Suraj Estate Developers IPO Review: India’s real estate sector is booming due to an increasing population, urbanization, and business interest from around the world. This growth presents a promising investment opportunity. This investment opportunity has presented itself in the form of an IPO of Suraj Estate Developers Limited.

The IPO will open for subscription on December 18, 2023 and close on December 20, 2023. In this article, we will look at the Suraj Estate Developers IPO Review and analyze its strengths, weaknesses, financials and GMP. Keep reading to find out!

Suraj Estate Developers IPO Review

About The Company

Incorporated in 1986, Suraj Estate Developers Limited is a company engaged in real estate construction in the South Central region of Mumbai. 

The company develops real estate across the residential and commercial sectors and currently has a residential portfolio located in the markets of Mahim, Dadar, Prabhadevi and Parel.

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The company has expertise in the redevelopment of tenanted properties under Regulation 33(7) of the Development Control and Promotion Regulations (“DCPR”) in the Mumbai region. The Projects undertaken by the Company rely entirely on third-party contractors for their construction services, as the Company does not provide any such services itself.

Since its incorporation, it has completed 42 projects with a developed area of more than 1,046,543.20 square feet in the South-Central Mumbai region. Furthermore, it has 13 Ongoing Projects with a developable area of 2,034,434.40 square feet, a saleable RERA carpet area of 609,928 square feet and 16 Upcoming Projects with an estimated carpet area of 744,149 square feet. 

About The Industry

India, with a population of over 1.37 billion, has a massive domestic demand base, attracting businesses from around the world to establish their operations here. This change in population demographics will have a significant impact on real estate demand.  

Furthermore, India’s urbanization rate is increasing rapidly, and the UNDP estimates that approximately 50% of India’s population will be urbanised by 2046. This rapid urbanization is expected to drive medium to long-term demand for housing, offices, and other real estate asset classes.

Suraj Estate Developers IPO – Financials

If we look at the financials of Suraj Estate Developers we notice that their total assets have increased from ₹792.00 crores in March 2021 to ₹994.73 crores in June 2023.

Similarly, its revenue has also increased from ₹244.00 crores in March 2021 to ₹307.89 crores in March 2023. The net profit of the company has increased from ₹6.28 Crores in March 2021 to ₹32.06 with a net profit margin currently standing at 10.59%.

During the June quarters of FY24, the company reported a total revenue and a net profit of ₹102.81 crores and ₹ 14.53 crores respectively.

In terms of return ratios, it has a ROE of 58.18% and a RoCE of 21.93% as of FY23. These ratios indicate a good return to shareholders’ capital and an efficient use of company resources.

The company has a debt-to-equity ratio of the company stood at 8.31. This suggests that the company is extremely leveraged.

Key Players in the Market

The following are the listed peers of Suraj Estate Developers in the market:

  • Oberoi Realty Limited
  • Sunteck Realty Limited
  • Keystone Realtors Limited
  • Shriram Properties Limited
  • Mahindra Lifespace Developers Limited
  • D B Realty Limited
  • Hubtown Limited

Strengths of the Company

  • The company has a longstanding presence in South Central Mumbai in Value Luxury Segment and Luxury Segment. Furthermore, they have in-house expertise in redevelopment which has helped them gain customers’ trust over the past 36 years.
  • The company capitalises on its brand strength by selling a significant portion of units shortly after the project launch and before obtaining occupation certificates. This minimizes their reliance on construction finance, optimizing returns during the project’s construction phase.
  • The company has a diverse portfolio of residential developments in South Central Mumbai catering to different economic and demographic segments. This helps them cater to different segments of the market and diversify their risk of dependence on a particular segment. 
  • As the company offers free housing to occupants during redevelopment projects, they are the most preferred developers in the region.
  • The company’s customer engagement has helped it strengthen its brand value which has helped it achieve more sales

Weaknesses of the Company

  • The company is subject to risks that arise from economic, legislative, and other changes, as well as natural calamities in the South-Central Mumbai region and the general performance of the real estate sector.
  • Due to increased competition in the limited area in which the company operates, there can be an increase in the cost of land. As these price increases cannot be passed to customers, it can adversely affect the business
  • Agreements with customers on Ongoing and Upcoming Projects may entail interest payments due to construction delays or project cancellations. Any such delays or cancellations resulting in payments could adversely impact the business
  • If the company is not able to sell its project inventories in a timely manner, then it may adversely affect its business.
  • The company’s business is subject to seasonality (monsoon). Its operations may be adversely affected by difficult working conditions during monsoons that restrict its ability to carry on construction activities to some extent and fully utilize its resources.

Suraj Estate Developers IPO Review – GMP

The shares of Suraj Estate Developers Limited traded at a premium of 14.17% in the grey market on December 13th, 2023. The shares tarded at Rs 411. This gives it a premium of Rs 51 per share over the cap price of Rs 360.

Key IPO Information

IPO Size₹400.00 Cr
Fresh Issue₹400.00 Cr
Offer for Sale (OFS)Nil
Opening dateDecember 18, 2023
Closing dateDecember 20, 2023
Face Value₹5 per share
Price Band₹340 to ₹360 per share
Lot Size41 Shares
Minimum Lot Size1
Maximum Lot Size13 (533 shares)
Listing DateDecember 26, 2023

Promoters: Mr. Rajan Meenathakonil Thomas

Book Running Lead Manager: ITI Capital Limited and Anand Rathi Advisors Limited

Registrar to the Offer: Link Intime India Private Limited

The Objective of the Issue

The proceeds from the IPO will utilised for the following purposes:

  • Repayment/Prepayment of the aggregate outstanding borrowings of the Company and its Subsidiaries. The subsidiaries include: Accord Estates Private Limited, Iconic Property Developers Private Limited and Skyline Realty Private Limited
  • For the purpose of acquiring land or land development rights
  • General corporate purposes

In Closing

In this article, we looked at the details of Suraj Estate Developers. We conclude that, while the company faces tough competition in the region it operates, the rising demand for real estate is a favourable factor that can help the company in its growth.

What do you think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.

Written By Aaron Vas

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