The Macrotech Developers, a major real estate company in Mumbai and also known as the Lodha Group, has secured debt facilities of Rs 650 crore for three years. They obtained this funding from Standard Chartered Bank and Deutsche Bank to replace their high-cost debt.
Standard Chartered Bank contributed Rs 245 crore with an annual interest rate of 9%, while Deutsche Bank chipped in with Rs 405 crore at a 9.5% interest rate, payable quarterly. It’s worth noting that the debt these banks provide comes in the form of non-convertible debentures (NCDs) with varying terms, where Deutsche Bank’s contribution is unsecured, while Standard Chartered’s bonds are secured.
Moreover, the NCDs worth Rs 245 crore issued to Standard Chartered Bank include a condition that imposes a 50 basis points increase in interest for every downgrade in Lodha’s credit rating. One basis point is equivalent to one-hundredth of a percentage point.
Additionally, the interest rate on the Rs 405 crore NCDs subscribed by Deutsche Bank is calculated with a 2.7% spread over the 90-day treasury bills issued by the Reserve Bank of India (RBI). This spread on T-bills will decrease by 25 basis points starting from the December 2023 quarter, as stated in the bond’s offer document shared on the stock exchange.
This decision to refinance their debt is part of Lodha’s efforts to decrease their overall debt, even as they have initiated more than half a dozen new projects in the current fiscal year.
In fact, during the September quarter, Lodha expanded its portfolio by adding two projects in the Mumbai Metropolitan Region (MMR), collectively valued at Rs 2,300 crore, per the company’s quarterly operational update.
In an email response to ET, Sushil Kumar Modi, CFO of Lodha, said: “Our exit cost of debt as of June 2023 was 9.65%. Given the NCDs were raised between 9% and 9.5%, they would lower the overall interest cost by 5-10 bps.”
Net Debt Reduction
As of September 2023, Lodha has reduced its net debt significantly, bringing it down to Rs 6,730 crore from Rs 16,100 crore as of March 2021. This impressive reduction has been achieved through increased sales bookings and collections.
Lodha is confidently progressing towards accomplishing its full-year target for reducing net debt to a level lower than 0.5 times its equity or 1 time its operating cash flow. Further debt reduction is anticipated during the second half of the current financial year.
For the fiscal year 2024, the developer has a debt payment obligation of Rs 1,403 crore, and the group is well-prepared to handle these upcoming repayments, as confirmed by a rating report from Crisil dated September 15. It’s worth noting that the group possesses unsold ready-to-move-in inventory worth approximately Rs 6,560 crore across completed, ongoing, and planned projects. As a result, Crisil upgraded its rating by one notch to CRISIL A+.
The rating agency has set its sights on reducing gross debt to Rs 8,000 crore in fiscal 2024, down from the previous year’s figure of Rs 9,050 crore.
