Aditya Birla Real Estate gains growth visibility from Vashi project and launch pipeline

Investment View

Motilal Oswal Financial Services (MOFSL) reiterates its Buy rating on Aditya Birla Real Estate (ABREL) following its August 14, 2026 results update. The broker believes the addition of a Navi Mumbai redevelopment project, the sale of the paper division and a stronger launch pipeline have improved medium-term growth visibility, despite a tepid but expected Q1 FY27 operating performance.

MOFSL maintains its FY26-FY28E pre-sales compound annual growth rate forecast of 10%, reaching Rs 99 billion. Management remains confident of its three-year Rs 150 billion pre-sales target, supported by business-development opportunities and planned launches.

MOFSL’s target price is Rs 1,960, compared with the current market price of Rs 1,400.

Q1 FY27 Operating Performance

ABREL reported Q1 FY27 pre-sales of Rs 3.3 billion, down 22% year on year and broadly in line with MOFSL’s expectations. The decline was primarily due to the absence of new launches during the quarter.

Birla Taranya in Thane contributed Rs 1.3 billion, or around 38% of quarterly sales. Pune contributed 36%, with cumulative bookings of Rs 1.2 billion supported by Birla Punya Phase 2 and Birla Evam.

ABREL terminated a few bookings at Birla Niyaara and Birla Arika. Management indicated that these units were likely to be resold at higher rates, consistent with the pattern seen in prior quarters.

Project Additions and Launch Pipeline

ABREL acquired a Vashi redevelopment project in the Navi Mumbai micro-market, with gross development value potential of Rs 26 billion and a 90% company revenue share. The project is expected to launch in FY28.

Management aims to add projects with gross development value of Rs 100 billion to Rs 150 billion in FY27. The FY27 launch pipeline comprises six projects—three in MMR, one in NCR and two in Pune—with aggregate gross development value of Rs 96 billion. Most of these launches are scheduled for Q3 and Q4 FY27.

Beyond FY27, the pipeline includes eight projects with gross development value of Rs 325 billion, excluding Vashi. Birla Niyaara Phase 3 is targeted for early-to-mid Q3 FY27, subject to RERA approval by the end of Q2 FY27.

Demand and Collections Outlook

Management described premium housing demand as stable and resilient across MMR, NCR, Bengaluru and Pune. Mumbai is showing growth in both volumes and pricing.

At Birla Niyaara, Tower B has an approximate ticket size of Rs 400 million per apartment, and 118 units have been sold net of cancellations. MOFSL expects collections to rise at a 30% CAGR to Rs 56 billion in FY26-FY28E, supported by pre-sales growth and project execution.

Deleveraging and Portfolio Development

The sale of the Century Pulp and Paper division to ITC was concluded in August 2026. MOFSL notes pre-tax cash flow of Rs 35 billion, with Rs 33.3 billion received so far. The broker expects ABREL’s balance sheet to become almost net cash in the following quarter.

MOFSL believes the deleveraging and release of management bandwidth will enable greater focus on real estate development and future business development. The broker also views the planned ramp-up of the annuity portfolio positively, as it should provide more stable cash flows after FY30.

Valuation

MOFSL uses a sum-of-the-parts approach to derive its target price. The residential business is valued at net asset value based on the present value of future cash flows, while the annuity portfolio is valued at a 7.5% capitalisation rate on FY28E EBITDA. The broker assigns no NAV premium pending a sustained revival in business development.

Key Risks to the Thesis

• Execution of planned launches and deliveries.
• Achievement of pre-sales and collection forecasts.
• Receipt of required approvals, including the approval needed for Birla Niyaara Phase 3.
• Sustained additions through business development.
• Achievement of the expected balance-sheet deleveraging.