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Healthy presales, steady margin improvement to continue

GPL has delivered a strong presales CAGR of 50% over FY21-24 and outperformed all its peers. However, its presales are estimated to clock an 8% CAGR over FY25-27 due to the high base effect. Recently, GPL raised INR60b via QIP and is set to raise further INR20b via NCD to support its aggressive business development (BD) activities and debt reduction initiative. As of 4QFY25 end, GPL’s net debt-to-EBITDA (D/E) ratio stood at 0.19x and net debt was INR33b. GPL aims to be the top player in all its markets with a strong brand equity and a track record of timely delivery with quality product offerings. GPL is estimated to generate a cumulative operating cash flow of INR229b over FY25-27E. We reiterate our BUY rating with a revised TP of INR2,843, which includes a 75% premium to the high-growth residential business. Our TP implies a potential upside of 22%.

Upcoming launches to fuel performance

* GPL achieved a 50% CAGR in presales during FY21-24. In FY25, GPL exceeded its full-year pre-sales guidance by 9% to INR294b, up 31% YoY. This demonstrates the company’s strong pipeline and its ability to consistently deliver high sales performance across its portfolio.

* GPL reported exceptional growth in its key markets in FY25, with presales growth at ~2x in Bangalore and 3x in other cities such as Kolkata and Hyderabad on a YoY basis. GPL further plans to increase its exposure and sustain its sales growth momentum in these cities, guided by strong demand for quality residential properties. Additionally, GPL aspires to be among the top 2-3 players in each of its markets.

* Despite the higher base from previous years, GPL will sustain 9% volume growth over the medium term. With a project pipeline of ~100-110msf set to generate cumulative presales of INR660-700b during FY26-27, the company is poised for continued success. Further, its ongoing investments in BD will help to gain market share in key regions, including MMR, NCR, Pune, and Bengaluru, ensuring that the company meets its ambitious growth target and becomes the top player. By strengthening its presence in these high-demand micro-markets, GPL aims to consolidate its leadership position and deliver sustainable value to stakeholders over the coming years.

Strong cash flow generation to support aggressive BD

* GPL’s strategic shift toward outright ownership of projects in the last few years started yielding results. In FY25, GPL reported a 73% YoY increase in OCF, reaching an all-time high of INR73b.

* In spite of significant spending (INR90b) on land acquisitions, its net debt declined to INR33b from INR62b in FY24, bringing the debt-to-equity ratio to 0.19x, aided by QIP proceeds of INR60b. This strategic investment in land demonstrates GPL's commitment to expanding its development pipeline while keeping debt at manageable levels.

* During a period when the industry was just beginning to recover, GPL took an aggressive stance on land acquisition. During FY22-24, the company signed projects with a total saleable area of 55msf and a projected revenue potential of INR600b. This forward-thinking approach allowed GPL to position itself for strong growth as the real estate market began to uptrend. It secured valuable assets for future development to generate significant revenue streams.

* In FY25, GPL had acquired 14 new projects, with an estimated GDV of INR264.5b, 132% of FY25 guidance. This expansion in the development pipeline reflects the company's continued ability to identify opportunities and execute its growth strategy. This steady performance over the years has ensured that GPL remains on track to meet and exceed its targets.

* As the company continues to capitalize on its strong execution capability, we expect its collections to increase to INR284b at a ~23% CAGR during FY25-27, leading to operating cash flows of INR80b in FY27E. This surge in cash flows will not only support higher spending on BD but will also enable GPL to generate surplus cash flows starting from FY26. This surplus will provide the company with greater flexibility to reinvest in its growth initiatives, enhancing its longterm financial stability.

Valuation and view

* GPL completed FY25 with a strong performance across key operational parameters of pre-sales and cash flows. With a strong launch pipeline, the company remains on track to achieve its operational goals. Thus, we keep our FY26/FY27 pre-sales estimates unchanged.

* While gross margin has remained healthy at 35-40% for recognized projects in P&L, the higher scale of operations has led to a proportionately high overhead increase, leading to subdued operating profits. We expect the sales booked over the past two years, characterized by a better margin profile and outright ownership, to be recognized after FY26/FY27, which will allay investor concerns.

