This would mark the third attempt by the firm, which is known for luxury projects such the Trump Towers in Mumbai and Grosvenor Square in London, to launch an IPO.
Macrotech Developers (formerly Lodha Developers), one of India’s largest real estate players, is taking another stab at listing on the bourses on the back of a sharp surge in residential sales and improved investor sentiment and demand, people with direct knowledge of the matter told Moneycontrol.
This would mark the third attempt by the Mumbai-based firm, which is known for luxury projects such the Trump Towers in Mumbai and Grosvenor Square in London, to launch an initial public offering (IPO).
Lodha Group weighed a listing in 2009 and 2018, but deferred those plans due to unfavourable market conditions.
“Their IPO plans are now back on track and they have engaged investment banks Axis Capital and JP Morgan as advisors. Preliminary work has begun and the plan is to file the DRHP (draft red herring prospectus) by March 2021. More bankers are likely to be added at a later stage,” said one of the persons cited above.
“The markets are flush with liquidity and the firm has clocked record sales in the past few months. As of now, the plan is to raise between Rs 2,000 crore to Rs 3,000 crore via the proposed IPO via a fresh issue of shares, but the issue size has not yet been finalised,” a second person added.
In 2018, the realtor had said a major chunk of the IPO proceeds would be used towards debt repayment.
A third person confirmed the renewed IPO plans of the Lodha Group.
All the three persons spoke to Moneycontrol on the condition of anonymity.
Moneycontrol sent an email query to the Lodha Group on its IPO plans. When contacted on the phone, a company spokesperson declined to comment. JP Morgan declined to comment, and an email sent to Axis Capital did not elicit a response.
In October, 2019, when the market conditions were different, the firm’s Managing Director Abhishek Lodha said it would complete around 7 million square feet of commercial assets over a three year period and look at monetising them through the REIT (real estate investment trust ) route.
Another player in the space, Mumbai-based realty player Puranik Builders, which has received the Sebi nod for its IPO, is planning to hit the markets in the next two months.
According to Prime Database, the last IPO in the real estate/construction space was Karda Constructions, which got listed in April 2018 and has risen nearly 250 per cent (including stock split and bonus) over its offer price as of January 5, 2020. Prior to that, Capacit’e Infraprojects Ltd and PSP Projects Ltd made their debuts in September 2017 and May 2017, respectively.
When it comes to REIT listings, in April, 2019, India saw its first REIT IPO when Embassy Office Parks, backed by Blackstone and Embassy Group hit the domestic bourses. Later, in August 2020, the second REIT IPO, namely Mindspace Business Parks, backed by Blackstone and K Raheja Corp, made its market debut.
In the capital markets space, investor sentiment in the real estate segment has been bullish with many of the key listed peers like DLF, Godrej Properties, Mahindra Lifespace, India Bulls Real Estate (IBRL), Sobha Ltd and Brigage Enterprises clocking more than 50 per cent returns in the last three months.
After being battered in the initial months of the COVID-19 pandemic, the real estate sector has gradually recovered with homebuyers lured by the low interest rate regime and attractive pricing options and plans by developers.
The Maharashtra government’s move to reduce stamp duty from 5 percent to 2 percent for October to December and to 3 percent for the January-March period has prompted fence sitters to take the plunge, leading to record sales in the month of December.
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According to reports, the Lodha Group sold around Rs 2,500 crore worth of inventory in the December quarter and had garnered around ₹6,000 crore of sales for the full year. The firm has tilted its focus from premium, luxury housing to affordable housing in the past two years. The integrated smart city project Pallava, at the outskirts of Mumbai is an example of that shift.
Lodha Group: A few quick stats
Lodha Developers was founded in 1995 and has operations in Mumbai, Pune, and London. As of March 2020, it had 38 projects in India with a developable area of 23 million square feet and 19 planned projects with a developable area of 54 million square feet. It clocked sales of 6.2 million square feet in India in FY20.
According to the firm’s FY20 annual report, its consolidated revenues rose by 4.6 percent on a YoY basis to Rs 12,486 crore as compared to Rs 11,936 crore. Profit for the year decreased by 54.97 percent on a YoY basis to Rs 742 crore as compared to Rs 1,647 crore on account of lower average margins due to change in project mix and losses of overseas projects.
Lodha Group: A closer look at the debt position
According to the firm’s FY-19-20 annual report, its total indebtedness stood at Rs 17,176 crores. In March 2020, during the initial phase of the Covid-19 outbreak, the firm’s UK arm raised $225 mn by selling bonds to refinance a part of its debt.
In November 2020, rating agency Moody’s changed its outlook on the firm to “stable” from “negative” citing an improvement in liquidity position and a gradual recovery in the company’s operating performance , which would result in higher earnings and cash flow
“Even though MDL's (Macrotech Developers) liquidity position has improved significantly over the last six months, the company continues to face sizeable debt maturities of around $800 million in both India and London over the next 18 months. MDL plans to meet its upcoming obligations via its internal cash flow generation and through obtaining further extensions on its project loans in India, keeping the company exposed to the uncertain macroeconomic environment,” the Moody’s report said.
“While the company's operating performance has started to recover in India following a sharp slump in the quarter ended June 2020, this is partly due to pent-up demand and the ongoing festive season in India. But local market conditions remain favorable for home buyers as interest rates and property prices are at multi-year lows. This environment will continue to support housing demand in the country at least over the next 12 months,” the report added.