Shares of Lodha Developers fall 5.8% on debut
Shares of Macrotech Developers, also known as Lodha Developers, fell as much as 13 per cent on their stock market debut on Monday, before recouping half of the losses and settling at ~458, down ~28 or 5.8 per cent. It touched a low of ~423 and a high of ~478 on the NSE, where ~20,484 crore worth of shares changed hands.
The poor listing comes amid weakness in the secondary market because of the rise in Covid-19 infections and lockdown measures imposed in key states. Since Lodha’s ~2,500-crore IPO closed on April 9, the Sensex has declined by 3.3 per cent.
Also, the investor response to Lodha’s IPO was lukewarm with the issue garnering just 1.4 times subscription. The retail and employee portion of the issue had managed to garner just 40 per cent and 17 per cent subscription, respectively.
At Monday’s closing price, Lodha had a market capitalisation of ~20,718 crore — making it the third mostvalued developer in the listed space behind DLF and Godrej Properties and slightly ahead of Oberoi Realty.
Analysts said the company is reasonably valued at 26 times its financial year 2019-20 (FY20) earnings. However, high debt is a concern.
“The company has a substantial amount of debt and contingent liabilities and the impact of Covid-19 on the business is still uncertain. Moreover, the company is hugely focused on the Mumbai Metropolitan Region, which is the worst affected by the Covid crisis. Hence, we advise investors to exit in case of any bounce back in the share price,” said Saurabh Joshi, research analyst at Marwadi Shares and Finance.
Macrotech’s successful listing ends a more than decade-long effort to take the developer public, after previous attempts in 2009 and 2018 were shelved. A global equity rout in midoctober 2018, caused by concerns about geopolitical tensions and rising interest rates, upended its plan to raise ~5,500 crore then.
Macrotech aims to use the funds from its IPO to help reduce its debt load by at least ~1,500 crore. The company also plans to push ahead with asset sales to reduce net debt to ~12,700 crore from the ~18,400 crore it carried as of December, according to Chief Executive Officer Abhishek Lodha. Founders of Macrotech, which includes CEO Lodha and a family trust, still own about 88.5 per cent after the listing.
Rajnath Yadav, an analyst with Choice Equity Broking, said large realestate firms with better access to capital and ability to leverage are capturing market share held by smaller players, and Lodha with unsold inventory of 5.5 million square feet of ready-to-move residential projects, may benefit.