Arkade Developers IPO analysis

Arkade Developers IPO will open for subscription on September 16, 2024 and close on September 19, 2024. We break down the residential property developer's strengths, weaknesses, and growth prospects to help investors make an informed decision. Arkade Developers IPO in a nutshell Quality : Its three-year average ROE and ROCE were nearly 39 and 32 per cent, respectively, during FY22-24. Growth : Its revenue and net profit grew 67 and 56 per cent per annum, respectively, during FY22-24. Valuation : Post the IPO, the stock will be valued at a P/E and P/B ratio of around 19 and 3 times, respectively. Overview: Arkade Developers is expected to benefit from the growing housing demand in the economy. The real estate sector overall is benefiting from the government's increased focus on infrastructure development. This is expected to increase prices in the sector and support the company's growth. However, some risks for the company include the cyclicality of the industry and stiff competition from other organised players. About Arkade Developers Incorporated in 1986, Arkade is a real estate developer specialising in residential development and redevelopment projects primarily in the Mumbai Metropolitan Region. Redevelopment projects accounted for one-third of its FY24 revenue. Over the past two decades, the company has completed 28 projects covering more than 4.5 million square feet, serving nearly 4,000 customers. The company's typical project completion timeline is around three years. Currently, it is developing six projects, with about 4 million square feet of land under construction. Strengths of Arkade Developers Timely execution: Arkade Developers has successfully developed 28 projects without ever facing any delays. The company has a consistent record of completing projects within an average three-year timeframe. Diversification via redevelopment: The company has recognised the increasing demand for redevelopment in the Mumbai Metropolitan Region and has steadily increased its focus on this segment. The vertical's share in company revenue has risen from zero to 33 per cent during FY22-24. According to the municipal corporation of Greater Mumbai, there are over 19,500 buildings constructed before September 1969, now requiring redevelopment, creating a significant opportunity for the company. Weaknesses of Arkade Developers Concentration in one region : The company's operations are heavily focused in the Mumbai Metropolitan Region. While it is a lucrative market, over-reliance on a single geographical region exposes the company to risks from regional economic downturns or regulatory changes. Redevelopment snags: Redevelopment projects often involve lengthy approval processes and complex negotiations with existing property owners. Any delays or disputes could hinder project completion and affect the company's revenues​. Arkade Developers IPO details Total IPO size (Rs cr) 410 Offer for sale (Rs cr) - Fresh issue (Rs cr) 410 Price band (Rs) 121 -128 Subscription dates September 16-19, 2024 Purpose of issue To fund existing projects and potential acquisitions Post-IPO M-cap (Rs cr) 2,376 Net worth (Rs cr)