Macrotech Developers (formerly known as Lodha Developers) is set to raise up to Rs 2,500 crore via IPO which opens on 7th April, Wednesday. Here are the details:
About Macrotech Developers
- Macrotech Developers is the largest real estate developer in India, by residential sales value for the financial years between FY14-20. The core business consists of residential real estate development with a focus on affordable and mid-income housing.
- Currently, they have residential projects in the Mumbai Metropolitan Region (“MMR”) and Pune. In 2019, MacroTech got into development of logistics and industrial parks and entered into a joint venture with ESR Mumbai 3 Pte. Ltd (“ESR”).
- As at the end of 2020, Lodha Developers had successfully completed 91 projects comprising 77.22 million sq. ft. of developable area, with 59.13 million sq. ft. in the affordable housing segment. Lodha generated 58% of total sales from the affordable housing, and mid-income segment in FY20.
- Some key brands of the company include “Lodha”, “CASA by Lodha” and “Crown – Lodha Quality Homes.” The “Lodha” and “Lodha Luxury” brands are for their premium and luxury housing projects, and the “iThink”, “Lodha Excelus” and “Lodha Supremus” brands are used by Macrotech Developers for their office spaces.
- The Lodha Group firm has a very strong presence in the Extended Western Suburb micro-market of the Mumbai Metropolitan Region (MMR). Macrotech is among the 5 largest developers in the MMR from 2015 to 2020.
Competition for Macrotech (Lodha) Developers
- Macrotech Developers operates in a highly fragmented and competitive real-estate market. Company’s competitors include real estate developers such as Godrej Properties, Oberoi Realty, Piramal Realty, DLF, Prestige Estates Projects Ltd, Wadhwa Group Holdings Pvt. Ltd.
- Macrotech Developers had posted better return ratios as compared to its competitors in FY20. Macrotech also fares better than its peers on EBITDA, PAT, Bookings as well as Collections. The EBITDA margins have consistently outperformed peers at ~30% in the last 3 years. However, huge debt compared to others remains a key concern.
- Macrotech had posted loss of Rs 270 crore in Apr-Dec 20 period, and had negative P/E ratio in 9MFY21.
Some key highlights of Macrotech
- This is the third attempt by Macrotech to launch its IPO. It had decided to go public in 2009, but shelved plans due to adverse market conditions after the global financial crisis. In 2018, the second attempt failed following the fallout of IL&FS fiasco.
- The company had a merger of its existing company, Macrotech Developers, in 2019. Following this, the name was changed from Lodha Developers to that of the merged entity.
- At the higher end of the price band, Macrotech will have a mcap of about Rs 21,750 crore. This is lesser than its peers DLF (mcap of ~Rs 69,000 crore) and Godrej Properties (mcap of ~Rs 38,000 crore).
- In the last three years, Macrotech Developers has reported revenues in the range of Rs 12,000- 13,600 crore. For FY18 to FY20, Revenue CAGR has been negative 5.34%, net profit CAGR has been negative 36.5%.
- It reported a profit of Rs 744.84 crore for FY20, down 55% compared to Rs 1,643.97 crore in the previous year. Revenue increased 4.5 percent to Rs 12,442.6 crore compared to the previous year.
- Covid-19 pandemic has taken a huge toll on real-estate businesses. Macrotech’s revenue from operations fell 69% to Rs 2,915 crore in the Apr-Dec 20 period, as compared to Rs 9,273 crore in the same period previous fiscal.
- Loss expanded to Rs 264 crore in 9MFY21.
- Macrotech has a very high debt of Rs 18,662 crore in Dec-20. A part of the IPO proceeds will be used to bring down the debt, according to Macrotech's management.
- Lodha Developers has reported an average RoNW (Return on Net Worth) of 42% in the last three financial years. The EBITDA margin has been in the range of 30% over the last three years.
- The company has not declared any dividend in the last three financial years.
Macrotech IPO: Issue details
Issue open: 07th April- 09th April 2021
Price band: Rs 483-486 per share
Issue Size: Rs 2,500 crore (Gross)
Issue Size: The IPO consists of a fresh issue of Rs 2,500 crore. The fresh issue includes a reservation of equity shares of Rs 30 crore for Lodha’s employees.
Reservation for QIB: 50% ,Retail - 35%, Non institutional Investors -15%.
Bid lot: 30 shares, and in multiples of 30 shares
Macrotech Developers has reported losses over the last nine months, and hence, it has a negative P/E ratio in terms of 9MFY21 data. That said, the company is valued at a PE ratio of ~29.16 times based on FY20 data. The issue seems to be expensively priced, as compared to peers.
The company’s financial performance has taken a hit over the last two years. Further, real-estate business have been severely impacted following Covid-19 related disruptions. This has also hurt investor sentiment in the space. Even though the company ranks better as compared to peers in terms of margins and return ratios, Macrotech is burdened by very high debt. Given its huge issue size, Macrotech IPO is unlikely to see huge listing gains. Given factors such as weak outlook (due to Covid-19 disruptions), lacklustre financial performance, high debt and expensive valuations, we remain Neutral on the prospects of the issue.