Macrotech Developers IPO lists at 10% discount — analysts recommend that shareholders should wait it out

Macrotech Developers IPO lists at 10% discount — analysts recommend that shareholders should wait it out
An artist's impression of Palava City being built by Macrotech DevelopersLodha
  • Marcotech Developers is now live on the exchanges listing at a share price of ₹436.
  • This is a 10.3% dip from the subscription price of ₹486 per share.
  • Prior to listing, the ₹2,500 IPO saw lukewarm response from investors, only being subscribed to 1.36 times.
Macrotech Developers, formerly known as Lodha Developers, saw its initial public offering (IPO) list at a 10.3% discount on the National Stock Exchange (NSE). Its share price at 10:00 am, the time of listing, was ₹436 versus the subscription price of ₹486.

Within the first 10 minutes, the price was able to reach a high of ₹472.95 before dipping back down to ₹458 at 10:10 am.
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The company’s ₹2,500 crore initial public offering (IPO) received a lukewarm response from investors after only seeing a subscription rate of 1.36 times.

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Macrotech Developers IPOQualified Institutional BuyerNon-institutional InvestorRetail Individual InvestorTotal
No. of times issue subscribed 3.05 times1.44 times0.40 times1.36 times


According to analysts, the company is a good bet if you were willing to hold on to the stock for the long run — not for its listing premium. So, if you have the shares and are concerned that there’s been a loss on premium, keep the stock if you have the patient.

Why are investors wary of Macrotech Developers?
One of the reasons for investors to be wary was the company’s high level of debt. Around ₹1,500 crore of funds from the IPO will go towards repaying lenders to ease its balance sheets. But that doesn’t mean that it won’t need more money, which brings us two the second reason investors were vary about putting their money into the offer.

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Marcotech Developers is operating in a capital intensive sector, the real estate industry, during a pandemic. Any delays due to a lockdown, curfew or the implementation of restrictions like Section 144, could add to its costs — especially since the majority of its projects are in India’s financial capital, Mumbai. The city has been one of the worst hit in all of India during the second wave of the pandemic.

“If the company does not have access to funds required on favourable terms, it may be required to delay or abandon some or all planned projects or reduce the scale of operations,” noted Capital Markets in its preview.

The brokerage pointed out that the company has earlier difficulties in serving its debt. It was among the companies that availed the moratorium offered by the Reserve Bank of India (RBI) for six months during the pandemic, from March to August 2020.

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The size of Macrotech Developers has its own loopholes
The problem with Macrotech Developers possibly having to reduce its scale of operations due to the uncertainty propagated by the pandemic is that it’s one thing it has playing in its favour.

Macrotech Developers is one of the largest players in the Indian real estate market going up against behemoths like Godrej Properties, Sunteck Realty, and Oberoi Realty. And so far, it has consistently outperformed all its peers when it comes to sales, as per Hem Securities.

It has a strong distribution network, not just in India, but in foreign markets like the UK, the US, Singapore and the Gulf Cooperation Council (GCC).

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But even that comes with its own loopholes. “Large construction projects in all parts of the world provide opportunities for corruption, fraud or improper conduct, including bribery, deliberate poor workmanship, theft or embezzlement by employees, contractors or customers or the deliberate supply of low-quality materials, which may delay development of projects,” said Capital Market’s report.

Yes, it's one of the biggest players in the residential real estate market, but being so big at a time when the real estate market is witnessing its biggest slump in five years can be dangerous — even with home loans rates on the downtrend.

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