Homesfy Realty coming with an IPO to raise Rs 15.86 crore

Homesfy Realty

• Homesfy Realty is coming out with an initial public offering (IPO) of 8,05,200 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 197 per equity share.
  
• The issue will open for subscription on December 21, 2022 and will close on December 23, 2022.
  
• The shares will be listed on NSE Emerge Platform.
  
• The share is priced 19.70 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Sarthi Capital Advisors.
  
• Compliance Officer for the issue is Tarun Gupta.
  

Profile of the company

Homesfy Realty was incorporated on May 06 2011, headquartered in Thane, Maharashtra. It is engaged in providing real estate broking services to Real Estate Developers, retail buyers/sellers and investors for residential and commercial space. It deals in new constructed properties, whereby it assists the Real Estate Developers in selling and potential customers in purchasing the properties. It operates its business through direct selling from its in-house sales team and Direct Selling Agent listed on mymagnet platform for referral services. Homesfy was founded with the that it can create best experience in the housing transactions and services by focusing on productivity, transparency and quality of service providers. It is driven by 4 pillars i.e. people, process, technology and platform.

The company runs its brokerage business in name of Homesfy and is well partnered by mymagnet platform. It has grown with proven track record and hence has enabled it to build customer service standards that drive the rapid and sustainable growth of mymagnet platform. It has more than 9 years of experience of enabling housing transactions through Homesfy. Such elaborate industry experience has provided it with distinct insights into market strategies, business conditions, developer’s need and customer expectations, which is critical for it to offer effective and practical solutions to rapidly growing property transaction market of India. Currently it generates 80.00% of its revenue via direct selling and remaining 20% via mymagnet platform. It has established and currently maintain a network of 7 offices located in 4 cities, Mumbai, Pune, Noida and Bangalore, which primarily engage in sales, marketing and payment collection activities for its business.

Proceed is being used for:

• Working Capital requirements of the company.
  
• Meeting Issue Expenses.
  
• General Corporate Purpose.
  

Industry overview

The 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 accommodation. 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 favored property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun. 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. India’s real estate sector saw over 1,700 acres of land deals in the top 7 cities in 1 year. Foreign investments in the commercial real estate sector were at $ 10.3 billion from 2017-21. As of February 2022, Developers expect demand for office spaces in SEZs to shoot up after the replacement of the existing SEZs act.

The real estate agency and brokerage services market consists of sales of real estate and brokerage services by entities (organizations, sole traders and partnerships) that act as agents and/or brokers for real estate activities. The main types of real estate agency and brokerage are residential buildings and dwellings brokers, nonresidential buildings brokers, mini warehouses and self-storage unit’s brokers and other brokers. A real estate broker is a licensed real estate dealer who has completed further schooling and obtained a local real estate broker license. The different modes include online, offline and involves various property types such as fully furnished, semi-furnished, and unfurnished. The global real estate agency and brokerage market size is expected to grow from $1,221.82 billion in 2021 to $1,344.45 billion in 2022 at a compound annual growth rate (CAGR) of 10.0%. The growth in the real estate agency and brokerage market is mainly due to the companies rearranging their operations and recovering from the COVID-19 impact, which had earlier led to restrictive containment measures involving social distancing, remote working, and the closure of commercial activities that resulted in operational challenges. The real estate agency and brokerage market is expected to reach $1,912.99 billion in 2026 at a CAGR of 9.2%.

Pros and strengths

Efficient Transaction Process: The company has defined effective and standardized transaction process through proprietary CRM system that enables agents to enhance efficiency and service quality through productivity tools and commission distribution. It has effectively created a system that is comparable to best CRM systems in business and continuously adopting to changing sector conditions with technology to target the unique market dynamics in India. Gaining from its industry experience, it has been constantly implementing new initiatives and protocols to standardize the transaction process.

Service Quality: Low productivity and low-quality training of agents in the residential real estate industry make it challenging to retain agents with experience and create healthy growth trajectory for them. It is committed to create value through empowering its agents to be more productive, so they are better rewarded in terms of career development, resulting in higher level of self-esteem at work and best in class service quality. Building from its decent understanding of residential real estate market of metro cities like Mumbai, Bengaluru, Pune and NCR accumulated throughout its 12-year of building well run property transaction business, it offer its systems and various other tools for Team managers and agents to seamlessly follow its effective sales process and support their entire workflows.

