IPO: Suraj Estate Developers

Suraj Estate Developer, a Mumbai-based real estate developer, is coming out with its IPO (initial public offering) on December 18, 2023. Here's a breakdown of the company's strengths, weaknesses, and growth prospects to help investors make an informed decision. In a nutshell Quality : Its three-year average ROE and ROCE are 53 and 19 per cent, respectively. Moreover, it has generated positive cash flows in two of the last three financial years. However, its debt-to-equity and interest coverage ratio stood at 8.3 and 1.4 times, respectively, in FY23. Growth : Its revenue and net profit grew at an annual growth rate of 13 per cent and 128 per cent, respectively, in the last three financial years. Also, its three-year average operating profit margin stood at 43.5 per cent. Valuation : The stock is valued at a P/E and P/B of 49.7 and 3.3 times, respectively, compared to its peers' median and average of 45.8 and 2.9 times. Overview : Rising income levels, easier access to home loans and increasing demand for office space are expected to drive growth. However, a high debt-to-equity ratio and capital requirements remain a concern. About the company Incorporated in 1986, Suraj Estate Developers is a real estate developer primarily focusing on the luxury and commercial segments. It operates mainly in the South Central Mumbai region and has plans to enter the Bandra sub-market. Strengths of Suraj Estate Developers Strong brand. It is a known name in the South Central Mumbai region, operating for over 30 years, and has developed 42 projects covering 10 lakh sq ft. Weaknesses of Suraj Estate Developers It is dependent on third-party contractors for construction services , exposing it to quality concerns. It operates in a capital-intensive industry . In fact, around 70 per cent of the net proceeds will be used for debt repayment. The real estate segment is highly unorganised and competitive . IPO details Total IPO size (Rs cr) 400 Offer for sale (Rs cr) 0 Fresh issue (Rs cr) 400 Price band (Rs) 340-360 Subscription dates Dec 18 - 20, 2023 Purpose of issue Repayment of debt, acquisition of land & general corporate purposes. Post-IPO M-cap (Rs cr) 1597 Net worth (Rs cr) 486 Promoter holding (%) 75 Price/earnings ratio (P/E) 49.7 Price/book ratio (P/B) 3.3 Financial history Key financials 2Y growth (% pa) Q1 FY24 FY23 FY22 FY21 Revenue (Rs cr) 12.9 102 306 273 240 EBIT (Rs cr) 32.7 46 148 128 84 PAT (Rs cr)