Shriram Properties: Avoid

  • Date

    08 Dec 2021 - 10 Dec 2021

  • Price Range

    ₹ 113 - ₹ 118

  • Minimum Order Quantity

    125

  • (D) RHP

    View

Shriram Properties Limited incorporated as ‘Synectics Infoway Private Limited’ on March 28, 2000 at Chennai, Tamil Nadu is one of the leading residential real estate development companies in South India, primarily focused on the mid-market and affordable housing categories. It is a part of the prestigious “Shriram Group” which is a prominent business group with four decades of operating history in India and a well-recognized brand in the retail financial services sector and several other industries .As of September 30, 2021, they have 29 completed projects, representing 16.7 Mn sq ft of saleable area, out of which 24 completed projects in the cities of Bengaluru and Chennai accounted for 90.56% of their saleable area. In addition, they have a total portfolio of 35 projects in ongoing projects, projects under development and forthcoming projects aggregating to 46.7 Mn sq ft of estimated saleable area and a land bank of approximately 197.47 Acres, with a development potential of approximately 21.45 Mn sq ft. The management has indicated that they are transitioning from a real estate development model to a combination of real estate development and service model through the use of joint-development agreements (“JDA”) with landowners or through development management (“DM”) business, whereby they provide end-to-end real estate development services to smaller real estate developers and other landowners. This DM model accounts for 31.92% of their portfolio as on of September 30, 2021.
Objects of the issue:
The IPO proceeds shall be used towards the following purposes
  • Repayment and/ or pre-payment, in full or part, of certain borrowings availed by the company and their subsidiaries
  • General corporate purposes
Investment Rationale:

Core strategy of asset light development management model and focus on mid market and affordable segment

The Company has stabilized their “DM model” having entered into definite agreements for 14 different projects and DM segment contributing 22% revenue in FY21. This allows them to earn fee income based on project development milestones achieved in terms of project sales, construction progress and customer collections, apart from reimbursement of costs and overheads. This model if scaled will allow them higher margins than their industry counterparts. In addition since inception they have been focused on the mid-market and affordable housing categories as their target segment within the residential housing market. The mid-market and affordable housing categories have accounted for significant share of overall market absorption in India in recent years. According to JLL, mid-market and affordable housing categories accounted for 74% of overall residential unit absorption during calendar year 2020.Thus as a result of this they have lower inventory levels.