Lodha has indicated the following –
- Complete repayment of $225 mn bonds in the next 4 months. These were raised against it’s UK projects in March 2020 and are originally scheduled to be repaid by March 2023. However, they would be prepaid due to strong sales from UK projects during the last 2 quarters.
- Target to reduce Company debt below Rs 6,000 crore by March 2023. This again due to continued strong real estate sector prospects.
The Company had borrowings exceeding Rs 15,000 crore as on September 30, 2021. Target of Rs 6,000 crore by March 31, 2023 means a net repayment of more than Rs 9,000 crore over 18 months i.e., 6 quarters.
Key points to note in this regard –
- In the last 2 quarters ended September 2021, Company did made a net repayment of Rs 3,100 crore of borrowings. However, Rs 2,400 crore of this repayment came from IPO equity raise. Net of this, repayment from operations was only Rs 700 crore.
- Needless to say last few quarters have been strong for the real estate market in general.
- Though I expect the strength in real estate to continue and may even pick up, very unlikely that it would be without volatility.
- In November 2021, the Company had also announced raising Rs 4,000 crore equity from institutional investors. This fund raise was mentioned to be for various purposes including acquisition of land, development rights, deleveraging and general corporate purposes.
Keeping everything in perspective, I don’t see Rs 9,000 crore of debt repayment happening over the targeted timelines without further preferential equity allotments and also Lodha controlling it’s aggressive approach towards expansion.
However, I really want that I am proven wrong and Lodha actually delivers on it’s promise of debt reduction. That’s the only way to build a strong real estate franchise that survives and thrives over the long term.