Mahindra Lifespace Developers Limited (MAHLIFE) Q3 FY23 Earnings Concall Transcript

Mahindra Lifespace Developers Limited (NSE:MAHLIFE) Q3 FY23 Earnings Concall dated Feb. 03, 2023.

Corporate Participants:

Arvind Subramanian — Managing Director and Chief Executive Officer

Vimal Agarwal — Chief Financial Officer

Analysts:

Parikshit Kandpal — HDFC Securities — Analyst

Himanshu Upadhyay — O3 Capital — Analyst

Adhidev Chattopadhyay — ICICI Securities — Analyst

Pritesh Sheth — Motilal Oswal — Analyst

V.P. Rajesh — Banyan Capital Advisors LLP — Analyst

Prem Khurana — Anand Rathi Shares — Analyst

Pritesh Sheth — Motilal Oswal Financial Services Ltd. — Analyst

Ronald Siyoni — Sharekhan — Analyst

Manan Patel — Airavat Capital — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen. Welcome to Mahindra Lifespace Developers Limited Q3 and 9M FY23 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Arvind Subramanian, MD and CEO from Mahindra Lifespace Developers Limited. Thank you, and over to you, sir.

Arvind Subramanian — Managing Director and Chief Executive Officer

Thank you, Lisan. Good morning, everyone and welcome to our quarter three FY23 earnings call. I’d like to thank all of you for participating in this conference call.

A reminder, once again, that, as you know, many of our key operating entities from the residential business like Mahindra Homes and Mahindra Happinest, as well as from our IC & IC business like Mahindra World City Developers Limited, Mahindra World City Jaipur Limited and Mahindra Integrated Parks Chennai Limited are not consolidated on a line-by-line basis.

I’d like to take you through some of the highlights for the quarter and the year so far, the nine months of the year. Let me start with the residential business. We’ve had a strong quarter with about INR451 crores of presales, bringing us to INR1,452 crores for the nine months. You would remember that the full year FY22 was INR1,028 crores and the corresponding nine-month period in FY [Technical Issue] INR709 crores. So, on a like-to-like basis, it’s a 100% growth.

This has come on the back of four launches. We launched a new project Mahindra Citadel in Pimpri in Pune. This was the land that was acquired in April and we launched it in November. So within seven months, we’ve been able to get the designs completed, approvals in place and been able to launch it to the market.

We also launched the second phase of Mahindra Eden in Kanakpura in Bangalore. Again, the first phase was launched in Q1 of the financial year, received an outstanding response. And that encouraged us to bring forward the second phase by almost a year. It was originally slated to be launched in the next financial year, but given the response to the first phase, we brought it forward. We also increased prices quite significantly by almost 14%. And even at those higher prices, we’ve seen an excellent response in Mahindra Eden.

We did a formal launch of Mahindra Happinest Kalyan 2. This was a project that was pre-launched in February last year. The main launch happened in December. And again, we’ve seen a good response there.

And the fourth project that was launched was the second phase of Mahindra Happinest at Mahindra World City Chennai. Again, a very successful first phase, which was launched a year back, 100% sold at that stage. We brought the second phase in towards the end of Q3. Once again, took the price up quite significantly, more than a 20% increase in price, and have brought it to market.

In the coming quarter, we expect to launch two new projects, new activations: the second phase of Mahindra Nestalgia in Pune and a plotted development in Mahindra World City Chennai. A lot of our management time and effort this quarter is going to be on preparing for new launches for the next year, particularly for the first half of next year. We would like to bring Kandivali project to market in the first half of the next financial year. We would also like to do a full-fledged launch of Mahindra Citadel what we did in Q3 was a pre-launch, but we’ll do the main launch in H1 of next financial year.

Within H1 of next financial year, we are also bringing — intending to bring our new acquisition in Hosur Road, which we had announced last month to market. And we’ll be looking at later in that year, bringing both the Dahisar project, as well as the Santacruz redevelopment project that we had announced to market as well. So we are looking at a busy FY24 from a new launch perspective.

Turning my attention to business development for the residential business. As you would have seen, we’ve announced two new transactions in January. One was in Bangalore of Hosur Road and the second was a society redevelopment project in Santacruz. Both of these are very attractive new opportunities for us. Bangalore is a market that we continue to build a presence in. And society redevelopment as we had discussed is an area that we have been keenly pursuing for almost a year. So it’s very heartening to see our first breakthrough in the society redevelopments space. We are very excited about the prospects and opportunities in terms of bringing in premium products in fully built out neighborhoods in the city of Mumbai. And hopefully with this win under our belt, it should open the doors to many more wins in the quarters to come.

Our overall BD pipeline last — in the last call, we had talked about pursuing a pipeline at various stages of maturity of about in aggregating about INR5,000 crores of GDV. Out of that, around INR1,000 crores has got converted, roughly INR1500 crores has either been dropped or we’ve lost. And we’ve added back about INR3,000 crores of new deals in the pipeline. So today we are working on a pipeline of about INR5,500 crores. Again, these are in various stages of maturity. And we are hoping that a reasonable proportion of these will get converted in the next two to three quarters.

In this last quarter, we’ve also completed the conveyance of the Kandivali land, which we purchased from M&M, as well as our land 68 plus acres of land in Thane of Ghodbundar Road. As I mentioned, we will — we are working to in Kandivali to market in H1 of the next financial year, and Thane we continue to be on track to bring it into the market in the early part of FY25.

