Keystone Realtors IPO Listing And GMP

A Mumbai-based real estate developer Keystone Realtors Ltd launched its initial public offer (IPO) on 14 November.  The IPO closed on 16 November and its listing is expected on 24 November 2022. Its lead managers are Axis Capital Limited and Credit Suisse Securities (India) Private Limited.

Keystone Realtors  develops property under the more commonly known brand name Rustomjee in the  Mumbai Metropolitan Region. Founded in 1995 it  has completed 32 projects across Mumbai till date. Rustomjee has 19 upcoming projects as well as 12 ongoing ones. Rustomjee has developed properties of all categories from affordable projects to the premium projects.

The IPO is expected to raise Rs.635 crores with this issuance of 11,737,523 shares of a face value of Rs.10. Out of this the fresh issue of shares is worth Rs.560 crores and the remaining Rs.75 crores is from the promoters shares on offer. The lot size is 27 shares. The company has fixed the value of the share at a price range of Rs.514 to Rs 541 per share. Just prior to the IPO the company had taken Rs.190 crores from its anchor investors.  Abu Dhabi Investment Authority, Morgan Stanley and Saint Capital accounted for nearly 35% of the anchor investor portion. Domestic mutual funds Aditya Birla Mutual Fund, IDFC Mutual Fund, Tata Mutual Fund and Quant Mutual Fund also participated in the anchor investor portion. SBI Life Insurance and HDFC Life Insurance Company too were part of the anchor investors.  

The initial demand  for the IPO was tepid. On the last day of the IPO it was subscribed 2.01 times,  despite the fluctuating market conditions. The qualifying institutional buyer (QIB) segment received 3.84 times subscriptions. The Non Institutional Investors (NII) category was subscribed  3.03 times. The retail investor portion received a lukewarm response with 0.53 times subscription.

The promoters are Boman Rustom Irani, Percy Sorabji Chowdhry and Chandresh Dinesh Mehta. After the IPO, the promoters stake will reduce from 96.7% to 86.7%. The metrics for allotment of shares has been decided. The investors’ portion for QIB is 50%, NII is 15%, and Retail is 35%.

The purpose of the IPO was to raise funds for repayment as well as to fund the future projects and corporate purpose.  The Chairman and Managing Director of Keystone Realtors Limited, Boman Rustom Irani said “ The overall secured debt on our books is about Rs.776 crore. Of this, we will be repaying debt worth Rs.341.6 crore using the IPO proceeds. This debt repayment is towards a project which is nearing completion. So that will free some cash flows which will be utilised towards our new projects.”

The Positives and Strengths of Keystone Realtors and making the stock a good long term bet. Some are :

  • Rustomjee is a well established brand in the Mumbai Metropolitan Region
  • It has a strong diversified portfolio of completed projects
  • It has a strong management team which has demonstrated project execution capabilities.
  • It is a technology focused company making it operationally efficient.
  • It has a large customer base having housed over 14,000 families
  • It has an asset-light and scalable model resulting in profitability and stable financial performance
  • It has tremendous experience in redevelopment projects which is highly beneficial in MMR 
  • Its business model allows it to minimise the upfront capital expenditure compared to the direct acquisition of land and generate revenue with lower initial investments
  • The net income for FY20, FY21, and FY22 was Rs 14.5 crore, Rs 231.8 crore, and Rs 135.8 crore, respectively

KRChoksey commented on the Keystone Realtors IPO  “The current value is appealing from a long-term viewpoint, given the average industry P/E of 96.5x, according to the company RHP. The company is trading at a P/B ratio of 5.8x its FY22 book value, with the highest RONW among its peers at 15.0%. With a strong brand and upcoming construction opportunities, we believe it is well placed, and as a result, we recommend that Keystone Realtors be rated ‘SUBSCRIBE’.”

Shares of Keystone Realtors had a Rs 5 per share Grey Market Premium (GMP) on Monday. This means the grey market expected the company’s IPO to list with Rs 5 premium over the price band of Rs 514 to 541.

Allottees should have a long term perspective as the company has a good financial track record and has generated stable profits in the past 3 years. It has a diverse category of projects in hand. Even though the issue price band is overpriced it is a good bet in the long term.

Recent IPOs listed at the premium are  Bikaji Foods IPO and Archean Chemicals IPO.

Disclaimer: The investments discussed or recommended in the market analysis, research reports, etc. may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and only after consulting such independent advisors as may be necessary.

Keystone Realtors IPO Listing And GMP
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