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Informist, Monday, Oct. 28, 2024

By Rajesh Gajra

MUMBAI – Real estate company Macrotech Developers Ltd., which operates under the brand 'Lodha', is mulling developing large, scalable data centres on its own and earning rent rather than selling land pieces to global hyperscale data centre companies, the management of the company said in a post-earnings conference call on Monday. "We are just learning the data centre business currently," the management said, adding that the company will decide in 2025-26 (Apr-Mar) whether it should develop the data centre buildings and rent them to hyperscale data centre companies who don't want to own the asset.

The excitement about the data centre business comes after Macrotech Developers closed a transaction with a global hyperscale data centre player for close to 40 acres in Palva near Navi Mumbai at the rate of INR 120 million per acre. The Palava deal with a hyperscale data centre company, which was signed earlier, was concluded this month "in terms of the cash flow being received," the management said.

Asked about the rental model, the management said the company will provide the land, approvals, or in other words, own the bare shell, and then rent it out to the data centre players. But it also put in a word of caution, "we haven't quite frankly understood the value chain beyond that or understood whether it makes sense for us to play in it or not."

In the last 3-4 years, the company has developed industrial and warehousing income streams from Palava, the management said.

The current assessment by the company puts data centre business growth at about 25% every year. The management said that installed capacity for the business in India lags that in Asia Pacific countries. "With the explosion in data and AI, this demand is going to increase significantly in India over the next decade," the management said.

The management said cloud-based and other data centre operators face key challenges due to scalability requirements, reliable power connectivity, access to deep sea cables, continuous water supply, and other world-class infrastructure. "Work in Palava for making the location data centre acceptable has been going on for over five years now... and (for the deal that was successfully concluded this month) it took us almost 15 months in a due diligence process with one of the world's leading hyperscalers to get approved as a location," it said.

The management of the real estate developer said that the company was currently in talks with two other major data centre players that value the land at INR 200 million per acre.

The management said the moderation in volumes in the September quarter was due to the company's stated strategy of "moving away from very lower mid-income, entry-level housing, (and) towards upper mid-income and premium housing."

On annual price growth, the company said in Apr-Sept it was at about 3%. This, according to the management, was in line with its guidance for a 6%-7% price growth for FY25. The management said the property market "is pretty efficient right now in terms of what margins it is leaving on the table." This requires the price growth to be reasonable and "one which improves affordability rather than highly speculative double-digit price growth," it said.

The company management said with the accelerated business it did in Apr-Sept, it expects the operating cash flows to increase significantly in Oct-Mar. The company's cost of funds was about 8.9% in the September quarter, as against 9.1% in the previous quarter.

On Monday, shares of Macrotech Developers ended 2.4% higher at INR 1,108.20 on the National Stock Exchange.  End

Edited by Saji George Titus

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