Suraj Estate Developers IPO Dates, Details, Risks and Review

Suraj Estate Developers IPO Introduction

Suraj Estate Developers IPO is scheduled to open on December 18, 2023 and closes on December 20, 2023. Company is engaged in real estate business across residential and commercial sectors in South Central Mumbai Region. This article provides Suraj Estate Developers IPO dates, issue details, Size, GMP, Positive Aspects, Risk or Negative factors and review.

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About Suraj Estate Developers Limited

Company is involved in real estate business since 1986 and develops real estate across residential and commercial sectors in South Central Mumbai Region.

Company have a residential portfolio located in the markets of Mahim, Dadar, Prabhadevi and Parel, which are sub-markets of the South-Central Mumbai micro market where they have established its presence.

They are focused primarily on value luxury, luxury segments and commercial segment. They are now venturing into residential real estate development in Bandra sub-market. Its focus area of operation is the South-Central region in Mumbai mainly consisting of Mahim, Matunga, Dadar, Prabhadevi and Parel, as its expertise lies is in the redevelopment of tenanted properties under Regulation 33(7) of the Development Control and Promotion Regulations in the Mumbai region. Since most of the land parcels in the South Central Mumbai market are in the nature of re-development projects, its core competence lies in tenant settlement which is a key element for unlocking value on such land parcels.

They have identified cessed/ non-cessed properties with existing tenants, and tie up with the landlords of such tenanted properties by entering into a development agreement or on outright purchase basis through conveyance deed.

Company does not provide any construction services on its own and is 100% dependent on thirdparty contractors for the construction services of its Projects. Since incorporation, they have completed 42 projects with a developed area of more than 1,046,543.20 square feet in the South-Central Mumbai region. In addition to the completed projects, they have 13 Ongoing Projects with a developable area of 20,34,434.40 square feet and saleable carpet area 6,09,928square feet and sixteen (16) Upcoming Projects with an estimated carpet area of 7,44,149 square feet.

Suraj Estate Developers IPO Dates, Details, Risks and Review

Suraj Estate Developers IPO Dates, Price Band and Size

IPO Date IPO Opens on December 18, 2023 and closes on December 20, 2023
IPO Listing Date December 26, 2023
Issue Type Book Built Issue IPO
Face Value Rs 5 per equity share
IPO Price band Rs 340 to Rs 360 per equity share
Lot Size 41 Shares
Listing at BSE and NSE
Total Issue Size Rs. 400 Crores

About Company Financials

Financial Year ending / Period ending (Amt in Crores)
Period Ended 31-Mar-21 31-Mar-22 31-Mar-23 30-Jun-23
Assets 792.00 864.00 942.58 994.73
Revenue 244.00 273.91 307.89 102.81
Profit After Tax 6.28 26.50 32.06 14.53
Net Worth 29.15 39.16 71.39 86.11
Reserves and Surplus 22.94 23.32 55.48 70.29
Total Borrowing 600.48 638.16 593.09 598.50

Objects of the IPO

Objectives of the IPO has only fresh issue. Company intend to use these funds for the following:

  • Repayment/Prepayment of the aggregate outstanding borrowings of the company and its subsidiaries, Accord Estates Private Limited and Iconic Property Developers Private Limited.
  • Acquisition of land or land development rights.
  • General corporate purposes.

Suraj Estate Developers IPO Grey Market Premium (GMP)

The Grey Market Premium (GMP) for Suraj Estate Developers IPO is reported to be in the range of Rs 50 to 54. It’s important to note that the accuracy of GMP cannot be independently verified as these trades occur in the offline mode, making it challenging to obtain real-time and reliable information.

Suraj Estate Developers IPO Valuation

  • The IPO price band is Rs 340 to 360 per share
  • P/E Ratio Analysis
    • If we consider the last year FY23 EPS of Rs 10.1, the P/E ratio works out to be 36x
    • If we consider last 3 years weighted EPS of Rs 8.16, the P/E ratio works out to be 44x
  • Comparison with listed peers
    • Sunteck Realty Limited trading at P/E 4536x (Highest)
    • Hubtown Limited is trading at P/E of 16x (Lowest)
    • Industry average P/E is 668x
  • While there are some companies which has abnormal P/E, however consider the IPO Price band at P/E of 36x to 44x of this company is reasonably priced.

