Suraj Estate IPO: A look at GMP, subscription status on final day; should you buy?
The IPO opened on Monday, December 18, and will close today, December 20, 2023. The realty company has fixed a price band at ₹340-360 per equity share for the issue.
The retail portion of the IPO was subscribed the most 4.97 times followed by the Non Institutional Investors’ (NII) quota, which was bid 3.41 times. Meanwhile, the Qualified institutional buyers (QIB) part was bid just 13 percent.
GMP: The company’s shares in the grey market continued trading at ₹70, indicating a 19.44 percent premium versus the IPO price at listing. It has been the same since December 17. Before that, it was at ₹66.
However, one must note that grey market premium is only an indicator of how the company’s shares are performing in the unlisted market and can change quickly.
About the issue: The issue comprises a fresh issue of 1.11 crore shares worth ₹400 crore. There is no offer for sale (OFS) segment in the public offer.
Anchor Investors: Suraj Estate Developers has garnered over ₹120 crore from 11 anchor investors including Jagdish Master managed Quantum-State Investment Fund, Blue Lotus Capital, Lighthouse Canton, Societe Generale, BNP Paribas and Meru Investment Fund, SBI General Insurance Company Limited and Tata Housing Opportunities Fund, allotting 33.33 lakh equity shares at ₹360 apiece.
Objective: The net proceeds from the IPO will be allocated towards the repayment and/or prepayment of the aggregate outstanding borrowings of the company and its subsidiaries. Funds will be utilized for the acquisition of land or land development rights and general corporate purposes.
Lot Size: A bidder will be able to apply in lots and one lot of the IPO will comprise 41 company shares. Hence, at the upper price band, one lot will cost ₹14,760.
About the firm: Established in 1986, Suraj Estates Developers specialises in the development of residential and commercial real estate in the South-Central Mumbai region. Notably, the company relies entirely on third-party contractors for the construction services of its projects, as it does not provide any in-house construction services.
It has a track record of completing 42 projects in the South-Central Mumbai region. The company currently has 13 ongoing projects and 16 upcoming projects, having developed over 10 lakh square feet of land in Mumbai. It operates in the ‘value luxury’ and ‘luxury’ segments, catering to various price categories.
Important Dates: In the wake of the T+3 listing rule, the most likely date for share allocation is December 21, 2023. Meanwhile, it is likely to list on December 26 on BSE and NSE.
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Suraj Estate has been a real estate developer in the South Central Mumbai area, working on projects in both the residential and commercial sectors. The residential portfolio of the company is situated in the sub-markets of Mahim, Dadar, Prabhadevi, and Parel. It has shown consistent growth over the stated periods.
With extensive market knowledge, it is a market leader in the combined South-Central Mumbai submarkets; yet, the company must contend with competition from a range of national and regional real estate developers. The IPO is coming at a P/E of 35.64 which looks fairly priced so we recommend applying for this IPO for listing gains.
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At the upper price band of Rs.360, SEDL is available at a P/Bv of 3.3x (FY24E Annualised), which appears to be fairly priced. Considering its consistent growth in both top line and bottom line, healthy return ratios, asset-light business model, redevelopment opportunities, and promising industry outlook, we assign a “Subscribe” rating on a short to medium-term basis.
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The company’s ability to deliver differentiated product offerings through its deep understanding of the real estate market coupled with design and execution capabilities, strong brand presence, and extensive marketing initiatives has helped it to grow its business successfully. Their strong presence in the South-Central Mumbai region has generated significant brand recall in sub-markets and substantial sales referrals from existing customers. We, therefore, recommend a SUBSCRIBE rating for the issue.
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At the upper end of the price band, the P/E translates to 49.81x. Suraj continues to focus primarily on residential projects in the Value Luxury and Luxury Segments within select micro-markets of the South Central Mumbai region by
leveraging its brand, deep experience, and a track record of successful execution. It further intends to leverage its in-depth knowledge of these sub-markets and continue to focus its expansion plans in South Central Mumbai across different price points and customer segments. We recommend subscribing to the issue as a good long-term investment due to its presence in one of the most promising real estate pockets of the country and attractive long-term growth prospects.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decision.
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Published: 20 Dec 2023, 11:01 AM IST
