Signature Global IPO: From GMP to subscription status and brokerage views, here's all you need to know

The Rs 730 crore initial public offering (IPO) of Signature Global opened for bidding on September 20 and will close on September 22. The real-estate developer has fixed the price band in the range of Rs 366-385 per share for the issue.

Issue size: The issue includes a sale of fresh equity shares worth Rs 600 crore, and an offer-for-sale (OFS) of up to 2.7 crore equity shares worth Rs 127 crore by the International Finance Corporation (IFC).

Objective: Net proceeds from the fresh share sale would be utilised towards repayment of debts, amounting to Rs 432 crore. The rest of the proceeds will be used for inorganic growth through land acquisitions and general corporate purposes. The OFS amount will go to the selling shareholder of the company.

Subscription status: The issue has received a decent response from investors. By 2:30 pm on its second day of bidding, the IPO was fully subscribed (1.02 times) against its offer. It has received bids for 1.08 crore shares against 1.06 crore shares on offer. The category for non-institutional investors (NII) was bid the most, 2.22 times, followed by that of retail investors, which was subscribed to 2.13 times. However, the qualified institutional buyers (QIBs) portion was bid just 9 percent.

Grey Market Premium: Shares were commanding a premium of Rs 31 in the grey market today, indicating an 8 percent premium at listing (Rs 416). The GMP, however, had declined from Rs 34 in yesterday's session.

However, it is important to note that grey market premiums are just an indicator of how the company's shares are stacked up in the unlisted market and are subject to change rapidly.

Lot size: Investors can bid for a minimum of 38 equity shares and in multiples of 38 after that. Hence, the minimum investment by retail investors would be Rs 13,908.

Reservation: The company has reserved 75 percent of the net offer for qualified institutional bidders (QIBs), 15 percent of the offer for non-institutional investors (NIIs) and 10 percent for retail investors.

Anchor investors: Signature Global raised Rs 318.5 crore from 19 anchor investors, allocating 82,72,700 equity shares at Rs 385 per share. Nomura Trust, Eastspring Investments, Lion Global Investment Funds, Troo Capital, Segantii India Mauritius, Morgan Stanley, BNP Paribas Arbitrage - ODI, Goldman Sachs, Copthall Mauritius, Kotak Mahindra Trustee, Quant Mutual Fund, Nippon India, Bandhan Mutual Fund and Max Life Insurance Company participated in the anchor book.

About the firm: Incorporated in 2014, Signature Global claims to be the largest real estate development player in the National Capital Region of Delhi (Delhi-NCR) in affordable and lower mid-segment housing, majorly in Gurugram, Ghaziabad and Karnal. It has sold 27,965 residential and commercial units, all located within the Delhi NCR region as of March 2023. Over FY20-23, its pre-sales booking has increased by 98.3 percent CAGR to Rs. 3,430.6 crore in FY23. As of 31st March 2023, the company has sold 25,089 residential units with an average selling price of Rs 36 lakh per unit.

Financials: For the year ended on March 31, the company reported a net loss of Rs 63.7 crore, with consolidated revenue from operations at Rs 1,553.6 crore. However, its net loss came in at Rs 115.5 crore with a revenue from operations at Rs 901.3 crore in the previous financial year.

Book-running managers: ICICI Securities, Kotak Mahindra Capital Company and Axis Capital are lead managers to the issue, while Link Intime India is the registrar.

Important dates: The finalisation of the basis of allotment will be done on September 27, and the initiation of refunds will be done on September 29. The company's shares are proposed to be listed on both BSE and NSE, with October 4 as the tentative date of listing.

Brokerage view

Choice Broking has an ‘avoid’ call on the issue due to its continued loss-making operations. However, at the higher price band, SGIL is demanding an EV/Sales multiple of 3.9x (to its FY23 sales), which is at a significant discount to the peer average, it informed.

Signature Global brand is well-established in Gurugram and the wider NCR region for affordable and mid-segment housing projects. Combining its strong brand recognition, attractive price and quality construction, the company is able to sell a substantial portion of its inventory soon after the launch, said the brokerage in an IPO note. As of March 2023, SGIL has completed 12 projects with 6.1mn sq. ft. of saleable area. Further, it has 29 ongoing projects with 17.2 mn sq. ft. of saleable area and 19 forthcoming projects with an estimated saleable area of 21.3mn sq, mentioned the brokerage.

Despite expanding the business at the highest pace over FY20-23, SGIL operating and financial performance is not encouraging. It has reported an operating loss over FY20-22, while an operating profit of just Rs 6 cr in FY23. During this period, business has expanded by 86 percent CAGR to Rs 1,553.6 cr in FY23. Reported EBITDA was at a loss during the initial three reported years, while there was an EBITDA profit of Rs 6 cr in FY23. With the expansion in the business, depreciation charge increased by 69.4 percent CAGR, while finance cost was higher by 10 percent CAGR. Pre-tax and reported PAT were at a loss during the reported period, it added.

Competitive strengths:

• Largest affordable, lower-mid and mid-segment real estate developer in Delhi-NCR

• Well-established brand, strong distribution network and digital marketing capabilities translating into faster sales

• Fast growing with the ability to scale up rapidly

• Ability to provide aspirational lifestyle & amenities at affordable pricing and at strategic locations

• Standardised product offerings, quick turnaround and end-to-end in-house project execution expertise

• Positive operating cash flows with low levels of debt

• Strong focus on sustainable development

• Experienced promoters and professional senior management team with marquee investors

Risks and Concerns:

• General slowdown in global economic activities

• Unfavorable government policies & regulations

• Sustained higher inflation

• Further rise in interest rates

• Continued loss-making operations

• Competition

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.