Suraj Estate Developers, founded in 1986 by Rajan
Meenathakonil Thomas, is a Mumbai-based real estate
developer, with development across the residential
and commercial sectors in the south-central Mumbai region. The company
specialise in the redevelopment of tenanted properties.
It has residential portfolio located in the markets of Mahim,
Matunga, Dadar, Prabhadevi, and Parel, all in the south-central Mumbai region.
The company is now venturing into residential real estate development in the
Bandra sub-market. In
the south-central Mumbai region, it focuses on the value luxury, luxury
segments and commercial segment.
With over
36 years of presence in the real estate market, it has completed 42 projects
with a developed area of more than 1,046,543.20 square feet in the south-central
Mumbai region. All these 42 projects are redevelopment projects with houses
redeveloped for more than 1011 tenants free of cost under regulation 33(7) of the Development Control and Promotion
Regulation, 2034 (DCP Regulations). Compliance of Regulation
33(7) of the DCP Regulations enables sanction of more than FSI - 3.00 for
development from regulatory authorities.
The company caters to the discerning clientele across
the `value luxury’ and `luxury’ segments, offering a diverse range of
properties priced from Rs 1 crore to Rs 13 crore. It has constructed and sold
built-to-suit corporate headquarters to institutional clients, which includes
Saraswat Co-operative Bank Limited (Prabhadevi) and Clearing Corporation of
India Limited (Dadar).
Expertise
of the company lies in the redevelopment of tenanted properties under
Regulation 33(7) of the Development Control and Promotion Regulations (DCPR) in
the Mumbai region. Since most of the land parcels in the south-central Mumbai
market are redevelopment projects, its core competence lies in tenant
settlement which is a key element for unlocking value on such land parcels. It
identifies cessed and non-cessed properties with existing tenants and ties up
with the landlords of such tenanted properties by entering a development
agreement or on outright purchase basis through conveyance deed.
In
addition to the completed projects, it has 13 ongoing projects with a
developable area of 20,34,434.40 square feet and saleable carpet area of 6,09,928
square feet as well as 16upcoming projects with an estimated carpet area of
7,44,149 square feet as on Oct 31, 2023. Twelve out of 13 ongoing projects and 13 out
of 16 of the upcoming projects are redevelopment projects.
Of the
13 ongoing projects, it directly acquired land for nine through conveyance deed
and the balance four were acquired by way of development agreement with
landowners. Similarly, in the case of 16 upcoming projects,it directly acquired
land for 10 through conveyance deed and the balance sixwere acquired by way of
development agreement with landowners.
To cater to the increasing need for independent office
buildings in the commercial segment, it is currently proposing a 16-storey
commercial building situated in Tulsi Pipe Road, Mahim.
Its
customer-centric business model focuses on addressing customer requirements in
various locations, ticket sizes and configurations.
Positioned for future growth and expansion, the
company holds certain strategic land parcels in Bandra (West) and Santacruz
(East) for development. As of October 31, 2023, it possessed land reserves of
10,359.77 square meters, intending to capitalize on the entire FSI potential of
more than index 2.0, subject to marketability and receipt of regulatory
clearances. They have land parcels spanning 9,631.35 square meters in Bandra
(West), Mumbai, Maharashtra, and 728.42 square meters in Santacruz (East),
Mumbai, Maharashtra, showcasing its commitment to strategic real estate
investments and future projects.
The
company does not provide any construction services on its own and is 100%
dependent on third-party contractors for the construction services of its projects.
The Issue and the object of the offer
The IPO
is entirely a fresh Issuance of equity shares with no Offer for Sale (OFS)
component. The issue comprises fresh
issue of equity shares (of Rs 5 face value) worth Rs 400 crore.
Of the
net proceeds of the Issue, the company intend to spend Rs 285 crore towards repayment
and prepayment of the aggregate outstanding borrowings of the company and its
Subsidiaries (i.e. Accord Estates Private Limited, Iconic Property Developers
Private Limited, and Skyline Realty Private Limited); Rs 35 crore towards
acquisition of land or land development rights and balance for general
corporate purposes.
