B-Right Realestate coming with an IPO to raise upto Rs 44.36 crore

B-Right Realestate

• B-Right Realestate is coming out with an initial public offering (IPO) of 2899200 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 153 per equity share.
  
• The issue will open on June 30, 2022 and will close on July 05, 2022.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 15.30 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Gretex Corporate Services.
  
• Compliance Officer for the issue is Zoya Jahur Shaikh. 
  

Profile of the company

The company is an integrated construction and real estate development company, focused primarily on construction and development of residential and commercial projects, in and around Mumbai. It has established a successful track record in the real estate industry in Mumbai, by developing versatile projects through its focus on innovative architecture, strong project execution and quality construction.

The company has opted a business model whereby it Invests in its subsidiary LLP named B-Right RealEstate Ventures LLP and this LLP makes investment in various SPV (Special Purpose Vehicle) which is been incorporated for a Particular project. Each Real estate project has its own SPV and such SPV is closed upon completion of the project. This helps the company to keep a track of all the materials, human resource and all other miscellaneous expenses that occur from a particular project. Till today such a business model has been proven to be successful but it does not assure that the same would continue in future. The company also operates on Development Management contracts where by the company extends financials assistance for a particular RealEstate projects.

The company’s customer-centric business model focuses on designing and developing its “branded products” to address consumer needs across locations and price points. It has in-house capabilities to deliver a project from conceptualization to completion with fast turnaround time from acquisition to launch to completion, which focuses on de-risking and improving its return on investment. Its core competence lies in professionally managing the real estate value chain and attracting and retaining talent to maximize value creation. It streamlines its supply chain and construction processes with an aim to develop high quality products consistently and in a timely and cost-efficient manner. Its design team uses customer insights to conceptualize and design products that are best suited for the respective locations and target a variety of customer groups. Its construction management and procurement teams focus on realizing efficiencies in procurement, vendor selection and construction. 

Proceed is being used for:

• Working capital requirement.
  
• General corporate purposes.
  

Industry overview

Real estate sector is one of the most globally recognized sectors. It comprises of four sub sectors - housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodations. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. In India, the real estate sector is the second-highest employment generator, after the agriculture sector. It is also expected that this sector will incur more non-resident Indian (NRI) investment, both in the short term and the long term. Bengaluru is expected to be the most favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun. By 2040, real estate market will grow to Rs 65,000 crore ($ 9.30 billion) from Rs 12,000 crore ($ 1.72 billion) in 2019.

Real estate sector in India is expected to reach $ 1 trillion in market size by 2030, up from $ 200 billion in 2021 and contribute 13% to the country’s GDP by 2025. Retail, hospitality, and commercial real estate are also growing significantly, providing the much-needed infrastructure for India's growing needs. Indian real estate sector has witnessed high growth in the recent times with rise in demand for office as well as residential spaces. According to the data released by Department for Promotion of Industry and Internal Trade Policy (DPIIT), construction is the third-largest sector in terms of FDI inflow. Construction is the third-largest sector in terms of FDI inflow. FDI in the sector (including construction development & activities) stood at $ 52.48 billion between April 2000 to December 2021. Government of India along with the governments of respective States has taken several initiatives to encourage development in the sector. The Smart City Project, with a plan to build 100 smart cities, is a prime opportunity for real estate companies.

Pros and strengths

Established brand and reputation: The company’s established brand and reputation has enabled and will enable it to obtain future business opportunities. It has gained significant experience and has established track record and reputation for efficient project management, execution and timely completion of projects in the real estate sector. Its expertise in successful and timely implementation of projects provides it with significant competitive advantages. The Promoter Group has a strong presence in the real estate market which provides it with significant competitive advantages.

Operation methodology: The company focus on the overall management of its projects, including land acquisition, project conceptualization and marketing. It works with service providers which enable it to access third party design, project management and construction expertise. It also associates with other third-party architects, project management consultants, contractors and international property consultants.