Turning our attention to the industrial business. In the quarter we did INR69 crores of industrial leasing. It’s great to see the pickup in Origins Chennai and Mahindra World City Chennai. The last several quarters much of our leasing has happened in Jaipur, but I had been mentioning that we’ve had a nice pipeline building up in our two Chennai Parks as well. And it’s good to see some of those deals coming to fruition in the last quarter. We continue to have a very active pipeline and are looking at roughly 52 acres of advanced pipeline to be converted over the next two quarters. This INR69 crores of leasing in Q3 takes our year-to-date leasing to INR255 crores, and this compares to INR297 crores for the full FY22. So again, we are looking at a strong growth momentum in the industrial business as well.

Let me turn it over to Vimal to take you through the financial highlights.

Vimal Agarwal — Chief Financial Officer

Thank you, Arvind; and good morning, everyone. Moving on to financial performance for Q3 F ’23. Here are the key points. The consolidated total income stood at INR198 crore against INR74 crores in Q3 FY22. The consolidated EBITDA, which includes other income, as well as share of profit from JVs stood at a profit of INR5.5 crores against a profit of INR20 crores in Q3 FY22.

The consolidated PAT, after non-controlling interest stood at INR33 crores as against a profit of INR25 crores in Q3 F ’22. Your Company has debt of INR280 crores at a consolidated level, while cash in hand and bank balance was about INR228 crores. The cost of debt is 7.76% on consolidated basis, while standalone cost was also almost similar at 7.72%.

These are the key highlights on the financial front. I’ll now request if the floor can be opened for questions please.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.

Parikshit Kandpal — HDFC Securities — Analyst

Yeah. Hi, Arvind. Congratulations on business development and strong pre-sales for the nine month and the third quarter. My first question is on the business development pipeline. Now, I wanted to understand that typically you said this quarter we have added INR3,000 crores of new BD pipeline. So what is the timeline of closure of this INR3,000 crores of typically how much will be the closure timeline where you will take some decision on this?

Arvind Subramanian — Managing Director and Chief Executive Officer

So, typically, I would say two quarters is what we would see as the maturity timeline for this pipeline. So between this quarter and next quarter whatever gets converted our experience has been gets converted within two quarters then if it doesn’t get converted in two quarters, it gets dropped.

Parikshit Kandpal — HDFC Securities — Analyst

Now coming back to the last quarter, we had INR5,000 crores of BD, you said INR1,000 crores got converted, INR1,500 crores got dropped and INR2,500 crores gets carryover to this quarter. So do you expect it to close by whatever decision making happens and happened by this quarter-end on that INR2,500 crores.

Arvind Subramanian — Managing Director and Chief Executive Officer

Yes, a lot of it should either one way either get converted or dropped by the end of this quarter.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. So if you can also give a breakup of this INR5,500 crores of BD in terms of the JDA JVs and redevelopment and also geography-wise Pune, MMR and Bangalore.

Arvind Subramanian — Managing Director and Chief Executive Officer

Yeah. So, roughly, rough split about INR2,500 crores in Mumbai, INR2,000 crores in Pune, INR1,000 crores in Bangalore. And outright is about out of that INR5,500 crores, roughly INR3,500 crores is outright, INR1,000 crores is JDA and another INR1,000 crores is between redevelopment and plotted.

Parikshit Kandpal — HDFC Securities — Analyst

Just one more question on this GDV addition over the last two years. So, we have added INR3,800 crores in FY22 and now financial year to-date, we have added INR2,600 crores. So what will be the total value of the land acquisition cost of this entire INR3,800 crores plus INR2,600 crores, so if Vimal can answer that.

Vimal Agarwal — Chief Financial Officer

The acquisition cost of land for the GDV [Speaker Overlap] INR3,800 crores plus INR2,600 crores.

Parikshit Kandpal — HDFC Securities — Analyst

Yeah, INR6,400 crores which we have added.

Vimal Agarwal — Chief Financial Officer

Just one update on that, Parikshit, you may have picked it up in our release yesterday. This year the Pimpri land that we acquired we’ve actually got some enhanced development potential there. So, the value — GDV value has gone up from INR1,700 crores to INR2,300 crores.

Parikshit Kandpal — HDFC Securities — Analyst

That is added to this year’s number, right, INR1,700 crores to INR2,200 crores is roughly about INR500 crores, sir. So INR2,600 become INR3,100 crores now. So roughly INR6,900 crores in the last two years GDV addition. So what will be the land acquisition cost hard cost, which will be incurred and how much has been paid till now?

Vimal Agarwal — Chief Financial Officer

So overall, Parikshit, the way it will operate and — for example, it has got, say, Kandivali land based the payment is staggered. At an overall level what you can assume if it’s not a JD or a redevelopment usually the cost will vary between 15% to about 23%, 24% depending on the geography in which we’re operating. That’s what I will sort of stay with so far as the numbers are concerned, Parikshit.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. Then how much of this will be like paid off — what will be the pending cost on this GDV yet to be like incurred from the balance sheet?

Vimal Agarwal — Chief Financial Officer

We would have incurred almost about INR400 crores in the last nine months.

Parikshit Kandpal — HDFC Securities — Analyst

And what is the pending to be incurred on these?

Vimal Agarwal — Chief Financial Officer

Almost similar.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. And how are you going to fund it, Vimal? I mean, how do you look at funding here?

