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BD boost provides visibility; scale yet to be achieved

Mahindra Lifespace Developers (MLDL) has always been a conservative organization. However, the recent boost in BD activity indicates a steady change in strategy, with a clear focus on accelerating growth. Supporting this transition, the company is now in a net cash position and plans to maintain its net D/E comfortably below 0.5x in the long run. With the current launch pipeline and timely execution, collections are expected to post a 37% CAGR over FY25-27, while OCFs are projected to clock a 17% CAGR. We believe the management is actively addressing growth challenges, and this is beginning to yield positive results. We will closely monitor developments at MLDL and may adopt a constructive viewpoint once certain milestones are achieved. For now, we reiterate our NEUTRAL stance on the stock with a TP of INR345 per share.

INR450b development pipeline reflects positive outlook

* In FY25, bookings reached INR28b, marking a 20% YoY increase and exceeding expectations by 15%. The robust performance was primarily supported by cumulative bookings of approximately INR21b in 1QFY25 and 4QFY25, which were boosted by the successful launches of Vista Phase 2, IvyLush, Zen, and Green Estates.

* MLDL’s residential sales mix is undergoing a significant shift toward premium housing. In FY25, premium projects launched after FY23 contributed 71% to sales value (68% of volume). This contribution is expected to rise to 97% by FY30, largely driven by land already secured. Affordable housing, which constituted 12% of sales value (27% of volume) in FY25, is currently being phased out. The company is also moving from a new launch-heavy model (~65% in FY25) to a more sustenance-based model (~75% by FY30), supported by multi-year sales streams from large projects like Bhandup and Thane.

* However, 1QFY26 saw a decline in bookings by 56% YoY and 57% QoQ due to the absence of material launches.

* In 1QFY26, MLDL launched New Haven in Bangalore and Citadel in Pune for a total GDV of INR4.5b. In 2QFY26, MLDL launched Marina64 in MMR. Upcoming launches include Project Pink in Jaipur (INR2b plotted), Citadel Phase 3 in Pune, Saibaba Redevelopment in Borivali with a GDV of INR18b, and Bhandup Phase 1.

* Between Apr’25 and Jun’25, MLDL signed three projects with a GDV of INR35b. These include a project at Lokhandwala 2 (INR11.5b), in addition to the Lokhandwala 1 cluster development signed in Feb’25; a project in Mulund, Mumbai (INR12.5b); and a project in Navrat, Bengaluru (INR11b).

* As part of its INR450b GDV expansion plan, MLDL had already secured projects worth INR410b by 1QFY26. The remaining INR40b is targeted for acquisition, with a focus on the Pune and Bangalore regions. Within the existing pipeline of INR410b, INR200b is allocated to projects in Bhandup and Thane, INR120b is attributed to redevelopment projects, INR30b is for developments in Rajasthan and Murud, and the remaining INR60b comprises outright acquisitions. The outright acquisitions are expected to be launched within 12 months of acquisition, while the rest of the pipeline may take longer to materialize.

* In addition to the development pipeline, MLDL currently holds unsold inventory from completed projects valued at INR39b (3.14msf), which it aims to monetize in the near term.

* Until FY18, MLDL was generating a project-level IRR of 3%. However, by FY24, the company reported five projects worth INR50b, delivering an average IRR of 26%—reflecting a 23% increase since FY18. Currently, at the project level, the company generates ~20% IRR.

* We estimate 55-65% of sales to come from MMR in FY26-27, which will continue to be MLDL’s major focus area.

Valuation and view

* MLDL posted strong booking growth and is well-positioned to improve this momentum, given the healthy project pipeline across its key markets.

* We have incorporated the recent rights issue proceeds of INR15b and accordingly adjusted equity, debt, and cash components.

* We value the Residential business on a DCF basis with a WACC of ~14%, translating into INR44b.

* We reiterate our NEUTRAL rating on the stock with a TP of INR345, implying a 2% downside.

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