Scalable Business Model: The company’s business model is scalable. Its Business model is customer centric, and requires optimum utilization of its existing resources, assuring quality supply and achieving consequent economies of scale. The business scale generation is basically due to development of new markets both domestic and international by exploring customer needs and by maintaining the consistent quality output.

Risks and concerns

Geographical constraints:  The company’s entire revenues have been derived from real estate development in the city of Mumbai. Also, its future planned projects are situated in Mumbai, and thus any of its future revenues are also based on the development and market in this geographical location. Such geographical concentration of its real estate business in Mumbai, heightens its exposure to adverse developments related to competition, as well as changes in the supply and demand for properties comparable to those it develop, changes in the applicable governmental regulations, economic conditions, demographic trends, employment and income levels and interest rates in these regions which may affect its business prospects, financial conditions and results of operations. Further, its operations could also be affected by lack of skilled, semi-skilled and unskilled labour or increased cost thereof. 

Rely on independent third-party service providers: The company utilize various independent service providers and contractors to execute its projects. Also, many of its regulatory requirements and approvals are outsourced to third party consultancy firms who liaison with various government authorities on its behalf. Further, it constantly requires labour for its construction work and the same are procured on contractual basis including contacting for electrical, plumbing and other such tasks. If a service provider or contractor fails to perform its obligations satisfactorily or within the prescribed time periods with regard to a project, or terminates its arrangement with it, it may be unable to develop the project with its intended quality, within the intended timeframe and at the pre-estimated cost.

Stiff competition: The market in which the company is doing business is highly competitive on account of organized players. Players in this industry generally compete with each other on key attributes such as technical competence, experience, pricing and timely delivery. Some of its competitors may have longer industry experience and greater financial, technical and other resources, which may enable them to react faster in changing market scenario and remain competitive. Moreover, the unorganized sector offers their products at highly competitive prices which may not be matched by it and consequently affect its volume of sales and growth prospects. Growing competition may result in a decline in its market share and may affect its margins which may adversely affect its business operations and financial condition.

Outlook

B-Right Realestate is engaged in the business of real estate development. It has real estate development project in and around Mumbai City in Maharashtra. Currently, its business focuses on residential apartments and commercial developments. Its residential apartment portfolio consists of various types of accommodation of varying sizes. Its residential projects are primarily designed for middle income and high-income group. Its residential buildings are designed with a variety of amenities such as security systems, sports and recreational facilities, play areas and electricity back-up. Its operations span all aspects of real estate development, from the identification and acquisition of land, the planning, execution and marketing of its projects, through to the maintenance and management of its completed developments.  The customers of the company have been highly appreciative of the developmental activities carried out by the company and its promoter group entities, particularly with regards to the speed of execution, flexibility and property management services. On the concern side, the company cannot assure you that it will always finish the construction or development of its projects in accordance with the requisite specifications or that the construction of its projects will be free from any and all defects. If the work is unsatisfactory, the work has to be redone as per the designs and / or as per the instructions of project incharge which will entail additional costs. Besides, as the company is engaged into construction of residential and commercial projects, its business would adversely be affected by variation in availability, cost and quality of raw materials and labour.  

The company is coming out with a maiden IPO of 2899200 equity shares of Rs 10 each at a fixed price of Rs 153 per share to mobilize around Rs 44.36 crore. On performance front, the company’s total revenue decreased by Rs 28.27 lakh or 19.23% to Rs 118.77 lakh for the financial year 2020-21 from Rs 147.04 lakh for the financial year 2019-20. The company’s profit after tax decreased by 31.35% to Rs 58.37 lakh for the financial year 2020-21 from Rs 85.03 lakh for the financial year 2019-20, reflecting a net decrease of Rs 26.66 lakh. Meanwhile, the company intends to further improve operational efficiencies by designing its projects in a cost-efficient manner (Design Smart) to ensure faster execution. It also intends to bring in efficiencies in construction by simplifying construction structures such as minimizing high-rise buildings and basements, and maintaining standardized floor layouts within the same building. It also intends to further improve its operational efficiencies by designing projects in a cost-efficient manner to ensure faster execution.