Macrotech Developers IPO Is Open: Should You Subscribe?

Amid IPO frenzy, Macrotech Developers' IPO shall be the first IPO of the new FY 22. Here are all the details that you should know before subscribing to the issue:

IPO details:

The price band of the issue was fixed in the range of Rs/ 483- 486 per share. Ahead of the issue, from the anchor investors there was mopped up a sum of Rs. 741 crore.

The IPO, which closes on April 9, comprises fresh issuance of 51 million equity shares worth Rs 2,480 crore.

Issue objective:

The net proceeds from the IPO will be used in paring debt of up to Rs 1,500 crore, acquisition of land or land developmental rights aggregating up to Rs 375 crore, and for general corporate purposes.

About Macrotech Developers:

Erstwhile called as Lodha Developers aims to considerably deleverage in upcoming quarters and make use of the proceeds from IPO, recovery of investment from the company's UK projects as we as with the help of improved collections over time.The company's plan to reduce net debt to Rs 12,700 crore in the coming quarters negates concern over high leveraging.

Macrotech Developers, established in the year 1995, is among the leading real-estate developer in the country. The company commands a strong brand equity in the MMR and Pune. The company's major projects are into mid-and affordable category.

Financials:

The company's financials are not very impressive and over the period FY18 and FY29, debt surged sharply due to rising inventory. Net profit also during the period FY18-FY20 clocked 35 percent negative CAGR because of a spike in finance cost.
The company's reported sales figure was hit amid the pandemic and for the nine months ended December 2020, the topline stood 68.6 percent lower to Rs. 2915 crore.

Valuations:

"The IPO is valued at 26.3x of FY20 earnings and 4.8x of FY20 book value, which appear to be reasonably priced vis-à-vis its peers like Godrej Properties and DLF," said Reliance Securities.

Should you subscribe to the issue of Macrotech Developers?

The issue of Macrotech Developers is given a 'buy' call by brokerages given the attractive valuation in comparison to its listed peers. Also, other factors owing to which there is recommended a buy include consolidation in the real estate industry, debt shall be reduced as well as strong project portfolio is another plus for the company.

Further, "strong project portfolio and monetisation of huge land banks offer comfort. Moreover, its return ratio looks to be superior compared to peers. Hence, we recommend subscribe to the issue", suggest Reliance Securities.

Another company Choice Broking gave a "subscribe for long term" rating to the issue of Macrotech Developers which has two investments in the UK and both of the projects are now complete. So, the net proceeds after repaying the debt will be repatriated to the company over a period of time. Further Choice Broking is of the view that the industry is witnessing consolidation after the NBFC crisis. And major players like Macrotech are to benefit in the medium to long term.

Angel Broking however has given a neutral call on the IPO of Macrotech Developers owing to weak revenue growth and leverage balance sheet.

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