs. 60 crore to Rs. 8796 crore. Consequently, it would need to reduce almost Rs. 2800 crore
Company details net debt reduction during H2FY2023. The repatriation of money from UK investments were just Rs. 100
crore during Q2FY2023 due to the weak UK economic environment. However, the company maintained
Market cap: Rs. 47,820 cr additional repatriation of Rs. 1000 crore in CY2023.
Š Pre-sales booking remained strong despite a seasonally weak quarter: The company continued its
52-week high/low: Rs. 1,539/815 strong performance in terms of pre-sales for Q2FY2023 with Rs. 3148 crore (up 57%/12% y-o-y/q-o-q)
pre-sales recorded during Q2FY2023. The strong pre-sales booking during Q2FY2023 was despite
NSE volume:
4.5 lakh it being a seasonally weak quarter of the year due to monsoon and inauspicious period (Pitrupaksh/
(No of shares) Shraadh). Further, rising home loan rates and increase in sales prices have not affected the underlying
housing demand for the company as underscored by its pre-sales booking for H1FY2023 (Rs. 5962
BSE code: 543287 crore, up 101% y-o-y). Hence, it has been able to achieve 52% of its yearly guidance of Rs. 11500 crore
during H1FY2023, which tends to be ~40-45% of full-year sales. However, collections during Q2FY2023
NSE code: LODHA
were lower by 9% q-o-q (up 24% y-o-y) at Rs. 2375 crore affected by seasonality.
Free float: Š New project additions continued: The company added four new projects having ~2.2msf of the
8.6 cr saleable area with GDV of ~Rs. 3100 crore across various micro-markets of MMR and Pune. The same
(No of shares)
leads to addition of seven new project additions having ~7.3msf of the saleable area with GDV of ~Rs.
9300 crore during H1FY2023. Consequently, it achieved 62% of its full-year guidance of Rs. 15000
crore of GDV addition for FY2023.
Š Net debt reduction and London repatriations lagged: In its UK investments, the company pre-paid
Shareholding (%) a balance $ 55mn in September 2022, fully repaying $225mn bonds six months ahead of schedule.
Consequently, there is no further obligation on Lodha’s balance sheet with respect to the London
Promoters 82.2 investments. The company repatriated ~Rs. 100 crore from UK to India during Q2FY2023 and expects
additional repatriation of ~Rs. 1000 crore in CY2023. The company was able to reduce its net debt
FII 14.5 marginally by Rs. 60 crore q-o-q to Rs. 8796 crore. It would have to pare net debt by almost Rs. 2800
crore during H2FY2023 in order to achieve its net debt target of Rs. 6000 crore by FY2023 end.
DII 1.9
Our Call
Others 1.4 Valuation – Stay Positive; expect 36-38% upside: Macrotech continues to be on track on achieving its
pre-sales and new project additions targets for FY2023 despite the continued rise in home loan rates and
increase in property prices. Further, the recent media articles suggest towards possibility of stamp duty
reduction on Property by the Maharashtra government which if implemented can provide a strong fillip
to pre-sales booking going ahead. However, repatriation of London investments and net debt reduction
Price chart need to be keenly monitored over the next one to two years. Additionally, rising home loan rates remain
a key headwind for the sector. Lodha’s leadership positioning in the Mumbai Metropolitan Region (MMR)
1,600
and an eye on newer geographies such as Pune and Bengaluru provide a distinct advantage in the sector.
1,400 Lodha has underperformed its listed peers providing a favourable risk-reward ratio to investors. Hence,
we retain a positive view of the stock and expect a potential upside of 36-38%.
1,200 Key Risks
1,000 Slowdown in real estate demand especially in MMR and Pune is a key risk to our call. Unfavorable macro-
economic indicators like a rise in interest rates can dampen demand.
800
Valuation (Consolidated) Rs cr
Oct-21

Oct-22
Jun-22
Feb-22

Particulars FY21 FY22 FY23E FY24E

Revenue 5449 9233 10356 12407
OPM (%) 25.2 23.0 23.0 24.0
Adjusted PAT 503 1202 1603 2163
Price performance % YoY growth -30.9 139.1 33.3 34.9

