Lodha’s IPO is credit positive, says Moody’s

Bengaluru: Credit rating firm Moody’s Investors Service on Monday said real estate firm Lodha Developers Ltd’s (LDL) planned initial public offering (IPO) to raise an estimated Rs5,500 crore is credit positive.

“This is credit positive for LDL if the IPO goes ahead as planned because it will meaningfully pare debt and improve leverage,” Moody’s said in a note.

Last week, Lodha filed its draft documents for its IPO with the capital markets regulator. The proposed IPO will see the company raise ₹ ,750 crore through a primary share sale while the promoters of the company are looking to offload 18 million shares and also considering a pre-IPO placement of up to 9.5 million equity shares for a cash consideration aggregating up to ₹ 750 crore.

Lodha proposes to use the IPO proceeds to pare debt.

“The total funds available for debt repayment is comprised of around ₹ 3 billion ( ₹ ,300 crore) of the expected ₹ 37 billion ( ₹ ,700 crore) proceeds from the fresh issue of shares and around 80% of the offer for sale by the promoters. The promoters intend to use at least 80% of the proceeds from the offer for sale to repay loans given to the shareholders by the company. The company intends to use such proceeds towards debt reduction as well,” the research note said.

The company’s net debt stood at Rs17,397.04 crore as on December 2017, according to the filing.

The last time real estate firms hit the primary market was in 2010.

This is the second time that Mumbai-based Lodha has filed for an IPO. In 2009, the realty firm had filed a prospectus with the market regulator but eventually withdrew it.

Lodha Developers was founded in 1995 by Mangal Prabhat Lodha.

In an interview in February, managing director Abhishek Lodha said the company plans to pare debt this year after bringing down borrowing cost in the past couple of years. In the past two years, Lodha has focused on reducing the cost of debt, and has managed to do so by over 1%.