Puranik Builders Limited has Filed DRHP for the IPO with SEBI on 21.09.2022

Puranik Builders Limited has filed DRHP with SEBI to launch its IPO. The IPO consists of both Offer for Sale (OFS) and Fresh Issue. 

The worth of Equity Shares of Fresh Issue is up to 510 crore whereas the size of Offer for Sale is up to 945,000 Equity Shares by existing shareholders. 

Business Model of Company 

The Company is among the prominent residential real estate developers in Mumbai Metropolitan Region and Pune Metropolitan Region based on the number of units currently being marketed in these regions. The Company is also among the leading residential real estate developers in the growing Thane region based on the projects currently being marketed and corresponding units sold. The Company has a longstanding presence of over 31 years in the real estate market in India, developing residential projects in the middle-income affordable housing segment in the MMR and the PMR real estate markets. The projects of the Company primarily cater to certain research-based strategic price ranges within the mid-income affordable housing market segment. As of July 31, 2021, the Company had completed 35 projects in the MMR and PMR.

The Company commenced its operations in Thane in 1990 and has over the years diversified into other micro-markets within the MMR and the PMR. The Company has consistently catered to evolving customer preferences, including theme-based projects, thereby successfully navigating fluctuating market conditions, leveraging the considerable experience operating in MMR and PMR markets under the guidance of technically qualified Promoters supported by a team of experienced professionals.

Who is the Management of the Company?

As on the date of this Draft Red Herring Prospectus, the following is the management of the company:

 (i)  Shailesh Puranik, the Chairman and Managing Director of the Company, holds a bachelor’s degree in architecture from the University of Bombay. He has completed the postgraduate certificate course in management studies from Robert Kennedy College, University of Cumbria. He has been associated with the Company since its incorporation. He has been awarded the ‘Best CEO of the Year’ in 2015 award by Construction Times and 

‘Brand Builder of the Year’ at Lokmat Corporate Excellence Awards by XRBIA-Building 100 Future Ready Cities on November 28, 2015. He has over 31 years of experience in various aspects of real estate business.

(ii) Shrikant Puranik, a Whole Time Director of the Company, has completed a certificate course of training in trade of building construction from Industrial Training Institute, Ambarnath, Thane. He has been associated with the Company since its incorporation. In the past, he has been associated with The Vivekanand Housing Corporation and has over 35 years of experience in various aspects of real estate business.

Why is the company raising funds via IPO?

The Company will not receive any proceeds from the Offer for Sale. Each of the Selling Shareholders will be entitled to the respective portion of the proceeds of the Offer for Sale, after deducting their portion of the Issue related expenses and relevant taxes thereon. 

The net proceeds of the Fresh Issue are proposed to be utilized in the following manner:

1. Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the Company on a consolidated basis.
2. General corporate purposes.

In addition to the aforementioned Objects, the Company intends to receive the benefits of listing its Equity Shares on the Stock Exchanges.

Is there any OFS in the IPO?

The IPO consists of both Offer for Sale (OFS) and Fresh Issue.  The worth of Equity Shares of Fresh Issue is up to 510 crore whereas the size of Offer for Sale is up to 945,000 Equity Shares by existing shareholders. As part of OFS, Ravindra Puranik and Gopal Puranik will affload up to 4,72,500 equity shares each. 

 Financials of the company?  

As per the financial statements, in FY22, the company has reported massive increase in its total revenue. The total revenue of the Company has increased 56% to Rs. 800 crore as against Rs. 513 crore in the previous financial year. The total expenses of the Company have also increased 56% 720 crore as against Rs. 468 crore in the previous financial year. The Profit Before Tax of the Company increased 56% to Rs. 70 crore as against Rs. 45 crore in the previous financial year. The net profit of the Company increased 61% to Rs. 58 crore as against Rs. 36 crore in the previous financial year.

In FY22, the net assets of the Company have increased 8% to Rs. 2263 crore as against Rs. 2093 crore in the previous financial year. The total equity and liabilities of the Company have also increased 8% to Rs. 2263 crore as against Rs. 2093 crore in the previous financial year.

In FY22, net cash generated from operating activities of the Company was Rs. 177 crore as against Rs. 52 crore in the previous financial year. The net cash used in investing activities of the Company was Rs. 12 crore as against Rs. 14 crore cash generated in the previous financial year. The net cash used in financial activities of the Company was Rs. 147 crore as against Rs. 59 crore in the previous financial year. The cash and cash equivalents at the end of the year of the Company was Rs. 38 crore as against Rs. 20 crore in the previous financial year. 

Risk in The IPO

Outstanding Litigation Proceedings

There are certain outstanding litigation proceedings involving the Company, Subsidiaries, Directors and Promoters, any adverse outcome which may have an adverse impact on the reputation, business, financial condition, results of operations and cash flows. Such proceedings could divert management time and attention and consume financial resources in their defense or prosecution. The amounts claimed in these proceedings have been disclosed to the extent ascertainable and quantifiable and include amounts claimed jointly and severally from the Company, the Directors and the Subsidiaries.

Any Negative Cash Flows in the Future 

 Negative cash flows over extended periods, or significant negative cash flows in the short term, could materially impact the ability to operate the business and implement the growth plans. Any negative cash flows in the future would adversely affect the cash flow requirements, which may adversely affect the ability to operate the business and implement the growth plans, thereby affecting the financial condition. 

Company May Not Successfully Identify and Acquire Suitable Parcels of Land for Development

The Company may be unable to successfully identify and acquire suitable parcels of land for development, which may impede the growth and could also adversely affect the business prospects, financial conditions and results of operations. The ability to identify suitable parcels of land for development is a vital element of the Company’s business and involves certain risks, including acquiring appropriate and contiguous parcels of land. The Company has an internal assessment process for identification and acquisition of land which includes a due diligence exercise to assess the title of the land and its suitability for development, development potential and marketability.

The Company Has Significant Unsold Units Among  Ongoing Projects

There is a lag between the time the Company acquires land and the time it constructs and develops a project and sells the inventories. Given that the market for properties is relatively illiquid, there may be little or insufficient demand for properties at the expected sale price. The risk of owning unsold inventories can be substantial and the market value of the same can fluctuate significantly as a result of changing economic and market conditions. If the Company is unable to sell  unsold inventory currently held, the business, results of operation and financial condition may be adversely affected.