The Shriram Properties IPO open date is Dec 8, 2021, and the close date is Dec 10, 2021. The issue may be listed on Dec 20, 2021.
This public issue comprises fresh issuance of equity shares worth Rs.250 crore and an offer for sale (OFS) of Rs.350 crore. The issue includes a reservation of equity shares worth Rs.3 crore for the company’s employees who will receive those shares at a discount of Rs.11 per share to final issue price. The company’s shares are expected to list on stock exchanges BSE and NSE.
The price brand for the IPO is Rs113-118 per equity share. A retail-individual investor can apply for a minimum of 1 lot comprising 125 shares amounting to Rs.14,750 and maximum of 13 lots comprising 1625 shares amounting to Rs.1,91,750.
Objects of the Issue:
The IPO aims to utilize the net proceed towards the following purposes;
- Repayment and/ or prepayment, in full or part, of certain borrowings availed by the company and its subsidiaries, Shriprop Structures, Global Entropolis and Bengal Shriram; and
- General corporate purposes, subject to applicable laws.
About 75 per cent of the issue size has been reserved for qualified institutional buyers (QIBs), 15 per cent for non-institutional investors and the remaining 10 per cent for retail investors.
Axis Securities Ltd, ICICI Securities Ltd and Nomura Financial Advisory and Securities Ltd are the book running lead managers to the issue.
About the company
Incorporated in 2000, Shriram Properties is a part of the Shriram Group and is one of the leading residential real estate development companies in South India. The company primarily focuses on the mid-market and affordable housing segments. The company is also present in the mid-market premium and luxury housing categories as well as commercial and office space categories. Bengaluru and Chennai are the key markets for the company. The company also has operations in Coimbatore, Visakhapatnam, and Kolkata.
As of September 30, 2021, the company has completed 29 projects, out of which 24 are in the cities of Bengaluru and Chennai. As of September 30, 2021, the company has a total portfolio of 35 projects in ongoing, projects under development, and forthcoming projects, stages, aggregating to 46.72 million square feet of estimated saleable area.
(Source: Shriram Properties IPO DRHP)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
Investment Thesis:
- Engineering and Services Business sale process is underway – this removes one downside risk to the stock.
- Balance sheet remain in solid position and even with the latest provision the Company has headroom available and is within its banking covenants. However, gearing is expected to rise to ~20% as development ramps up to FY23.
- Robust development outlook with demand for both commercial and residential especially with strong level of apartment pre-sales.
- Outlook for new infrastructure projects to be tendered in Australia in the next 2 years remains attractive.
- New management team will likely bring a fresh perspective and strategy.
- Proposed cost out program of $160m should be supported of earnings in a tough trading environment.
- Valuation appears undemanding.
Key Risks:
- Further provisions to the existing problem projects.
- New projects mispriced from a risk perspective.
- Cut to dividends.
- Sudden increases in interest rates.
- Increase in apartments default rate.
- Any delays or execution problems in development and construction that sees margin being affected.
- Any net outflows from its investment management business.
Key highlights:
- LLC saw FY21 core operating profit after tax surge +83% over pcp to $377m leading to +230bps improvement in ROE to 5.4%
- LLC completed preliminary findings from a wide-ranging business review commenced by the new CEO, announcing plans to strip out $160m in costs each year that will put it in a better position to respond to an upturn in the construction and development markets it is expecting in FY23.
- Strong balance sheet with gearing of 5% well below 10-20% target range.
- LLC is still targeting $8bn+ development production by FY24 at a ROIC of 10-13%.
- Core segment EBITDA of $918m increased +27% over pcp, driven by Construction (up +71% over pcp) and Development (up +46% over pcp), partially offset by Investments (down -8% over pcp)
- Core operating NPAT of $377m increased +83% over pcp and core operating EPS of 54.8cps (up +60% over pcp) due to higher number of weighted average securities following capital raising in FY20, leading to ROE of 5.4% (up +230bps over pcp)
- The Board declared final distribution of 12cps, taking FY21 distributions to 27cps (vs no distribution in pcp) reflecting a pay-out ratio of 49%, within Board’s stated target range of 40-60% of core operating earnings
- The results by segment are:
- Development segment delivered EBITDA of $469m, up +46% over pcp, primarily driven by two residential towers at One Sydney Harbour, Barangaroo (contributed $325m to EBITDA), forward sale of Melbourne Quarter Tower and a new JV partnership at Milan Innovation
- Construction revenue of $6.4bn declined -16% over pcp, with activity still impacted by delays in the commencement of new projects and ongoing productivity impacts across sites
- Investments segment recovered from the worst of the COVID impacts, with Asset management revenue increased +32% over pcp to $139m, driven by $1.3bn of redevelopment activity secured across the US residential portfolio
Company Description:
Lend Lease Corporation (LLC) is a global property developer with three key segments in (1) Development: involves development of communities, inner city mixed use developments, apartments, retirement, retail, commercial assets and social infrastructure (with earnings derived from development margins, development management fees received from external co-investors and origination fees for infrastructure PPPs) (2) Construction: involves project management, design, and construction service, predominately in infrastructure, defence, mixed use, commercial and residential sectors (with earnings derived from project and construction management fees and construction margin); and (3) Investments: involves wholesale investment management platform, LLC’s interests in property and infrastructure co-investments, Retirement and US military housing (with earnings derived from funds management fees as well as capital growth and yield from co-investments and returns from LLC’s retirement portfolio and US military housing business). LLC operates predominately in Australia, but also in the UK and US and with a smaller contribution to earnings derived from the Asia Pacific.
(Source: Banyantree)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.