Rustomjee Group firm Keystone Realtors’ IPO opens today. Should you subscribe?

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Keystone Realtors Ltd (KRL), which sells properties under the brand ‘Rustomjee’, will be launching its initial public offering (IPO) on Monday, November 14, 2022 and investors will be allowed to subscribe till Wednesday, November 16. The Mumbai-based real estate developer has fixed a price band of 514-541 a share. The company on Friday said it has collected over 190 crore from anchor investors ahead of its issue.

The company is looking to raise 635 crore through the initial share sale, which consists of a fresh issue of equity shares aggregating up to 560 crore and an Offer-For-Sale (OFS) worth 75 crore by promoters.

It intends to utilise the net proceeds towards funding the repayment/prepayment of borrowings to the tune of 341.6 crore as well as towards funding the acquisition of future real estate projects and general corporate purposes. The equity shares of the company are expected to be listed on stock exchanges BSE and NSE on Thursday, November 24, 2022.

“At higher price band, KRL is demanding an EV/TTM pre-sales multiple of 2.6x, which seems to be discount to peer average. Thus the issue seems to be attractively priced. However considering its 76.6% sequential fall in pre-sales business (compared to 3% average increase in the peer’s business), we assign a “Subscribe with Caution” rating for the issue,” said Choice Broking.

Founded in 1995, Keystone Realtors is one of the prominent real estate developers. As of March 31, 2022, they had 32 completed projects, 12 ongoing projects and 19 forthcoming Projects across the Mumbai Metropolitan Region (MMR), that includes a comprehensive range of projects under the affordable, mid and mass, aspirational, premium and super premium categories, all under their Rustomjee brand.

“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 IPO be rated ‘SUBSCRIBE’,” said KRChoksey.

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