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17 October 2023

Signatureglobal India IPO: Building Affordable Dreams

Introduction:

Signatureglobal (India) Limited, a prominent player in the real estate development sector, recently made its debut on the stock market through an IPO. This book-built issue was valued at Rs 730.00 crores and consisted of a fresh issue of 1.57 crore shares, amounting to Rs 603.00 crores, and an offer for sale of 0.33 crore shares, totaling Rs 127.00 crores. The IPO bidding window opened on September 20, 2023, and closed on September 22, 2023. Allotment for the Signatureglobal India IPO was completed on September 27, 2023, and the shares began trading on both the BSE and NSE on the same day. The IPO was priced in the range of ₹366 to ₹385 per share, with a minimum lot size of 38 shares and a minimum investment of ₹14,630 for retail investors.

Key Market Players:

The Signatureglobal India IPO was managed by book running lead managers ICICI Securities Limited, Axis Capital Limited, and Kotak Mahindra Capital Company Limited. Link Intime India Private Ltd served as the registrar.

Stock Performance:

As of October 6, 2023, Signatureglobal (India) Limited's stock was trading at ₹483.70, reflecting a 2.32% increase. The stock had opened at ₹474.75, reached a high of ₹503.45, and had a low of ₹471.05. The previous closing price stood at ₹472.75, with a total traded value of 20,03,596 shares. Notably, the stock hit a 52-week high of ₹503.00 on October 6, 2023, and a 52-week low of ₹444.10 on September 27, 2023.

Ownership Structure:

Before the IPO, the company had a pre-issue shareholding of 78.36%, which reduced to 69.63% post-issue.

Financial Insights:

Signatureglobal (India) Limited demonstrated substantial growth in its financial performance. As of March 31, 2023, the company's assets amounted to ₹5,999.13 crores. The company reported impressive revenue of ₹1,585.88 crores, showcasing significant growth. While it had faced losses in previous years, there was a marked improvement in the financial year ending March 31, 2023, with a reduced loss of ₹63.72 crores. The company's net worth increased to ₹47.54 crores, with reserves and surplus at ₹34.08 crores. Total borrowings amounted to ₹1,709.75 crores.

Market Indicators:

Key performance indicators included a Market Capitalization of ₹5,409.66 crores, a Return on Equity (ROE) of -134.0%, a Return on Capital Employed (ROCE) of 1%, and a Debt/Equity ratio of 34.1.

Objectives of the Issue:

The net proceeds from the Signatureglobal India IPO were intended for various purposes, including:

1. Repayment or pre-payment of certain borrowings availed by the Company.
2. Infusion of funds in certain Subsidiaries, namely Signatureglobal Homes, Signature Infrabuild, Signatureglobal Developers, and Sternal Buildcon for re-payment or pre-payment of certain borrowings availed by the Subsidiaries.
3. Inorganic growth through land acquisitions.
4. General corporate purposes.

Expert Opinion:

Highlighted that although the company holds a lion's share in the affordable housing market in the Delhi NCR region, its historical loss-making journey makes the IPO appear exorbitantly priced with a negative P/E ratio. The company has substantial ongoing projects, and with the realization of sales, it is likely to improve its financials in the near term. However, based on its performance so far, it's considered a "High Risk/Low Return" investment. Therefore, only well-informed, cash-surplus, risk-seeking investors may consider allocating moderate funds for potential long-term rewards.

Subscription Status:

The Signatureglobal India IPO garnered significant interest from investors, with an overall subscription rate of 12.50 times as of September 22, 2023. Retail investors showed enthusiasm with a subscription rate of 7.17 times, while the QIB category displayed high interest with a subscription rate of 13.37 times. The NII category also saw substantial interest, with a subscription rate of 14.24 times.

Conclusion:

Signatureglobal (India) Limited's IPO opens doors for investors to participate in the affordable housing sector in the Delhi NCR region. Prospective investors should thoroughly assess the company's project pipeline, sales potential, competitive positioning, and financial stability before making investment decisions. As with any investment, diversification and careful risk management are essential, particularly in the real estate industry, known for its cyclical nature and market dependencies.

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