As of
September 30, 2023, it had total financial indebtedness of Rs 568.825 crore and
of which about 13.61% is unsecured loans.
Strengths
Established
brand in residential real estate in SCM realty market with strong project
pipeline of 2.03 million sft of saleable area in ongoing projects and 7.4 lakh
sft of carpet area in upcoming projects.
One of
market leaders in redevelopment projects in the south-central Mumbai realty
market, with a market share of about 8%.
Strong
expertise in tenant settlement in the redevelopment projects
Redevelopment
in SCM market is a large and ongoing opportunity with cessed buildings of more
than 50 years and 80 years and need redevelopment in SCM numbering about 19642
and 16502, respectively.
A diversified
portfolio in value luxury and luxury segment as well as commercial.
Weakness
Largely
focused on one micro market of the Mumbai Metropolitan Region realty market,
with its entire ongoing project are in the south-central Mumbai micro market. Any
regulatory changes, economic and other changes as well as natural disasters in the
SCM region might impact the business of the company.
Unsold
units in the ongoing projects as of October 31, 2023, numbers 216 and not
selling this project inventory in a timely manner may adversely affect the
business operations.
The real
estate industry is cyclical in nature. It is also competitive and highly
fragmented resulting in increased competition in purchasing land and development
rights at right price and timely sale of the inventory.
The real
estate industry in India is heavily
regulated by the central, state and local governments. Any change in
regulations may adversely affect the business of the company.
Redevelopment
projects are subject to certain risks involving existing tenants and applicable
Government regulations.
Redevelopment
of co-operative housing societies projects are awarded following competitive
bidding processes and satisfaction of prescribed qualification criteria as set out
by the housing society and thus the growth of the company largely depends on
ability to qualify and win bids.
Have in
the past experienced, and may in the future, experience negative operating cash
flows.
Portion
of the net proceeds are for repayment and prepayment (in full or part) of
borrowings availed by its subsidiaries, which does not contribute in its
consolidated revenues from operation during the Fiscals 2021, 2022 and 2023 and
three months’ period ended on June 30, 2023.
Redevelopment
projects have long gestation periods and any delays and cost overruns in
relation to Ongoing Projects and Upcoming Projects could adversely affect the
prospects, business, and results of operations.
Development
and re-development of projects in MMRA may require additional FSI (TDRs), which
may not be available or may not be available at the expected price.
Have
outstanding legal proceedings aggregating to Rs 53.59 crore, against certain of
its subsidiaries (i.e. Skyline Realty Private Limited, Accord Estates Private
Limited, and New Siddharth Enterprises) that are incidental to its business and
operations. Any adverse developments related to which could adversely affect
its business, reputation, and cash flows.
The
company has not obtained occupation certificate for 16 flats out of its four
completed projects, which include projects Ocean Star – II, Harmony, Jacob
Apartments, and Gloriosa Apartments, and may require to incur additional
cost.
Sujatha
R. Thomas, member of the promoter group and non – executive director have an
interest in the company other than remuneration, benefits, and reimbursement of
expenses incurred as she has entered into lease deed dated July 17, 2015, with
Accord Estates Private Limited, a material subsidiary of the company, for
taking on lease four ground plus one upper floor row houses and having
possessory rights with respect to land underneath and land appurtenant thereto
in Mount Mary Hill, Bandra West for lease rent of ? 10,000 per month.
As on
October 31, 2023, three ongoing projects, seven upcoming projects were operated
by its subsidiaries and six land reserves were held by its subsidiaries. For
this, it has pledged 100% of total issued and paid-up share capital of one of
its subsidiaries, Skyline Realty Private Limited to secure financing.
Rely on
various contractors or third parties in developing all its projects, and
factors affecting the performance of their obligations could adversely affect
the projects of the company.
Valuation
For the
fiscal ended March 2023, sales were up Rs 305.74 crore. With the operating
profit margin expanding by 110 bps to 49.4%, operating profit was up 15% to Rs
151 crore. Gained by lower depreciation and lower tax incidence, PAT was up 21%
to Rs 32.06 crore.
