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Macrotech Developers (Lodha Developers) IPO Review and Analysis in Detail

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Basic Structure of the Macrotech IPO

Macrotech Developers (Lodha Developers) is one of the largest real estate developers in India with a leadership position in the attractive MMR market. 

The group is initiating the plans of IPO for the third time after two failed attempts. 

It had plans to raise about Rs 2,800 crore and Rs 5,500 crore through IPO in 2009 and 2018 respectively and had received SEBI's nod but did not go ahead with the plans because of unfavourable market conditions.

The Macrotech IPO will be open for subscription from 7th April - 9th April 2021.

This IPO is sized at Rs. 2,500 crores. It is going public through the book-building process i.e., there will be a price band (Rs. 483 to Rs. 486 per equity share) and not a specific price.

The Macrotech IPO will comprise both a fresh issue segment and an offer for sale. 

The funds raised from an offer for sale will be credited directly to the promoters and not to the company. After the IPO, the Macrotech Developers shares will be listed on the NSE and BSE.

The table below lists the details about the IPO. Things like Macrotech developers IPO date, Macrotech IPO size, Macrotech IPO price, and more have been summarised.

Macrotech developers IPO details

About the Macrotech Developers (Lodha Developers)

Macrotech Developers, earlier known as Lodha Developers, is a Mumbai-based company founded in 1980 and has been involved in the real estate business since 1986.

Led by Abhishek M. Lodha, the Lodha developers is one of the largest real estate developers in India. Its primary business is residential real estate developments and focuses on affordable and mid-income housing. The major residential projects for the Lodha developers are in the MMR and Pune.

As of December 31, 2020, the real estate company completed 91 projects covering around 77.22 million square feet of developable area, of which 59.13 million square feet is in affordable and mid-income housing.

It entered into the development of logistics and industrial parks in 2019 and is also working on commercial real estate. It has formed a joint venture with ESR India for the development of ESR-Lodha Industrial Park at Palava City, Maharashtra.

Lodha Developers is known for its prominent luxury craftings such as the Trump Towers in Mumbai and Grosvenor Square in London.

Sales from India Operations

The sales from the Indian operations have been declining for the last 3 years and from April to December 2020 the sales total stood at Rs. 3351.35 crore.

Macrotech developers Sales

Products and Services

The Lodha Developers business can be classified into the following categories.

  • Residential portfolio
    • Affordable and mid-income housing projects
    • Premium and luxury housing projects
  • Logistics and industrial park portfolio
  • Commercial portfolio
    • Office projects
    • Retail projects

Residential portfolio

For the financial year 2020, sales from affordable - mid-income projects and luxury projects are Rs. 3055.30 crore and Rs.1327.80 crore respectively contributing.

Affordable & Mid-income projects and Premium & Luxury projects accounted for 57.77% and 42.23% of our residential sales from India operations, for FY 2020.

Macrotech developers residential portfolio

Logistics and industrial park portfolio

Under the logistics and industrial park portfolio, Lodha Developers has over 800 acres of land to develop a logistics and industrial park near Palava.

Commercial portfolio

As of December 31, 2020, Macrotech developers has completed commercial projects with a Leasable Area of 5.95 million square feet.

Promoter Shareholding Pattern

Macrotech developers promoter shareholding pattern

The Sambhavath Infrabuild is the major shareholder with 67.5% of the stake.

The shareholders' group of Sambhavath Infrabuild includes Trustees of Sambhavnath Trust, Rajendra Narpatmal Lodha, Ashok Rajguru, Deepak Lodha and Manjula Mangal Prabhat Lodha.

The table below provides you the entire shareholding pattern of Sambhavnath Infrabuild.

Shareholding_Pattern_sambhavnathTrust

Financial Overview of Macrotech Developers

The table below summarises the main financial parameters for Macrotech developers over the past three years. All the figures given below are in Rs. crores.

Macrotech_developers_financials

Based on the financial figures, Macrotech developers revenue has decreased at a CAGR of 4.33%. 

Graph 3

Between 2018 and 2020, the assets decreased at a CAGR of 7.74%.

The expenses are increased at a CAGR of 2.43%. And as for the profits after tax, the real estate giant recorded a CAGR of -35.48%. 

Graph 5

The long-term debt is also increased to Rs. 2,133.85 crores in FY 2020 from Rs. 513.51 crore in FY 2019 i.e, increased by 4 times.

But, the PAT for nine months i.e, April to December 2020 is - 264.30 crores. 

The company claims the reason for the loss is the covid pandemic that made them even change the business model. 

Industry Overview

The real estate sector in India has been greatly influenced by demonetization, the liquidity crisis and the implementation of RERA (Real Estate Regulation and Development Act) and GST.