(%) 1m 3m 6m 12m Adjusted EPS (Rs.) 10.4 25.0 33.3 44.9

P/E (x) 95.1 39.8 29.8 22.1
Absolute -10.4 -10.1 -14.7 -11.6 P/B (x) 9.6 3.8 3.4 2.9
Relative to EV/EBITDA (x) 42.3 27.3 24.4 19.5
-9.1 -17.6 -13.4 -9.2
Sensex RoNW (%) 11.0 14.4 12.4 14.6
Sharekhan Research, Bloomberg RoCE (%) 5.9 8.1 8.6 11.1
Source: Company; Sharekhan estimates

October 06, 2022 1

 Viewpoint
Powered by the Sharekhan
3R Research Philosophy

Strong pre-sales in seasonally weak Q2

The company continued its strong performance in terms of pre-sales for Q2FY2023 with Rs. 3148 crore pre-
sales recorded during Q2FY2023, which was up 57% y-o-y and 12% q-o-q. Its H1FY2023 sales stood at Rs. 5962
crore, which was up 101% y-o-y. The company was able to achieve strong pre-sales booking during Q2FY2023
despite it being a seasonally weak quarter of the year due to monsoon and inauspicious period (Pitrupaksh/
Shraadh). Further, rising home loan rates and increase in sales prices have not affected the underlying housing
demand for the company as underscored by its pre-sales booking for H1FY2023. Hence, it has been able to
achieve 52% of its yearly guidance of Rs. 11500 crore during H1FY2023, which tends to be ~40-45% of full-
year sales. However, collections during Q2FY2023 were lower by 9% q-o-q (up 24% y-o-y) at Rs. 2375 crore.
The sequential dip in collections is attributable to seasonal factors such as lower construction activity during
monsoon and deferral of registrations during the 15-day inauspicious period (Pitrupaksh/Shraadh).

Pre-sales quarterly trend Quarterly trend in collections

4,000 3,000 2,843
3,456 2,616
3,500 3,148 2,375
2,500
2,814 2,089 2,127
3,000 2,608
2,531 1,912
2,000 1,714
2,500
2,003 1,472
1,862
2,000 1,500
1,107
1,500 1,066 957 1,000
1,000
509 384
500
500
0 0
Q1FY21

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q1FY23

Q2FY23

Q1FY21

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q1FY23

Q2FY23
Pre-Sales (Rs cr) Collections (R s cr)

Source: Company, Sharekhan Research Source: Company, Sharekhan Research

Strong BD additions; net debt marginally down

The company added four new projects having ~2.2msf of saleable area with GDV of ~Rs. 3100 crore across
various micro-markets of MMR and Pune. The same leads to addition of seven new project additions having
~7.3msf of saleable area with GDV of ~Rs. 9300 crore during H1FY2023. Consequently, it achieved 62% of
its full year guidance of Rs. 15000 crore of GDV addition for FY2023. In its UK investments, the company
pre-paid balance $ 55mn in September 2022, fully repaying $225mn bonds six months ahead of schedule.
Consequently, there is no further obligation on Lodha’s balance sheet with respect to the London investments.
The company repatriated ~Rs. 100 crore from UK to India during Q2FY2023 and expects additional repatriation
of ~Rs. 1000 crore in CY2023. The company was able to reduce its net debt marginally by Rs. 60 crore q-o-q
to Rs. 8796 crore. It would have to pare net debt by almost Rs. 2800 crore during H2FY2023 in order to
achieve its net debt target of Rs. 6000 crore by FY2023 end.