Vimal Agarwal — Chief Financial Officer

Two things. So far as operating cash flows are concerned, the Company continues to be fairly robust in terms of collections and overall cash flows. We are running ahead of our plans in that sense, that’s one. The second important point is that the balance sheet, as you know, is completely sort of unleveraged. And to that extent, there will be long-term borrowings, et cetera, which you will start seeing.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. Just last question to Arvind. Arvind, you had this Alibaug plotted launch. So just wanted to know what’s the response there and now you’re planning to bring the Chennai MWC land plotted. So what’s your outlook on overall plotted development as a overall strategy in the GDV. So do you think this can become big in the coming years, because the Chennai, you have seen a depleting presence, besides the industrial — I mean, industrial not much inventory is left as these also coming towards an end. So how do you see the Chennai market where you started a big part of your business, how do you see that play out for the residential piece, from the plotted side if you can help us understand that how will that product develop.

Arvind Subramanian — Managing Director and Chief Executive Officer

Sure. So Alibaug and Chennai, very different — while both are plotted, one is Alibaug is positioned at premium end of the spectrum and Chennai will be a mid-market plotting market. I’m quite hopeful that we will see success in plotted development. Many of our peers have made attractive successful business in plotted. So I’m hopeful that we will also see similar traction. The Chennai one that we are launching this quarter will be the first and hopefully will be followed up by more such launches. We’re also looking at new business development in the plotting space, particularly in Bangalore and Pune.

Parikshit Kandpal — HDFC Securities — Analyst

Okay, Arvind. Thank you and all the best. Those were my questions.

Arvind Subramanian — Managing Director and Chief Executive Officer

Thank you. We’ll move on to the next question. That is from the line of Himanshu Upadhyay from O3 Capital. Please go ahead.

Himanshu Upadhyay — O3 Capital — Analyst

Yeah. Hi, Arvind. Congrats on good set of results. And clearly the visibility is now much more clearer of business operations improving. I have a question on —

Operator

Sorry to interrupt, Mr. Upadhyay. Sir, can you use the handset mode while speaking, and not the speaker phone. It’s causing a lot of disturbance.

Himanshu Upadhyay — O3 Capital — Analyst

I am on handset only. Is it clear now?

Operator

Sir, little better. Please proceed.

Himanshu Upadhyay — O3 Capital — Analyst

Yeah. Congrats on good set of numbers and it becomes much more clearer the way the Company is moving ahead and visibility is clear. I have a question on this employee remuneration and benefits, okay. If we look at the nine months, okay, and even the quarterly, the employee remuneration and benefits is down around 6% to 7%, okay. So has there been some cost rationalization or there was some one-off event or can you just give an idea?

Vimal Agarwal — Chief Financial Officer

Yeah. So overall, couple of things, Himanshu. One is that as we are expanding the number of projects on which we are doing the construction, we do follow a consistent accounting policy of inventorizing some of that cost. And that is one key aspect. The second one is that what you are possibly seeing is the Ind AS accounted cost, and to that extent there are cost which are yet JV level also which are getting incurred. At an aggregate level, if you look at consistently in terms of remuneration increase, you will usually see about 10%, 11% of increase year-on-year on a decent growth trajectory.

Arvind Subramanian — Managing Director and Chief Executive Officer

And Himanshu, we are actually building the organization steadily, because as we are growing the business, we are building capacity as well as capability. So there is no manpower rationalization. If anything, we are investing in talent. We believe that’s going to be one of our key advantages.

Himanshu Upadhyay — O3 Capital — Analyst

No, I agree, because I mean, see last year the revenue in nine months what we did was INR253 crore, okay, including other income or if I exclude other income, it was INR231 crores. And in these nine months it is INR351 crores, but the employee remuneration has moved from INR66 crores to INR61 crores, okay. So that was the thing, and hence the question was. Even if when my revenue is increasing, my employee remuneration has fallen by 6%, 7%.

Vimal Agarwal — Chief Financial Officer

Yeah. So, as I said, two things which are not visible in the numbers, which you quoted. One in the inventorization, for example, Bangalore is a market where the project cost launched Phase 2 got opened up is leading to higher inventorization in that particular project. And second is the cost allocations which we do across our project and across entities. There is a bit of overall optimizations also we would have done in terms of taxability from a structuring point of view. In terms of headcount, if you look at Annual Report, the count would have gone up, levels would have improved and the increments etc would as Arvind mentioned has been decent.

Himanshu Upadhyay — O3 Capital — Analyst

Okay. And see, any timelines for Ahmedabad launch, means what we had — we were looking for a partner for quite some time now. So what is the progress on that Ahmedabad launch?

Arvind Subramanian — Managing Director and Chief Executive Officer

So continues to be an area which is work in process, looking as we had mentioned in the last couple of calls for the right anchor to create the location we still don’t have headway on that.

Himanshu Upadhyay — O3 Capital — Analyst

And at this year Murud, Raigad, okay, the 1,291 acres, okay, is it — means — we were going to develop with something like government project was that — is this, that land or what is this project?

Arvind Subramanian — Managing Director and Chief Executive Officer

So, we have 1,300 acres in Murud and now interestingly, we see two axis of growth there. One is the second home market, which from Alibaug will sequentially expand to Kashid and then to Murud. And the second is this land is also in the hinterland of the Dighi Port. And Dighi Port is getting expanded and a lot of investment is coming into that area from an industrial perspective. So both of these are opportunities that we are evaluating quite closely and some combination of that is what we will eventually develop Murud for is the hypothesis.

Himanshu Upadhyay — O3 Capital — Analyst

Okay. Best of luck. Thank you for the reply.

Arvind Subramanian — Managing Director and Chief Executive Officer

Thank you, Himanshu.

Operator

Thank you. The next question is from the line of Adhidev Chattopadhyay from ICICI Securities. Please go ahead.

Adhidev Chattopadhyay — ICICI Securities — Analyst

Yeah. Good morning. I have couple of questions.