For the quarter ended June 2023, sales were Rs 102.41
crore. With the OPM standing at 45.6%, operating profit was Rs 46.73 crore. Eventually,
PAT was RS 14.53 crore.
At the upper
price band, the PE works out to 50 times of its FY2023 EPS, the P/BV works out
to 3.3 times, and EV/Sales works out to 7 times.
In
comparison, realty players operating in Mumbai Metropolitan Region market such
as Keystone Realtors, Suntek Realty, Hubtown, Mahindra Lifespace and DB Realty
quote at a P/BV of 4.1 times, 2.5 times, 0.5 times, 4.6 times, and 5 times,
respectively. Similarly, Keystone Realtors, Suntek Realty, Hubtown, Mahindra
Lifespace and DB Realty quotes at EV/Sales of 11.5 times, 21.1 times, 5.2
times, 14.2 times, and 18.6 times, respectively.
Bigger
Mumbai-based realty players such as Macrotech Developers, Oberoi Realty, and
Godrej Properties quote at P/BV of 7.1 times, 4.4 times and 6.2 times,
respectively, and EV/Sales of 10.5 time, 13.7 times and 28.2 times,
respectively.
Suraj Estate Developers
: Issue Highlights
|
|
Sector
|
Real Estate
|
Fresh Issue (in Rs.
Crore)
|
400.00
|
Offer for sale (in Rs.
Crore)
|
0.00
|
Price band (Rs.)*
|
|
Upper
|
360
|
Lower
|
340
|
Post-issue equity (Rs
crore)
|
22.18
|
Post-issue promoter
(including promoter group) stake (%)
|
74.95
|
Minimum Bid (in nos.)
|
41
|
Issue Open Date
|
18-12-2023
|
Issue Close Date
|
20-12-2023
|
Listing
|
BSE, NSE
|
Rating
|
44/100
|
Suraj Estate
Developers: Consolidated Financials
|
|
|
|
|
|
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
2306 (3)
|
|
Sales
|
239.99
|
272.72
|
305.74
|
102.41
|
|
OPM (%)
|
36.1
|
48.3
|
49.4
|
45.6
|
|
OP
|
86.63
|
131.73
|
151.00
|
46.73
|
|
Other income
|
4.01
|
1.19
|
2.15
|
0.40
|
|
PBIDT
|
90.64
|
132.92
|
153.15
|
47.14
|
|
Interest
|
79.21
|
93.10
|
107.35
|
27.19
|
|
PBDT
|
11.43
|
39.83
|
45.80
|
19.95
|
|
Depreciation
|
2.39
|
3.68
|
2.58
|
0.58
|
|
PBT
|
9.05
|
36.15
|
43.21
|
19.37
|
|
Share of profit from
Associates (SoPA)
|
0.00
|
0.00
|
0.00
|
0.00
|
|
PBT before EO &
After SoPA
|
9.05
|
36.15
|
43.21
|
19.37
|
|
EO Exp
|
0.00
|
0.00
|
0.00
|
0.00
|
|
PBT after EO
|
9.05
|
36.15
|
43.21
|
19.37
|
|
Tax
|
2.77
|
9.65
|
11.15
|
4.84
|
|
PAT
|
6.28
|
26.50
|
32.06
|
14.53
|
|
Minority Interest
|
0.00
|
0.00
|
0.00
|
0.00
|
|
Net profit
|
6.28
|
26.50
|
32.06
|
14.53
|
|
EPS (Rs)**
|
1.4
|
6.0
|
7.2
|
13.1
|
|
** on post issue equity
(on upper price band) of Rs 22.18 crore. Face Value: Rs 5
|
EPS is calculated after
excluding EO and relevant tax
|
|
|
# EPS cannot be
annualised due to seasonality in operations
|
Figures in Rs crore
|
|
|
|
|
|
|
|
Source: Capitaline
Corporate database
|
|
|
|
|