Positive Factors to invest in Suraj Estate Developers IPO

Here are the positive factors for Investing in the IPO:

  • Long-Standing Presence and Expertise: The company has been involved in the real estate business since 1986, demonstrating a significant track record and experience. Specializes in the redevelopment of tenanted properties in the South-Central Mumbai region, with a focus on areas like Mahim, Matunga, Dadar, Prabhadevi, and Parel.
  • Diverse Portfolio: Engages in real estate development across residential and commercial sectors. Presence in “value luxury” and “luxury” segments, catering to various price points, with unit values ranging from ₹10.00 million to ₹130.00 million.
  • Successful Project Execution: Completed 42 projects with a developed area exceeding 1,046,543.20 square feet in the South-Central Mumbai region. Currently managing 13 ongoing projects with a developable area of 20,34,434.40 square feet and saleable carpet area of 6,09,928 square feet. Has 16 upcoming projects with an estimated carpet area of 7,44,149 square feet.
  • Customer-Centric Approach: Focuses on addressing customer requirements in various locations, ticket sizes, and configurations. Demonstrates the ability to deliver differentiated product offerings with a customer-centric business model.
  • Established Brand and Market Presence: A strong brand presence with over 36 years of operation in the real estate market in Mumbai. Significant brand recall in sub-markets of the South Central Mumbai region, leading to substantial sales referrals from existing customers.
  • Competitive Strengths: Established brand with a long-standing presence in the value luxury and luxury segments in the residential real estate market. Strong expertise in tenant settlement in redevelopment projects. Effective marketing and sales strategies.
  • Strategic Focus: Strategic business focus on enhancing the market position in the South Central Mumbai region through upcoming projects. Continued emphasis on redevelopment projects through an asset-light model. Selective development of commercial projects in the South Central Mumbai region.

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Negative or risk factors of investing In this IPO

  • Dependency on South-Central Mumbai Real Estate: Business heavily relies on the performance and conditions of the real estate sub-markets in South-Central Mumbai.Lack of diversification exposes the company to economic, regulatory, and natural disaster risks specific to the South-Central Mumbai region.
  • Title Uncertainty: Any uncertainty in the company’s title to real estate assets could have a significant adverse impact on current and future revenue.
  • Regulatory Compliance for Redevelopment Projects: Redevelopment projects require compliance with Regulation 33(7) of the Development Control and Promotion Regulation, 2034, involving tenant settlement, approvals from MHADA & MCGM, and construction of tenant and saleable portion units.
  • Project Completion Risks: Inability to complete ongoing and upcoming projects by expected completion dates or at all could have a material adverse effect on business, results of operations, and financial condition.
  • Inventory Unsold and Sales Timing: As of October 31, 2023, the company has 216 unsold units in ongoing projects. Failure to sell project inventories in a timely manner may adversely affect business, results, and financial condition.
  • Project Approval Challenges: Upcoming projects are in preliminary planning stages, requiring approvals and renewals from Brihanmumbai Municipal Corporation. Difficulties in fulfilling conditions precedent or delays in obtaining approvals may impact project schedules.
  • Seasonality and Geographic Expansion Challenges: Business subject to seasonality, and expansion into additional geographical markets, including the MMR region, may pose challenges and contribute to fluctuations in results and financial condition.
  • Competitive Industry Landscape: Operating in a highly competitive and fragmented industry, increased competition could adversely affect the company’s results.
  • Potential Negative Cash Flows: Negative cash flows in the future could adversely affect cash flow requirements, impacting the ability to operate the business and implement growth plans, thereby affecting financial condition.
  • Auditor’s Matters of Emphasis: Statutory auditors have highlighted certain matters of emphasis in the financial statements, indicating potential areas of concern.
  • Recall of Unsecured Loans: As of September 30, 2023, the company holds ₹774.35 million in unsecured loans, which may be recalled by lenders at any time, posing a potential financial risk.
  • Investors should go through all risk factors indicated in the Suraj Estate Developer RHP.

Suraj Estate Developers IPO – Should you Subscribe?

Investors should consider all pros and cons before assessing whether this IPO is good or bad for investment.

  • The company presents a compelling investment opportunity with its extensive 36-year presence and expertise in the real estate market, particularly in South-Central Mumbai. Boasting a diverse portfolio in both residential and commercial sectors, the company has successfully completed numerous projects, demonstrating a strong track record of project execution. Its focus on value luxury and luxury segments, coupled with a customer-centric approach, positions it well to cater to various market segments. The established brand, experienced management, and competitive strengths, such as expertise in tenant settlement and effective marketing strategies, contribute to the positive investment narrative.
  • However, investing in the IPO comes with inherent risks. The company’s heavy reliance on the South-Central Mumbai region exposes it to economic, regulatory, and natural disaster risks specific to that area, lacking geographical diversification. Compliance challenges in redevelopment projects, potential delays or non-completion of ongoing and upcoming projects, and a substantial inventory of unsold units pose significant operational and financial risks. Moreover, the competitive and highly fragmented nature of the real estate industry could impact the company’s results adversely. Additional concerns include potential negative cash flows, auditor-highlighted matters of emphasis in financial statements, and the risk of lenders recalling unsecured loans, contributing to an overall risk-laden investment proposition.

Investors can invest in this IPO after considering all positive and risk factors.

Suresh KP

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