Shriram Properties IPO has an issue size of Rs. 600 crores, a combination of fresh issue of Rs. 250 crores and an offer for sale worth Rs. 350 crores. Shriram Properties Limited is a part of the Shriram Group and is one of the leading residential real estate development companies in South India. The developer has focus on the mid-market and affordable housing categories.

Shriram Properties IPO Details:

Opening DateWednesday, 8th December, 2021
Closing DateFriday, 10th November, 2021
Issue DetailsFresh Issue of Equity Shares upto ₹ 250 Cr
+ Offer for Sale of Equity Shares aggregating upto ₹ 350 Cr
Face Value₹ 10/-
Issue Size  (₹ Cr)₹ 600 Cr
Bid Lot125 shares
Price Band₹ 113 – 118
QIB75% of the net offer
NIB15% of the net offer ( (₹ 89.55 Cr)
Retail10% of the net offer ( ~5,059,321 Shares  59.70 Cr)
Appl for 1x retail~0.4 Lacs

Updates :

  • ANCHOR ISSUE:Shriram Properties on December 7 garnered Rs 268.65 crore from 34 anchor investors, ahead of its initial public offering that will open for subscription on December 8.
  • Global investors including Optimix Wholesale Global Emerging Markets, Societe Generale, Pioneer Investment Fund, Nomura, and Blue Mount Capital made investments in the company through the anchor book. Domestic investors — SBI Life Insurance, Sundaram Mutual Fund, Aditya Birla Sun Life, Nippon Life, HDFC Life Insurance Company, and HDFC Trustee — also participated in the anchor book

Shriram Properties IPO Review: Video Presentation

About Shriram Properties (India)

  • Shriram Properties Limited is part of Shriram Group and was incorporated in 2000.
  • Primarily focused on the mid-market and affordable housing categories.
  • Company is also present in the mid-market premium and luxury housing categories as well as commercial and office space categories
  • As on Sept 30, 2021, the company has completed 29 projects, representing 16.76 million square feet of saleable area, mostly in Bengaluru and Chennai. Company is among the top five residential real estate companies in South India in terms of 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..
  • Company commenced operations in Bengaluru in the year 2000 and have since expanded our presence to other cities in South India, i.e., Chennai, Coimbatore and Visakhapatnam.  

Shriram Properties IPO: Financials

Particulars / (₹ In Cr)2021(06)2021(12)2020(12)2019(12)
Revenue from Operations118.18431.5571.96650.13
Revenue Growth (%)-24.56%-12.02%
EBITDA37.07121.0590.4179.93
EBITDA Margin (%)23.89%24.15%14.31%11.04%
Adj, EBITDA39.16124.04102.45119.55
Adj. EBITDA Margin (%)25.08%24.62%16.16%16.39%
Profit before Tax-52.72-45.2-81.66-82.92
Net Profit-60.03-68.18-86.39-48.79
Equity Share Capital148.11148.11148.11148.11
Net worth768.78837.54904.46979.7
EPS (₹ )-4.6-4.6-5.83.39
Net Asset Value (₹ )51.856.4360.9466.01
Post IPO Equity169.6
FV10
IPO Price118
Market Cap2001
Market Cap / Sales4.64

Salient Points

  • As a part of OFS, Omega TC Sabre Holdings Pte Ltd will offload shares worth up to Rs 90.95 crore, Tata Capital Financial Services Ltd for Rs 8.34 crore, while TPG Asia SF V Pte Ltd and Wsi/Wsqi V (XXXII) Mauritius Investors Ltd will divest shares worth up to Rs 92.20 crore and Rs 133.5 crore, respectively.
  • 83.69% of the total Saleable Area for Completed Projects were in the mid-market category and affordable housing category (accounting for 51.44% and 32.25% respectively), and the remainder in the commercial and office space and luxury housing categories.
  • Bengaluru and Chennai are two key markets for them.. In addition, they also have presence in Kolkata in East India.
  • Has benefited from the strategic inputs and support of marquee Investors
  • .

Cons

  • Its business and profitability is significantly dependent on the performance of the real estate market in India
  • Its real estate development activities are geographically concentrated in key cities in South India.
  • The company has a significant amount of liabilities.
  • Has made losses for almost 6 years now.
  • The business is capital intensive and is significantly dependent on the availability of real estate financing in India.
  • PE investors are exiting partly at a loss.
  • Legal uncertainties with regard to title and development rights:6 out of 26 of ongoing projects are involved in 15 land dispute litigation proceedings.

Investors

  • The company has also attracted multiple financial investment (from investors like 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.
  • The company has entered into partnership with Kotak Affordable India Fund (a joint investment vehicle focused on investing into affordable housing projects between CDC of UK and Kotak Alternative Investment Managers) wherein the company has secured capital from the fund towards 50% economic interest in Sunshine One (formerly known as Shriram Grand-2), as part of its project in Kolkata.
  • Company has entered into partnership with Mitsubishi Corporation for its Project Shriram Park 63 at Chennai.
  • The company proposes to leverage such arrangements to reduce its capital exposure by sharing risk and rewards with financial investors and thus translating  into better net margin

Comparison with Peers

CompanyShriram PropertiesSobhaBrigade EnterprisesPrestige EstatesPurvankaraSunteck Realty
Revenues Fy214312,1101,9507,264961614
FV10101051
CMP118860506451137447
Market Cap20018,14711,62518,05032446,539
P/S4.643.865.962.483.3810.65
P/B23.34.172.611.562.26
D/E0.871.161.860.841.230.24
P/E (TTM)82,6423.6645.817.2117

Shriram Properties IPO: Assessment

  • Part of Shriram Group
  • 40% sales from customer referrals
  • The residential housing market performed strongly during the quarter ended September 30, 2021, i.e., the third quarter of 2021, with residential unit sales and new launches of residential projects experiencing the strongest results since the outbreak of the COVID-19 pandemic
  •  Shriram Properties is transitioning from a real estate development model to a combination of real estate development and real estate services based business model, with a shift towards an asset light business strategy.
  • Has successfully stabilized the development management (“DM”) model in their core markets having entered into definitive agreements for 14 projects which accounts for 31.92% of total total project portfolio.
  • In general Real estate sector has been going through considerable consolidation.
  • The pre-sales volumes grew at a CAGR of 22.61% between the financial years 2017 and 2021.
  • The company could report a net profit in FY22
  • Though company D/E ratio is comfortable it has huge liabilities.
  • it has a credit rating of BBB+/Stable from CARE Ratings.
  • It total outstanding borrowings of Rs 695.10 crore as of September 30, 2021.Despite a poor profitability record I may apply in small to moderate numbers  for the IPO on last day subject to good QIB response. This stems from good amount of faith in management, expectation of it turning profitable in near future, faith of large investors and favorable sector trends.
  • Investors must be aware that IPO is rather risky and immediate rewards if any will not be high. Omicron scenario also adds to  short term uncertainty

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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