India Net Debt Quarterly trend

18,000 16,625 16,075
15,000
12,435 12,477
12,000 9,896 9,310 8,856 8,796
9,000

6,000

3,000

0
Q3FY21 Q4FY21 Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23
India net debt (Rs cr)
Source: Company, Sharekhan Research

October 06, 2022 2

 Viewpoint
Powered by the Sharekhan
3R Research Philosophy

Financials in charts

Sales Trend Gross collections Trend

10,000 8.00 9.0 10,000 9,065
7.40 8,564 8,597
8.0 8,190
8,000 6.37 6.18 7.0 8,000

5.10 6.0
6,000 6,000
5.0 5,052

4.0
4,000 4,000
3.0

2,000 2.0
2,000
8,130

7,163

6,570

5,968

9,024
1.0
0 0.0 0
FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22
Sales (Rs cr) Sales (msf) Gross coll ections (Rs cr)

Source: Company, Sharekhan Research Source: Company, Sharekhan Research

Completion Trend Revenue Trend

18 14,000
15.65 12,443 12,407

15 13.75 12,000
10,356
10,000 9,233
12
8,000
9
5,449
6.39 6,000
5.30
6
4,000
2.70
3 2,000

0 0
FY18 FY19 FY20 FY21 FY22 FY20 FY21 FY22 FY23E FY24E

Completed Developabl e Area (msf) Revenues (Rs cr)

Source: Company, Sharekhan Research Source: Company, Sharekhan Research

OPM Trend Net Profit Trend

30 2,500
25.18 2,163
24.00
25 23.01 23.00
2,000
1,603
20
15.33 1,500
1,202
15
1,000
727
10
503
500
5

0 0
FY20 FY21 FY22 FY23E FY24E FY20 FY21 FY22 FY23E FY24E

OPM (%) Adjusted PAT (Rs cr)

Source: Company, Sharekhan Research Source: Company, Sharekhan Research

October 06, 2022 3

 Viewpoint
Powered by the Sharekhan
3R Research Philosophy

Outlook and Valuation

n Sector View – Residential market on a growth trajectory

The real estate sector, especially the residential realty market, is expected to be in the limelight going ahead,
as it benefits from central and state governments’ favourable policies pertaining to the affordable housing
segment. Rising income levels and affordability levels are expected to drive sales for quality, organised
developers. Further, organised players are expected to benefit from ample inorganic opportunities in the
sector, which is leading to consolidation in the sector. The sector is also expected to benefit from low interest
rates, which provides the twin benefits in driving demand and lower funding costs. Overall, we are positive on
the residential segment of the real estate market for the reasons mentioned above.

n Company Outlook – Reaping benefits of scale as industry consolidates

Macrotech Developers (Lodha) has outpaced peers in terms of sales from FY2014 to FY2021 positioning itself in
the league of large residential property developers. The company has also been the second-largest in terms
of deliveries, showcasing strong execution capabilities on a larger scale. The company enjoys leadership
positioning in the lucrative MMR market. The management retained pre-sales guidance of Rs. 11,500 crore for
FY2023, a growth of 25% y-o-y. For sale projects would contribute Rs. 10,500 crore and a balance Rs. 1000
crore from sale of non-core assets, digital infrastructure etc. Net debt is expected to tread below Rs. 6000 crore
in FY2023 from Rs. 9300 crore in FY2022. The JDA target is Rs. 15,000 crores for FY2023. Over 3-5 years, it is
targeting pre-sales growth of 20% p.a. It targets debt to be not more than one-year operating cash flows.

n Valuation – Retain Positive view and upside potential of 36-38%

Macrotech continues to be on track on achieving its pre-sales and new project additions targets for FY2023
despite the continued rise in home loan rates and increase in property prices. Further, the recent media articles
suggest towards possibility of stamp duty reduction on Property by the Maharashtra government which if
implemented can provide a strong fillip to pre-sales booking going ahead. However, repatriation of London
investments and net debt reduction need to be keenly monitored over the next one to two years. Additionally,
rising home loan rates remain a key headwind for the sector. Lodha’s leadership positioning in the Mumbai
Metropolitan Region (MMR) and an eye on newer geographies such as Pune and Bengaluru provide a distinct
advantage in the sector. Lodha has underperformed its listed peers providing favourable risk-reward ratios to
investors. Hence, we retain a positive view of the stock and expect a potential upside of 36-38%.

