Lodha Group looking at IPO in 12-15 months

Aims for Rs 7,500 cr of sales in FY17

Lodha Group, the country's largest property developer by sales, is aiming at net sales of at least Rs 7,500 crore this financial year, despite prolonged slowdown in the market. In FY16, their net sales were Rs 6,430 crore.

By comparison, DLF, the country’s largest by market capitalisation, did net sales of Rs 3,150 crore in FY16 and expects Rs 3,000-3,500 crore this year.

Abhishek Lodha, managing director of the former entity, believes their brand name, focus on delivery and innovation would help it beat the slowdown. “Our sales have been stronger since the second half of the past financial year. Since Dussera, sales have started picking up…Buyers are smarter today. They do not buy from anybody.  They are buying from select names,” he told Business Standard. Forward momentum in the economy was helping, he added.

On plans for an initial public offering of equity, he said they were actively considering appointing of bankers but the timing would also depend on market conditions. "I won't put a date on it but we think in 12-15 months from now."

Online real estate advisor PropTiger’s India Realty Report for FY16 reveals housing sales across the top nine cities fell 33 per cent, even as prices saw a marginal increase of only two per cent. “In Mumbai, there is a lot of noise that sales are not happening — of 1,000 developers, 990 say their properties are not selling. But, credible names are selling,” said Lodha.

They delivered 6,800 homes in 2015-16, he said, largest such in the country. In FY17, the aim is to cross 7,000 units. However, Lodha recently saw a downgrade by rating agency Moody's on its corporate family ratings and US-denominated bonds.

“The downgrade reflects our expectation that the company's credit metrics will fail to improve to a level more appropriate for its ratings over the next 12-18 months. Operating performance will remain well below our original expectations at the time we assigned the ratings for the first time in November 2014 and also below our reduced expectations in June 2015," said Vikas Halan, vice-president at Moody's.

Lodha said the company had already responded on Moody's action; the company spokesperson said Moody's review was in relation to its international (in dollars) bond. "Our company's local (Indian) debt continues to enjoy a high rating of A/A- from leading Indian agencies, including India Ratings (Fitch) and Brickworks...We have been India's largest developer for four years and look to further grow our business this financial year."

Lodha said the group was modifying the size of apartments to suit buyer need and making ready the amenities, even as projects were under construction.

“Buying real estate is like having a good meal.  If you have a good reputation and a good kitchen, people come to your restaurant.  We consistently innovate our projects to meet their (consumers) lifestyle requirements,” he said.

For instance, he said, in their project near Lonavala (on the Mumbai-Pune highway), it offers one-bedroom apartments apart from those of two, three and four bedrooms, for a segment which wants a second home. "In some projects, we have increased the apartment sizes. For instance,  at our The Park project in Worli, we increased the size of units by 10 per cent.” Their debt of Rs 13,300 crore was not a big concern, he said, as they have to get Rs 11,000 crore from customers. “Debt has to be seen in the context of business. Even if I do not sell anything, we will pay off our debt,” he said.

They're also going slow on land acquisitions. "We are focused on buying right land and at the right value," said Lodha. 'We have five years of land supply and that is why we are not looking at large acquisition. Our focus (now) is on delivery of projects and enhancing profitability and sales."