IPO Analysis: Signatureglobal (India) Ltd

IPO Rating: Apply for listing gains

About the Issue: 

Signatureglobal is a renowned real estate brand with a strong presence in the Delhi-NCR region, known for its innovative construction technologies, exceptional amenities, and competitive pricing. 

The company is gearing up to launch its Initial Public Offering (IPO) for equity shares, each having a face value of Re 1. The IPO price range is set between Rs 366 and Rs 385 per equity share, resulting in a total issue size of Rs 730 crore at the upper price band. 

The IPO is scheduled to commence on September 20, 2023, and will conclude on September 22, 2023. The anticipated listing on the exchange is set for October 04, 2023. The market lot size for the IPO is 38 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 494 shares or a total investment of Rs 1,90,190 assuming the upper price band. 

Objects of the Issue 

The company plans to allocate the net proceeds raised from the issue for the following purposes: 

1. Re-payment or pre-payment, in full or in part, of certain borrowings availed by the company 
2. Infusion of funds in certain of the company’s subsidiaries, namely Signatureglobal Homes, Signature Infrabuild, Signatureglobal Developers and Sternal Buildcon for re-payment or pre-payment, in full or in part, of certain borrowings availed by the subsidiaries 
3. Inorganic growth through land acquisitions and general corporate purposes 

Promoter holding 

Pradeep Kumar Aggarwal, the Lalit Kumar Aggarwal, Ravi Aggarwal, Devender Aggarwal, Pradeep Kumar Aggarwal HUF, Lalit Kumar Aggarwal HUF, Ravi Aggarwal HUF, Devender Aggarwal HUF and Sarvpriya Securities Private Limited are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 78.36 per cent in the company. 

About the company 

Signatureglobal is a renowned brand with a robust presence in the Delhi-NCR region, celebrated for its innovative construction technologies, exceptional amenities, and competitive pricing. 

The company initiated its operations in 2014 under its subsidiary, Signature Builders Private Limited, by inaugurating the Solera project on a 6.13-acre land parcel in Gurugram, Haryana. Since then, the company has undergone significant growth, and as of March 31, 2023, it has successfully sold 27,965 residential and commercial units, all within the Delhi NCR region. The company maintains a strategic emphasis on the Affordable Housing and middle-income housing segments, leveraging Government of India and state government policies. 

In its affordable projects, the company offers an array of amenities such as recreational areas, lush gardens, expansive open spaces, and community halls. For its mid-housing projects, it provides an impressive range of facilities including well-equipped gyms, recreational spaces, entertainment centres, swimming pools, and top-notch sporting facilities. 

As of March 31, 2023, the company had successfully completed an accumulative developable area spanning 7.64 million square feet across its finished projects. Additionally, there was an ongoing development of an extra 1.37 million square feet within its ongoing projects, encompassing a total of 11,427 residential units and 932 commercial units. 

Financials

Outlook and Valuation  

China has opted to reduce mortgage interest rates for first-time homebuyers in a bid to stimulate growth in its real estate sector. The strong performance of the domestic property market can be attributed to the expectation of a resilient economy and sustained housing demand.  In Q2FY24 till date, real estate sales in Pune and Mumbai reached an all-time high, spearheading a notable boom. Additionally, major metropolitan areas such as Delhi NCR, Bengaluru, and Hyderabad are also experiencing rapid growth in the real estate sector. As a result, real estate stocks are currently experiencing a robust rally, driven by the upsurge in global optimism toward the sector, and are anticipated to continue their growth. 

When evaluating the company, its competitive advantage lies in its affordable pricing strategy, which is a distinct strength. Furthermore, the ongoing projects and sizeable market share in affordable housing in Delhi NCR inspire investor confidence in the company's future prospects. 

While the company has achieved significant growth in total sales and revenue, it has encountered challenges in generating profits, with a track record of reporting considerable losses in recent years. Over the past three financial years, the company has reported an average negative earnings per share of Rs 7.39. 

The issue is priced with a P/BV ratio of 101.05 times, calculated using its Net Asset Value (NAV) of Rs 3.81 as of March 31, 2023. At the upper price cap, it is priced at a P/BV ratio of 8.32, considering its post-IPO NAV of Rs 46.30 per share. The IPO is priced with a negative price-to-earnings (PE) ratio. 

There is anticipation of a 10 per cent potential gain upon listing, bolstered by a Grey Market premium of Rs 40 on top of the IPO price of Rs 385. Hence, we advise investors to consider a cautious, moderate subscription to the offering, with a focus on listing gains.