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Review By Dilip Davda on December 6, 2021
• SPL is one of the leading realty developers in the South for the mid and affordable housing segment.
• It enjoys strong brand recall of Shriram Group.
• The company has been suffering losses since FY2020.
• Work from Home has emerged as a blessing in disguise for this segment.
• This bet is purely for long term investors.
ABOUT COMPANY:
Shriram Properties Ltd. (SPL) is one of the leading residential real estate development companies in South India, primarily focused on the mid-market and affordable housing categories. It is among the top five residential real estate companies in South India in terms of the number of units launched between the calendar years 2012 and the third quarter of 2021 across Tier 1 cities of South India including Bengaluru, Chennai and Hyderabad. (Source: JLL Report) The company is also present in the mid-market premium and luxury housing categories as well as commercial and office space categories in core markets. SPL is operating on an asset-light model of activities and has no land bank.
It is a part of the Shriram Group, which is a prominent business group with four decades of operating history in India and a well-recognized brand in the retail financial services sector and several other industries. This helps it to enjoy strong brand recall and benefits under Shriram Brand.
SPL commenced operations in Bengaluru in the year 2000 and has since expanded its presence to other cities in South India, i.e., Chennai, Coimbatore and Visakhapatnam. In addition, it also has a presence in Kolkata in East India, where it is developing a large mixed-use project. Bengaluru and Chennai are two key markets for it. These cities are among two key residential housing markets in India, contributing to approximately 29.3% of the launches in India between the calendar year 2012 and the third quarter of the calendar year 2021, and 28.7% of the sold inventory in India between the calendar year 2019 and the third quarter of the calendar year 2021. (Source: JLL Report)
Since its inception, it has focused on the mid-market and affordable housing categories as target segments within the residential housing market. The mid-market and affordable housing categories have accounted for a significant share of overall market absorption in India in recent years. According to the JLL report, mid-market and affordable housing categories accounted for 75.00%, 72.00% and 74.00% of overall residential unit absorption during calendar years 2018, 2019 and 2020, respectively.
ISSUE DETAILS/CAPITAL HISTORY:
To part finances its plans for repayment/prepayment of certain borrowings by the group companies (Rs. 200.00 cr.), general corpus funds, SPL is coming out with a maiden IPO of equity shares of Rs. 10 each worth Rs. 600.00 cr. (approx. 50847500 shares at the upper price band) via book building route. The issue will have a fresh equity issue worth Rs. 250.00 cr. (21186500 shares at the upper cap) and an offer for sale (OFS) (29661000 shares - at the upper price band) valued at Rs. 350 cr. This issue opens for subscription on December 08, 2021, and will close on December 10, 2021. SPL has fixed a price band of Rs. 113 to Rs. 118 per share of Rs. 10 each. Minimum application is to be made for 125 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE.
The issue constitutes 29.98% of the post issue paid-up capital of the company. The company has reserved shares worth Rs. 3.00 cr. for its eligible employees and offering them a discount of Rs. 11 per share. From the residual portion, it has allocated 75% for QIBs, 15% for HNIs and 10% for the Retail investors.
The joint Book Running Lead Managers (BRLMs) to this issue are Axis Capital Ltd., ICICI Securities Ltd., and Nomura Financial Advisory and Securities (India) Pvt. Ltd., while KFin Technologies Pvt. Ltd. is the registrar to the issue.
Having issued initial equity at par, the company raised further equity in the price range of Rs. 96.06 to Rs. 791.18 per share between November 2007 to June 2014. It has also issued bonus shares in the ratio of 1 for 1 in September 2006 and 5 for 1 in August 2009. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.63, Rs. 1.31, Rs. 100.50 / Rs. 0.83, Rs. 1.67, Rs. 1.87, Rs. 10.00, Rs. 101.00, Rs. 127.39, Rs. 132.27, Rs. 176.98 and Rs. 176.99 per share.
Post-IPO, SPL's current paid-up equity capital of Rs. 148.41 cr. will stand enhanced to Rs. 169.60 cr. Based on the upper cap of the IPO price, the company is looking for a market cap of Rs. 2001.26 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, SPL has (on a consolidated basis) posted total revenue/net profit (Loss) of Rs. 723.78 cr. / Rs. 48.79 cr. (FY19), Rs. 631.84 cr. / Rs. - (86.39) cr. (FY20), Rs. 501.31 cr. / Rs. - (68.18) cr. (FY21). For the first half of current FY22 ended on September 30, 2021, it has posted a loss of Rs. 60.03 cr. on total revenue of Rs. 155.15 cr.
For the last three fiscals, on a consolidated basis, the company has posted an average EPS of Rs. - (3.67) per share and an average RoNW of 0.86%. The issue is priced at a P/BV of 2.29 based on its NAV of Rs. 51.53 as of September 30, 2021, and at a P/BV of 1.96 based on its post-issue NAV of Rs. 60.07 (at the upper cap). SPL's last two and a half fiscals EPS ratio could not be ascertained as it has posted losses.
COMPARISON WITH LISTED PEERS:
As per the offer documents, SPL has shown Sobha Ltd., Prestige Estates, Brigade Enterprises, Godrej Properties, Oberoi Realty and Sunteck Realty as its listed peers. They are currently trading at a P/E of 77.34, 65.83, 42.38, 00, 60.49 and 253.88 (as of December 06, 2021). However, they are not truly comparable on an apple to apple basis.
DIVIDEND POLICY:
The Company has neither any formal dividend policy nor declared any dividends for Fiscals 2021, 2020 and 2019 and has not declared any dividend in the current Fiscal. It will adopt a prudent dividend policy going forward based on its financial performance and future prospects.
MERCHANT BANKER'S TRACK RECORDS:
The three BRLMs associated with the offer have handled 54 public issues in the past three years, out of which 19 issues closed below the offer price on the listing dates.
Review By Dilip Davda on December 6, 2021
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Shriram Properties Limited offers an early investment opportunity in Shriram Properties Limited. A stock market investor can buy Shriram Properties IPO shares by applying in IPO before Shriram Properties Limited shares get listed at the stock exchanges. An investor could invest in Shriram Properties IPO for short term listing gain or a long term.
Read the Shriram Properties IPO recommendations by the leading analyst and leading stock brokers.
Shriram Properties IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Shriram Properties IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Shriram Properties IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Shriram Properties IPO.
The Shriram Properties IPO allotment status will be available on or around December 15, 2021. The allotted shares will be credited in demat account by December 17, 2021. Visit Shriram Properties IPO allotment status to check.
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