Macrotech Developers IPO subscribed 26% on Day 1

NEW DELHI: The Rs 2,500 crore initial public offer of Macrotech Developers, erstwhile known as Lodha developers, was subscribed 26per cent on the first day of the bidding on Wednesday.

Interestingly, qualified institutional buyers (QIBs), who usually bid on the last day of the process, came in hordes to apply for the shares. The quota reserved for them was subscribed 58 per cent. The retail investor quota was subscribed 15 per cent.

The company had raised Rs 740 crore from 14 anchor investors ahead of the IPO, allocating 15.2 million shares at Rs 486 apiece.

A total of 12 foreign portfolio investors (FPI) participated in the anchor round. The Capital Group, Nomura, Ivanhoe Cambridge, Wellington Asset Management, Abu Dhabi Investment Authority, Platinum Asset Management, Marshall Wace, Brookfield Asset Management, Segantii Capital, York, Oxbow and Discovery were the overseas investors allocated shares in this round.

Besides, HDFC Mutual Fund and Premji Invest also came on board.

The company is selling shares in the range of Rs 483-486 under the IPO. The bidding process will conclude on April 9.

Analysts are mixed on the issue with some counting superior return ratios as positives while others raising questions over its huge debt and negative cash flow. The grey market premium for the issue has also vanished.

“We also expect listing gains will be very limited in this IPO. We also have some investment concerns for the IPO, with the firm having a net debt of Rs 16,700 crore as of December 2020, any downturn in industry may affect the company significantly,” said Yash Gupta, Equity Research Associate, Angel Broking.

He warned that the company’s product portfolio is too concentrated on the MMR residential market, and any change in rules and regulations by authorities may affect the company significantly.

But not everyone is bearish on a company’s prospects. Reasonable valuations and some recovery in the residential market have givest wings to those hopes.

“The IPO reasonably priced vis-a-vis its peers like Godrej Properties and DLF. Macrotech’s plan to reduce net debt to Rs 12,700 crore in the coming quarters negates concern over high leveraging. Further, its strong project portfolio and monetisation of huge land banks offer comfort. Moreover, its return ratio looks to be superior compared to peers,” said Reliance Securities’ Vikas Jain, who has a ‘subscribe’ rating on the issue.