Mumbai-based real estate company Macrotech Developers' share price fell 13.3 percent on the first day of trading on April 19, dented by weak market conditions and a gloomy outlook for the real estate sector in the face of spiralling COVID-19 infections.
The stock corrected up to Rs 421.15 intraday after opening 9.7 percent lower at Rs 439 on the BSE. It was trading at Rs 467, down 3.91 percent, with 1.66 lakh equity shares being traded. On the National Stock Exchange, it was down 4 percent at Rs 466.80, with 49.51 lakh shares being traded at 1129 hours.
Analysts advised exiting the stock on the listing day and look for better companies in the real-estate space. High-risk investors can continue holding the stock, they said.
"We advise conservative investors should look to exit on a listing day at whatever muted or decent gain. If any rally comes in, allotted investors should not get carried away and look for profit booking," Prashanth Tapse, AVP Research at Mehta Equities told Moneycontrol.
Those planning to buy on a listing day should avoid Macrotech and look at peers like Godrej Properties or Brigade Enterprises for better long-term prospects, he said.
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Gaurav Garg, Head of Research, CapitalVia Global Research, also said Macrotech Developers had a high number of unsold inventories, which was a major concern. "We are not comfortable at its current valuations and won't suggest buying. If there is any major correction, then one can look at accumulation," he said.
Garg expected profit booking on the listing day because of the dampened market sentiments. Also, real estate players, generally, would be hit if lockdown restrictions were to be extended, he said.
The Rs 2,500-crore public issue was subscribed only 1.36 times, the lowest response to any IPO since October 2019. The company managed to sail through in its third attempt after failing in 2009 and 2018 due to unfavourable market conditions.
Macrotech Developers, earlier known as Lodha Developers, is one of the largest real estate developers in India, by residential sales value for the financial years 2014 to 2020.
The company will utilise net issue proceeds for repaying of debts, and acquisition of land or land development rights.
Lodha has a market share of more than 10 percent in micro markets of MMR and has seen a very good housing demand after the sector was hit by the COVID-19 pandemic. Sales momentum will continue for Lodha developers in near future, said Angel Broking. The company had a net debt of Rs 16,700 crore as on December 2020 any downturn in the industry could affect the company significantly, it said.
The company has not able to generate significant positive cash flow for the shareholder in the last three years and may continue to have negative cash flow in the near future, the brokerage said.
"Those who have received allotment and have short-term horizon can exit if the stock quotes (at) some premium to its issue price on the listing day. However, from a long-term investment perspective, we recommend hold as the company is one of India's largest residential real estate developers (and) has consistently outperformed all the peers in sales performance from FY14-20," Astha Jain, Senior Research Analyst at Hem Securities told Moneycontrol.
"With the company's strong focus on affordable and mid-income housing segment, Macrotech is well-poised to cater (to) the opportunities present in the sector due to healthy prospects of real estate markets. As the company is committed to reducing debt and intends to bring to the level of net debt positive by FY24 which needs to be seen and infusing optimism in long term prospects of the company," she said.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.