Peer Comparison
P/E (x) EV/EBITDA (x) P/BV (x) RoE (%)
Particulars
FY23E FY24E FY23E FY24E FY23E FY24E FY23E FY24E
Macrotech Developers 29.8 22.1 24.4 19.5 3.4 2.9 12.4 14.6
Oberoi Realty 28.1 17.7 20.4 13.1 2.9 2.5 11.1 15.6
DLF 47.5 42.6 39.7 35.1 2.4 2.3 5.2 5.5
Prestige Estates 41.0 33.5 11.8 10.4 2.0 1.9 4.9 5.8
Source: Sharekhan Research

October 06, 2022 4

 Viewpoint
Powered by the Sharekhan
3R Research Philosophy

About company
Lodha Group is among the largest real estate developer in India that delivers with scale since 1980s. The core
business of Lodha Group is residential real estate development with a focus on affordable and mid-income
housing. The group also has a growing industrial & logistics park business. Lodha Group has delivered more
than 81 million square feet of real estate and is currently developing ~93 million square feet under its ongoing
and planned portfolio. The Group has more than 4,400 acres of land beyond its ongoing and planned portfolio
which will be utilized in developing further Residential, Commercial and Industrial & Logistics spaces.

Investment theme
Lodha enjoys leadership positioning in the lucrative MMR region which has been recently showing strong
traction in residential sales which are expected to sustain going ahead. The industry consolidation is expected
to benefit the company owing to its scale of operations. The company is one of the leading players in both
sales and deliveries highlighting its in-house capabilities. The company’s large land reserves provide long-
term sustainable growth visibility. The company’s balance sheet is expected to improve materially led by
strong cashflows expected from residential projects.

Key Risks
Š A slowdown in the macro-economic environment percolating to the real estate sector slowdown.
Š A delay in execution, inability to maintain sales, rising interest rates, and rising commodity prices.

Additional Data
Key management personnel
Mr. Mukund Chitale Independent Director and Chairman
Mr. Abhishek Lodha Managing Director and CEO
Mr. Sushil Kumar Modi Chief Financial Officer
Source: Company Website

Top 10 shareholders
Sr. No. Holder Name Holding (%)
1 Sambhavnath Infrabuild 30.56
2 Sambhavnath trust 28.74
3 Hightown Cons Pvt 24.50
4 Homecraft Dev N Farms 4.70
5 Ivanhoe Op India Inc 1.57
6 Capital Group Cos Inc 0.65
7 Nippon Life India AMC 0.42
8 Nomura Holdings Inc 0.17
9 LivfoersaekringsABet Skandia Publ 0.10
10 Manulife Financial Corp 0.10
Source: Bloomberg

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

October 06, 2022 5

Understanding the Sharekhan 3R Matrix
Right Sector
Positive Strong industry fundamentals (favorable demand-supply scenario, consistent
industry growth), increasing investments, higher entry barrier, and favorable
government policies
Neutral Stagnancy in the industry growth due to macro factors and lower incremental
investments by Government/private companies
Negative Unable to recover from low in the stable economic environment, adverse
government policies affecting the business fundamentals and global challenges
(currency headwinds and unfavorable policies implemented by global industrial
institutions) and any significant increase in commodity prices affecting profitability.
Right Quality
Positive Sector leader, Strong management bandwidth, Strong financial track-record,
Healthy Balance sheet/cash flows, differentiated product/service portfolio and
Good corporate governance.
Neutral Macro slowdown affecting near term growth profile, Untoward events such as
natural calamities resulting in near term uncertainty, Company specific events
such as factory shutdown, lack of positive triggers/events in near term, raw
material price movement turning unfavourable
Negative Weakening growth trend led by led by external/internal factors, reshuffling of
key management personal, questionable corporate governance, high commodity
prices/weak realisation environment resulting in margin pressure and detoriating
balance sheet
Right Valuation
Positive Strong earnings growth expectation and improving return ratios but valuations
are trading at discount to industry leaders/historical average multiples, Expansion
in valuation multiple due to expected outperformance amongst its peers and
Industry up-cycle with conducive business environment.
Neutral Trading at par to historical valuations and having limited scope of expansion in
valuation multiples.
Negative Trading at premium valuations but earnings outlook are weak; Emergence of
roadblocks such as corporate governance issue, adverse government policies
and bleak global macro environment etc warranting for lower than historical
valuation multiple.
Source: Sharekhan Research
 Know more about our products and services