Operator

Sorry to interrupt Mr. Chattopadhyay, sir, there is lot of disturbance from your line.

Adhidev Chattopadhyay — ICICI Securities — Analyst

Okay. Is it better now?

Operator

No sir.

Adhidev Chattopadhyay — ICICI Securities — Analyst

Okay. I’ll come back in the que then. Thank you.

Operator

Thank you. The next question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.

Pritesh Sheth — Motilal Oswal — Analyst

Hi, sir. Thanks for the opportunity. The first question is on the projects that’s slipped out, obviously you did well in terms of business development and added couple of projects. But any specific reason probably you can highlight on where did we missed out on those projects? Is it just competition and the pricing that was offered or just any comments on that?

Arvind Subramanian — Managing Director and Chief Executive Officer

Yeah. So largely competitive dynamics. So look in any such pipeline, we will have a win-loss ratio. And we lost one society redevelopment project, we won one. So it was kind of a 50-50 in that space. And there was one other project as well, which got dropped because of some concerns on the diligence front.

Pritesh Sheth — Motilal Oswal — Analyst

Okay. Okay. Got it. And second on this Kalyan 2, which we relaunched, we still see not much ramp-up in terms of sales, but there might be some bookings that would have slipped over to Q4, but are you overall now happy with the kind of response that we’ve got for the project? And also I think I noticed even we have a higher area available for development in Kalyan 2. So just comments on both.

Arvind Subramanian — Managing Director and Chief Executive Officer

Yeah. So look as the CEO of the business, I’m never happy until it is 100% sold out, right. But that being said, I think there has been good traction in this launch. We are — I must kind of openly state that we are starting to see some constriction of demand in that segment of the market, the sub-INR40 lakh kind of segment. That being said, we’ve got a good response to this launch. You will see the numbers coming through in Q4, because this was launched in December, so much of the bookings will come through in Q4.

Pritesh Sheth — Motilal Oswal — Analyst

Got it. Got it. And in terms of launches, while we have highlighted about new project launches that can happen in FY24 that includes Dahisar, Hosur and also the redevelopment one. I’m not sure if you also mentioned Kandivali, but apart from that, any phase launches that are planned in FY24 maybe early part of second half?

Arvind Subramanian — Managing Director and Chief Executive Officer

So, as I said, Mahindra Citadel, which we launched in November-December, that — the main launch it — what we launched in November-December was a pre-launch. And we will have the main launch in Q1 or Q2 — Q1 of next year. Nestalgia, as I mentioned, the second phase is getting launched in this quarter. So again, you’ll see some of that getting logged this quarter and some of it next quarter. So those are the new phases. Kandivali, as I mentioned, is certainly on track for H1 of next financial year.

Pritesh Sheth — Motilal Oswal — Analyst

Okay. Okay. Got it. That’s it from my side for now. I’ll jump back in queue for few more questions. Thank you.

Arvind Subramanian — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of V.P. Rajesh from Banyan Capital Advisors LLP. Please go ahead.

V.P. Rajesh — Banyan Capital Advisors LLP — Analyst

Thanks for the opportunity and congratulations for good set of numbers. My first question was regarding these housing society redevelopment projects. So if you can give a little more detail as to why is this business more interesting, does it have higher IRR and how long does it take to get all the pre-work done to even start the construction. Just wanted to know a little bit more about this new business that we’re taking on.

Arvind Subramanian — Managing Director and Chief Executive Officer

Yeah. So, couple of things on that. One, it gives you access to certain markets where otherwise it will be very hard to participate. So market like the Western suburbs in Mumbai are fully built out. There is no vacant land available, so redevelopment is really the only opportunity to create a presence there. These also tend to be higher price segment markets. So, therefore, a stronger gross margin on these kinds of projects. In terms of timeline, we are structuring these deals in in a manner, where a lot of our costs and investments start coming in only when the site is fully vacated, when all the members have vacated their apartments. So therefore the IRRs are also looking healthy.

That being said, this is our first redevelopment project. I’m sure there will be learnings. We are actively looking at the experience that other developers have gone through and learning from those, but we will go through our own learning curve. But I do believe this is an attractive opportunity space, particularly with the Mahindra brand and the kind of trust that [Technical Issue] members of the society, we automatically, we’ve had lots of calls ever since we’ve announced our intent to be in [Technical Issue] This is the first thing we’ve had in a long process, but hopefully then sets the tone for many others.

V.P. Rajesh — Banyan Capital Advisors LLP — Analyst

Right. So, are you saying that between the announcement that you did this month or last month rather, and the time you start working on the projects, you have not really going to put any capital into it except some minor fees, etc. that you may have to pay for getting the land use change, etc. Is that the way to understand this?

Arvind Subramanian — Managing Director and Chief Executive Officer

Yeah. So largely what happens is, at this stage, there will be some diligence costs, legal costs. We will start doing design because that is important as we get into discussions with the members about their apartment allocations, etc. Those are the kinds of costs. So it’s much more of a service cost rather than any land or development costs, those start kicking in only after the site is fully vacated.

V.P. Rajesh — Banyan Capital Advisors LLP — Analyst

I see. Okay. And then just on the balance sheet side, you mentioned that you will start to think about taking long-term debt. So, any idea what the size could be, because obviously your cost of capital is very, very low, and that’s a big competitive advantage. So I was just curious like how much debt are you planning to put on the balance sheet?

Arvind Subramanian — Managing Director and Chief Executive Officer

Okay. I think we’ll hand this over to Vimal, but in general, we will continue to be very prudent about leverage. But Vimal, if you want to share any guidance around what we’re looking at.

