Proxy to Mumbai’s redevelopment story
Expects to clock a presales CAGR of 129% over FY25-28; initiate with a BUY rating Sri Lotus Developers and Realty (LOTUS), a public limited company incorporated in February 2015 under the name AKP Holdings Private Limited, has established itself as a key player in the society redevelopment space. The company’s pre-sales have clocked a CAGR of 39% over FY22-25. Currently, LOTUS has four completed and five ongoing residential projects with a combined potential value of INR19-20b, alongside eight upcoming residential projects with a GDV of INR70-75b. Additionally, it is developing three commercial assets with an estimated sales potential of 0.2msf, translating to a value of INR30-35b. Looking ahead, we estimate LOTUS’s presales to post a notable 129% CAGR over FY25-28, guided by its strong project pipeline.
Niche play in the luxury redevelopment space with a proven track record
Mumbai is home to numerous reputable and well-established real estate developers, both listed and unlisted, with proven track records of delivering projects across various price ranges. However, the future of Mumbai’s real estate market appears to be focused on redevelopment. It is estimated that nearly 30,000 buildings will undergo redevelopment over the next 3-5 years. A key challenge to this growth model is the limited number of developers with the necessary experience to execute these complex projects. LOTUS has emerged as a key player in society redevelopment, having successfully executed eight projects with a total developable area of 1.35msf. The company has distinguished itself by focusing exclusively on premium micro-markets, specializing in luxury residential properties across Mumbai’s most exclusive neighborhoods. LOTUS’s portfolio includes projects in prestigious and high-profile locations such as Juhu, Andheri, Bandra, Prabhadevi, Worli, Ghatkopar, Versova, and Nepean Sea Road. These areas are considered home to the city’s elite, reflecting the company’s focus on luxury and exclusivity.
Perfect blend: Strong testimony, product- and customer-oriented approach, and in-house end-to-end execution
LOTUS has an impeccable track record of successfully executing society redevelopment projects in Mumbai’s premium markets, a feat made particularly notable by the high expectations of homeowners in these exclusive areas. Homeowners from completed LOTUS projects have provided strong testimonials, clearly demonstrating the company’s ability to not only meet but exceed client expectations. The company is product-focused rather than project-focused, placing strong emphasis on the finer details of the finished product, including quality, amenities, design, and architecture. Its customer-oriented approach, which treats existing and new homeowners equally, has helped generate strong referrals from both customers and new societies seeking redevelopment. As the company plans to expand, it is on track to uphold its strong track record by executing 2.6msf across current and future projects.
LOTUS prefers to manage the entire project lifecycle, including design and construction, allowing tighter control over execution pace and costs. The company has consistently delivered projects well ahead of schedule—even during the COVID19 pandemic. Its four most recent projects were all delivered at least 18 months before their due dates.
Asset-light model enables rapid scaling
Mumbai, a land-starved city, experiences new property supply primarily generated through joint developments, joint ventures, and land rezoning, such as converting former mills into residential areas or redevelopment projects. Although society redevelopment is a complicated model, it offers significant opportunities to developers, as the base FSI is now 2x, with additional FSI available through Transferable Development Rights (TDR) and fungible FSI, further increasing development potential. Leveraging its deep understanding of the MMR market, LOTUS plans to grow using an asset-light model through JD/JV or society redevelopment. This approach allows rapid scaling with minimal capital deployment against outright land purchases. Currently, the company is executing 2.6msf of projects, nearly 89% of which are under the redevelopment model.
Robust collections and a healthy margin to generate a strong surplus
The company is focused on execution, with at least five ongoing projects with a total GDV of INR15-16b scheduled for completion by FY28. Moreover, eight new projects are planned for launch by the end of FY27, which will move into the execution phase. As a result, LOTUS’s collections are expected to clock a 129% CAGR and reach INR40.2b by FY28E. Cumulatively, LOTUS is projected to collect INR149b from projects under execution by FY30, guided by timely execution. The company’s healthy margins are a result of its selling strategy—pricing at ~20% premium to the nearest competitor, in-house end-to-end execution, and a lean sales team. Driven by strong margins, LOTUS is expected to generate cumulative operating cash flows of INR69b by FY32, with operating margins exceeding 40%.
Zero debt and strong financials
LOTUS’s management firmly believes that a debt-free developer leads to a stressfree customer. Upholding this philosophy, the company consistently aims to remain net debt-free. Its zero debt and litigation-free status have become key differentiators, enhancing project acquisition alongside top-notch execution. LOTUS posted a 75% CAGR in revenue over FY22-25 is expected to post a 58% CAGR in revenue over FY25-28, reaching INR21.6b by FY28, guided by strong collections resulting from impressive execution. Its EBITDA is expected to grow at a 52% CAGR and reach INR10.2b by FY28 with a 47% margin. The company is expected to achieve a PAT of INR7.7b by FY28, reflecting a 50% CAGR over FY25-28 and best-in-class margins of 36%. With strong profitability and a net cash position, the company’s ROE and ROCE are expected to remain above 26% by FY28.
Valuation and view: Expansion to drive valuation
LOTUS posted a 39% CAGR in pre-sales over the past three years, which is expected to accelerate to 129% over FY25-28, guided by its robust project pipeline and strong response to launches. Collections are also expected to clock 129% CAGR and reach INR40.2b by FY28.
Additionally, backed by best-in-class execution capabilities, the company is expected to achieve operating margins above 40% and net profit margins exceeding 35%.
With RoE/RoCE above 26% and a net cash status, LOTUS stands out as the best proxy for MMR’s redevelopment growth story.
We value the ongoing and upcoming projects based on a DCF approach, applying a WACC of 13% and terminal growth of 2%, to arrive at an NAV of INR121b or INR250/sh. Accordingly, we initiate coverage on the stock with a BUY rating.
