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Taking a breather before the next leap

Aditya Birla Real Estate’s (ABREL) robust scale-up, reflected in pre-sales expansion of 61% CAGR to INR81b during FY20-26, has propelled it into the ranks of the top 10 developers. Strategic BD, timely launches, rapid asset churn, and the brand pull of Aditya Birla have driven ABREL’s growth within a short span of its real estate foray. However, a more selective and slower pace of BD over the past 1-1.5 years has led to a consolidation phase, with launch pipeline replenishment lagging robust sales velocity. Following a flattish pre-sales performance in FY26, we expect pre-sales to remain at similar levels in FY27. New project additions, subsequent launches, and future phases of existing projects are likely to drive a 22% YoY growth in pre-sales in FY28. Meanwhile, strong collections and proceeds from the paper business sale are expected to support deleveraging, thereby providing future growth opportunities. The stock is currently trading at a 28% discount to its NAV. Reiterate BUY with a TP of INR1,940

New project additions expected in the coming quarters

ABREL targets business development worth INR100-150b GDV annually. During FY24-25, the company added INR393b of cumulative GDV across multiple micromarkets, enabling diversification and supporting simultaneous project launches during FY25-26 (faster project churn). However, with only one project (INR17-18b GDV) added over the past 1.0-1.5 years, inventory replenishment has lagged presales momentum. While INR421b of inventory remains to be launched, it is concentrated in a limited number of projects, restricting ABREL’s ability to launch multiple projects simultaneously. Based on our checks, several deals are currently under evaluation, and the acquisition of new projects could improve medium-term growth visibility

Entering a consolidation phase; growth expected to resume post FY27

ABREL’s prudent sales and marketing strategies, coupled with Aditya Birla’s brand pull, drove pre-sales to INR81b (61% pre-sales CAGR in FY20-26) within six years of real estate operations. The company has entered a consolidation phase, with limited sustenance inventory and fewer major launches leading to flattish pre-sales in FY26. Given the minimal BD activity over the past 1.0-1.5 years, the launch pipeline is likely to remain constrained in the near term. Consequently, we expect FY27 pre-sales to remain at similar levels. However, new project additions over the coming quarters and their subsequent launches should revive growth beyond FY27. We, therefore, bake in 22% YoY pre-sales growth in FY28

Deleveraging on the card

ABREL has maintained strong financial discipline and control over debt through business restructuring and the exit of low-profitability segments. The demerger of the cement business led to a sharp reduction in net debt, from INR41b in FY18 to INR13b in FY20. Despite a significant ramp-up in its real estate business, net debt stood at ~INR33b in FY26, cushioned by an 85% CAGR in collections over FY20-26. Backed by continued pre-sales growth and healthy project execution, we expect collections to expand at a 30% CAGR to INR56b during FY26-28. In addition, proceeds worth INR35b (pre-tax) from the paper division sale in 1HFY27 are expected to further deleverage the balance sheet, positioning the company well for its next leg of growth.

Valuations attractive; reiterate BUY

ABREL has recorded a robust scale-up in the real estate segment since its inception, delivering a 61% pre-sales CAGR during FY20-26. This growth has been supported by a continued focus on balance sheet strengthening. Further, the planned exit from the paper business in FY27 is expected to release management bandwidth, enabling a sharper focus on real estate development. While BD activity has been slow over the past year, an acceleration in BD remains crucial for improving medium-term growth visibility. Accordingly, we currently value the residential business at NAV, while a ramp-up in BD activity could unlock further value. The company’s focused efforts toward ramping up its annuity portfolio are encouraging and are expected to provide greater cash flow stability post-FY30. The stock is currently trading at 28% discount to NAV. We reiterate our BUY rating on the stock with a TP of INR1,940, implying a 39% upside potential.

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