Vimal Agarwal — Chief Financial Officer

So, conceptually, the same point as in going by the land pipeline and assuming that you will have 15% to 20%, 22% of land cost, if it’s a greenfield acquisition. There’ll be up-front cash payout which will be required. Two sources operating cash flow, upstreaming of cash from internal joint ventures, etc. And the third one will be the long-term borrowings and all three right now are going — the first two it seems operating as well as upstreaming of cash are going fairly strong. And the third one will be borrowings. Debt equity right now is extremely low. And therefore, we don’t have any challenges in terms of raising it at very, very competitive rates.

V.P. Rajesh — Banyan Capital Advisors LLP — Analyst

Right. But you don’t have any particular either in mind as yet about what this terminal will look like.

Vimal Agarwal — Chief Financial Officer

So, our going-in position, say from, especially from finance point of view is that that will never be the constraint. So far as we are getting good land parcels, we’ll go ahead and invest.

Arvind Subramanian — Managing Director and Chief Executive Officer

In addition to what Vimal said about internal cash, our cash accruals from a collections perspective as well as upstreaming from the JVs, we also have forward visibility on cash because of the strong pre-sales. So in many of the projects, it’s only a matter of time as long as construction progresses that the cash will come in. So in that sense, there’s a lot more predictability on the next few quarters of cash flow as well.

V.P. Rajesh — Banyan Capital Advisors LLP — Analyst

Right, right. Okay. And then talking about your GDV pipeline that you were discussing earlier, so what is typically your win ratio in these type of builds out — it’s not win ratio, but how much of that actually materializes in your experience over the last two, three years?

Arvind Subramanian — Managing Director and Chief Executive Officer

You know, very hard to say. It’s early days, calculating ratios on a small base is fraught with risk. So I won’t venture into talking about win ratios, but as when I think Parikshit asked this question, typically two quarters is what it takes for these deals to either convert or get dropped.

V.P. Rajesh — Banyan Capital Advisors LLP — Analyst

Right. I was just curious because you have had the experience of last two, three years now. So you would have some sense of how much are you going to convert into potential pipeline versus then dropping off for whatever reason.

Arvind Subramanian — Managing Director and Chief Executive Officer

Look, two years back, we had said we want to do about INR2,000 crores of annual GDV addition. We are well above that. We will continue to build on top of that. So anywhere in the INR3,000 crore to INR4,000 crore range of annual GDV addition for the next year or two, I think sets us up very well.

V.P. Rajesh — Banyan Capital Advisors LLP — Analyst

Okay. Great. Wonderful. Thank you. That’s all I had. And all the best.

Arvind Subramanian — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Prem Khurana from Anand Rathi Shares. Please go ahead.

Prem Khurana — Anand Rathi Shares — Analyst

Yeah. Thank you for taking my question and congratulation on good set of numbers this quarter. Sir, I mean, the idea was to try and understand our business development activity little better or portfolio augmentation side little better. So, when I look at the numbers, I mean, essentially over the last two years we’ve done almost around eight odd transactions with GDV potential in excess of INR8,000 crore.

But when I look at the split, so there are two projects, I mean, Kandivali and Pimpri wherein it is in excess of INR2,000 crore each. So these two in itself almost 60% if I include Dahisar, the three projects make up almost 70% of the total potential that you have on the books now or what you’ve been able to add over the last two years.

So the idea was to try and understand how do we — how do we — I mean, think about the sizing of these projects because I mean Kandivali and Pimpri seems you want to create value over a longer period of time with each phase you would want to raise prices and generate more value for the shareholders. And you have something like Kanakpura some of these recent additions wherein it’s around INR400 crore, INR500 crore quick churn kind of projects. So, do we go with any thought in mind that we want to have this kind of balance between quick churn and long-term value creation or it is as if I mean, as the opportunity comes and we evaluate and then go ahead with the opportunity?

Arvind Subramanian — Managing Director and Chief Executive Officer

Great question, Prem. And I think we had talked about this maybe three or four quarters back. Ideally, we would like to be in the, let’s say, INR500 crore to INR1,000 crore GDV range for each of these projects. And particularly in cities like Bangalore and Pune, I think that’s a nice sweet spot because it allows you to potentially launch in a single phase or two closely spaced phases, construct quickly and get out. And given our focus on IRR, it’s important that the overall project schedule in terms of land acquisition to completion is kept as short as possible, typically, within 4 years 4.5 years is what we target.

But that being said, as you rightly pointed out, there are strategic opportunities like Kandivali and Pimpri, where we’ve taken a call to flex that upper limit. In the city of Mumbai, we will typically see deals which are north of INR1,000 crores, just given the price points in the market and the kind of land supply-side dynamics that exist.

In Pune, Pimpri was potentially an exception at INR2,000 crore — now, INR2,400 crore INR2,300 crore GDV. Again, there typically we would do INR500 crore, INR700 crore kind of GDV transactions, but in certain strategic markets, Pimpri, this is a market that we have had significant presence in. This is our fourth or fifth project in Pimpri. Similarly, we will look at other markets like Kharadi and Hinjewadi etc., which are very important micro markets in Pune, where if the right opportunity comes across, we are open to looking at larger GDV transactions.

Prem Khurana — Anand Rathi Shares — Analyst

Sure, sure. And on the redevelopment side, because now we have experienced dealing with these societies, so how is our experience with them in terms of timeline let’s say compared to dealing with land owners and individual here you’re required to manage expectation of number of people society would comprise a number of members and residents as well. So, is it fair to assume that the converged timelines would be slightly longer for society versus the open plots or the JDAs that you do?

