The initial public offering (IPO) of Lodha Group's firm Macrotech Developers opened for subscription on Wednesday with a price band of Rs 483-486 a share. The Rs 2,500-crore public issue of the Mumbai-based real estate developer closes on April 9.
This is the company's third attempt to launch an IPO after it failed to raise Rs 2,800 crore in September 2009 due to global recession and then later in 2018 because of adverse market conditions.
The company has already raised Rs 741 crore from 14 anchor investors. It has allocated 1.52 crore shares at Rs 486 per scrip to anchor investors.
Lodha Group's Macrotech Developers to launch IPO on April 7; check issue size, price band, other key details
Brokerages are divided on the issue as some advised subscribing the offer on attractive valuations compared to its listed peers, while others flagged risks of COVID-19 to the real estate sector and the company’s huge debt.
Deven Choksey of KRChoksey Securities said he would be cautious of Macrotech Developers IPO.
“Because the current real estate market is showing signs of growth, the company has an advantage in form of having the land bank. However, gone are those days where you used to monetise your land bank significantly. So what is left out is a pure construction play as far as Macrotech Developers is concerned. The supply-side situation is going to be abundant even though the demand is going to improve gradually. In that kind of a situation we are not likely to see a major jump as far as the business is concerned,” he explained.
Lodha developers are Mumbai-based developers and one of the largest real estate developers in India by residential sales. Lodha develops real estate across the residential and commercial sectors in the Mumbai Metropolitan Region (MMR), Pune and London.
The company’s core business of residential real estate developments with a focus on affordable and mid-income housing along with the development of logistics and industrial parks
Also Read: Macrotech Developers IPO: Q4 a record quarter, India debt at Rs 16,800 cr, says Abhishek Lodha
Lodha developers reported revenue of Rs 2,920 crore with EBITDA of Rs 770 crore in 9MFY2021. The company had a net debt of Rs 16,700 crore as of December 2020 which is a very high number. The company focusing on deleveraging their balance sheet from the proceeds of the IPO.
“We have some investment concerns for the IPO, the company is having net debt of Rs 16,700 crore as of 31st December 2020, any downturn in the industry may affect the company significantly. The company product portfolio is too concentrated on the residential market of the MMR region and any change in rule and regulation by authority may affect the company significantly. The company has not been able to generate significant positive cash flow for the shareholder in the last three years and may continue to have negative cash flows in the near future,” said Yash Gupta Equity Research Associate, Angel Broking.
Angel Broking has a Neutral rating for this IPO.
“The company has high leverage, which signifies that it has little ability to absorb any shocks of unforeseen events. Moreover, its balance sheet is stressed. In this scenario where many listed players are available with a healthy balance sheet, this IPO can be given a miss,” SMC Global added.
However, Reliance Securities recommend Subscribe to the issue.
“The IPO is valued at 26.3x of FY20 earnings and 4.8x of FY20 book value, which appears to be reasonably priced vis-à-vis its peers like Godrej Properties and DLF. MDL is committed to substantially deleverage its balance sheet in ensuing quarters led by IPO proceeds; recovery of investment from the UK projects and improved collection. MDL’s plan to reduce net debt to Rs 127 billion in the coming quarters negates concern over high leveraging. Further, a strong project portfolio and monetization of huge land banks offer comfort. Moreover, its return ratio looks to be superior compared to peers,” Reliance Securities said.
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