IPO Size: Rs. 600 cr (75% reserved for institutions, as loss making since FY20) 

• Rs. 350 cr offer for sale (OFS) by 4 funds Walton Street, TPG, Starwood, Tata Capital (58% combined holding to drop to 35%)
• Rs. 250 cr fresh issue for repaying Rs. 200 cr, of total Rs. 650 cr debt (debt equity ratio of 0.8x to halve to 0.4x)

Price band: Rs. 113-118 per share

Mcap: Rs. 2,000 cr, implying 30% dilution

IPO Date: Wed 8^th Dec to Fri 10^th Dec 2021, Listing Mon 20^th Dec 2021

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Strengths:

1. Residential Real Estate company, focused on mid-market and affordable segments in Bengaluru, Chennai, Vizag and Kolkata, having 35 million sq ft saleable area in ongoing and under development projects.
2. Diversified into Development Management model, fees from which represents 25% of FY21 revenue of Rs. 431 cr and H1FY22 revenue of Rs. 118 cr. This is an asset-light and scalable model, as company receives 10-16% of project sales as fee income.
3. Part of Shriram Group, company has a strong brand, enabling healthy pre-sales. Its Kolkata land bank has development potential of 33.5 mn sq ft saleable area which is to be monetized over next few years.

Concerns:

1. Loss making since 5 years: Excluding exceptional items, company reported net loss consecutively since FY16. Moreover, FY21’s loss before exceptional items and tax of Rs. 44 cr, rose to loss of Rs. 49 cr in H1FY22, despite covid tailwinds of higher affordability, need for larger homes, tax rebates and company’s operations in IT-dominant geographies.
2. High Cost Debt: Average cost of debt is as high as 13-14%, even in the current low interest rate environment, as company’s credit rating is poor at BBB+. Contingent liabilities of Rs. 936 cr towards guarantees given is also steep, given net worth of Rs. 770 cr. 
3. Shareholders part-exiting at loss: Cost of acquisition, for selling investors are between Rs. 127-177 per share, implying all 4 funds are part exiting at a hair-cut. The fund with cost of Rs. 127 per share, first invested in the company in Nov 2007, implying loss even after 14 years of holding. Loss after such a long holding period is unheard of, clearly highlighting poor company fundamentals, and acting as a huge deterrent, irrespective of future prospects.