Sustainning Revenue Growth to be Crucial for Suraj Developers e e e e ey 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 group's stake will drop to 75% 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 inthe 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, Prabhadevi and Parel. It has completed 42 projects covering more than 10 lakh square feet. In the residential segment, the company follows three basic models. One is an asset light model in . which it outsourThe company, ces construction whichis Into work to a third residential & party contractor. commercial Another model segments, is where it buys plans to use vacantlandorre7285 croreto develops exisrepay debt ting buildings. In the third business 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 lang in SCM is largely redevelopment projects. In the commercial segment, the company has completed construction of ICICI Apartments, NEAT House, Saraswat Suraj Estate IPO ISSUE HIGHLIGHTS Dates: Dec. 18-20, 2023. Price: 340-360 Size: 400 crore Implied market cap: Upto 1.597 crore Face value: 5 Lot size: 41 shares Bank Bhavan, and CCHEMANG: van. At present, the company is developing thirteen projects amounting to more than 20 lakh squarefeet.Inaddition, the company has upcoming sixteen projectsamounting tomore than seven lakh square feet of carpet . areainthe coming years. FINANCIALS In the three years to FY23, the company's total income rose to 307.8 crore from 243.9 crore while net profit shot upto 32 crore from 6.2 crore. The operating margin before depreciation and amortisation (EBITDA margin) was intherange of 36-50% during the period. The return on capital employed (RoCE) improved to 21.9% in FY23 from 14.5% in FY21. VALUATION Considering fully diluted equity after the IPO, the issue commands price-earnings (P/E) multiple of upto 27.5. According to Bloomberg data, considering the estimated earnings of FY24 and FY25, the average P/E multiple of realty companies in the Nifty Realty Index is in the range of 40-50. rajesh.naidu@timesgroup.com INT NNNN NTNTT UN NNN TI NTNU TOU N TI NTU TNT NTT UN BUT UU NTU UNA I NTN TNR N HT RTT LNB NN NNT MUU UT GNU NUN TA UU FA HN NT HUTT