Should You Invest In India’s Largest Real Estate Company?

By Aditya Raghunath

Investing.com -- Macrotech Developers Ltd (NS: LODV ) previously known as Lodha Developers is planning to raise close to Rs 2,500 crore via an IPO. The company is India’s largest real estate developer in terms of residential sales value. Macrotech’s core business is essentially residential real estate development primarily in the Mumbai Metropolitan Region (MMR) and Pune.

Macrotech operates in a fragmented market and its competitors include DLF Ltd (NS: DLF ), Sobha Developers Ltd. (NS: SOBH ), Oberoi Realty Ltd (NS: OEBO ), Piramal Realty and Wadhwa Group among others. The company has managed to outperform peers with a return on net worth of 17.8%. It also has a better EBITDA margin of 30% in the last three years but is grappling with high debt levels.

This is Macrotech’s third attempt to go public via an IPO. It previously decided to list publicly during the market crash 0f 2009 but decided against the same due to unfavorable market conditions. In 2018, its second attempt was also shelved following the IL&FS debacle.

In the last three years, Macrotech Developers has seen its revenue decline from Rs 13,527 crores in fiscal 2018 to Rs 12,442.6 crore in fiscal 2020. Its net profit margins have also fallen from 13.2% to 5.9% in the same period. In the first nine months of fiscal 2021, Macrotech’s net profit margin stands at a negative 9.1%.

We can see that the company’s top-line has taken a hit in the last three years. The real estate industry has also been impacted amid the COVID-19 pandemic resulting in bearish investor sentiment. While Macrotech ranks better than real estate peers in terms of financial metrics such as EBITDA, its huge debt and a tepid macro-economic outlook might prove a deterrent to investors.

This article should not be construed as financial advice