Macrotech Developers IPO: All You Need To Know
Mumbai-based Macrotech Developers Ltd. will sell shares at Rs 483-486 apiece in its initial public offer on April 7, becoming the first real estate developer to launch a maiden offering in the new financial year.
This is the third attempt by Macrotech (erstwhile Lodha Developers Ltd.) to launch its IPO after the first attempt in 2009 failed due the global financial crisis and second attempt in 2018 failed post the IL&FS crisis and adverse market conditions.
The developer plans to raise Rs 2,500 crore through fresh issuance of shares. It scaled down its IPO size from Rs 5,500 crore in 2018.
Issue open: April 7-9.
Face value: Rs 10 per share.
Issue size: Fresh issue of 5.14 crore shares worth Rs 2,500 crore at the upper end of the price band.
Price band: Rs 483-486 apiece.
Minimum lot size: 30 shares.
Listing on: National stock Exchange and BSE.
Book running lead managers: Axis Capital, JPMorgan, Kotak Investment Banking, SBI Capital Markets, BOB Capital, ICICI Securities, Edelweiss, IIFL, JM Financial and Yes Securities.
The issue constitutes 11.50% of the fully diluted post issue equity capital, valuing the real estate developer at Rs 21,740 crore at the upper end of the price band.
Use Of Proceeds
The company plans to repay debt worth Rs 1,500 crore and acquire land and development rights worth Rs 375 crore, and the rest for general corporate purposes.
It has raised Rs 740 crore from 14 anchor investors. The company has allocated 1.52 crore shares at Rs 486 apiece.
At the end of December 2020, the company had a consolidated borrowing of Rs 18,662 crore comprising secured borrowings of Rs 18,496 crore and unsecured borrowings of Rs 165 crore.
Borrowings worth Rs 16,145 crore are coming up for repayment or refinance within the next one year. Total current liabilities stood at Rs 32,860 crore at the end of December.
The company availed moratorium offered by banks and lending institutions during the Covid-19 pandemic.
The developer mostly focuses on affordable and mid-income housing with projects mostly in the Mumbai Metropolitan Region and Pune. In 2019, it forayed into the development of logistics and industrial parks and entered into a joint venture with ESR Mumbai 3 Pte., a subsidiary of ESR Cayman Ltd., an Asia Pacific focused logistics real estate platform. It also develops commercial real estate, including mixed-use developments in and around its residential projects.
As on Dec. 31, the company had a land reserve, including land with developmental rights, of about 3,803 acres with an estimated developable area of about 322 million square feet for future development in the Mumbai region. Of this, about 500 acres are located at Upper Thane and about 3,303 acres are located in Dombivali as a part of the Palava project.
The land reserves are either owned or the company has sole development rights. As on Dec. 31, the land reserves owned by the company is about 3,174 acres, which comprises 83.46% of total acreage of land reserves.
At the end of December, the company had 91 completed projects comprising about 77.22 million square feet of developable area; 36 ongoing projects with 28.78 msf of developable area; and 18 planned projects having 45.08 msf developable area
In the logistics and industrial park portfolio, it has an ongoing and planned development of approximately 290 and 540 acres, respectively.
In addition, it has invested in two real estate projects in London: Lincoln Square in the West End and No. 1 Grosvenor Square in Mayfair. Both are now complete, and the company plans to repatriate the net proceeds after repaying debt.
Macrotech has pending collection of 49 million pounds from the two properties. The net debt outstanding, including accrued and unpaid interest, stands as 402 million pounds. It also has a $170 million loan secured against the cash flow from the project.
Sales and gross collections from residential projects declined to Rs 3,145 crore and Rs 2,686 crore in the nine months ended December from Rs 4,184 crore and Rs 5,049 crore a year earlier.
Sales and gross collections from commercial projects declined to Rs 206 crore and Rs 206 crore from Rs 1,215 crore and Rs 1,235 crore.
The company hasn’t declared any dividend in the last four financial years.
In the nine months ended December, it reported a loss of Rs 270 crore.
The company has financing agreements that require it to maintain certain financial ratios. Of the total outstanding borrowings worth Rs 18,662 crore as of December, majority of loan agreements include a mandatory prepayment using a certain percentage of its receivables under certain circumstances.
As of December, Macrotech had unsold residential inventory of about 14.8 million square feet, and 5.5 million square feet of ready-to-move unsold inventory in India.
The Mumbai Metropolitan Region may be exposed to natural disasters, putting its projects in region at risk. As of December, 35 of its 36 ongoing projects were in the MMR accounting for 96.72% of the total developable area in the category.
A large portion of its affordable housing portfolio qualifies for tax benefits such as 100% deduction of tax on profit (subject to minimum alternate tax) and lower GST on affordable housing. If the government amends the criteria for affordable housing or reduces or withdraws tax benefits and other incentives, business may be adversely affected.