Synopsis: Lodha’s elevated inventory days stem from its township-led, long-cycle development strategy rather than weak demand. Large land banks, phased execution, and a deliberate supply buffer inflate inventory metrics while supporting margins, cash flows, and long-term value creation.
Macrotech Developers, better known as Lodha, often draws investor attention for its unusually high inventory days and elongated cash conversion cycle. At first glance, these metrics may appear concerning. However, a deeper analysis shows that they are a direct outcome of Lodha’s business model, built around large townships, phased development, and disciplined supply management.
With strong presales growth, healthy operating cash flows, and low leverage, Lodha’s inventory profile reflects strategic choices aimed at maximising long-term value rather than short-term turnover.
Township Scale and Long-Gestation Development Model
Macrotech Developers’ high inventory days are intrinsically tied to its township-dominated portfolio, including Palava and Upper Thane. These projects are measured in decades, not years, which means that large land banks and future developments remain on the books for a longer period of time.
With 600 million sq ft of development land, Lodha is essentially operating a city-scale development model. Its inventory includes not only completed sales but also land in development, approvals, and phased development, which inherently pushes inventory days to 1,614 days in FY25.
Infrastructure-driven value unlocking further extends the cycle. Connectivity enhancements like the Navi Mumbai International Airport and the Mulund-Airoli-Palava corridor are expected to drive unlocking of pricing over time, which in turn encourages Lodha to extend inventory days to maximise long-term value creation as opposed to driving sales.
Intentional Supply Buffer and Sales Mix Dynamics
Lodha maintains an intentional supply buffer of 2.5-3.0x supply-to-sales, thereby ensuring a steady supply of inventory across micro-markets and minimising reliance on new launches. As of Dec-25, the company has reported Rs 89 billion of completed unsold inventory and Rs 347 billion of ongoing unsold inventory, which is geographically distributed across Mumbai, Pune, Bengaluru, and the new NCR business.
Sales are primarily driven by existing inventory and not new launches. Only 25-30% of presales are contributed by new launches, while 50% of sales are from under construction. inventory and 20% from ready-to-move-in inventory, thereby naturally slowing down inventory turnover but improving margins and absorption.
Moreover, Lodha’s average ticket price has increased to Rs 2.3 crore, thereby indicating premiumisation. Higher-end properties naturally have longer sales and construction cycles, which further extends inventory days without necessarily pointing towards weak demand.
Inventory-Led Cash Cycle, Not Balance Sheet Stress
The effect of high inventory is reflected in the cash conversion cycle of 1,504 days in FY25, which is largely driven by inventory. Crucially, this is not a receivables problem; debtor days are a mere 21 days.
Payable days of 130 offer some working capital relief, while the company has pointed out that cash flows typically follow presales by about a year, which is a milestone-driven characteristic of real estate cash flows rather than a liquidity issue.
Despite the long cash cycle, Lodha has still managed to generate Rs 66 billion of operating cash flow in FY25 and is further improving its balance sheet. With net debt-to-equity ratios at 0.45x and ROCE trends improving to 16%, it is clear that high inventory days are a deliberate strategy that is focused on long-term value creation rather than a liquidity issue.
In conclusion, the high inventory days at Lodha are strategic and structural, driven by its township-scale developments, disciplined supply approach, and long gestation value creation business model. The high inventory and cash cycle days are not indicative of weak demand or balance sheet issues, as seen from its presales growth, operating cash flows, leverage, and return performance. Rather, they represent a deliberate trade-off between inventory turns and margins, making the headline efficiency metrics less relevant in assessing the Lodha business model.
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