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Diversification at play

Lodha Developers (LODHA)’s focus on regional diversification, ~INR1.4t project additions, sharp deleveraging over the past five years, and strong growth visibility makes it a prudent play among larger developers. Building on its strong reputation in MMR, the company is now diversifying and scaling up across other major regions. With INR514b worth of unsold inventory and a strong launch pipeline, we expect pre-sales CAGR of 16% in FY26-28. Additionally, healthy execution and improved annuity income are likely to drive 18% collections CAGR over FY26-28. Consequently, a cumulative OCF of INR177b over FY27-28E should keep leverage in check, as we expect company to be INR33b net cash by FY28. This provides ample headroom to scale up the core portfolio while expanding into emerging segments such as data centers. Reiterate BUY with an SoTP-based TP of INR1,285.

Business development provides medium-to-long-term growth visibility

LODHA sharply accelerated its business development with the addition of INR601b GDV in FY26, equating to 76% of the total BD undertaken during FY22-25. Consequently, the company added INR1.4t GDV during FY22-26, while also pursuing regional diversification, with ~28% of BD during this period originating from outside MMR. Following the aggressive BD activity in FY26, new additions are expected to be slower and more selective over the next two years. However, the company currently has ~INR2t GDV available for sale (excluding long-term township land), which lends comfort to growth visibility over the medium term

Regional diversification to keep pre-sales growth strong despite a high base

Pre-sales recorded a strong 23% CAGR to INR205b during FY22-26. Given the robust BD over the last four to five years, LODHA has built a salable inventory of INR514b and FY27 launch pipeline of INR218b. Beyond the next 12 months, a launch pipeline spanning 72msf and ~600msf land bank is expected to sustain growth momentum over the medium term. We expect pre-sales to expand at a 16% CAGR to INR275b during FY26-28, despite a sizable base, supported by growth contributions from newer markets. Further, we believe new project additions in NCR, Bengaluru, and Pune over the next 1-2 years should provide growth opportunities and offer a more diversified play, de-risking the company’s operational performance

Healthy OCF to maintain balance sheet strength and offer growth avenues

Collections remained strong at a 15% CAGR during FY22-26, generating cumulative OCF of INR288b (NOCF-to-collections of 48%). Additionally, multiple fundraises have sharply deleveraged LODHA’s balance sheet, with net debt declining from INR165b in FY21 to INR54b in FY26. Simultaneously, it has built a significant launch pipeline (INR1.4t GDV additions over the last 4-5 years), ensuring mid-term growth visibility. Backed by a projected 18% CAGR in collections to INR212b over FY26-28, we expect cumulative post-tax OCF of INR177b during FY27-28 and net debt at ~INR2b by FY28, enabling continued growth investments in DevCo, RentCo, and data centers

Valuation and view

LODHA has showcased its ability to diversify regionally beyond MMR, which is expected to increase the opportunity size, de-risk operational performance, and improve growth visibility. Further, while OCF generation is expected to remain strong over the next 2-3 years, the scale-up of the commercial segment and data center businesses is likely to offer additional growth avenues over the medium term. The company is trading at a 32% discount to its residential segment NAV. We have valued Devco at its NAV, while the annuity business is valued at a 7.5% cap rate. Reiterate BUY with an SoTP-based TP of INR1,285.

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