Shriram Properties IPO — All you need to know

In the 1970s, three friends ventured into a chit funds business. Overtime, this small business evolved into a financial conglomerate called Shriram Group. The group’s real estate arm, Shriram Properties, is now set to hit the exchanges with a ₹600 crore IPO. The company primarily focuses on mid-market and affordable segments in the cities like Bengaluru and Chennai. The company’s financial performance has been impacted due to the pandemic and it has suffered losses over the last two years. 

Offer details 

• Start date: 8 December 2021
• End date: 10 December 2021
• Price band: ₹113-₹118 per share
• Minimum investment: ₹14,750
• IPO size: ₹600 crore

All about the IPO

In the early 2000s, the Indian economy was on a sharp upward trajectory and the prices of real estate were rising. Riding on this wave, Shriram Properties forayed into this space. It has also received financial backing from PE investors TPG, Tata Capital, Walton Street Capital and Starwood. 

The company has evolved into one of the top five real estate companies in South India. It currently has 35 projects in the pipeline.   

Business highlights

• Two decade-old real estate company with focus on mid-market and affordable housing categories
• Leading real estate company in South India with Bengaluru and Chennai as its key markets 
• Backed by the Shriram group and marquee investors.

Financials

Revenue: -18.5%; Net loss: NA (FY19-21 CAGR) 

The performance was hampered by the pandemic-led cancellations, resulting in lower volumes and gross collections 

Strengths 

• Demonstrated strong capabilities in project identification. Its pre-sales volumes grew at 22.6% CAGR between FY17 and FY21
• Shifted towards an asset light model which offers a combination of real estate development as well as real estate services
• It provides real estate services to smaller real estate developers and other landowners for a fee ranging between 10% and 16% of the project revenue

Risks

• The new variant of the virus could impact the business
• Real estate development activities are concentrated primarily in South India 
• Faces competition from large developers such as Prestige Estates, Brigade Enterprises, Embassy, Puravankara.  
• Top five projects have contributed to bulk of revenues in recent years - average 80% in the last three years. 

Good to know

The share of top 20 players has significantly improved post the implementation of RERA in Shriram Properties key markets like Bengaluru and Chennai. Also, the lower interest rates and pent-up demand for urban housing is expected to benefit organised players like Shriram Properties. The third quarter of 2021 witnessed new launches of 32,863 residential units, up 21% quarter-on-quarter.