Max Estates Limited: ‘Max’imising on industry tailwinds

22 Dec 2023 , 11:11 AM

Analysts of IIFL Capital Services recently interacted with the management of Max Estates (MEL). Post the reverse merger, Max Estates is now a pure play on mixed use real estate development in NCR. The company expects to build on its pre-sales of Rs18bn for YTD FY24; by targeting Rs23-25bn of GDV launch in H1FY25, and ~2msf of annual GDV addition in residential projects from hereon. NCR residential markets continue to witness strong demand and pricing tailwinds. Progress on commercial leasing has been also been encouraging, creating further room to take up LRD debt. Scaling up without stretching the balance sheet, and focus on profitability, is the key. 

Scaling up Residential amid strong tailwinds: 

MEL launched its second residential project in Noida in 1HFY24 and clocked in a pre-sales of Rs18bn (expected Ebitda margins >30%). MEL expects to build on this momentum, with a launch in 1HFY25 at Sector 36A, Gurgaon with GDV of Rs23-25bn. Further, it plans to add ~2msf annually in residential, with a pricing range of Rs12-20,000/sq.ft, indicating a GDV addition of Rs24- 40bn. NCR continues to witness strong tailwinds both on demand and pricing; further competitive intensity in business development remains favorable for the incumbents; although land prices have also shot up. 

Steady leasing in Commercial: 

MEL has recently leased ~50% at Max Square (LOIs incl.) at premium rentals, and achieved ~54% pre-leasing (LOIs Incl.) for Max House Phase 2; which could add ~5bn of gross rentals (over and above FY23 rentals of Rs4.9bn), and allow MEL to replace at least Rs2.4bn of construction debt with LRD. Further, it has undertaken construction of office spaces of 1.2msf in Noida and will launch another 1.6msf in Gurgaon; driving the total gross rental income on completion and leasing to Rs4-4.7bn p.a. Over this period, MEL’s facility management business can also scale up to Rs2bn annually with ~20% margins. 

Strong visibility on growth: 

Recent development in the Delhi One Project, Noida at regulatory level (for insolvency cases) have been encouraging; will add 1.5msf of net saleable/leasable area. Further under the land pooling policy, 100acres of promoter group land could add ~4- 5msf of developable area. Net debt of Rs4.9bn will be largely LRD (>40% of gross debt currently), and remains a key monitorable during MEL’s growth journey.