For Private Circulation only

Disclaimer: This document has been prepared by Sharekhan Ltd. (SHAREKHAN) and is intended for use only by the person or entity
to which it is addressed to. This Document may contain confidential and/or privileged material and is not for any type of circulation
and any review, retransmission, or any other use is strictly prohibited. This Document is subject to changes without prior notice.
This document does not constitute an offer to sell or solicitation for the purchase or sale of any financial instrument or as an official
confirmation of any transaction. Though disseminated to all customers who are due to receive the same, not all customers may
receive this report at the same time. SHAREKHAN will not treat recipients as customers by virtue of their receiving this report.
The information contained herein is obtained from publicly available data or other sources believed to be reliable and SHAREKHAN
has not independently verified the accuracy and completeness of the said data and hence it should not be relied upon as such. While
we would endeavour to update the information herein on reasonable basis, SHAREKHAN, its subsidiaries and associated companies,
their directors and employees (“SHAREKHAN and affiliates”) are under no obligation to update or keep the information current. Also,
there may be regulatory, compliance, or other reasons that may prevent SHAREKHAN and affiliates from doing so. This document is
prepared for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Recipients
of this report should also be aware that past performance is not necessarily a guide to future performance and value of investments
can go down as well. The user assumes the entire risk of any use made of this information. Each recipient of this document should
make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies
referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and
risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. We do not undertake to
advise you as to any change of our views. Affiliates of Sharekhan may have issued other reports that are inconsistent with and reach
different conclusions from the information presented in this report.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any
locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation
or which would subject SHAREKHAN and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession
this document may come are required to inform themselves of and to observe such restriction.
The analyst certifies that the analyst has not dealt or traded directly or indirectly in securities of the company and that all of the
views expressed in this document accurately reflect his or her personal views about the subject company or companies and its or
their securities and do not necessarily reflect those of SHAREKHAN. The analyst further certifies that neither he or its associates
or his relatives has any direct or indirect financial interest nor have actual or beneficial ownership of 1% or more in the securities of
the company at the end of the month immediately preceding the date of publication of the research report nor have any material
conflict of interest nor has served as officer, director or employee or engaged in market making activity of the company. Further, the
analyst has also not been a part of the team which has managed or co-managed the public offerings of the company and no part
of the analyst’s compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this
document. Sharekhan Limited or its associates or analysts have not received any compensation for investment banking, merchant
banking, brokerage services or any compensation or other benefits from the subject company or from third party in the past twelve
months in connection with the research report.
Either SHAREKHAN or its affiliates or its directors or employees / representatives / clients or their relatives may have position(s), make
market, act as principal or engage in transactions of purchase or sell of securities, from time to time or may be materially interested
in any of the securities or related securities referred to in this report and they may have used the information set forth herein before
publication. SHAREKHAN may from time to time solicit from, or perform investment banking, or other services for, any company
mentioned herein. Without limiting any of the foregoing, in no event shall SHAREKHAN, any of its affiliates or any third party involved
in, or related to, computing or compiling the information have any liability for any damages of any kind.

Compliance Officer: Ms. Binkle Oza; Tel: 022-61150000; email id: compliance@sharekhan.com;
For any queries or grievances kindly email igc@sharekhan.com or contact: myaccount@sharekhan.com

Registered Office: Sharekhan Limited, The Ruby, 18th Floor, 29 Senapati Bapat Marg, Dadar (West), Mumbai – 400 028,
Maharashtra, INDIA, Tel: 022 - 67502000/ Fax: 022 - 24327343. Sharekhan Ltd.: SEBI Regn. Nos.: BSE / NSE / MSEI (CASH /
F&O / CD) / MCX - Commodity: INZ000171337; DP: NSDL/CDSL-IN-DP-365-2018; PMS: INP000005786; Mutual Fund: ARN 20669;
Research Analyst: INH000006183.

Disclaimer: Client should read the Risk Disclosure Document issued by SEBI & relevant exchanges and the T&C on www.sharekhan.com;
Investment in securities market are subject to market risks, read all the related documents carefully before investing.