Lodha Developers IPO Financial Analysis (Avoid)

Lodha Developers Financial Review

Lodha Group is a residential real estate developer with focus on affordable and mid-income housing. The group commenced operations in Mumbai, developing affordable housing projects in the suburbs of Mumbai, and later diversified into other segments and regions in the MMR and Pune.

The revenues have fallen significantly by 66% as compared to the previous quarter due to the slowdown in business activity due to the pandemic.The Group posted total revenues of Rs 3160 crore for the 9 months ended 31st Dec 2020. The total revenues for FY20 increased marginally by 4.86% to Rs12560 crore from Rs 11978.87crore in FY19. However, PAT has fallen to Rs 745 crore in FY20 from Rs 1643 crore in FY19 owing to increased overall cost.

Operating margins and the net margins can be seen from the table below.It can be seen as a trend that PAT and EBITDA is showing a declining trend since the last three fiscals.

Return on net worth is (6.17%), 16.36%, 43% for 9MFY21, FY20 and FY19 respectively. Debt to equity is high at 4.58x for FY20.

Table 1 - Financials and Ratios (Amount in INR Crore)
Title 31-Dec-20 FY20 FY19 FY18
Total Revenue 3160.49 12560.99 11978.87 13726.57
Revenue from operations 2915.01 12442.59 11906.98 13527.19
PAT -264.31 744.84 1643.98 1789.39
EBITDA 925.72 2038.66 3238.92 3489.04
Total Assets 40594.62 40692.56 49863.94 47811.28
EBITDA Margin 5.32% 19.75% 20.12% 23.77%
Cash and Bank 295.34 186.95 657.55 522.45
Cash generated from operations 1436.74 3773.17 -463.18 695.99
EBITDA Margin 29.29% 16.23% 27.04% 25.42%
Net Margin -8.36% 5.93% 13.72% 13.04%

Peer Comparison

The listed peers of the Group are Brigade Enterprises, DLF Limited, Godrej Properties, Oberoi Realty, Prestige, Sobha Limited and Suntech Realty Limited.  Peer related data can be seen below.

Table 1 - Financials and Ratios (Amount in INR Crore)
Particulars 31-Dec-20 Brigade Enterprises DLF Godrej Oberoi Prestige Estates Sobha Sunteck Realty
Face Value per share 10 2 5 10 10 10 1
Total Income for FY20 (INR Crores) 2681.56 6888.14 2914.59 2285.99 8243.30 3825.66 631.55
EPS 6.39 -2.41 10.84 18.96 10.63 29.69 7.14
NAV per share 119.73 139.24 190.64 237.33 139.41 256.33 199.5
Return on net worth 4.66% -26.62% 5.63% 7.99% 9.82% 11.59% 3.46%
P/E 44.67 NA 135.51 31.12 27.44 15.12 52.14


  1. One of the largest residential real estate developers.
  2. Highly Diversified Portfolio which includes affordable, mid income housing projects and premium and luxury segment.


  1. Contingent liability of Rs 1600 crore from its UK investments.
  2. Volatility in financial performance and yoy reducing PAT and EBITDA for the last three fiscals.
  3. Net debt is Rs16700 crore as on 31st Dec 2020. Debt to equity is high at 4.58x for FY20.
  4. Real Estate sector continues to face liquidity problems.

Valuation and Conclusion

The Group has a negative P/E for 9 months ended Dec 31, 2020. The industry average P/E is 42.14 and highest industry P/E is 131.10. Hence, the IPO is valued at a negative P/E. At NAV of Rs 97.03, price to book value is 5.01x at upper price band of Rs 486 per share.

The sector in the past few years has been affected by introduction of GST and RERA. It was on the path of recovery that the economy was again hit by the pandemic. Real estate continues to bear liquidity problems and even shortage of labour due to lockdown measures to pandemic.

The track record of its financial performance is not very strong. EBITDA and the PAT is showing a declining trend since the last three fiscals. It is worth to note here that this is the Issuer’s third attempt in launching the IPO! Looking at the challenges faced by the sector, weak financial performance of the Group, high debt levels and the second wave of the pandemic, it would be apt to avoid this IPO.

Reviewer recommends Subscribing to the issue.

Review By CA Priyanka Choudhary on 30th Mar 2021

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Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

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