Homesfy Realty SME IPO Review (Apply)
• HRL is having asset-light business and provides advisory and marketing services for the realty sector.
It has posted growth in its top and bottom lines for the reported periods.
• Based on the current financials, the issue appears reasonably priced.
Post listing, it may generate first mover fancy, the only concern is longer gestation for migration to the main board.
• Well-informed, cash surplus investors may consider parking funds for long-term rewards.
HRL is the first mover in the organized realty corporate broker space. In advanced countries, this concept is well accepted and many companies are listed on exchanges. Post listing, this company is likely to mark first mover fancy and generate investors’ fancy. This company holds a pure long-term investment strategy.
Homesfy Realty Ltd. (HRL) is engaged in providing real estate broking services to Real Estate Developers, retail buyers/sellers, and investors for residential and commercial space. It deals in newly constructed properties, whereby the company assists Real Estate Developers in selling and potential customers in purchasing the properties. HRL operates business through direct selling from its in-house sales team and Direct Selling Agent listed on mymagnet platform for referral services.
Homesfy aims to create the best experience in housing transactions and services by focusing on productivity, transparency, and quality of service providers. It is driven by 4 pillars i.e. people, process, technology, and platform.
The company runs a brokerage business in name of Homesfy and is well-partnered with mymagnet platform. It currently maintains a network of 7 offices located in 4 cities, Mumbai, Pune, Noida, and Bangalore, which primarily engages in sales, marketing, and payment collection activities for the business.
HRL is well-posed to take advantage of the opportunities created by the increasing demand for real estate due to the rapid economic growth in India, the growing acceptance of new channels of real estate purchase such as tech-enabled platforms, Proptech, increasing internet penetration in India has led to the revolution in Indian real estate brokerage industry enabling customers, with new experience of real-time data, faster services, execution, and transparent transactions. As of October 31, 2022, it has 380 employees on its payroll including a sales team of 245.
ISSUE DETAILS/CAPITAL HISTORY:
HRL is coming out with a maiden IPO of 805200 equity shares of Rs. 10 each at a fixed price of Rs. 197 per share to mobilize Rs. 15.86 cr. The issue opens for subscription on December 21, 2022, and will close on December 23, 2022. The minimum application is to be made for 600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. HRL will utilize the net proceeds of the IPO fund for working capital (Rs. 11.61 cr.) and general corporate purposes (Rs. 2.90 cr.). The issue constitutes 26.36% of the post-issue paid-up capital of the company. HRL is spending Rs. 1.35 cr. for this IPO process.
The issue is solely lead managed by Sarthi Capital Advisors Pvt. Ltd., Bigshare Services Pvt. Ltd. is the registrar of the issue, and Rikhav Securities Ltd. is the market maker for the company.
HRL issued initial equity shares at par and then raised fresh equity shares at Rs. 197 per share in November 2022. It has also issued bonus shares in the ratio of 35 shares for every 1 share held in October 2022. The average cost of acquisition of shares by the promoters is Rs. – (14.66) per share.
Post-IPO, HRL’s current paid-up equity capital of Rs. 2.25 cr. (2250000 shares) will stand enhanced to Rs. 3.06 cr. (3055200 shares). Based on the IPO pricing, the company is looking for a market cap of Rs. 60.19 cr.
On the financial performance front, for the last three fiscals, HRL has posted a total income of Rs. 11.93 cr. / Rs. 0.91 cr. (FY20), Rs. 14.76 cr. / Rs. 1.99 cr. (FY21), and Rs. 30.40 cr. / Rs. 3.18 cr. (FY22). For the Q1 of FY 23, it earned a net profit of Rs. 1.39 cr. on a total income of Rs. 12.39 cr.
For the last three fiscals, the company has reported an average EPS of Rs. 481.62 (on the basis of pre-bonus and fresh issue of shares) and an average RoNW of 30.62%. The issue is priced at a P/BV of 0.09 based on its NAV of Rs. 2185.18 (on the pre-bonus and fresh issue basis) as of June 30, 2022, and at a P/BV of 1.74 based on its post-IPO NAV of Rs. 113.17 per share.
If we annualize FY23 earnings and attribute it to post-IPO fully diluted equity capital, then the asking price is at a P/E of around 10.87. Thus the issue appears fully priced based on its current financials. The company is operating an asset-light business with its advisory and marketing services.
The company has not declared any dividends for any financial year so far. It will adopt a prudent dividend policy based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer document, HRL has no listed peers to compare with.
MERCHANT BANKER’S TRACK RECORD:
This is the 47th mandate from Sarthi Capital in the last 11 fiscals (including the ongoing one). Out of the last 10 listings, 2 opened at discount, 2 at par, and the rest with premiums ranging from 0.71% to 333.05% on the date of listing.
Conclusion / Investment Strategy
The company is in an asset-light model business of marketing and advisory services for the realty sector. It is not doing any construction activity. Post-IPO small equity base indicates longer gestation for migration to the mainboard. Based on its current financials, the issue appears reasonably priced, and well-informed / cash surplus investors may consider investing in this IPO for a long-term reward. (Apply).
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.
(SEBI registered Research Analyst-Mumbai).
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.