Arvind Subramanian — Managing Director and Chief Executive Officer

Significantly long, but not just actually longer, because what you’re having to deal with is, in a typical land transaction, you deal with one landowner maybe a family, where there is two or three partners or family members who are taking the decision. Here you often have 100-plus members taking a joint decision. And it is a highly emotive decision, right. This is their house, they’ve lived in it for 20, 30 years, potentially this is second generation living in the house.

So it is — it is not an easy decision to take in terms of which offer to go forward with whether to redevelop at all, etc. So it tends to be a much more iterative process in the transaction that we won. There has been multiple rounds of discussions, multiple general body meetings that society has gone through where we presented and it’s the same case in the one that we lost as well.

So as many reasons, when a general body meeting is called for the decision not to be taken rather than for it to be taken. And one has to be patient and work through that.

Prem Khurana — Anand Rathi Shares — Analyst

Sure. And just one last bookkeeping question for Vimal, sir. Sir, in our presentation on Slide number 33, we give segment performance. And when I look at the residential vertical, our net debt seems to be up around INR120 odd crore sequentially. But when I try to kind of reconcile this with the kind of collections that we could have in this quarter at the construction spend that was incurred, there was a large gap. So why would we get to have the INR120 odd crore of sequential jump in our net debt for the residential vertical. Consol is down I understand, but in the residential vertical, it seems [Indecipherable] gone up.

Vimal Agarwal — Chief Financial Officer

You’re are saying net debt has gone up versus last quarter?

Prem Khurana — Anand Rathi Shares — Analyst

Yes, sir. So for the quarter, it’s around INR94 crore. And if you were to refer to your last quarter presentation, it was —

Vimal Agarwal — Chief Financial Officer

The position you are seeing is 31st December position, right?

Prem Khurana — Anand Rathi Shares — Analyst

Yeah, 31st December versus 30th September sequentially INR120 crore of rise.

Vimal Agarwal — Chief Financial Officer

Yeah, that’s right. So it’s all for the good is what I would say. There are, obviously, as Aravind mentioned, there are pipeline and therefore there is funding requirement, which will be there.

Prem Khurana — Anand Rathi Shares — Analyst

Okay, but the (Speech Overlap)

Arvind Subramanian — Managing Director and Chief Executive Officer

Land acquisition.

Prem Khurana — Anand Rathi Shares — Analyst

Okay. But the Kandivali payment is still not done right, and because it is always reflecting as a part of other financial liability. So, which is why I was wondering, if it was, if there was any other payments that you would have made during the quarter.

Vimal Agarwal — Chief Financial Officer

Yeah. So two things, one is that what you’re seeing on the liability side is not the full liability because part of the contribution has been paid out, one. Second is, Thane line conveyance happened last quarter. And towards that conveyance, they were payouts which we would have done to state authorities, both of this were also the —

Prem Khurana — Anand Rathi Shares — Analyst

Sure. And INR70 crores would have gone to the partner as well as in the Mahindra Homes, the buyback that they would have done so that again would have impacted to a certain extent, right?

Vimal Agarwal — Chief Financial Officer

Yes, absolutely. So as a data point, and this is not specific to your question, but I just do want to share this. In the last nine months, we have shared almost about INR200 crores with external stakeholders, including for example IFC World Bank or Actis or other partners which we have. So to that extent, it again indicates the robust cash flow, which we are experiencing in the last few quarters.

Prem Khurana — Anand Rathi Shares — Analyst

Sure, sir. That explains. Thanks a lot and all the very best for future.

Operator

Thank you. The next question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.

Pritesh Sheth — Motilal Oswal Financial Services Ltd. — Analyst

Yeah. Thanks for the follow-up opportunity again. My question is on again on redevelopment. So, while we are seeing not much competition in terms of outright land, but at the same time redevelopment does sound a good opportunity even for smaller developers. So, what kind of competition we are seeing in redevelopment especially where we are targeting those groups or a group society redevelopment rather than just one tower? So any comments on that?

Arvind Subramanian — Managing Director and Chief Executive Officer

So we see quite a lot of competition in the society redevelopment space as well. There are specialist player there both very local players in particular neighborhoods, who have built a strong reputation, but also players at the city level who have built a portfolio of redevelopment assets. And just like us, there are other developers who are dipping their toes and starting to embrace redevelopment who traditionally not done redevelopments. So, we are seeing a full set of competition in redevelopment, which we also see in outright deals. We are not the only ones who are seeing this as an attractive opportunity, many other leading developers are also pursuing this.

Pritesh Sheth — Motilal Oswal Financial Services Ltd. — Analyst

In terms of the projects we won in Santacruz, did we offer a better growth in terms of area or is it the brand, which attracted the tenants to choose us as a redevelopment partner, because I’m sure there would be enough competition for that project as well?

Arvind Subramanian — Managing Director and Chief Executive Officer

So the way these typically play out and I’m giving you a very general answer, there is often first weeding out of developers that the society would like to do the deal with. So, that is kind of that technical qualification, if I can call it that from a traditional procurement perspective.

And then among that, there is then a pure commercial discussion that happens. So, yes, in this situation, we did offer the best commercial terms, but we were also then in a shortlist which comprised a peer group, which was very credible. So, its — we’re not then at that stage competing with just any other developer.

Pritesh Sheth — Motilal Oswal Financial Services Ltd. — Analyst

Sure. Got it. And just if you can provide a split of the pipeline that we have right now around INR5,500 crore, out of that how much is outright land or redevelopment and in particular, which cities that they are targeted in?

