Sri Lotus Developers & Realty Ltd. (Neutral)

Highlights

Sri Lotus Developers and Realty Limited (LOTUS) incorporated in 2015, is a developer of residential and commercial premises in Mumbai, Maharashtra, with a focus in Redevelopment Projects in the Ultra Luxury Segment and Luxury Segment in the western suburbs.

LOTUS projects are bifurcated into the following 3 categories. (i) Greenfield Projects where company acquires land and construct infrastructure (ii) Redevelopment Projects where projects that are reconstructed by virtue of development agreements with housing societies, commercial unit holders or others (iii) Joint Development Projects where Projects they enter into a development agreement with the holder of the land parcel sought to be developed and developing the project jointly with such land holder.

Their developments focus primarily on ultra-luxury and luxury residential properties and commercial properties through: construction and development of 2BHK and 3 BHK flats with a price range of Rs. 30 mn to Rs. 70 mn (Luxury Residential), construction and development of 3BHK, 4 BHK and 4+ BHK flats and penthouses, with a price of above Rs. 70 mn (Ultra Luxury Residential Segment) and construction and development of commercial offices.

Out of the total proceeds of Rs. 7,920 mn, ~Rs. 5,500 mn would go towards Investment in their subsidiaries for part-funding development and construction cost of their ongoing projects, Amalfi, The Arcadian and Varun and ~Rs. 1,840 mn would be utilized for pursuing inorganic growth through unidentified acquisitions and other strategic initiatives and general corporate purposes.

Key Highlights

• The real estate market in India has grown at a CAGR of approximately 11 pct from USD 50 bn in 2008 to USD 180 bn in 2020 and is expected to further reach USD 1000 bn by 2030 and touch USD 5800 bn by 2047. Mumbai is one of the biggest real estate markets in India. In Mumbai redevelopment plays a crucial role due to the limited availability of land, particularly in the western suburbs. This micro-market faces significant land constraints, making redevelopment a key factor in addressing the demand.
• As of Q1FY26 the company has 4 completed projects (Developed area of 0.37 mnsqft) out of which 2 projects are residential and 2 are commercial, 5 Ongoing residential projects (Saleable area 0.29 mnsqft) and 11 upcoming projects (Saleable area of 1.6 mnsqft) out of which 8 are residential projects and 3 are commercial projects.
• Historically, LOTUS’ focus has been on the western suburbs of Mumbai. In order to drive future growth, they are further expanding their reach into other micro-markets in southern and central regions of Mumbai, such as Nepean Sea Road and Prabhadevi, and eastern suburbs of Mumbai, such as Ghatkopar.
• As per reports, the Lotus Developers commands a premium of approximately 22 pct on its quoted prices compared to the average quoted prices in the Juhu market. Juhu reflects a limited new supply coupled with continued robust demand, which has led to recent price appreciation and increased premiums.
• A substantial amount of LOTUS completed projects, ongoing Projects and upcoming projects are redevelopment projects or joint development projects. They acquire interest in land of a redevelopment project via an asset light model. This approach has served as a catalyst to strengthen redevelopment and joint development portfolio while simultaneously reducing cost on upfront land acquisition and boosting capital efficiency.
• LOTUS’ key growth strategies include (i) Strengthening position in the Ultra Luxury Segment and Luxury Segment in western suburbs of Mumbai (ii) Enhanced focus on asset-light model (iii) Expand into the micro-markets in the south central and eastern regions of Mumbai and other regions of western Mumbai (iv) Continue to selectively develop Commercial Projects in Mumbai region (v) Focus on enhancing brand visibility and reputation through development of quality real estate projects.
• The sales/EBITDA/profit of the company has grown by 81.48 pct CAGR/ 82.2 pct CAGR/90.23 pct CAGR over FY23 – FY25. In FY25 the company reported sales of Rs. 5,497 mn, which grew 19.09 pct YoY while EBITDA of the company rose 82.22 pct YoY to Rs. 2,890 mn due to lower cost of construction. In FY25 the company posted profit of Rs. 2,279 mn which jumped by 90.23 pct YoY.

Key Risk

• LOTUS current business model is primarily focused on redevelopment projects; their bids may not always be accepted for society redevelopment projects.
• The real estate industry in which LOTUS operate is competitive and highly fragmented resulting in increased competition that may adversely affect their results as many players focusing on Redevelopment projects due to asset light nature.
• LOTUS business is dependent on the performance of, and the conditions affecting, the real estate micro markets with high geographical concentration in the Western Suburbs of Mumbai.

Financial Performance

Peer Comparison Based on FY25 Financials

Valuation

Sri Lotus Developers and Realty Limited (LOTUS), a MMR developer which develops property for HNI and UHNI segment, with focus on redevelopment and want to expand into the micro-markets in the south central and eastern regions of Mumbai and other regions of western Mumbai. At the upper end of the price band of Rs. 150, the issue priced at EV/EBITDA of 24.48x of FY25 earnings post issue. The issue appears to be fully priced.

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