IPO Review - Macrotech Developers Ltd - ICICI Direct

Macrotech Developers Ltd (MDL), incorporated as Lodha Developers Pvt Ltd on September 25, 1995, is one of the largest real estate developers in India by residential sales value for FY14-20. Its core business is residential real estate development with a focus on affordable and mid-income housing. Currently, it has residential projects in the MMR and Pune. In 2019, the company had forayed into the development of logistics and industrial parks and entered into a joint venture with ESR Mumbai 3 Pte Ltd. MDL also develops commercial real estate, including as part of mixed-use developments in and around its core residential projects.

Investment Rationale

Residential real estate developer with leadership position in attractive MMR region

The Mumbai Metropolitan Region (MMR) is considered the most attractive real estate market in the Top Seven Indian Markets, having the largest share of supply and absorption, and highest average base selling price. In this region, MDL has developed a strong brand and has existing land reserves, industry knowledge and regulatory environment know-how. This, in turn, has aided the company to attain a leadership position in South Central Mumbai, Thane and the Extended Eastern Suburbs micro-markets of the MMR, with the largest share of supply (by units), absorption (by value) and completion (by area) of residential developments.

Well-established brand with ability to sell at premium pricing

MDL focuses on branded realty and has created strong brands such as 'CASA by Lodha', 'Crown-Lodha Quality Homes', and 'Lodha' for affordable and mid-income housing projects, the 'Lodha' and 'Lodha Luxury' brands for premium and luxury housing projects and the 'iThink', 'Lodha Excelus' and 'Lodha Supremus' brands for office spaces. The strength of MDL's brand and its association is primarily driven by its track record of delivering quality products, with modern amenities and innovative design elements. It leverages its brand presence, customer confidence, track record of successfully delivering projects and superior construction quality to increase sales volumes and also command premium pricing for its products.

Diversified portfolio across price points, MMR micro markets

MDL has a diversified portfolio of residential developments, spread across price points and micro-markets in the MMR, catering to a wide spectrum of economic and demographic segments, from luxury residences in South Mumbai to large, integrated townships in the extended suburbs offering affordable homes. As of December 31, 2020, 35% of its unsold inventory of residential developments was priced under Rs. 1 crore, 21% was priced between Rs. 1 and Rs. 3 crore, 7% between Rs. 3 and Rs. 5 crore, 22% between Rs. 5 and Rs. 8 crore while 15% was priced above Rs. 8 crore. For 9MFY21, 39% of its residential sales value was obtained through the sale of residential developments that were priced under Rs. 1 crore, 23% between Rs. 1 and Rs. 3 crore, 14% between Rs. 3 and Rs. 5 crore, 11% between Rs. 5 and Rs. 8 crore and 13% priced above Rs. 8 crore.

Priced at 3.2x 9MFY21 P/B (fully diluted) on upper band

At Rs. 486, the stock is priced at 9MFY21 P/B on a fully diluted basis.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_MacrotechDeveloper_IPOReview.pdf

Source : Equity Bulls

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