Macrotech pips Godrej for the No. 2 spot in realty m-cap race

The company, erstwhile Lodha Developers, closed with a market capitalization of ₹41,770.59 crore on Monday after its shares surged 4.75% to close at ₹934.15, BSE data showed. During the day, its shares hit a record ₹947.70. Godrej Properties ended at ₹1,495.10 on the BSE, up 1.52% from its previous close. Its market cap stood at ₹41,538.97 crore. DLF Ltd remains India’s top real estate developer, with a market cap of ₹79,135.72 crore.

Despite the lukewarm response to its initial public offering and a tepid debut, the Macrotech stock has gained nearly 91% from its issue price of ₹486 a share. Investors have shown interest in the stock after the company steadily reduced its debt and improved business momentum. The company aims to become net debt-free by 2024.

Analysts say Macrotech has a sizeable mid-income focused project pipeline across the Mumbai metropolitan region (MMR), and its foray into asset-light business development as well as land/annuity asset monetization are likely to keep momentum strong in FY22-24.

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Macrotech has a 3,500-acre land bank for its industrial and warehousing business. The company has sold 255 acres already. While no sales concluded in the first quarter, a 22-acre land sale was done in July and a deal for another 40 acres is in advanced discussions. As of June 2021, its net debt stood at ₹12,500 crore, down 22% from fiscal year 2021. Collections were at ₹1,714 crore during the quarter.

“Over 9MFY22-FY24, we expect consolidated net debt levels to fall by another ₹70 billion to ₹68 billion, driven by strong operating cash flows and lower finance costs. Faster land-bank monetization through leasing of the industrial & logistics park and the potential sale of completed annuity assets could further accelerate the pace of deleveraging,” said IIFL Securities in a note to investors.

Macrotech plans to launch 5 million sq. ft of projects worth ₹6,400 crore in the year. Additionally, ₹7,800 crore worth of completed inventory and ₹17,200 crore worth of ongoing project inventory is available to drive sales towards the ₹9,000 crore target. It has also signed new projects (JD/JVs) of 3.3 million sq. ft worth ₹3,450 crore.

“Macrotech Developers, with its strong positioning and execution track record in MMR, remains on the forefront to capture joint development opportunities in the region. Unlike the past, Macrotech has been growing its project pipeline through JDA projects. Simultaneously, it continues to reduce debt levels and is also looking at launching new projects,” said JM financial in a report to its investors.

Of the eight brokers tracking the Macrotech stock on Bloomberg, seven have recommended a ‘buy’ rating, while one has a ‘sell’ rating.

According to an ICICI Securities report, the net debt of Godrej Properties increased by ₹1,920 crore between the fourth quarter of FY20 and the third quarter of FY21 as it continued to incur significant land capex/joint development agreement (JDA) advances of ₹1,600 crore during the same period. However, a qualified institutional placement fundraise of ₹3,700 crore in the fourth quarter of FY21 resulted in it becoming net cash.

“With the company’s stated intent to invest over $1 billion into new projects over FY22-23E, the company’s net debt levels are expected to rise again, but will be compensated by higher operating surplus considering the large pipeline of project launches,” the brokerage firm added.