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 residential and commercial Segments, plans to use 285 crore to repay debt of itsown and that of its subsidiaries. Im addition, the company plans to use 35 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 m the industry, Hence, nvestors will be better off considering investments in the company in the secondary market. BUSINESS Thecompany isfocused on the South Central Mumbai market (SCM) which includes Mahim, Matunga, Dadar Prabhadevi and Parel. It has completed 42 projects covering morethan10lakh square feet. In the residential segment, the company follows three basic models. One isan 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. In 7285 croreto the third busirepay debt ness segment, it 1S 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 1S 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 1,597 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. Im addition, the company has upcoming Sixteen projects amounting to more than seven lakh square feet of carpet areainthe coming years. FINANCIALS In the three vears to FY23, the company's total mcome 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) wasin the range of 36-50o during the period. The return on capital employed (RoCE) improved to 21.9% in FY23from 14.5% in FY2l. VALUATION Considering fully diluted equity after the IPO. the issue commands price-earnings (P/E) multiple of upto 27.5. Accordingto Bloomberg data, considering the estimated carningsof FY24 and FY25, the average P/E multiple of realty companies in the Nifty Realty Index is inthe range of 40-50. rajesh.naiduia timesgroup.com