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Macrotech Developers IPO opens today: Should you subscribe to the issue?

BusinessToday.In     April 7, 2021

Macrotech Developers Ltd, earlier known as Lodha Developers  will launch its Rs 2,500 crore initial public offering (IPO) today. The share sale will end on April 9. On April 6, the realty firm raised Rs 740 crore from 14 anchor investors including global long only, pension funds, sovereign wealth funds multi-strategy and domestic mutual funds. The company allocated 1.52 crore shares at Rs 486 per share to anchor investors.

Promoters of the firm hold 100% stake in the firm. They plan to sell 10% stake by issuing 51,440,328 equity shares of Rs 10 face value during the IPO.

Lot size of the IPO is 30 shares for which one will have to spend Rs 14,580. A maximum of 13 lots comprising 390 shares can be bought for Rs 1,89,540.

Allotment of shares is likely to be done on April 16, 2021 and the stock is expected to make its market debut on April 22.

Price band of the issue is Rs 483 to Rs 486 per equity share. 

The real estate firm plans to raise money for the following purposes; a. To reduce aggregate outstanding borrowings of the company on consolidated basis. b. To acquire land or land development rights. c. To meet general corporate purposes.

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The firm filed draft papers with market regulator Securities and Exchange Board of India (SEBI)  in February. This is Lodha's  Group's third attempt to go public. The firm made attempts to launch an IPO in 2009 and 2018 but dropped plans citing challenging times for the realty sector.

Founded in 1995, Lodha Group is one of India's largest real estate players by sales bookings, that develops real estate across the residential and commercial sectors in the Mumbai Metropolitan Region (the "MMR"), Pune and London.

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Here's a look at the stance of brokerages on the issue.

Angel Broking has a neutral stance on the issue.

"Company has a strong brand in affordable and mid income housing projects, but is not able to deliver the growth in sales and free cash flow in the last couple of years. The company has reported sales degrowth of 68% in 9MFY21 and reported a negative profit after tax of Rs 265 crore. Given weak revenue growth in the past and leveraged balance sheet, we assign a NEUTRAL rating to the IPO," the brokerage said.

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Choice Broking has given a subscribe for long term rating to the issue. "At higher price band of Rs 486, the company is demanding an TTM EV/Sales multiple of 6.3x, which is at discount to the peer average of  8.5x.  Thus, the  issue  seems to  be  attractively  priced.  Moreover,  the  real  estate  sector  is  witnessing  significant consolidation  especially  after  the  NBFC  crisis.  Dominant  players  like  Macrotech  are likely  to  benefit  in   the  medium  to long term. However, the resurgence of the Covid-19 infection and discontinuation of stamp duty waiver on property registration would dent the sentiment in the near term. Thus considering the above observations, we assign a "Subscribe for Long Term" rating for the issue."

Edited by Aseem Thapliyal

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