Puranik Builders IPO : 7 things to know about

Puranik Builders, a real estate development company which had filed its DRHP with SEBI in September 2021, had got approval for its proposed IPO in December 2021. However, the company is yet to firm up its plans for the IPO date and timing. Clearly, the company wants to wait and watch for now till the dust settles and there is more clarity on the demand for new issues.

Puranik Builders is predominantly present in the metropolitan regions of Mumbai and Pune in Western India. Ironically, this is the third attempt made by the company to tap the IPO market after cancelling the IPO twice in the past and hopes to be third time lucky.

7 key factors to know about Puranik Builders IPO

1) To begin with, this is not the first attempt by Puranik Builders but the third attempt at an IPO. On the first occasion, Puranik Builders had filed for its proposed IPO in 2018 but had shelved the IPO plans at that point of time due to the downturn in the markets.

Then, once again, the company had file for IPO in late 2019, but once again the timing was awfully wrong. Due to the stress created by COVID-19, Puranik Builders was forced to abandon its IPO plans. It has now got approval for its third attempt at the IPO.

2) The Puranik Builders IPO will be a combination of a fresh issue of shares and an offer for sale by the existing promoters and early investors. The fresh issue component will be around Rs.510 crore which will infuse fresh funds into the company and also be EPS dilutive.

In addition, Puranik Builders  will also offer 945,000 shares under the offer for sale route, in which case it will only be a transfer of ownership but will not result in any fresh funds coming into the company nor would it be EPS dilutive.

3) As part of the offer for sale, participation will come from the two core promoters. The two promoters, Ravindra Puranik and Gopal Puranik, will offer 472,500 shares each in the OFS taking the total size of the OFS to 9.45 lakh shares. However, the overall size of the IPO will only be known once the price band is decided upon. Let us now turn to how the fresh issue proceeds of Rs.510 crore (net of issue expenses) will be utilized by the company.

The fresh issue proceeds of Rs.510 crore will be used by Puranik Builders predominantly to reduce the debt of the company and also for general working capital funds and other corporate purposes. The reduction of debt would be specifically value accretive for Puranik Builders as the company has a high leverage ratio which is impacting its solvency ratios to a great extent. Therefore, the debt reduction program would be value accretive for Puranik Builders.

4) Puranik Builders specializes in developing and marketing lower-mid and mid-range projects in the Mumbai Metropolitan Region (MMR) and the Pune Metropolitan Region (PMR). The company has a fairly rich experience since it has been active in the real estate business in the MMR and PMR region for the last 31 years.

This long association with the business has helped the company to build deep linkages with the potential customers, suppliers, labour etc. Its focus remains on affordable residential housing.

5) For FY21, the company sales fell from Rs.730 crore to Rs.513 crore while the profits fell from Rs.51 crore to Rs.36 crore. This fall can be predominantly attributed to the cessation of construction activity for prolonged period on account of the pandemic as well as higher stress on the disposable income of people. In the first quarter of FY22, Puranik Builders reported net cash from operations at Rs.57 crore.

6) With the help of the issue, Puranik Builders intends to build on the traction that realty companies are seeing in the last few quarters in terms of a spike in bookings. This has been the case with most of the large realty companies in India, especially in the lucrative Mumbai, Bengaluru and the NCR region.

Some of the major projects underway include Puraniks Tokyo Bay, Puranik Hometown, Puraniks City Reserva, Puranik Rumah Bali, Puranik Capitol, Puranik Elito Grand Central etc.

7) Elara Capital and Yes Securities will be the book running lead managers for Puranik Builders. The company is also seriously considering Rs.150 crore pre-IPO placement of shares with select institutions, HNIs and family offices. In the event of the pre-IPO placement being successful, the size of the IPO would be reduced proportionately.

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