6 Min Read
Mahindra Lifespace targets ₹8,000-10,000 crore bookings by FY28, driven by residential pre-sales
Amit Kumar Sinha, MD & CEO, Mahindra Lifespace Developers said the company is exploring future fundraising through qualified institutional placements (QIPs) and preferential allotments.
Mahindra Lifespace Developers' MD and CEO Amit Kumar Sinha expects bookings to hit ₹8,000-10,000 crore by 2027-28 (FY28), driven predominantly by residential pre-sales.
Mahindra Lifespace's subsidiary, Mahindra World City Developers, recently announced the second phase of its industrial parks project in Tamil Nadu, in partnership with Japan's Sumitomo Corporation, with a 60:40 ownership structure for phases 1 and 2.
In an interview with CNBC-TV18, Sinha said the company is exploring future fundraising through qualified institutional placements (QIPs) and preferential allotments.
This is the edited excerpt of the interview.
Q: Can you give us a sense of what the shareholding will be in this phase, this is phase two of the project? What kind of investments will you be making in this because it is basis the equity shareholding that you have here?
A: We already have a partnership with Sumitomo Corporation of phase one, of our Origins Chennai industrial park. The shareholding currently 60:40. For phase two, this will continue to be the same state, so we will have 60%, Sumitomo Corporation will have 40% and that's the deal that we have signed to expand from phase one we go to phase two.
In terms of the investment, there are two kinds of investment. The first is the initial investment, as we are finishing the land acquisition for that, we have earmarked ₹225 crore. It will be in the same ratio as our shareholding, and there will be significant additional investment that will happen during the development of the industrial park, as we do the infrastructure, road, STP, all the other relevant structures that are required for any corporate MNCs to actually establish their industrial establishment into these parts. So that will be significant over the next few years, but the initial starting point is ₹225 crore.
Q: Give us a sense now, while you are developing this particular industrial park. Do you already have tie ups, what are the kind of rental agreements that you have in place, are any of the existing clients also setting up shop over there? Can you give us a sense of what kind of annuity you can expect from this particular industrial park 2 that is being developed?
A: It's slightly different business. Let me just explain. These are these are not rental incomes. These are called lease income, but they are actually perpetual leases. So it's considered as a sale, from that point of view, you don't have an annuity income. We have a small annuity income that comes through the O&M business. We maintain the parks so that comes as the annuity income. But we have a very, very healthy pipeline.
Origins Chennai has attracted one of the largest set of investments from Japanese clients. Last year, Mitsubishi, for example, decided to put the largest factory in Origins Chennai, roughly $220 million investment along with the land investments. Similarly, we have a very healthy pipeline from Japanese and non-Japanese client, and that's why the partnership with Sumitomo is extremely important for us. So that will get translated to lease revenue, which is a one time, let us say sale revenue.
But the rental income that you refer to is actually the O&M revenue, which is based on a case by case, a basis, which is much smaller, but that allows us to collect that O&M or common area maintenance (CAM) charges in residential equivalent terms, that comes to us on an annual basis.
Q: What is the number to that these rentals, or the O&M charges that we are talking about, or do you decide it before you let it out? And the second thing is the commercialisation date by when do you commercialise the space to completely?
A: So the approval process has started as we have concluded a land acquisitions. The obviously, this goes through two rounds of approval. First is the master layout, and then the specific to the client. So that process has started. It typically takes six to nine months to get approvals, and in the same time, we are able to attract companies to come and do the due diligence on the land, what kind of construction they want to set up here all those things happen concurrently.
We have a very healthy pipeline. The commercial numbers are a little bit confidential at this time because each client is very different. There the kind of land, the kind of support services they require, so we will be able to share those as those deals conclude. But at this time, they are currently in the pipeline stage, but as we have done in the past, when deal concludes, we share all the details.
Q: A lot of your peers have actually looked at monetising the commercial part of the business, via real estate investment trust (REIT), is that something you will look at. Also you have guided for close to ₹8,000 to 10,000 crore of booking guidance as far as FY28 is concerned. Will this largely be organic, also looking at inorganic growth, any more land acquisitions, any more JD, JVs, that you are targeting?
A: Let me answer the second part of your question. So ₹8,000 to 10,000 crore is primarily coming from residential. Let's take the midpoint, ₹9,000 crore so our estimate is that ₹8,500 crore should be our residential pre-sales, and roughly ₹500 crore would be from the industrial side. And that's how the business we are building.
You may have seen some of our recent announcements in the first half or in the last seven months of this year, including the announcement of large joint development agreement (JDA) that we did in Bhandup. This is a very large, close to 3.5-3.6 million plus, almost 4 million square foot that will be mixed use - residential, commercial and retail, and we had done a few others in the early part of the year. We are consistently growing our residential business, while we are maximising value creation from our industrial business.
To your question about REITs, we are looking at ways to do, raise funds. REIT is an example of it, but they are more relevant for commercial, where you have rental revenues, rental annuity coming in. But for residential, you are looking for platforms, some kind of QIP, preferential, all those are part of our options that we look for providing the capital for growth.
