IPO listed on 26 Dec'23
Suraj Estate Developers Ltd
Minimum Investment
₹ 14,760 / 41 shares
Grey market premium
₹ 70 (19.5% premium)
Issue price
₹ 360
Listing price
₹ 344
Listing gains
-16 (-4%)
Listing on
Dec 26, 2023
Subscribe for listing gains
- Suraj Estate Developers Ltd (SEDL) stands out in the residential real estate sector in South Central Mumbai, known for its expertise in redevelopment. The firm has shown impressive growth over the last three years, marked by significant increases in both revenue and profit. Notably, it has achieved an EBITDA margin of over 49% and a remarkable Return on Equity (ROE) exceeding 50%.
- However, there are concerns about the underperformance of its subsidiaries and its concentrated focus on a single area within the Mumbai Metropolitan Region real estate market. All of its current projects are located in the South Central Mumbai area.
- From a valuation standpoint, the IPO appears to be fully priced at a PE multiple of 27.5x, based on the projected earnings for the fiscal year 2024. The grey market premium (GMP) for the issue, however, suggests a premium listing. Therefore, risk-tolerant investors seeking listing gains, may consider subscribing to this issue.
- It is important to note that the firm’s impressive growth has been largely driven by debt, currently at Rs 593 crore, which is more than 8 times its total equity of Rs 71.4 crore. Although this raises concerns, the firm plans to repay a significant part of the debt using the proceeds from the issue.
- These factors collectively suggest that it might be prudent for long-term investors to observe the company's performance and debt reduction progress in the ensuing quarters post-IPO, to better gauge its long-term viability and growth prospects before making investment commitments.
About the company
Founded in
10 Sep'86
Managing director
Rajan Thomas
- SEDL specializes in developing both residential and commercial properties in the South Central Mumbai area. The firm entirely relies on external third-party contractors for constructing its projects, as it does not offer in-house construction services.
- Since its establishment, SEDL has successfully completed 42 projects, encompassing a total developed area of over 1,046,543.20 square feet in South-Central Mumbai. Currently, it is working on 13 ongoing projects with a developable area of 20,34,434.40 square feet and a saleable carpet area of 6,09,928 square feet.
- Additionally, the firm has plans for 16 upcoming projects, which are expected to cover an estimated carpet area of 7,44,149 square feet.
STRENGTHS
- Impressive Financial Track Record: The firm demonstrated notable growth from FY21 to FY23, achieving a compound annual growth rate (CAGR) of 13% in revenue, 32% in EBITDA, and 126% in net profit.
- Improving Margins: The firm maintained a profit after tax (PAT) margin of 10.5% in FY23, improving to 14.19%, by June 2023. Further, EBITDA margin has seen a notable growth from 36.10% in FY21 to 49.39% in FY23.
- Outstanding Returns: In FY23, the firm achieved a remarkable Return on Equity of 58.18%, surpassing many of its peers. The Return on Capital Employed was 21.93%.
- Asset light model: SEDL possesses a significant number of redevelopment projects, accounting for 10.38% of its total projects. This model is asset-light in nature, thereby lowering acquisition costs and enhancing capital efficiency.
RISK FACTORS
- Geographic Concentration: As of October 31, 2023, SEDL's operations were limited solely to South Central Mumbai. This singular focus subjects the firm to regional economic, regulatory shifts, natural disasters, and other location-specific risks. These factors could negatively impact the business, operational outcomes, cash flows, and overall financial stability.
- Subsidiary Performance Issues: Over the last three years, SEDL's subsidiaries have reported losses, contributing little to its total revenue. The firm plans to use some of the issue proceeds to pay off subsidiary debts. Any underperformance or financial issues within these subsidiaries could significantly affect its overall financial health.
- Cash Flow Challenges: In the past, SEDL has faced periods of negative cash flows. Sustained negative cash flows could strain the firm’s cash requirements, potentially hampering its operational capabilities and growth strategies.
- Real Estate Project Financing: SEDL incurs various expenses in real estate development, partially financed through loans from banks and financial institutions. As of September 30, 2023, its total debt stood at Rs 568.82 crore. Failure to timely repay interest and principal on these debts could lower the firm’s credit rating and creditworthiness, making future borrowing more difficult or expensive.
- Contingent Liability Risks: Contingent liabilities represented approximately 18% of the firm's net worth in FY23. A substantial or unexpected realization of these liabilities could significantly impact the firm's operations, financial results, and overall business health.
Issue details
Issue type
Mainstream
Issue size
₹ 400 crore
Fresh Issue
₹ 400 crore
OFS
₹ -
Price range
₹ 340 - 360
Lot size
41 shares
Issue Objective
The firm intends to utilize the net proceeds from the issue towards funding the following objects:
- Repayment/ prepayment of outstanding borrowings;
- Acquisition of land or land development rights; and
- General corporate purposes.
Dates
Bidding open
18 Dec'23
Bidding close
20 Dec'23
Allotment date
21 Dec'23
Refund date
22 Dec'23
Listing
26 Dec'23
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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