By Harshita Tyagi,
The IPO of real estate developer Shriram Properties, part of the Shriram Group, will open for subscription today (8 December), and will close on 10 December. The price range for the IPO has been set at Rs 113-118 per share. . The issue includes a New Shares Issue of Rs 250 crore and an Offer for Sale (OFS) of Rs 350 crore. The company reduced the size of OFS from Rs 550 crore earlier. The company raised just over Rs 268 crore from major investors prior to the IPO.
The size of the issue share and the portion reserved for the investor
Investors can bid for a minimum of 125 shares of stock and multiples of 125 shares after that. Retail investors can invest as little as Rs 14,750 for one lot and their maximum investment will be Rs 1,91,750 for 13 lots. Individual investors are allowed to invest up to Rs 2 lakh in the IPO. The quota allocation will be completed by December 15th; Unsuccessful investors will receive the refunds in their bank accounts on or after 16th, while successful investors will receive shares in their demo accounts by 17th December.
Shriram Real Estate Premium IPO Gray Market
Before the IPO opened, shares of Shriram Properties were trading at a premium of Rs 20 on the gray market, above the issue price of Rs 118 (upper end), according to IPOWatch.
The company recorded a loss of Rs.60 crore on revenue of Rs.118.2 crore in the six-month period ending September 2021. In the financial year ending March 2021, it recorded a loss of Rs.68.2 crore as against a loss of Rs.86.4 crore in the previous year. Revenue from operations decreased from Rs.571.96 crore to Rs.431.5 crore during the same period.
The main risks
The price segment of Rs 113-118 per share values the company at Rs 1,752 crore at the upper end of the segment, which may represent a significant risk to investors as the majority of the issuance is from the OFS portion.
Competitively priced version compared to peers
INDmoney: Shriram Properties’ total revenue was down 21% YoY to Rs 501 crore in FY21, impacted by the ongoing pandemic. Due to the COVID-19 pandemic, construction activity was halted during the year. The company also recorded losses in the past two years. Due to its negative earnings, the company cannot be evaluated on the basis of earnings-to-earnings ratio. At the higher end of the price range, the IPO of Shriram Properties was priced to book value ~2.29 times (April – September 21). This appears to be in line with listed peers Prestige Estates (2.61 times), but lower than Oberoi Realty (3.10 times), DLF (2.63 times), Sobha (3.25 times), Godrej Properties (6.51 times). When comparing on EV/EBITDA basis, Shriram Properties prices seem to be high compared to its peers, due to lower profits in previous years. Notably, Prestige, Sobha and Oberai have higher yield ratios than those of Shriram. Given lower revenue, negative earnings, an uncertain outlook due to the ongoing pandemic, and elevated valuations, we remain “neutral” on the outlook for this issue.
Choice Brokerage: Assigning a “subscription” rating to the issue, Choice Broking said in its IPO note: “SPL is a leading developer of residential property in South India, focusing primarily on the affordable and mid-market housing categories. It is part of The Shriram Group, a prominent business group with four decades of operating history in India and a well-known brand in the retail financial services sector and many other industries.Partnership with the group benefits the company from the confidence of home buyers, lenders, financial investors, landowners, development partners, contractors and stakeholders The others are in the Shreram brand.”
“SPL is well backed by prominent private equity investors such as TPG, Tata Opportunities Fund, Walton Street Capital and Starwood, which cumulatively own 58.35% of the shares. Through this IPO, these investors are partially offloading their stake. The company has also attracted multiple financial investments (from investors such as SUN Apollo India Real Estate Fund I LLC, Mitsubishi Corporation, Amplus Capital Advisors, ASK Real Estate Special Opportunities Fund, India Realty Excellence Fund II LLP managed by Motilal Oswal and Kotak Affordable India Fund) in its projects.
Funds raised to be used to pay off debts
The money raised through the IPO will be used to pay off debts. Of the net proceeds of the new issue, Rs 200 crore will be used for repayment/prepayment of certain loans provided by the company. Axis Capital Ltd. and ICICI Securities Ltd. and Nomura Financial Consulting and Securities (India) Pvt. Ltd are the lead book managers for the IPO of Shriram Properties. KFinTech Ltd is the issue registrant. After listing, Shriram Properties will be added to the list of other listed property developers such as Sobha, Prestige Estate Projects, Brigade Enterprises, Godrej Properties, Oberoi Realty and Sunteck Realty.