Suraj Estate Developers to stage a lukewarm debut

Suraj Estate Developers' Rs 400 crore public issue was an entirely fresh issue of 1.11 crore shares.

Realty company Suraj Estate Developers is likely to stage a lukewarm debut on the exchanges on December 26. Data from the grey market suggest marginal listing gains of around 7 percent on the upper end of the price band of Rs 340-360 apiece.

The anticipation of minor listing gains is aligned with the decent interest shown by investors in the company's Rs 400 crore public issue. Suraj Estate Developers' IPO was subscribed 15.65 times as investors placed bids for 12.88 crore shares against the offer size of 82.35 lakh.

Qualified institutional buyers (QIBs) showcased maximum interest as they bid 24.31 times the reserved portion. The quota allotted for retail investors was subscribed 9.30 times while high net-worth individuals (HNIs) picked 18.9 times their assigned portion.

"We expect Suraj Estate Developers Ltd. IPO to open at a premium of around 6 percent to the issuance price of Rs 360 per share. We remain optimistic on the issue and recommend investors who have received allotment to hold shares from a medium to long term perspective," said Prathamesh Masdekar, Research Analyst, StoxBox.

Geojit Financial Services also remains positive on the company as it feels its consistent growth in both topline and bottomline, healthy return ratios, asset-light business model, redevelopment opportunities and promising industry outlook provide it with strong growth prospects.

"The company also has a track record of sustained consolidated revenue from operations, growing at a CAGR (Compounded Annual Growth Rate) of 12.9 percent during the FY21-23 period. Their strong presence in the South-Central Mumbai region has generated significant brand recall in sub-markets and substantial sales referrals from existing customers," highlighted Masdekar.

Meanwhile, the company, at the upper end of its price band is also valued at a P/BV of 3.3x its expected FY24 annualised revenue, which according to Geojit Financial appears to be fairly priced.

The real estate construction company specialises in the redevelopment of tenanted properties in Mumbai, with a primary operational focus on the South-Central region, covering Mahim, Matunga, Dadar, Prabhadevi, and Parel. In the last 37 years, Suraj Estate Developers has successfully completed 42 projects, encompassing both residential and commercial developments, with 97.62 percent of those being redevelopment projects.

The real estate developer plans to use the proceeds from the IPO for repaying debts amounting to Rs 285 crore, while another Rs 35 crore will be utilised for the acquisition of land or land development rights in the Mumbai Metropolitan Region. The remaining funds from the issue will be set aside for general corporate purposes.

Some of the marquee institutional names that received allotment in the anchor book are SBI General Insurance Company, Tata Housing Opportunities Fund, Aditya Birla Sun Life AMC, LC Pharos Multi-Strategy Fund VCC, ITI Flexi Cap Fund, and Meru Investment Fund PCC-Cell 1.

BNP Paribas Financial Markets, Societe Generale-ODI, Quantum-State Investment Fund, and IEGFL-Multi Opportunity also participated in the anchor book.

As for the financials, the real estate developer recorded a 21 percent on-year growth in net profit at Rs 32.06 crore in FY23 with a revenue of Rs 305.7 crore. For the June quarter of FY24, its net profit stood at Rs 14.53 crore on a revenue of Rs 102.41 crore.

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