Arvind Subramanian — Managing Director and Chief Executive Officer

Yeah, I think Parikshit had asked this earlier. So just to reiterate, roughly INR5,500 crores total split as INR2,500 crores in Mumbai, INR2,000 crores in Pune, INR1,000 crores in Bangalore. And if I split it by transaction type, roughly INR3,500 crores of outright, INR1,000 crores of JDAs and INR1,000 crores of redevelopment and plotted.

Pritesh Sheth — Motilal Oswal Financial Services Ltd. — Analyst

Sure. Got it. And just lastly, I don’t know if I missed it out, but update on Thane, is it still FY ’24 or spilled over to ’25?

Arvind Subramanian — Managing Director and Chief Executive Officer

We’ve always said ’25, early part of ’25. So it stays there.

Pritesh Sheth — Motilal Oswal — Analyst

Okay. Okay. Got it. Thanks for answering my questions. That’s it from my side and all the best.

Pritesh Sheth — Motilal Oswal Financial Services Ltd. — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.

Parikshit Kandpal — HDFC Securities — Analyst

Thanks for the follow-up. So I mean, my question is that last two years back, we have set INR2,000 crores of GDV addition and INR2,500 crores of pre-sales by ’25. And we’ve been doing 2x of that, but still I see on the slide FY ’25, INR2,500 crores, so which should ideally have gone up by 2 times, so any thoughts there?

Arvind Subramanian — Managing Director and Chief Executive Officer

Yeah. So look as you kept pushing me and I’ve stuck with that stand, we would certainly like to do better, let the land visibility build up a bit more and we can kind of update those [Technical Issues]. So INR2,500 crore is, as I’ve always said, it is a step in the journey. If we achieve it, before FY ’25, great. I mean, it just means that the journey as well on its course. It was never intended to be a destination.

Parikshit Kandpal — HDFC Securities — Analyst

The second one is on the spillover of you said did touch upon that there was some spillover of sales on the December launches, which will get reflected in Q4. So between all these new launches, which you did in this quarter Pune, Bengaluru and MMR. So, how much would be the spillover sales, which would have not got recorded under this quarter and maybe will just slip over from December to next quarter?

Arvind Subramanian — Managing Director and Chief Executive Officer

I think, let’s wait for this quarter to close for those numbers to come out, but we’ve got good response to those launches, Citadel as well as Kalyan. I think, Eden phase 2 most of it has been recognized in the last quarter below last quarter to this quarter. Those are the two which came in at about December, so there was some bookings that happened last quarter and some will happen this quarter.

Parikshit Kandpal — HDFC Securities — Analyst

But in this INR450 crores of sales, how much would be the new launch contribution?

Arvind Subramanian — Managing Director and Chief Executive Officer

I don’t have that on the top of mind.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. Maybe I’ll take it offline.

Arvind Subramanian — Managing Director and Chief Executive Officer

We can take it offline.

Parikshit Kandpal — HDFC Securities — Analyst

Yeah. And just lastly on this question on the warehousing. So we had a tie-up with Actis of 100 acres. So when do we start monetizing this land bank in Jaipur, which year it comes there?

And lastly on that operating cash flows of nine months, so post construction and other period costs what would have been the net operating cash flows for the nine months?

Arvind Subramanian — Managing Director and Chief Executive Officer

So the Actis joint venture is building out nicely. We are in the phase where the company has been incorporated, we are building out the management team and hopefully in the next three months, the key leadership team should be in place. And that’s when we will start bringing the land — the seed assets in as well as look at virgin assets, greenfield assets as well to build out the business. So over the next year or so, I think that business will start getting built out quite nicely.

As you know, we are a minority partner in that. So will be largely playing kind of a Board and governance role rather than an operating role there in addition to providing the feedback.

Vimal, you want to talk about operating cash flows?

Vimal Agarwal — Chief Financial Officer

Operating cash flows, overall, for the first nine months, primarily because of very solid action on the IC leasing side, which I’ve been talked about of about INR255 crores, similarly on the collections and sales side, we had operating cash flow positive about, INR450 crores in the first nine months. And majority of this has been deployed either towards acquisition of new land parcels or buying more development potential in the existing land parcel or towards payment of our existing stakeholders.

Parikshit Kandpal — HDFC Securities — Analyst

You are saying INR450 crores is after construction cost and after period costs, employee costs and corporate overheads. So post that you’ve generated INR450 crores of cash flow.

Vimal Agarwal — Chief Financial Officer

After every operating including corporate overheads.

Parikshit Kandpal — HDFC Securities — Analyst

And pay out of partners? Does it include pay out to partners also which you mentioned about INR200 crores?

Vimal Agarwal — Chief Financial Officer

The operating numbers and to that extent financing or the investing activity is not included.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. Got it, sir. Okay. Understood. Thank you, Vimal.

Operator

Thank you. The next question is from the line of Ronald Siyoni from Sharekhan. Please go ahead.

Ronald Siyoni — Sharekhan — Analyst

Yeah. Good morning, sir, and congratulation on good numbers. My first question was the pre-sales or sales booking we have done over the last two years and say before that. What kind of movement you have seen in terms of the gross margin, operating margins and return on capital employed. No sales done before the two years and new sales over the trailing two years.

Operator

Sorry to interrupt Mr. Siyoni. Sir, we are not able to hear you clearly.

Arvind Subramanian — Managing Director and Chief Executive Officer

Yeah. Ronald, you are not clear at all.

Ronald Siyoni — Sharekhan — Analyst

Am I audible now?

Arvind Subramanian — Managing Director and Chief Executive Officer

Yes, much better.

