Subscribe to Macrotech Developers: Choice Equity Broking

Choice Equity Broking IPO report on Macrotech Developers

Macrotech Developers Ltd. (Macrotech) formerly known as Lodha Developers Ltd., is planning to raise up to Rs. 2,500cr through an IPO, which opens on 7th Apr. and closes on 9th Apr. 2021. The price band is Rs. 483 - 486 per share. • The issue comprises of only fresh issue. Of the net proceeds from the fresh issue, Rs. 1,500cr will be utilized to reduce the outstanding borrowings, Rs. 375cr will be used for land acquisition & land development rights. Residual funds will be used for general corporate purposes. • This would be the third attempt by the Macrotech to launch an IPO. The company had initially filed draft red herring prospectus in Sept. 2009 and then again in Apr. 2018. At both the times, the planned public issue was shelved amid market turmoil.

Valuation and Outlook

At higher price band of Rs. 486, the company is demanding an TTM EV/Sales multiple of 6.3x, which is at discount to the peer average of 8.5x. Thus, the issue seems to be attractively priced. Moreover, the real estate sector is witnessing significant consolidation especially after the NBFC crisis. Dominant players like Macrotech are likely to benefit in the medium to long term. However, the resurgence of the Covid-19 infection and discontinuation of stamp duty waiver on property registration would dent the sentiment in the near term. Thus considering the above observations, we assign a “Subscribe for Long Term” rating for the issue.

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