Signatureglobal (India) Limited IPO is open for subscription: All you need to know

Last week, four IPOs opened for subscription. This week is no different - we have three confirmed IPOs. The first IPO that opens for subscription is Signatureglobal (India). In this article, we will discuss Signatureglobal Limited (SGIL) in detail, which opens for subscription on 20th September and closes on 22nd September. The various aspects related to the company will help you decide whether to subscribe or invest in the IPO for the long term.

Signatureglobal India Limited IPO: Key Details

Below are the key details related to the SGIL IPO:

• Issue Size: Rs 930 crore
• Price Band: Rs 366 - Rs 385
• Issue Details: Rs 603 crore Fresh Issue + Offer for Sale of Rs 127 crore
• Market Cap: At the upper price band, Rs 5,409.66 crore
• Minimum Investment: Rs 14,630

Signatureglobal India Limited IPO: About the business

They are the largest real estate development company in the National Capital Region of Delhi (Delhi NCR), which started operations in 2014. SGIL is the largest company in the affordable and lower mid-segment housing in terms of units supplied (in the below Rs 80 lakh price category) between 2020 and the three months ended 2023, with a market share of 19%. (Anarock Report).

As of 31 March 2023, the company has sold 27,965 residential and commercial units, all within the Delhi NCR region, with an aggregate Saleable Area of 18.90 million square feet. Their sales (net of cancellation) have grown at a CAGR of 42.46% between FY21 and FY23. The company has strategically focused on the Affordable Housing (AH) segment (below Rs 40 lakh price category) and the Middle Income Housing (MH) segment (between Rs 25 lakh to Rs 40 lakh private category) through GoI and state government policies. The state government of Haryana, under its various policies, allows the development of AH and MH.

They provide 'value homes' with attractive designs and amenities. The company proactively seeks to enhance the value of its projects by creating a better living environment through the provision of comprehensive community facilities and by engaging renowned architects.

Signatureglobal India Limited IPO: Industry Overview

Real Estate is one industry that impacts the life of most investors, directly or indirectly. Let us look at the real industry in India. 

The good news about the Indian real estate industry is that the Central and State Governments along with RBI have been instrumental in improving transparency and accountability in the real estate sector through policies and interventions. 

Affordable housing today is an integral part of the national agenda with significant significance in urban areas. There have been introductions and revisions in policies and measures at the national and state levels, oriented to encourage and regularize development in this sector.

NCR is a large territory that encapsulates Delhi NCR along with certain districts of Rajasthan, Haryana, and Uttar Pradesh. While many locations in the NCR can be identified as affordable housing destinations, the Gurugram- Sohna region collectively accounted for 98% for 2022 and 84% for the first quarter of 2023 of the affordable units supplied in NCR.

Given the trends from previous years, they foresee that the affordable housing segment will have continued traction in the market concerning supply due to sustainable demand. Over the past years, from 2017 to the first quarter of 2023, the average share of affordable housing (Gurugram and Sohna) in the total supply of residential units is close to 36%.

Signatureglobal India Limited IPO: Listed Peers

SGIL has many listed peers in India. The names include companies like DLF, Godrej Properties, Macrotech Developers, Prestige Estates Projects, and Sobha Limited. Let us look at the peers and compare them with the SGIL financials to understand which company has the edge on the critical financial parameters:

• In terms of revenue for FY23, DLF is a clear winner, followed by Sobha, which has a little more than half of DLF's revenue, and SGIL, which has one-fourth revenue of DLF.
• The average Earning Per Share (EPS) of all listed peers is around 62. However, the EPS of SGIL is negative since the company has not generated any profits in FY23.
• Return on Net Worth (RoNW) is highest for Prestige Estates, followed by Godrej Properties. RoNW of SGIL is negative for the above same reason.

Signatureglobal India Limited IPO: Financials

Let us now look at the most essential part that one needs to consider while evaluating a new company - the company's financials. Below are the financial numbers of SGIL over the last three financial years:

• The company has reported a revenue of Rs 82.05 crore, Rs 901.30 crore, and Rs 1,553.57 crore for FY21, FY22, and FY23, respectively. Revenue has grown exponentially from FY21 to FY23 because of a low base in FY21 due to Covid. 
• SGIL has launched 5,062 units, 5,894 units, and 5,526 units in FY21, FY22, and FY23, respectively, which amounted to 3.34 million square feet, 4.21 million square feet, and 6.21 million square feet of Saleable Area for the corresponding periods. Signatureglobal India has sold 6069, 7001, and 4512 units in FY21, FY22, and FY23, respectively. 
• SGIL has reported an EBITDA of Rs (58.28) crore, Rs 27.38 crore, and Rs 215.56 crore for FY21, FY22, and FY23, respectively. In the same period, the EBITDA margins were (71.03)%, 3.04%, and 13.88%, respectively. The EBITDA margins have increased at a good rate in this period. 
• The company is not profitable and they have not reported in any of the last three financial years. For FY21, FY22, and FY23, the loss reported by the company was Rs (86.27) crore, Rs (115.5) crore, and (63.72) respectively. 
• For the last three fiscals, SGIL has reported an average negative EPS of Rs (7.39), and an average RoNW is not possible to calculate. 
• As the company has posted losses for the last three financial years, its asking price is at a negative P/E, which is irrelevant.
• The debt-to-equity ratio for FY21 and FY22 were 1.17 and 1.23, respectively.

What are the competitive strengths of SGIL Limited?

As per the company, their competitive strength is as below:

• SGIL is the largest affordable and lower-mid and mid-segment real estate developer in Delhi NCR.
• Signatureglobal India Limited is a well-established brand, with a strong distribution network and digital marketing capabilities translating into faster sales.
• The company has replicated its business model across micro-markets in Delhi NCR and particularly in Gurugram, Haryana, and has continuously expanded its business to capitalize on its strong brand name. They have been able to scale up at a rapid pace owing to their standardized design, technical specifications, and layout plans, which they also anticipate will allow them to expand their operations speedily in the future.
• They can provide aspirational lifestyle and amenities at affordable pricing and strategic locations.

Risks associated with Signatureglobal India Limited

Below are the risks associated with SGIL:

• The company has incurred net loss and negative Net Worth in the past, and it may not be able to achieve or maintain profitability in the future.
• Their business and profitability are significantly dependent on the performance of the real estate market in the Delhi-NCR region, generally, and particularly in Gurugram and Sohna micro-markets in Haryana.
• The withdrawal of certain benefits under the Haryana Affordable Housing Policy, 2013, and the Deen Dayal Jan Awas Yojna, may adversely affect their business.
• SGIL depends significantly on its residential development business, particularly in the affordable housing category, the success of which is dependent on its ability to anticipate and respond to consumer requirements.