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Review By Dilip Davda on September 17, 2023

•    SGIL is the largest real estate developer in Delhi NCR region in the affordable housing.
•    Though the company posted growth in its working, it still continues to post losses.
•    It has achieved 20% market shares within its region of operation in a short span.
•    Due to negative earnings for the reported periods, the issue is at a negative P/E.
•    With the projects on hand, it is likely to turn the table in the nearer term. 
•    Well-informed/cash surplus/risk seekers may park moderate funds for long-term rewards, others can skip.

ABOUT COMPANY:
Signatureglobal (India) Ltd. (SGIL) claims to be the largest real estate development company in the National Capital Region of Delhi ("Delhi NCR") in the affordable and lower mid segment housing in terms of units supplied (in the below Rs. 8 million price category) between 2020 and the three months ended March 31, 2023, with a market share of 19%. (Source: Anarock Report).

It commenced operations in 2014 through its Subsidiary, Signature Builders Private Limited, with the launch of Solera project on 6.13 acres of land in Gurugram, Haryana. As of March 31, 2023, it had sold 27,965 residential and commercial units, all within the Delhi NCR region, with an aggregate Saleable Area of 18.90 million square feet. SGIL's Sales (net of cancellation) have grown at a compounded annual growth rate ("CAGR") of 42.46%, from Rs. 1690.27 cr. in Fiscal 2021 to Rs. 3430.58 cr. in Fiscal 2023. As of March 31, 2023, the company has sold 25,089 residential units with an average selling price of Rs. 0.36 cr. per unit.

SGIL has strategically focused on the Affordable Housing ("AH") segment (below Rs. 0.40 cr. price category) and the Middle Income Housing ("MH") segment (between Rs. 0.40 cr. to Rs. 0.25 cr.) through GoI and state government policies. The state government of Haryana under its various policies allows development of AH and MH. In addition, going forward it will also develop some of its Forthcoming Projects under the Haryana Group Housing Policy ("HGHP") and New Integrated Licensing Policy ("NILP") combining them with the provisions of Transit Oriented Development Policy ("TODP") and Transfer of Development Rights Policy ("TDRP"), which will enable the company to achieve higher FAR, hence higher developable area as well as higher density to target the MH segment. The TODP aims to encourage development around metro corridors for which extra FAR and higher density has been allowed. (Source: Anarock Report) 

Most of SGIL's Completed Projects, Ongoing Projects and Forthcoming Projects are located in Gurugram and Sohna in Haryana, with 88.49% of Saleable Area located in this region as of March 31, 2023, and almost all of its projects have been, or are being, undertaken under the AHP or the DDJAY - APHP. In terms of sales in Gurugram, the company had a market share of 31% in the affordable and lower mid segment, and a market share of 24% in all budget categories, in the period from 2020 to the three months ended March 31, 2023. (Source: Anarock Report) The AHP permits for greater density, which is the number of persons per acre, that enables it to build smaller unit sizes leading to improved saleability. In addition, lower regulatory costs with waiver of license fee and infrastructural development charges for developers coupled with higher floor area ratio ("FAR") for residential development and commercial development are some of the other benefits available under the AHP. Under the DDJAY - APHP as well, higher density, smaller plot sizes and higher FAR compared to that for a residential plotted colony enable the company to offer units at competitive prices allowing it to expand operations. These benefits have made it viable for the company to offer projects at affordable prices at premium locations while remaining profitable.

The company provides "value homes" with attractive designs and amenities. It proactively seeks to enhance the value of projects by creating a better living environment through the provision of comprehensive community facilities and by engaging renowned architects. Its projects under the AHP, typically priced below Rs. 0.30 cr. per unit, includes amenities such as recreational areas, gardens, open spaces and community halls. Its projects under the DDJAY - APHP, typically priced between Rs. 0.40 cr. and Rs. 1.20 cr. per unit, provide facilities including gymnasiums, recreational spaces, entertainment centres, swimming pools and sporting facilities. All its AHP and DDJAY - APHP projects have a retail component within them which are intended to offer further convenience to residents, and these components have the effect of increasing the value of projects owing to the absence of price ceilings. All its projects are located in the well-developed Delhi NCR region, with connectivity to other parts of Delhi NCR. In addition to the Gurugram area, it has also launched certain projects across key markets in Haryana such as Karnal, under the DDJAY - APHP policy. The company also have one Ongoing Project being developed by its Subsidiary, Sternal Buildcon Private Limited, outside the AHP and DDJAY -APHP policies, namely Infinity Mall, which is located close to its Ongoing Projects under the DDJAY - APHP in Sohna.

