Suraj Estate IPO: Should you subscribe to Rs 400-crore issue?

Suraj Estate IPO: The price band for the issue is fixed at Rs 340-360 per share

Suraj Estate IPO opened for subscription on December 18 and so far has been subscribed to over 240 percent. The Rs 400 crore public offer comprises a fresh issue of 1.11 crore shares. The price band is fixed at Rs 340-360 per share.

Suraj Estate Developers is among the prominent residential real estate developers, focused primarily on constructing and developing residential and commercial projects in and around South Central Mumbai. The company does not provide any in-house construction services and is 100 percent dependent on third-party contractors for the construction services of its projects.

Also Read: Suraj Estate Developers IPO: Anchor investors pick Rs 120 cr of shares

“Since most of the land parcels in the area are redevelopment projects, the company’s core competence lies in tenant settlement, which is a key element for unlocking value on such land parcels,” said analysts at BP Equities.

Owned by Rajan Meenathakonil Thomas and family, the developer recorded 21 percent on-year growth in net profit at Rs 32.06 crore for the year ended March FY23. Its revenue for the quarter stood at Rs 305.7 crore. In the quarter ended June FY24, its net profit stood at Rs 14.53 crore and revenue stood at Rs 102.41 crore.

The real estate developer will use the proceeds to repay debts amounting to Rs 285 crore, and Rs 35 crore will be utilised for the acquisition of land or land development rights in the Mumbai Metropolitan Region. The remaining money will be set aside for general corporate purposes.

Also Read: Suraj Estate Developers IPO: 10 things to know before subscribing to Rs 400 crore issue

Should you subscribe to Suraj Estate IPO?

BP Equities: Subscribe

The company’s ability to deliver differentiated product offerings through its deep understanding of the real estate market coupled with design and execution capabilities, strong brand presence, and extensive marketing initiatives has helped it to grow its business successfully.

“Their strong presence in the South-Central Mumbai region has generated significant brand recall in submarkets and substantial sales referrals from existing customers. We, therefore, recommend a ‘subscribe’ rating for the issue,” said analysts at BP Equities.

SMIFS: Subscribe

Suraj Estate's profit margin increased to 10.49 percent in FY23 from 9.72 percent in FY22. The company’s ROE and ROCE were 58.01 percent and 22.44 percent in FY23. At the upper end of the price band, the P/E translates to 49.81x.

“We recommend subscribing to the issue as a good long-term investment due to its presence in one of the most promising real estate pockets of the country and attractive long-term growth prospects,” said analysts at SMIFS Ltd.

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