Mahindra Lifespace Developers Limited (MLD) is the Real Estate company of Mahindra group. They operate in both commercial as well as the residential space. They have manageable debt on their books.
They are right now executing a number of residential as well as commercial projects.
Pros:
- Fast execution - Average project completion in Mumbai is 4-4.5 years and 3-3.5 years in other cities. (Source - please read the report by Angel Broking attached below). Also they sell units faster than they can complete them. So sales cycle is faster than project completion cycle.
- Future revenue visibility - They currently have 20.3 million sq ft of saleable area. On top of it they have 11.3 million sq ft of land bank (Source - please read the report by Angel Broking attached below).
- Building in phases - They depend on cash flow from sales to complete project execution. For e.g. - If a building has 3 towers then they will first build 1 tower and then sell that tower substantially. The cash generated from this 1st tower will then be used to start work on the 2nd tower. This ensures minimal cash is blocked. This point shows the conservative way of thinking by management
- Strong commercial property play - MLD is currently developing two integrated business cities called Mahindra World City. One is in Chennai and the other is in Jaipur. The Mahindra World City in Chennai is almost completely leased out. The company now is trying to replicate the same success for Mahindra World City Jaipur.
Cons:
- The company is professionally managed and therefore lacks the fast paced growth that an entrepreneur may bring to the company.
Current situation of the sector:
- There is a genuine shortage of residential units in India. Therefore demand for the sector seems favourable in the future too.
- Due to the reduced availability of cash in the Indian economy real estate transactions using black money will reduce. This may mean that demand from black money hoarders will go down and therefore prices for real estate will continue to remain subdued.
- Due to increased digitisation more Indians will have a credit rating. This will make it easy for them to get formal credit especially housing finance. This would enable people to buy a house thereby increasing demand from lower middle class and economically backward sections.
- Due to the new Real Estate Act being implemented by the Govt. small developers will find it difficult to use money raised for one project for the construction of another. This would put pressure on their cash flows and they would find it difficult to launch multiple projects at one go. This is good news for developers who are already in the habit of following clean and conservative processes.
Some claims by the company in their last con call on Oct 27, 2016. The transcript of the con-call is also attached below:
- The CEO Ms.Anita said that in this financial year the company will spend Rs.350-400 crores on construction.
- In Chennai the company has a residential property called Iris. It only has 15-20 units left to be sold.
- In Mumbai the company has a residential property called Vivante. In Vivante Phase 1 the company has 10 unsold units.
20160822_Mahindra-Lifespace-Developers-Limited_4_InitiatingCoverage-2.pdf (180.0 KB)
MahindraLifespaceDevelopersLimited-3.pdf (283.7 KB)