"IPO of Macrotech Developers seems to be richly valued by the company. Other listed companies better for investment"

New Delhi: Mumbai-based Macrotech Developers Ltd, formerly Lodha Developers, is coming out with its Initial Public Offering (IPO) scheduled from 7-9 April to sell around Rs 2,500 crore of shares.

The company has decided on a price band of Rs 483-486 for the shares on sale in the IPO. 

The company, established by Mangal Prabhat Lodha, has a mammoth Rs 18,660 crore of debt on its outstanding at 2020 end. The IPO proceeds will help the realty firm pare some of its debt.   

Interestingly, the company had to face rating downgrade in the recent past. The ratings have pushed the shares of the company in the junk territory in recent years. The company even had to manage with a default on its dollar bonds almost a year ago.

“This is a big-sized IPO. Given the high debt, the issue seems to be richly valued by the company. After the listing on the bourses, it is expected that the shares may trade near the issue price levels. If things deteriorate in the real estate industry due to corona pandemic or because of any other factors, the share price of Macrotech may even go down than the issue price,” said Aditya Kondawar, Chief Operating Officer at JST Investments.      

On the upper end of the proposed price band of Rs 483-486 and earnings per share (EPS) of Rs 18.46 based on earnings of fiscal 2019-2020, the P/E ratio works out to be 26x. “It is expensive. There are better-listed companies available from the long-term point of view of investment by small or even large investors,” he added.