Will Puranik Builders be third time lucky as it files for IPO again?

Real estate developer Puranik Builders Ltd has filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India to raise funds through an initial public offering (IPO).

The IPO comprises a fresh issue of shares worth Rs 510 crore and an offer for sale of up to 9.45 lakh shares by the company’s promoters, according to the DRHP filed with the capital markets regulator.

The offer for sale involves Ravindra Puranik and Gopal Puranik divesting up to 4.725 lakh shares each.

The Mumbai-based developer may also consider a pre-IPO placement to raise as much as Rs 150 crore. If it does so, it will reduce the amount to be raised via the fresh issue of shares in the IPO.

The company plans to use the fresh proceeds to repay loans and for other general corporate purposes.

Elara Capital (India) Pvt. Ltd and YES Securities (India) Ltd are the merchant bankers managing the issue. 

This is the company's third attempt to go public. The company had first approached SEBI for IPO approval in June 2018. It filed its DRHP again in November 2019 and even received regulatory clearance to launch the offering but didn’t follow through with its plans.

Puranik Builders’ business

The company has been operating for three decades. It develops housing projects in the mid-income affordable segment in the Mumbai Metropolitan Region and Pune Metropolitan Region.

As of July 31, 2021, it had developed almost six million square feet of space across 35 completed projects in the two regions.

It also had 23 ongoing projects with an aggregate developable area of 14 million square feet with ticket sizes ranging between Rs 47.3 lakh and 1.25 crore in the MMR and between Rs 34.1 lakh and Rs 97.2 lakh in the PMR for mid-income affordable housing segment. The ticket size ranged from Rs 11.5 lakh to 34.2 lakh for low-income affordable housing segment. 

In addition, it has 17 forthcoming projects with an aggregate estimated developable area of 13.6 million square feet. 

The company develops most of its projects through joint development or joint venture arrangements with land-owners. As of July 31, it had carried out 32 projects on its own and 43 projects through the joint venture model. The company also has a land bank of 70.09 acres.

Puranik Builders’ finances

The company’s total income fell to Rs 513.56 crore for 2020-21 from Rs 730.24 crore and Rs 721.23 crore for the previous two financial years, as sales were affected because of Covid-19 and measures to tackle the pandemic including lockdowns.

“Due to the nationwide lockdown and inability to conduct site visits, sales enquiries from prospective customers that typically follow site visits were significantly affected,” the company said.

Similarly, its net profit for 2020-21 dropped to Rs 36.3 crore from Rs 51.23 crore for 2019-20 and Rs 71.27 crore the year before. 

Earnings before interest, tax, depreciation and amortisation (EBITDA) for 2020-21, 2019-20 and 2018-19 were Rs 164.27 crore, Rs 192.29 crore and Rs 209.26 crore, respectively. The EBITDA margin came in at 32.71%, 26.68% and 29.26% for the last three years. 

For the four months ended July 31, 2021 it clocked a net profit of Rs 17.5 crore and EBITDA of Rs 51.3 crore on total income of Rs 191.13 crore.