Macrotech's Rs 2,500-cr IPO gets lukewarm response from investors

The Rs 2,500-crore initial public offering (IPO) of Macrotech Developers (erstwhile Lodha Developers) got a lukewarm response from investors with the issue garnering just 1.37 times subscription. This is the least for any IPO in 2021.

The 36.42-million offering got less than 50 million bids with retail and employee portions of the issue remaining undersubscribed at 40 per cent and 17 per cent, respectively.

The IPO managed to sail through on the back of demand from qualified institutional buyers (QIBs). The QIB portion was subscribed 3.06 times. The high-networth individual (HNI) portion was subscribed 1.45 times.

Industry players said grey market rates indicated that the stock could list at a discount, which discouraged many investors from applying for the IPO.

Besides, there were concerns around high debt levels, they said. Institutional investors, who typically hold shares of large companies in their respective sector, applied for the IPO. Macrotech, a Mumbai-based developer, will use the IPO proceeds to prune debt and acquire land.

The price band for the IPO was Rs 483–Rs 486 per share. At the top-end, the company will have a post-diluted market capitalisation of Rs 21,740 crore. This will make it the third-most valued developer in the listed space behind DLF and Godrej Properties and slightly ahead of Oberoi Realty.

“The IPO is valued at 26.3 times of FY20 earnings and 4.8 times of FY20 book value, which appear to be reasonably priced vis-à-vis its peers like Godrej Properties and DLF. Further, strong project portfolio and monetisation of huge land banks offer comfort. Moreover, its return ratio looks to be superior compared to peers,” Reliance Securities had said, in a note advising its clients to ‘subscribe’.

At the end of December 2020, Macrotech’s aggregate outstanding borrowings on a consolidated basis stood at Rs 18,662 crore.