As of March 31, 2023, it had completed an aggregate Developable Area of 7.64 million square feet in its Completed Projects and an additional 1.37 million square feet in Ongoing Projects, comprising 11,427 residential units and 932 commercial units, for which it has received occupation certificates. SGIL has sold 25,089 residential units, amounting to 88.81% of the total number of residential units launched in its Completed and Ongoing Projects as of March 31, 2023. As of March 31, 2023, it had 963 employees on its payroll. As of March 31, 2023, its forth coming projects have developable areas of 24506650 square feet which hints at bright prospects ahead.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden combo IPO of fresh equity shares issue worth Rs. 603 cr. (approx. 15662346 shares at the upper cap) and an Offer for Sale (OFS) worth Rs. 127 cr. (approx. 3298704 shares at the upper cap) to garner overall Rs. 730 cr. (approx. 18961050 shares at the upper cap). The company has announced a price band of Rs. 366 - Rs. 385 per share of Re. 1 each. The issue opens for subscription on September 20, 2023, and will close on September 22, 2023. The minimum application to be made is for 38 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 13.50% of the post-IPO paid-up capital of the company. From the net proceeds of the fresh equity issue, the company will utilize Rs. 264.00 cr. for repayment/prepayment of certain borrowings, Rs. 168.00 cr. for repayment/prepayment of borrowings by its four subsidiaries, and the rest for inorganic growth through land acquisitions and general corporate purposes. 

ICICI Securities Ltd., Axis Capital Ltd., Kotak Mahindra Capital Co. Ltd. are the three joint Book Running Lead Managers (BRLMs) and Link Intime India Pvt. Ltd. is the registrar of the issue. 

Having issued initial equity shares at par value, the company issued/converted further equity shares in the price range of Rs.20.00 - Rs. 417.00 per share between March 2000, December 2022. It has also issued bonus shares in the ratio of 5 for 2 in June 2016, and 1 for 1 in March 2022. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs.0.14, Rs. 1.04, Rs. 1.05, Rs. 1.08, Rs. 1.09, Rs. 30.55, and Rs. 417.00 per share. 

Post-IPO, SGIL's current paid-up equity capital of Rs. 12.49 cr. (124848354 shares) will stand enhanced to Rs. 14.05 cr. (140510700 shares). At the upper cap of the IPO price band, the company is looking for a market cap of Rs. 5409.66 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis), posted a total income/net profit - (loss) of Rs. 154.72 cr. / Rs. - (86.28) cr. (FY21), Rs. 939.60 cr. / Rs. - (115.50) cr. (FY22), and Rs. 1585.88 cr. / Rs. - (63.72) cr. (FY23). Though it posted growth in its top line, it continued to post negative bottom lines for the reported periods. 

For the last three fiscals, SGIL has reported an average negative EPS of Rs. - (7.39), and an average RoNW of NA. The issue is priced at a P/BV of 101.05 based on its NAV of Rs. 3.81 per share as of March 31, 2023, and at a P/BV of 8.32 based on its post-IPO NAV of Rs. 46.30 per share (at the upper cap). 

As the company has posted losses for the last three fiscals reported in the offer document, its asking price is at a negative P/E. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, SGIL has shown DLF Ltd., Godrej Properties, Macrotech Developers, Prestige Estates, and Sobha Ltd. as their listed peers. They are trading at a P/E of 58.76, 72.55, 253.52, 92.74, and 62.31 (as of September 15, 2023). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
The three BRLMs associated with the offer have handled 90 public issues in the past three years, out of which 30 issues closed below the issue price on listing date.  

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