The real estate market in India is expected to reach USD 1 trillion by 2030 with a CAGR of 17.7%. The market value was at $50 billion and $120 billion in 2008 and 2017 respectively with a CAGR of 10%.

6% of India’s GDP in 2017 was contributed by the real estate market and by 2025 it is expected to contribute around 13%. 

In India, the real estate market is generally classified under three primary asset classes i.e., residential, commercial, and retail.

NCR, MMR, Pune, Bangalore, Chennai, Hyderabad, and Kolkata are the top seven markets in the real estate sector, in India. Among them, MMR stood at the top with a share of 24% of the total supply (by units), and 46% of total absorption (by value).

The following graph sets forth the absorption rate of the top seven Indian markets i.e, NCR, MMR, Pune, Bangalore, Chennai, Hyderabad, and Kolkata over the years.

Graph 5

If we talk about the real estate developer with the most sales, then Macrotech Developers stood at the top with 32% following Godrej Properties, Prestige Group, Sobha Ltd, DLF, and Oberoi with 18%, 17%, 13%, and 6.8% respectively.

An absorption rate represents the rate at which properties are moved off the market in a period.

With a 29.5% absorption rate, FY 2019 has a good absorption rate. While it stood at 18% for FY 2020.

Graph 6

As an industry rule of thumb, a good absorption rate in real estate would be anything more than 20%. It represents a strong sellers’ market.

Strengths of the Macrotech Developers IPO

  • Macrotech Developers (Lodha developers) is one of the largest residential real estate developers in India with sales worth 50,000cr and deliveries of 57 million square feet from FY 2014 to FY 202s0.
  • Mumbai (MMR) has the most supply and absorption with 24% and 32% respectively and it is one of the biggest advantages to the company as it has the most number of projects in the attractive MMR market.
  • Industry ruler in the Affordable and mid-income housing segment, over 76% of its projects are under this segment.
  • It has a proven record of proven execution capabilities at a competitive cost. It almost handovers units by 3 to 7 years based on the size of the project.

Weaknesses of the Macrotech Developers IPO

  • For the last 3 years, company revenue has been in declining mode and it incurred a loss of Rs.2,64.30 crore for 9 months ended Dec-20.
  • Lodha Developers has the contingent liabilities worth Rs. 7,82.16 crore
  • The company also facing around 12 criminal proceedings and civil litigations amounting to ₹ 41.11 crores.
  • Rs. 1,500 crores of the total proceeds are going to be used for the reduction of the aggregate outstanding borrowings of the company.

Peer Review

The Indian residential real estate market is dominated by renowned players. Lodha Developers is the biggest player with sales worth Rs. 50,000 crores and deliveries of 57 million square feet from FY 2014 to FY 2020.

Considering the cumulative sales from Fiscal 2014 to 2020, Lodha Developers, Godrej Properties Limited, Prestige Estates Projects Limited, Sobha Limited, and DLF Limited are the top five real estate developers in India.

Among them, DLF Limited, Godrej Properties Limited, and Sobha Limited have a pan-India presence.

Graph 7

Graph 8

Macrotech Developers has the least PE ratio compared to its peers with 26.32. 

EPS of the company is Rs.18.46 meaning the company makes Rs. 18.46 for each share of its stock.

Return on Equity (ROE) or Return on Networth (RoNW) represents how good or bad the company is performing with your investments. And the ROE of Macrotech is 17.8%. 

Generally, the ROE over 15%  is considered ideal.

Table 11

Valuation of Macrotech Developers IPO

Generally, an ideal P/S ratio is between 1 and 2 and anything above 4 is considered as unfavourable and overvalued.

Table 117

In this case, the Lodha Developers P/S ratio is 1.74, which means the Macrotech Developers IPO is undervalued.

Frequently Asked Questions

 

  • When will the Macrotech Developers (Lodha developers) IPO open?

The subscription window for the Macrotech developers IPO is from April 7 - 9, 2021.

  • What is the lot size of Macrotech Developers (Lodha developers) IPO?

The Macrotech developers IPO shares will be available in lots of 30. This means you can bid for a minimum of 30 shares. The maximum number of bids you can apply for is 13 with 390 shares worth Rs. 1,89,540.

  • How to apply for Macrotech Developers (Lodha developers) IPO?

You can choose either UPI or through ASBA (net-banking) to apply for an IPO.

To apply for Macrotech developers IPO, you need to log on to your chosen platform, select the IPO for which you want to apply from the list of upcoming IPOs. Then select the number of lots that you want to bid for, and submit your bid.

  • When is the Macrotech Developers (Lodha developers) IPO listing date?

The listing date for Macrotech developers shares is March 25, 2021.

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