Keystone Realtors Ltd IPO
Published by Sharekhan Education | November 15, 2022
Amit Pathak| Sharekhan Education
Keystone Realtors Ltd IPO has an issue size of ₹ 635 Cr, price Band: ₹ 514-541. The issue opens on Monday, 14th Nov’2022 and closes on Wednesday, 16th Nov’2022.
Company Overview:
Keystone Realtors Ltd is one of the prominent real estate developers in the Mumbai Metropolitan Region (MMR). It sells properties under the brand name ‘Rustomjee’. The company has developed 20.2 million sq ft of high value & affordable residential buildings, corporate parks, schools, and iconic landmarks. It has 32 completed projects, 12 ongoing projects, and 19 forthcoming projects across the MMR, and it commands a market share of 28% in Khar, 23% in Juhu, 11% in Bandra East, 14% in Virar, 3% in Thane, and 5% in Bhandup in terms of absorption (in units) between 2017-21.
Objects of Issue:
The IPO consists of a fresh issue of equity shares aggregating to Rs 560 crores, and an offer for sale (OFS) of up to Rs 75 crores by existing shareholders. The proceeds from the fresh issue will be used for funding the acquisition of future real estate projects and repayment of a portion of the existing borrowings. The minimum application is to be made for 27 shares and in multiples thereafter. Post allotment, shares will be listed on BSE and NSE.
Industry Overview:
Structural reforms like RERA, GST, and IBC have brought a degree of transparency, accountability, and fiscal discipline to the Indian real estate sector. The Covid-19 pandemic has seen renewed interest in township living by nuclear families, who were previously averse to buying residential properties and preferred rental accommodations. India’s urbanization rate is increasing at a rapid pace. As per UNDP projections, by 2046, ~50% of the population in India will be urban. It is estimated to drive the demand for housing, offices, and other real estate asset classes in the medium to long term. The market size of Indian real estate has improved from US$50 bn in 2008 to US$180 bn in 2020. It is likely to increase to US$1,000 bn by 2030E.
Competitive Strengths:
The company has an asset-light and scalable business model resulting in profitability and stable financial performance. It focuses on entering into joint development agreements with landowners, developers, or societies, which requires lower upfront capital expenditure than the direct acquisition of land parcels. The company’s brand image encourages industry stakeholders to prefer partnering with it, particularly for re-development projects. It has embraced an integrated real estate development model, handling projects from start to finish in-house. It is characterized by Technology-focused operations resulting in operational efficiency and enhanced customer experience. The company leverages its development track record, industry knowledge, and know-how of the regulatory environment in the MMR to deliver projects that meet the demands of its customers.
Key Concerns:
Financials:
The company’s topline increased by 50% in FY22 to 1269.3 crores from Rs 848.7 crore in FY21. However, the bottom line reduced to Rs 135.8 crore from Rs 231.8 crore in FY21. This was mainly due to the increase in construction costs. The company significantly cut debt, lowering its net debt-to-equity ratio from 5x in FY20 to 1.4x in FY22.They priced the issue at a P/E of approximately 45x based on FY22.
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