Keystone Realtors Limited IPO

About the company:

Keystone Realtors Ltd

About the company

Keystone realtors are one of the prominent real estate developers in the micro markets that the company is present in. They have a market share of 28% in Khar, 23% market in Juhu, 11% in Bandra East, 14% in Virar, 3% in Thane and 5% in Bhandup in terms of absorption (in units) from 2017 to 2021.

They are led by experienced Promoters and a professionally qualified senior management team to provide the strategic direction and implementation of growth plans. The business is headed by Boman Rustom Irani as the Chairman and Managing Director.

As of June 30, 2022, Rustomjee has developed 20.22 million square feet of high-value and affordable residential buildings, premium gated estates, townships, corporate parks, retail spaces, schools, iconic landmarks and various other real estate projects.

Strengths

·        As of June 30, 2022, they had 32 Completed Projects, 12 Ongoing Projects and 21 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 the Rustomjee brand.

·        A strong ‘Rutomjee’ brand image also encourages stakeholders in the real estate development industry to prefer partnering with the company, in particular for re-development and stalled projects.

·        Amongst the leading residential real estate development companies in MMR with a well-diversified portfolio and strong pipeline.

·        The company’s business model focuses on entering into the joint development agreements, redevelopment agreements with landowners or developers or societies, which requires lower upfront capital investment compared to direct acquisition of land parcels.

Risks

·        The business commands over 50% price premium in the markets of Juhu, Bandra East and Khar, as compared to the average price of the Western Suburbs micro-markets. Any change in the demand for the flats could affect the financials of the company.

·        Rustomjee has high levels of debt on its balance sheet. The Net Debt of the company as of Q1FY23 stood at Rs. 1,192 crores. The debt to equity ratio is 1.10x which is high.

Operational Update

Financial Snapshot

Conclusion

Rustomjee is a premium brand name in Mumbai with a prime market share in sub-markets such as Juhu, Bandra and Khar. The business leverages its brand image and commands a higher premium. However, its financials have not been strong. Its geographical concentration remains to be a concern. The company comes at a fair valuation but the company is debt-heavy which will keep the margins under pressure. We advise our investors to AVOID the IPO.