Ronald Siyoni — Sharekhan — Analyst

So first question was the sales booking, which we have done over the trailing two years and before two years. So what kind of margin trajectory you have seen before two years and last trailing two years in terms of operating margins and gross margins and return on capital employed? How we have evolved over the trailing two years, the new launches which we have done?

Vimal Agarwal — Chief Financial Officer

So, Ronald, couple of points here, and this is more like a summary of what we have been responding to in the last four quarters or so. In general, our sales numbers first and then we get into the gross margin numbers. We were at about INR700 crores per year till about F ’21 and then last year was about INR1,000 crores and right now it’s closer to INR1,500 crores as we speak.

Now with every passing quarter, there are two things which we have done. One is a much stronger control on the cost and that comes on the — with very active interventions we have got on the design side, as well as costing sides to get our estimations much more accurate closer to reality. So that we can ensure the realizations in net realizations are much superior.

And the last two launches, which we have done, we have usually done better than our guardrails, which for example on the profitability side all cost taken will be closer to about, say, 18% or upwards. And this is about 4, 5 percentage points better than the old projects which you just talked about.

Ronald Siyoni — Sharekhan — Analyst

So, 18% on the operating level, which was better by 4% to 5% you mean to say?

Vimal Agarwal — Chief Financial Officer

Yeah.

Ronald Siyoni — Sharekhan — Analyst

Okay. And second question was in terms of what we have seen the rise in the interest cost. So, have you kind of seen some flatness or sluggishness in the — especially in the affordable housing side or in terms of footfall per se closing of sales by customers. So, what kind of interest rate impact have you seen especially on the affordable projects?

Arvind Subramanian — Managing Director and Chief Executive Officer

Yeah. So Ronald, I covered this in my opening comments. We are seeing some constriction in demand on the affordable side, particularly less than INR40 lakh kind of ticket size. The combination of higher mortgage rates and also inflation is starting to pinch affordability in that segment.

That being said, it is still robust market. So, while the overall market might be kind of flat or declining compared to the mid-market, which is growing quite significantly, within that the stronger players are still seeing good traction.

Ronald Siyoni — Sharekhan — Analyst

Okay. And sir, last question would be setting aside the INR40 lakh categories, in the upper categories what kind of percentage on an average there is mortgage lending taken by the customers?

Arvind Subramanian — Managing Director and Chief Executive Officer

Roughly 60% to 70% of sales in that segment happens through mortgage.

Ronald Siyoni — Sharekhan — Analyst

Okay, okay. Thank you very much sir and best of luck.

Arvind Subramanian — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Manan Patel from Airavat Capital. Please go ahead.

Manan Patel — Airavat Capital — Analyst

[Technical Issues]

Operator

Sorry to interrupt, Mr. Patel. We are not able to hear you.

Manan Patel — Airavat Capital — Analyst

Hello.

Operator

Sir, your audio is not audible.

Manan Patel — Airavat Capital — Analyst

Am I clear now?

Operator

Sir, your voice is sounding a little muffled.

Arvind Subramanian — Managing Director and Chief Executive Officer

Yeah, you can go ahead. We can hear you now.

Manan Patel — Airavat Capital — Analyst

Sir, the first question is related to IC business. I want to understand like last — this quarter we had 8 acres of sales in the SEZ and we were talking about some policy change. So has that policy change happened or how do you think about that SEZ part of the MWC?

Arvind Subramanian — Managing Director and Chief Executive Officer

So we are still waiting for clarity on that. This is the DESH Bill that was announced in the last budget and the rules were to be formulated around how that will get implemented in the SEZs, which effectively the spirit of that is to open up the SEZ for units that also serve the domestic market. The specifics are still awaited and we are hoping in the next few months, we will have some clarity on that.

Manan Patel — Airavat Capital — Analyst

Sir, second question is you mentioned to one of the previous participants that INR450 crores of operating cash flows in the nine months. So I understand it would be lumpy in our business, but for full-year basis in general, should we assume a north of INR600 crores cash flows over the next few years?

Vimal Agarwal — Chief Financial Officer

Arvind articulated it very well FY ’25 number. So to that extent, directionally the operating cash flow is going to be sort of reflective of the sales trajectory, which we are on. Yeah.

Manan Patel — Airavat Capital — Analyst

And sir, last question, even though we have very less land left MWC Chennai, but realization came down to some extent. So any particular reason for that?

Vimal Agarwal — Chief Financial Officer

No fundamentally, very limited land parcels and the location of those land parcels can be inside the World City. There are few land parcel, which are — which are residing outside of the World City premises in that sense, what we call as outside boundary land. And every land transaction to that extent is negotiated and depending on the location trajectory overall area, etc., the pricing gets fixed.

Arvind Subramanian — Managing Director and Chief Executive Officer

Yeah. Going forward also you will see us doing some transactions of what we call outside boundary land, which is beyond the boundaries, planned boundaries of the World City. Those are significantly lower price, there is fundamentally no infrastructure nothing none of the World City infrastructure is extended there. So it’s a different market altogether.

Manan Patel — Airavat Capital — Analyst

Thank you so much, sir. And wish you all the best.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Arvind Subramanian for his closing comments.

Arvind Subramanian — Managing Director and Chief Executive Officer

Great. Thank you once again all of you for participating in the call. As we mentioned, we are on a very steady and planned growth trajectory. The numbers are reflective of that and all the operating metrics, residential presales, industrial leasing, cash flow or land acquisition, these are all trending in the direction that has been indicated. And with your support and blessings, we hope to continue on that trajectory. We are seeing a strong cycle in the real estate sector. So there is favorable tailwinds as well, which we hope to take advantage of. Thank you again.

Operator

[Operator Closing Remarks]