Shriram Properties IPO: All You Need To Know
The IPO opens on Dec. 8 and closes on Dec. 10.
Shriram Properties Ltd. will launch its three-day initial public issue on Wednesday as it aims to raise fresh equity and allow partial exit to investors in a record year for Indian maiden offers.
The IPO comprises a fresh issue and an offer for sale by private equity and other selling shareholders, the real estate developer said in a red herring prospectus. It constitutes 29.98% stake of the post-issue shareholding, with the promoters holding nearly 32% of the post-issue equity.
Issue Details
IPO Opens: Dec. 8-10.
Fresh issue: Rs 250 crore.
Offer for sale: Rs 350 crore.
Price band: Rs 113-118 apiece.
Market value at the upper end of the price band: Rs 2,001.3 crore.
Face value: Rs 10 apiece.
Lot size: 125 shares and multiples.
Listing: NSE and BSE.
Lead managers: Axis Capital, ICICI Securities, Nomura.
Where Will The Money Go
The company will use Rs 200 crore from the proceeds to repay or pre-pay, in full or part, certain borrowings availed by its subsidiaries, Shriprop Structures, Global Entropolis and Bengal Shriram.
As on Sept. 30, the amount outstanding was Rs 695.09 crore.
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Business
Shriram Properties primarily focuses on mid-market and affordable housing.
It’s among the top five residential real estate developers in south India by the number of units launched between 2012 and the third quarter of 2021 across tier-1 cities of the region, including Bengaluru, Chennai and Hyderabad.
The company’s also present in luxury housing, commercial and office space in core markets—Bengaluru and Chennai.
As of September, it had 29 completed projects, representing 1.68 crore square feet of saleable area. Of this, 24 are in Bengaluru and Chennai, accounting for 90.56% of its saleable area.
The company has 83.69% of its total saleable area for completed projects—the mid-market and affordable housing accounting for 51.44% and 32.25%, respectively. The rest is the commercial and office, and luxury housing.
Shriram Properties is also into plotted development, which accounted for 33.41% and 34.67% of sales volumes during the six months ended September and fiscal 2020-21.
Ongoing Projects
The company has 35 ongoing, under development and forthcoming projects, aggregating to 4.67 crore square feet of estimated saleable area.
Ongoing projects: 26
Under-development projects: 5
Forthcoming projects: 4
In this, the mid-market category accounts for 35.67%, while affordable housing forms 35.80% of the total estimated saleable area. Core markets Bengaluru and Chennai constitute 67.15% of the total estimated saleable area.
The company has land reserves of close to 197.47 acres, with a development potential of about 2.145 crore square feet of estimated saleable area.
Development Management Projects
In its core markets, Shriram Properties has a definitive agreement for 14 projects with an estimated saleable area of 1.491 crore square feet under the DM model—a setup where large real estate companies step in as development managers for smaller peers in return for a share of revenue.
This accounts for 31.92% of the total estimated saleable area under ongoing, under development and forthcoming projects as on Sept. 30.
Covid-19 Impact
The company witnessed an increase in customer cancellations due to Covid-19.
Its sales volumes and gross collections from residential projects declined from 3.25 million sq. ft. and Rs 1,182.60 crore in 2019-20 to 3 million sq. ft and Rs 939.36 crore in 2020-21, and stood at 1.56 million sq. ft and Rs 577.66 crore for the six months ended September.
There were no sales volumes and gross collections from commercial projects for the financial year ended March 2021.
Financials
While Shriram Properties has reported operating income for the last three fiscals and six months ended September, it has suffered losses since FY19.
Peers
Shriram Properties competes with Sobha Ltd., Prestige Estates Projects Ltd. and Brigade Enterprises Ltd. in the southern market, and Oberoi Realty Ltd., Sunteck Realty Ltd. and Godrej Properties Ltd. in the western region.
Risks
Business and profitability is significantly dependent on the performance of the real estate market in India, particularly in south India. Fluctuations in market conditions may affect ability to sell projects at expected prices, which may adversely affect revenue and earnings.
The extent to which Covid-19 disease may affect business and operations in the future is uncertain and cannot be predicted.
Real estate development activities are geographically concentrated in key cities in south India. It is exposed to risks from economic, regulatory and other changes as well as natural disasters in south India, which in turn may have an adverse effect on business and cash flows.
It has significant amount of debt, which could affect its ability to obtain future financing or pursue growth strategy.
Has provided corporate guarantees in relation to loans obtained by its subsidiaries and joint venture and any default by them may result in invocation of the corporate guarantee.
The company has pledged equity shares of certain of its subsidiaries, in favour of their respective lenders. If such lenders exercise their rights under the respective share pledge agreements in the event of default and in accordance with the respective financing agreements, its business may be adversely affected.
The company has not acquired the entirety of the land required to develop certain of its forthcoming projects. In the event it is unable to acquire all the land required, it may not be able to develop these projects as planned, or at all.
It depends significantly on residential development business, particularly in the mid-market and affordable housing categories, the success of which is dependent on its ability to anticipate and respond to consumer requirements.
Some or all of its ongoing projects, projects under development and forthcoming projects may be delayed or may not be completed by their expected completion dates or at all. Such delays may adversely affect reputation, business and financial condition.