Shriram Properties, that will be launching its maiden public offering on December 8, said today that its focus will continue to be on mid-income housing, asset-light development management projects and that it does not have any plans to foray into the Delhi-NCR or Mumbai markets.
The company has completed close to 29 projects spread across 17 mn sq ft and has close to 35 projects with a development potential of 47 million sq ft.
As many as 71.48% of the project pipeline are in the affordable and mid-market segment. Despite challenges relating to the two waves of COVID-19, the company has completed close to 3.25 mn sq ft in the last two completed financial years.
“We see a long term opportunity in the mid segment market. Our criteria for the mid-market is projects priced between Rs 40 lakh to Rs 80 lakh. We believe that demand for mid market and affordable housing is likely stay for over a 15-20 period due to urbanization and the ever growing middle class population,” said Murali M, chairman and managing director, Shriram Properties Limited.
He agrees that COVID-19 pandemic had disrupted construction activity but going forward the company is committed to the timelines promised.
The company does not plan to expand to either Mumbai, Pune or Delhi-NCR markets.
“We are only focusing on the southern markets where there is huge potential. Our only land bank, which we acquired from Hindustan Motors is in Kolkata. Delivery of all these projects will take close to three to four years. Our focus right now is to scale up whatever we have consolidated over the last three years,” he told Moneycontrol.
He is of the opinion that despite Omicron, the outlook for the real estate sector is positive and that industry consolidation is likely to accelerate further.
“Each region may not have more than 10 players and that would be an advantage for a large player like us. The development model comprises almost one-third of our total portfolio,” he said, adding “we charge close to 8-16% of total project revenues as development management fees.
“The Omicron variant is not expected to have an impact at this point in time as it is just about 10 days old and vaccination has picked up speed. Financing is not a problem for branded players like us,” he said.
He told Moneycontrol that the company has also picked up close to 6-8 stuck projects spread across Bengaluru and Chennai and sees incomplete projects as a big opportunity.
The company has fixed a price band of Rs 113-118 a share for its Rs 600-crore initial share-sale, which will open for public subscription on December 8. The three-day initial public offering (IPO) will conclude on December 10, the bidding for anchor investors will open on December 7, according to the company.
Elaborating on the Rs 600-crore IPO, Murali said Rs 350 crore would be offered for sale (OFS) by institutional investors while the rest would be fresh equity. The four institutional investors, he said, are Walton Street, Starwood Capital, TPG Capital and Tata Capital.
The company plans to utilise the net proceeds from the fresh issue towards repayment and/ or pre-payment of debt and general corporate purposes. About 75 per cent of the issue size has been reserved for qualified institutional buyers (QIBs), 15 per cent for non-institutional investors and the remaining 10 per cent for retail investors