For full interview, watch accompanying video
The company, which has a market capitalisation of ₹7,487 crore, has seen its shares declined 7% over the last year.
Mahindra Lifespace's subsidiary, Mahindra World City Developers, recently announced the second phase of its industrial parks project in Tamil Nadu, in partnership with Japan's Sumitomo Corporation, with a 60:40 ownership structure for phases 1 and 2.
In an interview with CNBC-TV18, Sinha said the company is exploring future fundraising through qualified institutional placements (QIPs) and preferential allotments.
This is the edited excerpt of the interview.
Q: Can you give us a sense of what the shareholding will be in this phase, this is phase two of the project? What kind of investments will you be making in this because it is basis the equity shareholding that you have here?
A: We already have a partnership with Sumitomo Corporation of phase one, of our Origins Chennai industrial park. The shareholding currently 60:40. For phase two, this will continue to be the same state, so we will have 60%, Sumitomo Corporation will have 40% and that's the deal that we have signed to expand from phase one we go to phase two.
In terms of the investment, there are two kinds of investment. The first is the initial investment, as we are finishing the land acquisition for that, we have earmarked ₹225 crore. It will be in the same ratio as our shareholding, and there will be significant additional investment that will happen during the development of the industrial park, as we do the infrastructure, road, STP, all the other relevant structures that are required for any corporate MNCs to actually establish their industrial establishment into these parts. So that will be significant over the next few years, but the initial starting point is ₹225 crore.
Q: Give us a sense now, while you are developing this particular industrial park. Do you already have tie ups, what are the kind of rental agreements that you have in place, are any of the existing clients also setting up shop over there? Can you give us a sense of what kind of annuity you can expect from this particular industrial park 2 that is being developed?
A: It's slightly different business. Let me just explain. These are these are not rental incomes. These are called lease income, but they are actually perpetual leases. So it's considered as a sale, from that point of view, you don't have an annuity income. We have a small annuity income that comes through the O&M business. We maintain the parks so that comes as the annuity income. But we have a very, very healthy pipeline.
Origins Chennai has attracted one of the largest set of investments from Japanese clients. Last year, Mitsubishi, for example, decided to put the largest factory in Origins Chennai, roughly $220 million investment along with the land investments. Similarly, we have a very healthy pipeline from Japanese and non-Japanese client, and that's why the partnership with Sumitomo is extremely important for us. So that will get translated to lease revenue, which is a one time, let us say sale revenue.
But the rental income that you refer to is actually the O&M revenue, which is based on a case by case, a basis, which is much smaller, but that allows us to collect that O&M or common area maintenance (CAM) charges in residential equivalent terms, that comes to us on an annual basis.
Q: What is the number to that these rentals, or the O&M charges that we are talking about, or do you decide it before you let it out? And the second thing is the commercialisation date by when do you commercialise the space to completely?
A: So the approval process has started as we have concluded a land acquisitions. The obviously, this goes through two rounds of approval. First is the master layout, and then the specific to the client. So that process has started. It typically takes six to nine months to get approvals, and in the same time, we are able to attract companies to come and do the due diligence on the land, what kind of construction they want to set up here all those things happen concurrently.
We have a very healthy pipeline. The commercial numbers are a little bit confidential at this time because each client is very different. There the kind of land, the kind of support services they require, so we will be able to share those as those deals conclude. But at this time, they are currently in the pipeline stage, but as we have done in the past, when deal concludes, we share all the details.
Q: A lot of your peers have actually looked at monetising the commercial part of the business, via real estate investment trust (REIT), is that something you will look at. Also you have guided for close to ₹8,000 to 10,000 crore of booking guidance as far as FY28 is concerned. Will this largely be organic, also looking at inorganic growth, any more land acquisitions, any more JD, JVs, that you are targeting?
A: Let me answer the second part of your question. So ₹8,000 to 10,000 crore is primarily coming from residential. Let's take the midpoint, ₹9,000 crore so our estimate is that ₹8,500 crore should be our residential pre-sales, and roughly ₹500 crore would be from the industrial side. And that's how the business we are building.
You may have seen some of our recent announcements in the first half or in the last seven months of this year, including the announcement of large joint development agreement (JDA) that we did in Bhandup. This is a very large, close to 3.5-3.6 million plus, almost 4 million square foot that will be mixed use - residential, commercial and retail, and we had done a few others in the early part of the year. We are consistently growing our residential business, while we are maximising value creation from our industrial business.
To your question about REITs, we are looking at ways to do, raise funds. REIT is an example of it, but they are more relevant for commercial, where you have rental revenues, rental annuity coming in. But for residential, you are looking for platforms, some kind of QIP, preferential, all those are part of our options that we look for providing the capital for growth.
For full interview, watch accompanying video
The company, which has a market capitalisation of ₹7,487 crore, has seen its shares declined 7% over the last year.
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
Live TV
Loading...