Macrotech Developers IPO: Information Analysis

Macrotech Developers Limited, which commenced its operations in 1995 with Mangal Lodha at the helm, is a large realty player focussed on constructing residential apartments in the Mumbai Metropolitan Region (MMR). The company, formerly known as Lodha Developers Limited (until 2019), primarily focuses on the affordable and mid-income housing segment, which accounted for nearly 55 per cent of its sales in FY21. Premium and luxury residences segment is also a crucial segment for the company, accounting for nearly 40 per cent of the sales. Development of commercial real estate, and logistics and industrial parks accounted for the rest. The company currently has 36 ongoing projects covering around 29 million square feet (msf) of developable area and 18 planned projects spanning over 45 msf. The company also has a land bank of 3803 acre in MMR which can potentially develop 322 msf overall. This is the company's third attempt to come out with an IPO after two failed attempts in 2010 and 2018. During the financial year 2019-20, it reported a profit of roughly Rs 720 crore on sales of Rs 12,561 crore. Strengths Leading position in MMR region: The company has a strong presence in the MMR region which is considered to be the most attractive market in the country with the highest base selling price. The company stands amongst the top five developers in most micro-markets of the MMR region. High entry barriers: The realty segment is capital intensive in nature. Additional factors unique to the MMR region such as limited land availability, high prices of land and the requirement of many approvals before developing a project result in high entry barriers for any new player in the industry. Favourable regulatory climate: Promoting housing has always been a high priority for governments across the board and there are many incentives for home buyers. Maharashtra's reduction in stamp duty and construction premium, along with the additional incentives given in the Budget are recent examples. Risks and weaknesses Weak balance sheet: The company is neck deep in debt. On a consolidated level, the company's total liabilities were at Rs 35,782 crore on an equity base of Rs 4,812 crore (7.4 times). Its net debt stood at Rs 18,367 crore as of December 31,