Amid increased volatility in the stock markets owing to geopolitical tensions between Russia and Ukraine and higher oil prices, a realty company has filed its draft papers with the SEBI to come up with an IPO. The name of the company is Puranik Builders Limited. So let us understand in detail the company’s business fundamentals.
About the company
Puranik Builders Limited is among the prominent real estate developers in the Mumbai Metropolitan Region (MMR) and Pune Metropolitan Region (PMR) based on the number of units currently being marketed in these regions.
The company has a longstanding presence of over 31 years in the real estate market in India, developing residential projects in the mid-income affordable housing segment in the MMR and PMR real estate markets.
As of July 2021, the company had completed 35 projects in the MMR and PMR, and has developed 554,197 square meters of developable area. As of July 2021, the company had 23 ongoing projects with an aggregate developable area of 1305632 square meters.
Puranik Builders Limited IPO Details
Following are the details of the company’s IPO:
- The company is not yet out with its IPO subscription dates.
- The company is not yet out with its IPO issue price range.
- The company’s shares will list on the NSE and the BSE.
Objectives of the IPO
Following are the objectives of the company’s IPO:
- The IPO issue is a combination of fresh issue and an offer for sale. The company will receive up to ₹510 crores as gross proceeds from the fresh issue part.
- The company will use a part of the net proceeds for prepayment or repayment of all or a portion of certain outstanding borrowings availed by it on a consolidated basis.
- The company will also use a part of the proceeds for general corporate purposes.
- Further, the company wants to enhance its corporate image and improve its credibility by listing its shares on the exchanges.
Key strengths
Following are the key strengths of the company:
- The company has longstanding operations in the attractive real estate markets of the Mumbai Metropolitan Regions and the Pune Metropolitan Regions.
- The company’s focus is in the mid-income affordable housing segment.
- The company strategically prices its units for MMR and PMR micro-markets.
- The company has an established brand and customer goodwill in the MMR and PMR markets.
- The company has differentiated and diversified product offerings.
- The company follows an asset-light model for development of projects through joint development agreements and joint venture arrangements.
- The company has a proven track record for development of quality projects.
- The company has a strong pipeline of projects coupled with integrated project execution and management capabilities.
Key risks
Following are the key risks that the company faces in its business:
- There are certain outstanding litigations against the company and its promoters. Any adverse outcome owing to this could disrupt the company’s business operations.
- The company’s cashflow generation track record has been poor.
- The company has several contingent liabilities on its books.
- The company’s real estate development activities are predominantly dependent on the developments in the real estate markets around Mumbai and Pune, which poses a concentration risk.
- The company’s inability to deliver projects on time could lead to cost overruns.
- The company has significant unsold units among its ongoing projects.
- The company is subject to various regulatory approvals.
- The company’s business and growth plans could be adversely affected by the change in the rate of property taxes and stamp duties.
Fundamentals of the company
Following are the fundamentals of the company:
- The company’s revenue from operations decreased from ₹721.2 crores in FY19 to ₹513.5 crores in FY21. The company’s revenue from operations stood at ₹191.1 crores for four months ended July 2021.
- The company’s profit after tax decreased from ₹71.2 crores in FY19 to ₹36.3 crores in FY21. The company’s profit after taxes stood at ₹17.5 crores for the four months ending July 2021.
- The company’s total borrowings increased from ₹1238.8 crores in FY19 to ₹1354.4 crores in FY21. The company’s total borrowings stood at ₹1366.7 crores for the four months ended July 2021.
- The net asset value per share stood at ₹61.23 as of July 2021.
- The company’s earnings per share stood at ₹2.97 as of July 2021.
Peer comparison
According to its prospectus, Puranik Builders Limited counts Oberoi Realty Limited, Godrej Properties Limited, Prestige Estates Projects Limited, Sunteck Realty Limited, Sobha Limited, Brigade Enterprises Limited, and Macrotech Developers Limited among its peer group. Puranik Builders Limited’s return on net worth stood at 10.41% as of March 2021, which is much better when compared to its peers.
Conclusion
These were the details of the company’s business fundamentals. Investors should do their own due diligence before investing in the company’s IPO when it comes out with its subscription dates and the issue price range, through which valuations can be assessed.
