IPO of Macrotech Developers subscribed 26% on day 1 of IPO, retail quota subscribed paltry 15%

New Delhi: The IPO of Macrotech Developers was subscribed to the extent of 26 percent on the first day of bidding today with the retail investor quota being subscribed a paltry 15 percent. The quota reserved for qualified institutional buyers (QIBs), however, got subscribed to the extent of 58 percent.

The Mumbai-based company, earlier known as Lodha Developers, is offering shares in the price range of Rs 483-486 in the IPO. The last day of the bidding process will be 9 April.

The net debt of the company stood at Rs 16,700 crore as of December 2020, something seen as very high by analysts. “We dont expect great participation by the retail investors. The listing gains will be quite limited in Macrotech’s IPO, remaining single digit only. We have investment concerns for the IPO also as the company has a net debt of Rs 16,700 crore as of last December and a downturn in the real estate industry may affect Macrotech significantly,” said Yash Gupta, Equity Research Associate, Angel Broking.

It will be pertinent to note the company suffered a net loss of Rs 270 crore due to the corona pandemic in the nine-month period ending 31 December 2020 when most listed real estate companies earning a net profit in the same period. As the pandemic is getting unmanageable yet again this year, there can be significant risks for the earnings of the company.

According to an IPO note by Angel Broking, there are some risks associated with investment in the company. These are:

1 Company (Macrotech) product portfolio is too concentrated on the residential market of MMR region any change in rule and regulation by authority may affect the company significantly. 

2 Company (Macrotech) not able to generate significant positive cash flow for the shareholder in the last 3 years and may continue to have negative cash flows in the near future.

However, there are some strengths of the company, according to Angel Broking. These are:

1 Change in customer preference of buying ready to move inventory will help the company to increase its market share in MMR region as the company has significant inventory of completed units. 

2 There has been good housing demand after the sector was hit by the covid pandemic and the sales momentum to continue for Macrotech in near future.