Macrotech Developers floats 1st realty IPO in over two years; should you apply?
Incorporated as Lodha Developers, the company is one of the largest real estate developers and its core business is residential real estate development
Shares of Macrotech Developers are up for IPO bidders. The price band of the IPO is Rs 483 to Rs 486 per equity share. The public issue which has opened on April 7, will close on April 9. The Rs 2,500-crore IPO money will be used by the company to cut debt and buy land. Here are more details.
Shares of the Macrotech Developers IPO are likely to be allotted on April 16 and the stock is expected to make its debut on April 22. Lot size of the IPO is 30 shares for which one will have to spend Rs 14,580. The shares have a face value of Rs 10 each.
Post public issue, promoter holding will be 88.5 per cent.
Macrotech Developers filed draft papers with the capital market regulator Securities and Exchange Board of India (SEBI) in its third attempt to go public. The company tried to go float an IPO in 2009 and again in 2018 but backed down citing challenging times for the realty sector.
The company has raised Rs 740 crore from 14 anchor investors. The company informed the bourses that it has allocated 1.52 crore shares at Rs 486 per share on Tuesday, April 6, 2021 to anchor investors. 12 Foreign Portfolio Investors who participated in the anchor were 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. Two domestic investors HDFC Mutual Fund and Premji Invest, were also allocated shares.
|Face value||₹10 per equity share|
|Open date||Apr. 7|
|Close date||Apr. 9|
|Allotment date||Apr. 16|
|Listing date||Apr. 22|
|IPO size||₹2500 crore approx.|
|IPO band||₹483 to ₹486 per equity share|
|Bid lot||30 shares|
A play on MMR
The Mumbai Metropolitan Region (MMR) is considered the most attractive real estate market in the top seven Indian Markets, having the largest share of supply and absorption, and highest average base selling price. In this region, Macrotech has developed a strong brand and has existing land reserves, industry knowledge and regulatory environment know-how. This, in turn, has aided the company to attain a leadership position in South Central Mumbai, Thane and the Extended Eastern Suburbs micro-markets of the MMR, with the largest share of supply (by units), absorption (by value) and completion (by area) of residential developments, says ICICIdirect.
The company focuses on branded realty and has created strong brands such as ‘CASA by Lodha’, ‘Crown-Lodha Quality Homes’, and ‘Lodha’ 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.
The strength of Macrotech’s brand and its association is primarily driven by its track record of delivering quality products, with modern amenities and innovative design elements. It leverages its brand presence, customer confidence, track record of successfully delivering projects and superior construction quality to increase sales volumes and also command premium pricing for its products.
As of December 31, 2020, 35 per cent of its unsold inventory of residential developments was priced under Rs 1 crore, 21 per cent was priced between Rs 1 crore and Rs 3 crore, 7 per cent between Rs 3 crore and Rs 5 crore, 22 per cent between Rs 5 and Rs 8 crore while 15 per cent was priced above Rs 8 crore.
For 9MFY21, 39% of the company’s residential sales value was obtained through the sale of residential developments that were priced under Rs 1 crore, 23 per cent between Rs 1 crore and Rs 3 crore.
What brokerages say
Reliance Securities: The IPO is valued at 26.3 times of FY20 earnings and 4.8 times of FY20 book value, which appear to be reasonably priced vis-à-vis its peers like Godrej Properties and DLF.
Choice Broking: 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.
Angel Broking: The company has posted 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 leverage balance sheet we assign a “NEUTRAL” rating to the IPO.
Key risks and concerns
* Substantial amount of debt
* Reported a restated loss in 9MFY21; may incur losses in future
* Spread of Covid-19 may affect operations in near future