SVS Ventures coming with an IPO to raise upto Rs 11.24 crore

SVS Ventures

• SVS Ventures is coming out with an initial public offering (IPO) of 56,22,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 20 per equity share.
  
• The issue will open on December 30, 2022 and will close on January 4, 2023.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 2.00 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is First Overseas Capital.
  
• Compliance Officer for the issue is Sanchita Kailashchandra Ojha.
  

Profile of the company

The company and the Erstwhile Proprietary Firm- Vijay & Co. have been into the business of real estate since 2015 and 2014 years, respectively. The company and the Erstwhile Proprietary Firm are into the business of construction and real estate development, focused primarily on construction and development of residential and commercial projects, in and around Ahmedabad, Gujarat.

With this business takeover, the Company intends to develop versatile projects by focusing on innovative architecture, strong project execution and quality construction. These projects currently cater to and will continue catering to the middle income and high income group. Currently, the company’s business focuses on residential villas and apartment development projects. Its residential villas and apartments portfolio consists of various types of accommodation of varying sizes. Its residential buildings and villas are designed with a variety of amenities such as security systems, sports and recreational facilities, play areas and electricity back-up.

Proceed is being used for:

• Meeting the Working Capital requirements.
  
• General Corporate Expenses.
  

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 a market size of $ 1 trillion by 2030 from $ 120 billion in 2017 and contribute 13% to the country’s GDP by 2025. Increasing share of real estate in the GDP would be supported by increasing industrial activity, improving income level and urbanisation. 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.

Pros and strengths

Development of projects through Joint Development model: The company utilizes an outsourcing model that allows scalability and emphasizes quality construction. Its Management is well assisted by experienced project manager who oversees the functions of contractors. It has developed strong relationships with various contractors who will assist it in timely development of its lands. The joint development model enables it to focus on the core area of operations.

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.

Quality Assurance and Standards: Quality standards followed right from the beginning were stringent, and adhere during the process of construction of projects. The company is very particular from usage of right quality of material for construction. Its dedicated efforts towards the quality of material has helped it gain a competitive advantage over others. Its quality construction has earned it goodwill from its customers.

Risk and concerns:

High working capital requirements: The company’s business requires significant amount of working capital and major portion of its working capital is utilized towards debtors and inventories. The results of operations of its business are dependent on its ability to effectively manage its inventory and trade receivables. To effectively manage its trade receivables, it must be able to accurately evaluate the credit worthiness of its customers and ensure that suitable terms and conditions are given to them in order to ensure its continued relationship with them. However, if its management fails to accurately evaluate the terms and conditions with its customers, it may lead to write-offs bad debts and/ or delay in recoveries which could lead to a liquidity crunch, thereby adversely affecting its business and results of operations. A liquidity crunch may also result in increased working capital borrowings and, consequently, higher finance cost which will adversely impact its profitability.

Depends on various sub-contractors or agencies to construct and develop projects: The company’s construction projects require the expertise of various professional agencies such as construction contractors, architects structural designer contractors, plumbers, etc. In order to ensure completion of its projects it enter or may enter into agreements with the various subcontractors and agencies, which determine their scope of work and other terms and conditions. Thus, it primarily relies on these third parties for the implementation of such work which forms a crucial part or crucial base of its projects. Accordingly, the timing and quality of construction, or part thereof, partly depends on the availability and skill of such sub-contractor and agencies. Although its relationships with third party sub-contractors and agencies would be cordial, it cannot assure that such sub-contractors/ agencies will continue to perform their duties and obligations in a cordial manner or continue to be available at reasonable rates and in the areas in which it conduct or may conduct its operations.

Business subject to various operating risks at construction sites: The company’s business operations are subject to operating risks, such as breakdown or failure of equipment’s used at the project sites, weather conditions, interruption in power supply, shortage of consumables, performance below expected levels of output or efficiency, natural disasters, obsolescence, labour disputes, accidents, its inability to respond to technological advancements and emerging realty industry standards and practices along with the need to comply with the directives of relevant government authorities. The occurrence of these risks, if any, could result in stoppage of work along with penalty in monetary terms. Any stoppage of work may result in a delay in completing its projects leading to failure to deliver the real estate to the customers within the time frame.

Outlook

Incorporated in 2015, SVS Ventures is engaged in the real estate business. The entity undertakes construction and real estate development projects, focused primarily on the construction and development of residential and commercial projects. It primarily operates in and around Ahmedabad, Gujarat. In 2021, the company entered into a business takeover agreement in April with Erstwhile Proprietary Firm Vijay & Co. of Shashikant Vedprakash Sharma. The company's business model is customer-centric, and requires optimum utilization of its existing resources, assuring quality supply and achieving consequent economies of scale. The business operations include the development of real estate projects in the residential segment comprising apartment-type complexes, and villas, largely catering to the middle-income and high-income groups. On the concern side, the company’s business and prospects could be adversely affected by changes in any of these regulations and policies, including the introduction of new laws, policies or regulations or changes in the interpretation or application of existing laws, policies and regulations. Besides, the company does not have any long-term contracts with its contractors & service providers and any change in the selling and/ or buying pattern could adversely affect the business of the Company.

The company is coming out with an IPO of 56,22,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 20 per equity share to mobilize Rs 11.24 crore. On performance front, during the year 2021-22, the total revenue of the firm has decreased to Rs 675.07 lakh as against Rs 1355.00 lakh in year 2020-21 showing a decrease of 50.17%. This is primarily due to Covid-19 impact during Fiscal 2021-22. Moreover, Profit After Tax (PAT) for Financial Year 2021-22 has increased to Rs 183.37 lakh from Rs 26.61 lakh in Financial Year 2020- 21, an increase of around 589% over the previous year. Meanwhile, the company intends to establish strategic alliances and share risks with companies whose resources, skills and strategies are complementary to its business and are likely to enhance its opportunities. It further intends to continue to focus on performance and project execution in order to maximize client satisfaction. It will continue to leverage advanced technologies, designs and project management tools to increase productivity and maximize asset utilization in capital intensive construction activities.