Although Shriram Properties has solid future prospects, Omicron may mess things in the near term

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Although Shriram Properties has solid future prospects, Omicron may mess things in the near term
Shriram Properties
  • Shriram Properties’ IPO opened subscription for investors on Wednesday and will close on December 10.
  • The company is looking to raise ₹600 crore through the public listing, out of which ₹250 crore is fresh issue and ₹350 crore is an offer for sale by promoters.
  • Shares of the company are demanding a premium of ₹20 in the grey market today.
  • Analysts have mixed views on whether to subscribe for the IPO or not after the company booked losses in the past two years due to COVID-19.
Shriram Properties, part of the Shriram Group and one of the leading residential real estate development companies in south India, opened its initial public offering (IPO) today, December 8, and will close on December 10.

The company primarily focuses on the mid-market and affordable housing segments. Bengaluru and Chennai are the key markets for the company, while it also operates in Coimbatore, Visakhapatnam, and Kolkata.

Shriram Properties is well supported by marquee private equity investors like TPG, Tata Opportunities Fund, Walton Street Capital and Starwood, which cumulatively held 58.35% equity stake. Through this IPO, these investors are partially offloading their stake.

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Adding to it, the company has attracted multiple financial investments from investors like SUN Apollo Ventures, Mitsubishi Corporation, Amplus Capital Advisors, ASK Property Investment Advisors, Motilal Oswal and Kotak Private Equity Group in its projects.
Shareholders selling sharesNumber of shares on sale
Omega TC Sabre Holdings₹90.9 crore
Tata Capital Financial Services₹8.34 crore
TPG Asia₹92.2 crore
WSI/WSQI V (XXXII) Mauritius Investors₹133.4 crore

The company plans to utilise some of the net proceeds from the IPO towards the company and its subsidiaries’ debt payments and some for general corporate purposes.

Keeping aside the company's strong position in the southern part of the country and growth prospects, financial performance of the company has been disappointing. It has reported losses for two consecutive years because its business operations were impacted by COVID-19 induced lockdown and restrictions.
Although Shriram Properties has solid future prospects, Omicron may mess things in the near term
Flourish chart

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Following this, the IPO has received mixed views from the brokerages suggesting whether to subscribe for the IPO or not.
BrokeragesRecommendation
Kotak SecuritiesNot rated
Canara Bank SecuritiesSubscribe for listing gains
ICICIdirectUnrated
Choice BrokingSubscribe

While the company has already suffered losses due to pandemic related restrictions, it may again get impacted as the new COVID variant cases are increasing day-by-day.

“The COVID-19 pandemic may affect company’s business, results of operations and financial condition, in the future, in a number of ways which includes delays in the completion of construction of properties on account of the lockdown and work stoppages, affecting ability of customers to visit sales offices and undertake in-person discussions, inability to access capital on commercially acceptable terms and company’s ability to execute growth strategies and identify and complete acquisitions,” said analysts at ICICIdirect in a brokerage note.

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Ravi Singhal, vice chairman at GCL Securities said that, “Company is posting losses from the last two years and its revenue has reduced significantly since the 2019 level. These losses may extend further this year looking at the Omicron scenario. This company is part of the reputed Shriram Group, but that cannot be the only point to apply for this IPO. Clearly investors cannot apply for this IPO for listing gain; one may apply for long-term holding based on their risk appetite.”

However, some analysts feel that the company’s leading position in the residential segment along with strong execution quality will take the company a long way.

“Company is one of the leading residential real-estate developers in south India and focuses on mid-market and affordable housing categories. We believe that the company has a strong track record of delivering the project on time and can maintain strong execution which will get reflected in the pre-sales numbers going ahead. Hence, we are assigning a “SUBSCRIBE” recommendation to the Shriram Properties Limited IPO,” said Yash Gupta, equity research analyst at Angel One.

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Here is how Shriram Properties’ peers performed this year:
Peer companiesMarket cap% return in 2021
Macrotech Developers₹69,722 crore210.00%
Indiabulls Real Estate₹7,856 crore113.00%
Sobha₹8,225 crore113.00%
Brigade Enterprises₹11,658 crore103.00%
Prestige Estates Projects₹17,860 crore67.00%
DLF₹97,898 crore65.00%
Oberoi Realty₹32,049 crore49.00%
Godrej Properties₹23,601 crore41.00%
Kolte-Patil Developers₹2,397 crore29.00%
Sunteck Realty₹6,593 crore26.00%

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