Suraj Estate Developers IPO: What's The Best Bet, Short Or Medium Term? Latest GMP

Marquee real estate construction company, Suraj Estate Developers Ltd (SEDL) has received a full subscription to its Rs 400 crore worth initial public offering (IPO) driven by strong demand from non-institutional and retail investors. Institutional investors bid at a slower pace. Subscriptions for the IPO will close on December 20th.

As per NSE data, the IPO received bids of 1,52,11,205 equity shares, against its offered size of 82,35,293 equity shares, registering an oversubscription of 1.85 times during the mid-bidding session of Day 2.

The IPO is purely a fresh issue and it opened on December 18. Bidding will close on December 20.

On Tuesday, as of now, the portion for retail investors subscribed the most by 3.12 times, while the non-institutional investors portion fully subscribed by 1.19x. The Qualified Institutional Buyers (QIBs) portion subscribed just 12% of the reserved size of 23,52,940 equity shares.

Meanwhile, as per Investor Grain, in the grey market, Suraj Estate Developers IPO last GMP is Rs 70, last updated Dec 19th 2023 03:01 PM. With the price band of 360.00, Suraj Estate Developers IPO's estimated listing price is Rs 430 (cap price + today's GMP). The expected percentage gain/loss per share is 19.44%.

The price band for the IPO is fixed at Rs 340 per share and Rs 360 per share respectively. The bid lot size is 41 Equity Shares and in multiples thereof.

Should you subscribe to the IPO?

In its IPO note, Geojit said, "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."

Some of the key factors highlighted by Geojit about the IPO are:

- In South Central Mumbai, MHADA (Maharashtra Housing and Area Development Authority) data reveals a total of 19,642 old, dangerous & dilapidated buildings, yet to be redeveloped, providing a great opportunity for re-developers like Suraj.

- Revenue/EBITDA/PAT clocked a CAGR of ~13%/32%/126% respectively, over FY21-23, driven by an uptick in sales of new projects, asset-light business model and efficient capital utilisation.

- SEDL enjoys sustainable EBITDA margins of ~44.6% (3 yr. Avg FY21-FY23) and a strong RoE of ~45% (3 yr. Avg) over the same period.

- SEDL follows an area-sharing model with landlords and barely acquires land for construction. It helps them to reduce upfront costs and gives them a competitive advantage over their listed peers by superior margins.

- SEDL currently holds 221 unsold units, comprising 5 units in completed projects and 216 units in ongoing projects, presenting a positive outlook for robust free cash flow generation in the upcoming years.

- The current adjusted D/E is 8.3x, which will substantially go down to 0.65x, on utilisation of Rs. 285cr from the IPO proceeds.

With over 35 years of experience, SEDL is spread across the residential and commercial sectors with a primary focus on value luxury, luxury, and commercial segments. Specializing in the redevelopment of tenanted properties under Regulation 33(7) of the Development Control and Promotion Regulations (DCPR) in Mumbai, their primary operational focus is the South-Central region, covering Mahim, Matunga, Dadar, Prabhadevi, and Parel. From 1986 to 2023, SEDL has completed 42 projects, encompassing both residential and commercial developments (97.62% being redevelopment projects). The prestigious projects of SEDL are ICICI Apartments, NEAT House, Saraswat Bank Bhavan, CCIL Bhavan, etc.

Disclaimer:

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.