Max Ventures and Industries: Riding the NCR Real Estate void

20 Jun 2023 , 10:47 AM

Recommendation: Not Rated

Capitalizing on supply consolidation in the NCR, MaxVIL aims to evolve into a multi-asset-class, NCR focused real estate developer. It started out in 2017 with a focus on building commercial annuity projects, the company is now aggressively expanding into Premium Residential segment as well, with a new launch planned in Noida in Q1FY24. Over the next few years, MaxVIL plans to execute 7-8msf of developable area. Scaling up without stretching the balance sheet and focus on profitability, will be the key to stock performance.

Strong execution so far, commands premium rentals

After selling stake in Specialty Films business, MaxVIL is now a pure play on real estate and is also in the process of a merger with its subsidiary Max Estates, which will be the eventual listed entity. Currently, it has 2 fully leased annuity assets with leasable area of 0.4msf, generating annuity revenue of Rs. 483 million p.a. It also provides CAM services/fitouts and managed offices to tenants through its subsidiary Max Asset services – (MAS). MaxVIL’s projects enjoy superior location/connectivity, and command 20-30% premium to prevailing market rents.

Entering a high growth phase

MaxVIL recently received OC for Max Square (0.7msf) and is completing another 0.2msf in Delhi, which will generate Rs. 850 million annuity income. Further, it has acquired annuity development potential of >3msf with a revenue potential of Rs. 4.7 billion p.a. (MAXVIL share Rs. 3.3 billion). In the Residential segment, it has acquired 2 projects with GDV of Rs. 45 billion (MaxVIL’s share Rs. 35 billion); the Noida project is expected to be launched in Q1FY24. MaxVIL plans to add 1msf each in Commercial and Residential, over next 5 years.

Healthy balance sheet to aid capitalizing on industry tailwinds

MaxVIL has secured committed investment of Rs. 8 billion from New York Life Insurance across some of its commercial assets; thereby de-risking capex. Further, it has received Rs. 6.3 billion from the sale of Speciality Films business — all of which has aided business development at a time when NCR is witnessing strong supply-side consolidation. Despite being capex-heavy, balance sheet has remained healthy so far (0.6x net debt-to-equity for FY23); and management expects to keep it within 0.6-0.8x in the medium term.