* We believe GPL will continue to surprise on growth, cash flows, and margins, given its strong pipeline and healthy realizations, which have been key concerns for investors. We reiterate our BUY rating with a TP of INR2,843, implying a 22% potential upside.

QIP leads to debt reduction; likely to be a net-cash company in FY26

* Net debt in FY25 stood at INR33b, with net D/E at 0.19x.

* In 3QFY25, GPL raised INR60b through a QIP (~23m shares at INR2,595/share), which was partially utilized to reduce debt. As of 3Q end, net debt was INR38b, with net D/E at 0.23x.

* In 4QFY25, the board approved a fundraise of INR20b through non-convertible debentures/bonds/debt securities via a private placement.

* With the cash flows expected to increase, the company is estimated to be net cash in FY26, with the net cash surplus likely to increase to INR98b in FY27.

Steady margin improvement visible over FY26-27

* Backed by the execution-led deliveries of ~30msf over the next two years, we estimate a 9% CAGR in revenue over FY25-27 to reach INR58b in FY27.

* EBITDA is estimated to grow to INR8.9b in FY27 (from INR444m in FY25), with margin at 15%. The embedded margins are improving as a mix of outright to JD/JV projects (61% owned projects).

* Adjusted PAT is estimated to grow to INR24b, implying a 32% CAGR over FY25- 27, with margin improving 1330bp over three years to reach 42%.

Management discussion and analysis for FY25

* India’s strong fundamentals, infrastructure push, and resilient rural demand supported 6.5% GDP growth in FY25.

* The residential real estate market stayed robust with steady demand, premiumization trends, and healthy absorption rates.

* NCR led FY25 presales with a 36% contribution, while MMR and Bengaluru accounted for 27% and 17% respectively, supported by landmark launches.

* Proportion of loans and advances to related parties out of total loans declined to 86% in FY25 from 92% in FY24 on a consolidated basis, staying within compliance and arm’s length norms.

* Key managerial personnel saw fair, performance-linked remuneration increases, aligned with the company’s retention and governance policies.

India’s real estate transition from USD300b to USD5.8t by 2047E

* Strong economic growth: India’s real estate sector reflects the broader optimism about the country’s economic prospects. According to the IMF’s World Economic Outlook (Apr’25), India’s GDP has more than doubled to ~USD4.2t from USD2t in 2014, moving the country from the 10th to the 5th largest economy globally. It is projected to become the 3rd largest economy by FY30-31, growing steadily at around 6.7%.

* Key long-term drivers: This growth trajectory is supported by an expanding middle class, accelerating urbanization, higher disposable incomes, rapid digital adoption, and ongoing structural reforms.

* Pro-growth monetary policy: The Reserve Bank of India maintained a calibrated monetary policy stance with two repo rate cuts of 25bp each in Feb’25 and Apr’25, signaling a pro-growth approach while keeping inflation under control.

* Government initiatives: Flagship programs, such as the Smart Cities Mission, Housing for All, and the Real Estate (Regulation and Development) Act (RERA), have enhanced transparency, improved regulatory oversight, and strengthened investor confidence across the real estate value chain.

* Significant economic contribution: Real estate remains a major contributor to India’s GDP and employment generation. As per Knight Frank, the sector is projected to expand from USD300b in CY24 to USD650b by CY25, reaching USD1t by CY30 and potentially USD5.8t by CY47.

* Rising share of GDP: The sector’s share of GDP is estimated at ~7.3% currently, which is expected to grow to 15.5% by 2047, highlighting its increasing role in the economy.

* Deep industry linkages: This growth reflects not only rising demand for housing and office spaces but also the sector’s strong connections with over 200 allied industries, including cement, steel, logistics, finance, and consumer goods.

* Long-term outlook: Stable demand across residential, commercial, and industrial real estate, coupled with the expansion of India’s corporate sector and a services-driven economy, reinforces the sector’s positive long-term outlook.

* Urban development impact: As India progresses toward more inclusive and sustainable urban development, real estate will continue to be a critical enabler, shaping cities, creating employment, and building the physical and social infrastructure required to support its evolving population.

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