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Building scale through a diversified growth trajectory Robust launch visibility on continued business development

Lodha Developers (LODHA) added one project in MMR during 2QFY27, with 0.9msf of saleable area and an estimated GDV of INR48b. It has INR409b of launched inventory yet to be sold, which is expected to support sustenance sales. Further, a robust pipeline of INR191b is planned for launch in 2HFY27 across MMR, Bangalore, Pune and NCR. Beyond the next 12 months, LODHA would likely launch ~68msf (own land + JDA). Overall, the company has unsold GDV of ~INR2t (excl. land forming part of LandCo), which provides ample growth visibility for the medium term.

Contribution from new regions on a rise; presales to pick up in 2H

In 2QFY27, presales grew by 10% YoY to INR50.4b (in line). It launched one new project in Bengaluru (INR22b GDV) and the region contributed 37% to the quarter’s presales, whereas MMR’s contribution was ~49%. LODHA recently launched its first project in the NCR, with more launches in NCR, Bengaluru and Pune likely to boost presales in 2HFY27 and make the performance well diversified. The company has a strong pipeline of projects in 2H offering a GDV potential of INR191b and expects INR60-70b presales rate in each of the next two quarters. Additionally, it expects INR15b data center land transaction in 4Q. We maintain a 16% CAGR in presales, reaching INR276b during FY26-28E.

Progressing well in the DC business segment

LODHA’s approved power availability has increased to 5GW from 3GW, translating into over 4GW of IT capacity. Definitive documents for the first multi-hundred-megawatt BTS deal are expected in FY27, with rentals likely commencing after handover to clients in FY29. The company targets signing up 1GW of input power by FY30 and delivery by FY32, with annual rental potential of INR20-23b, supporting its target of 10x growth in overall annuity income over six years.

Collections to improve in the coming quarters

Collections were flat YoY at INR34.5b, while net OCF was down 39% YoY to INR8.8b. Cash flows are expected to significantly increase in 2H, supported by improving execution and Palava land monetization. The company has guided for OCF to increase to INR85b in FY27 from INR28b in 1H. We have maintained our collection CAGR at 18% to INR212b in FY26-28E. Net debt increased INR3.5b QoQ to INR52.8b as of 2QFY27, with a net debt-toequity ratio of 0.21x. Given the strong cash flow visibility, we expect net debt to remain at comfortable levels in the next two years

Valuation and view

* With strong presales generation from regions outside MMR, LODHA has showcased its ability to diversify regionally while scaling up operations. This has expanded its addressable opportunity, derisked operational performance, and improved growth visibility over the medium term.

* The strong growth visibility in the DevCo business with INR2t unsold GDV would limit the company’s requirement for business development in the near term, which would boost the free cash flows. We expect new project acquisitions to be limited to new regions and some opportunistic BD in MMR.

* Regional diversification and continuity in BD activity reinforce our confidence that LODHA can deliver higher growth compared to peers of similar scale while maintaining balance sheet strength.

* Hence, given the continued investments toward growth, we assign a 20% premium to the residential NAV, which we believe is justified as our calculations suggest that the segment can command ~40% NAV premium. A further increase in NAV premium would depend on the pace of project additions in the coming quarters.

* While we have maintained our presales and collections estimates, we have increased the WACC rate of residential portfolio to 11.3% and cap rate for the annuity portfolio to 8.0%. Hence, the target price has declined to INR1,375. Reiterate BUY. LODHA is our preferred pick among large developers.

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