Sustaining Revenue Growth to be Crucial for Suraj Developers Rajesh N Naidu ET Intelligence Group: Mumbaibased real estate company Suraj Estate Developers plans to raise 400 crore through a fresh issue of equities in the primary market. The company, which is into resldential and commercial segments, plans touse 285 crore to repav debt of itsown and that of its subsidiaries. In addition, the company plans to use T35 crore for acquisition of land or land development rights. After the IPO, the promoter gro up's stake will drop to 75o from 100%. Given a smaller size of operations, investors may wait and assess whether the company is able to sustain the revenue growth and how well it catches up with its bigger peers in the industry. Hence, investors will be better off considering investments in the company in the secondary market. BUSINESS Thecompany isfocused onthe South Central Mumbai market (SCM) which includes Mahim, Matunga, Dadar. Prabhadeviand Parel. It has completed 42 projects covering morethan10lakh square feet. In the residential Segment, the companv follows three basic models. One is an asset light model in which it outsources construction L work to a third Thecompany, party contractor. whichis into Another model residential& 1S where it buys commercial vacant land or resegments, develops exisplans to use ting buildings. I 2285 crore to the third busirepay debt ness segment, it is a niche player in the redevelopment of tenanted properties under Regulation 33 (7) of the Development Control and Promotion Regulations (DCPR) in the Mumbai region. This works in company's favour asalargechunk of land in SCM is largely redevelopment projects. In the commercial segment, the company has completed construction of ICICI Apartments, NEAT House, Saraswat Bank Bhavan, and CCIL BhaSuraj Estate IPO Dates: Dec. 18-20, 2023 Price: 340-360 Size: 400 crore Implied market cap: Up to 21,597 crore Face value: -5 Lot size: 41 Shares Retail portion: 35% | HEMANT L Meanwhile, the Mumbai-based realestate company raised 120 crore from anchor investors ahead of its IPO. The company offered 33.33 lakh shares at ?360 apiece, reports RUC. SBI General Insurance, Tata Mutual Fund, ITI Mutual Fund and Aditya Birla Sun Life were some of the anchor investors. van. At present, the company is developing thirteen projects amounting to more than 20 lakh square feet. In addition, thecompany has upcoming sixteen projects amounting tomore than seven lakh square feet of carpet areainthecoming years. FINANCIALS In the three years to F'Y23, the company's total income rose to 07.8 crore from 243.9 crore whilenet profit shot up to 32 CrOre from 6.2 crore. The operating margin before depreciation and amortisation (EBITDA margin) was inthe range of 36-50o during the period. The return on capital employed (RoCE) improved to 21.9% in FY23 from 14.5 in FY2]1. VALUATION Considering fully diluted equity after the IPO, the issue commands price-earnings (P/E) multiple of Upto27.5. According to Bloomberg data, considering the estimated carningsof FY24 and FY25, the average P/E multiple of realty companies in the Nifty Realty Index is im the range of 40-50. rajesh.naidw'a timesgroup.com