Macrotech Developers IPO is planning to raise up to Rs. 2,500cr in the price band is Rs. 483 – 486 per share. The Macrotech Developers IPO,which opens on 7th Apr. and closes on 9th Apr. 2021 comprises of only fresh issue of equity shares. Of the net proceeds of Rs. 2500 crore from the fresh issue, Rs. 1,500cr will be utilized to reduce the outstanding borrowings, Rs. 375cr will be used for land acquisition & land development rights. Residual funds will be used for general corporate purposes.. Macrotech Developers is one of the largest real estate developers in India, by residential sales value for the financial years 2014 to 2020.
Macrotech Developers IPO Details:
About Macrotech Developers
- Lodha Developers, now renamed as Macrotech Developers, was founded in 1995 by Mangal Prabhat Lodha.
- As of December 31, 2020, the company has completed ~ 77.2 million square feet of developable area across 91 projects. It has 54 ongoing and planned projects having approximately 73.8 million square feet of developable area.
- Macrotech Developers also has international offices in Singapore, the UAE and UK.
- Its brands include “Lodha”, “CASA by Lodha” and “Crown Lodha Quality Homes” for affordable and mid-income housing projects, the “Lodha” and “Lodha Luxury” brands for premium and luxury housing projects, and the “iThink”, “Lodha Excelus” and “Lodha Supremus” brands for office spaces.
- As of December 31, 2020, besides having completed 91 projects, 36 projects are ongoing and 18 are planned projects. Further, ~290 and 540 acres are an ongoing and planned development in their logistics and industrial park portfolio. In addition, they have land reserves of ~3,803 acres for future development in the MMR.
Macrotech Developers IPO: Financials
- Macrotech Developers Limited is one of the leading residential real estate developers with a leadership position in the attractive MMR market.
- It has a well-established brand.
- Proven end-to-end execution capabilities.
- Diversified portfolio across MMR with a focus on affordable and mid-income housing
- Significant inventory of completed, ready-to-move units.
- Ability to develop townships and generate recurring operating cash flows f
- Good marketing and sales strategies
- Experienced management team
- The company has a substantial amount of debt, which could affect its ability to obtain future financing or pursue growth strategy.
- Rise in Covid cases may impact business.
- The business is capital intensive.
Macrotech Developers raised Rs 740 crore from 14 anchor investors ahead of its initial public offer.As many as 12 foreign portfolio investors participated in the anchor. The FPIs are Capital Group; Nomura; Ivanhoe Cambridge, real estate arm of CDPQ; Wellington Asset Management; Abu Dhabi Investment Authority, Abu Dhabi’s sovereign fund; Platinum Asset Management, Marshall Wace, Brookfield Asset Management, Segantii, York, Oxbow and Discovery. The two domestic investors are HDFC Mutual Fund and Premji Invest, India’s largest family office.
Macrotech Developers IPO: Assessment
- This is the third attempt at attempt at IPO by Macrotech. The company had initially filed draft red herring prospectus in 2009 and then also in 2018, but abandoned the IPO due to unfavorable market conditions.
- The real estate market in the country has grown at a CAGR of ~ 10% from USD 50 billion in 2008 to USD 120 billion in 2017. This is further expected to further grow at a CAGR of 17.7% to reach USD 1 trillion by 2030.
- The company is India’s Largest Real Estate Developer with ~₹ 50,000 crore of cumulative sales in the last 7 fiscal years and ~58% sales from affordable and mid-income housing projects.
- As of December 31, 2020, Macrotech Developers had ₹ 186,621.85 million of aggregate outstanding borrowings on a consolidated basis, of which ₹ 184,975.61 million was secured indebtedness and ₹ 1,646.24 million was unsecured indebtedness.
- Macrotech Developers availed a moratorium offered by the banks and lending institutions to defer payments under the facilities for a majority of its indebtedness. Additionally, pursuant to the circulars issued by the RBI in relation to deferment of date of commencement of commercial operations (“DCCO”) for commercial real estate projects, it has applied to lenders for their approval to defer the DCCO for certain of our borrowings ranging from six months to two years.
- Roselabs Finance Ltd, is a subsidiary of Arihant Premises Private Limited, which is a part of Lodha Group was penalised by SEBI.
- Macrotech Developers is highly leveraged, with debt equity ratio of 2.9 times. Even after the proposed repayment of Rs. 1,500 cr debt from IPO proceeds, net debt equity ratio of 2.2 times is quite high compared to peers.
- There are Legal claims under litigation worth Rs. 7,000-8,000 cr. which pose a high risk
- The resurgence of the Covid-19 infection and discontinuation of stamp duty waiver on property registrationwould dent the sentiment in the near term.
- Macrotech Developers is demanding an EV/Sales of 6.3x, which is at discount to the peer average which stands at 8.5x.
- On post issue equity after the IPO and EPS for FY220 which stood at Rs. 16.2 on consolidated basis after excluding EO and relevant tax, PE being demanded is about 30x, which is lower than most of the peers.
- Residential sales have been significantly improving across the country over the last six months driven by low-interest rates and pent up demand. However Macrotech Developers may lack ability to faced troubled times due to high leverage.
- Macrotech Developers IPO was last reported to be commanding a GMP of Rs. 5-6
- I do not intend to apply in Macrotech Developers IPO. The Macrotech Developers IPO could turn out to be OK but at present I would like ti steer clear of it.
Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.