Lodha's Macrotech Developers share trades 117% above IPO price; up 4% today

Shares of Macrotech Developers, formerly known as Lodha Group, surged more than 4% in opening deals on the BSE on Wednesday after global rating agency Moody’s upgraded the credit rating of its overseas arm. The stock of the realty company has gained 125% over the past one year and surged 117% above its initial public offering (IPO) issue price of ₹486 per share. The Mumbai-based real estate developer made its debut on the domestic exchanges on April 19, 2021, after successfully raising ₹2,500 crore via IPO.

Snapping two-session losing streak, shares of Mumbai-based real estate developer opened higher at ₹1,055.95 against the previous close price of ₹1,036.05 on the BSE. In the first hour of trade so far, the largecap stock gained as much as 4.24% to hit a high of ₹1,080, while market capitalisation rose to ₹50,481.13 crore.

At 10:00 a.m., Macrotech Developers’ shares were trading 1.2% higher at ₹1,048.40. In comparison, the BSE benchmark Sensex was quoting at 56,567, up 790 points or 1.42%.

The stock price surged after Moody's Investors Service upgraded the corporate family rating (CFR) of Macrotech Developers Limited (MDL) and its wholly-owned subsidiary, Lodha Developers International, with a positive outlook. The global agency has revised the rating of MDL and the backed senior secured rating of Lodha Developers’ dollar bonds to ‘B2’ from ‘B3’.

"The upgrade of MDL's ratings to B2 from B3 reflects the company's improved liquidity following the partial prepayment of its $225 million backed senior secured bonds due in 2023, as well as a continued recovery in operating performance both at India and London," says Sweta Patodia, a Moody's Analyst.

"The positive outlook reflects our view that MDL's credit profile could improve further if the company is able to demonstrate a track record of strong operating performance while adhering to its committed financial policies," adds Patodia.

The ratings were revised after its arm Lodha Developers International Ltd, Mauritius on March 14 prepaid $170 million (around ₹1,298 crore) out of its outstanding $225 million senior secured notes due March 2023. The debt were paid after the company registered best-ever quarter sales of 191 million pounds (around ₹1,900 crore) in the December quarter of 2022.

The company expects to repay the balance of $55 million by June 2022. Of the $425 million (£328 million) of inventory financing that was outstanding at Grosvenor Square (GSQ) as of November 2021, MDL has repaid around $180 million in January 2022, Moody’s said in a report on March 15.

“These debt repayments not only strengthen the company's liquidity but also reflect a sustained recovery in operating performance at its London projects, which had thus far been a drag on its credit profile,” the report highlighted.

In addition to the $55 million of outstanding bonds, the company now has around $240 million of loan outstanding at Grosvenor Square, which is due for repayment in January 2026.

Moody's expects MDL's operating sales and collections to remain upbeat over the next 12-18 months as pandemic-related restrictions ease and rising vaccination rates drive up economic activity. “Structural changes in customer preferences toward bigger homes will also support housing demand. MDL is well placed to capitalize on these positive industry trends, given its stock of ready inventory and its strong launch pipeline over the next 12 months,” it said.

The company’s liquidity has improved following debt reduction through inorganic measures taken by the management. As of December 2021, debt at the company's Indian operations was around ₹9,900 crore, down 38% from debt levels as of March 2021. In November last year, MDL raised around ₹4,000 crore through a qualified institution placement of its equity shares. The company intends to use capital proceeds to fund future growth, which will allow it to use its internal cash flow generation for further debt reduction.