Established wide network of offices to support and augment sales and client management: The company currently maintains a network of 7 offices in 4 cities of India, where its staff endeavours to acquire new users, assists existing users on various services provided by it and undertakes collection of payment from Corporate Customers and other users for products and services offered by it. This network of offices and technology also enables it to provide its services to such of its real estate customers who either are not accustomed to or do not have the means of completing transactions on the internet without assistance from its employees.

Risks and concerns

Rely on Real Estate Developers and Real Estate Brokers: The company relies upon Real Estate Developers and Real Estate Brokers to provide broking services to customers. It doesn’t have any formal agreement with the Real Estate Developers whose properties it deal in as a broker for customers. The Top 10 Real Estate Developers in whose properties it deal in, contributes 45.07%, 62.83% and 72.35% for last 3 Financial Years i.e. March 2022, 2021 and 2020 respectively. The Top 5 Real Estate Developers in whose properties it deal in, contributes 31.62%, 49.57% and 48.84% for last 3 Financial Years i.e. March 2022, 2021 and 2020 respectively. If any developer no longer wishes to work with the Company, it might face heavy losses and its reputation and brand could be damaged. Further, there are many real estate brokers registered on its mymagnet portal through which it achieves part of its revenue. If there is any misconduct on the part of such brokers, like misleading information or false representation to customers, its reputation and brand could be damaged.

Demand for real estate assets subject to seasonal fluctuations in property values: Historically, the Indian real estate market has been subject to fluctuations, a phenomenon that can affect the optimal timing for the purchase of land, the sale of residential units and/or ability to attract investment in the various businesses proposed to be carried out by the developers. It cannot assure that real estate market volatility will not continue to affect the Indian real estate market, and its various operations amongst others, including the development and sale of real estate assets, in the future. As a result, it may experience fluctuations in property values over time which in turn may materially and adversely affect its business, financial condition and results of operations. There could be cycles of poor real estate absorption tractions in the lifecycle of the real estate development. Any such adverse market trends may adversely affect its business, results of operation and financial condition.

High working capital requirements: The company’s business requires a significant amount of working capital for smooth functioning. It meets its requirement for working capital majorly through banking facilities or fresh infusion of funds by way of issue of shares or internal accruals. In future, its inability, if any to meet its working capital requirements through banking arrangements or otherwise can adversely impact its business operations and financial position.

Outlook

Incorporated in 2011, Homesfy Realty is Proptech engaged in providing real estate broking services to Real Estate Developers, retail buyers/sellers and investors for residential properties. The company runs its brokerage business in the name of Homesfy and is well-partnered with the mymagnet.io co-broking platform. Homesfy Realty has established and currently maintains a network of 7 offices located in 4 cities, Mumbai, Pune, Noida and Bangalore, which primarily engage in sales, marketing and payment collection activities for the business. Homesfy brokerage business is a combination of both offline and online presence and provides real estate broking-related services through the website, prospect calling, and digital advertisement platform. The company operating model is backed by strong expertise in Digital Marketing and Operational efficiency backed by process-driven expertise, technology and automation. On the concern side, there are other key competitors for its business like Anarock, Square Yards and some other internet-based service providers. Further, it does not have any exclusive arrangement with its Customers. Thus, its customers have the option of choosing any competitor providing similar services.

The company is coming out with an IPO of 8,05,200 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 197 per equity share to mobilize Rs 15.86 crore. On performance front, total revenue increased by 105.97% from Rs 1,475.92 lakh in the fiscal year ended March 31, 2021 to Rs 3,039.93 lakh in the fiscal year ended March 31, 2022. Moreover, net Profit has increased by 59.89% from Rs 199.14 lakh in the fiscal year ended March 31, 2021 to Rs 318.41 lakh in the fiscal year ended March 31, 2022. Meanwhile, the company intends to focus on growing its business based on a model most suitable for its business. It intends to evaluate acquisition opportunities as well as organic growth.