Motilal Oswal Sees 35% Upside for Sri Lotus Developers: 4 Key Factors Driving Growth
Motilal Oswal Financial Services has initiated coverage on Sri Lotus Developers with a 'Buy' rating, setting a target price of Rs 250. This implies a potential upside of 35% from current levels. The strong sales growth over the next three years and a focused niche market have led to this coverage. Following the initiation, the share price of Sri Lotus Developers rallied over 8% to an intra-day high of Rs 200.69 on the National Stock Exchange.
Motilal Oswal expects Sri Lotus Developers to achieve a presales Compound Annual Growth Rate (CAGR) of 129% over FY25-28, driven by its robust project pipeline. The company’s collections are also projected to grow significantly, reaching Rs 4,020 crore by FY28. This strong financial trajectory is expected to generate cumulative operating cash flows of Rs 6,900 crore by FY32, with the company projecting best-in-class margins.
Sri Lotus Developers has established itself as a key player in the society redevelopment space, focusing exclusively on premium micro-markets in Mumbai’s most exclusive neighborhoods. This specialisation in the luxury redevelopment space is a niche play. The company’s portfolio includes projects in prestigious, high-profile locations such as Juhu, Bandra, Worli, and Nepean Sea Road, catering primarily to the city’s elite. This focus positions the company well to benefit from the rising demand for premium and luxury housing in the MMR (Mumbai Metropolitan Region).
Sri Lotus Developers’ management adheres to the belief that a debt-free developer leads to a stress-free customer. The company’s zero debt and litigation-free status have become key differentiators, enhancing project acquisition and top-notch execution. Motilal Oswal notes that this financial strength, coupled with strong profitability visibility, ensures the company is expected to remain net cash positive. Furthermore, the brokerage expects Return on Equity (RoE) and Return on Capital Employed (RoCE) to remain above 26% by FY28.
The company leverages its deep understanding of the land-starved MMR market. The company plans to grow using an asset-light model primarily through Joint Developments (JD), Joint Ventures (JV), or society redevelopment. This strategy allows for rapid scaling with minimal capital deployment compared to outright land purchases. Currently, almost 89% of Sri Lotus Developers’ projects are executing under the redevelopment model.
