Veer Global Infraconstruction
Veer Global Infraconstruction is coming out with an initial public offering (IPO) of 17,56,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 28 per equity share.
The issue will open on September 30, 2020 and will close on October 09, 2020.
The shares will be listed on SME Platform of BSE.
The share is priced 2.80 times higher to its face value of Rs 10.
Book running lead manager to the issue is Capital Square Advisors.
Compliance Officer for the issue is Deepali Chundawat.
Profile of the company
The Company was founded in 2012 by its promoters; its promoters have been associated with the real estate business for over 15 years and have been instrumental in the growth of the company. The company is experienced invarious aspects of the real estate development business, including identification and selection of location,development, design, project management and sales and marketing. The company focuses on residential projects, which include residential building in townships, redevelopments, etc. mainly in affordable segments. Till date the company has completed 5 residential projects. It currently has seven ongoing projects.
The company is a real estate developer, primarily focusing on development of residential projects in Vasai- Virar and Palghar district. The company has over 9 years of experience in, developing residential projects in the low-income affordable housing segment. Its projects primarily cater to affordable housing where it tries to bring reality to the dreams of people for owning their own place to live, the company achieves this by creative pricing and flexible payment terms ranges within the low-income affordable housing market segment.
The company has established reasonable brand image and have a proven track record of execution of real estate projects. It focuses on designing and developing its products to address consumer needs at convenient locations and at affordable price points. It has tethered the fluctuations of the market through the guidance of its promoters. It streamlines its project management and construction processes with an aim to develop affordable housing products consistently and in a timely and cost-efficient manner.
Proceed is being used for:
Meeting working capital requirement.
General corporate purposes.
Meeting the issue expenses.
Industry overview
The real estate sector is one of the most globally recognized sectors. Real estate sector comprises four subsectors; housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth of 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. It is also expected that this sector will incur more non-resident Indian (NRI) investments in both 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.
The real estate industry is being clobbered by the coronavirus (Covid19), and it is going to get worse before it gets better. The effects on real estate will vary by sector and market, and the extent of the effects will depend upon the duration of the economic shutdown. Supplies that the builders and developers need are being interrupted more and more as workers stay home, and due to business shutdowns, quarantines and curfews. Huge numbers of layoffs will lead to further contraction in consumer spending, starting a downward spiral of economic activity. Together, these forces are already pushing the economy into recession. The industry is facing an acute working capital crisis which is essential to restart the business and keep it moving. The ongoing Covid19 outbreak and its impact on economy have pushed sentiment in real estate to its all-time lowest level in the quarter ended March 2019. In coming time, both residential and commercial real estate sectors are expected to be hit in term of launches, sales and prices. The next six months will be one of the worst phases in terms of new supply additions across the major office markets in the country.
Indian real estate industry is likely to struggle in coming time due to Covid-19 outbreak. The impact of Covid-19 is far reaching for most global markets which is reflected in the outlook for the prime residential segments. Covid-19 may change the trend of home buying. It might bring about a change in priorities related to buying a second home, financing of a home, the rental market, and so on. However, there are expectations that property will retain its appeal as a long-term investment and store of capital. The stimulus packages provided by the government for the sector will provide support to sector. The government’s credit-linked subsidy scheme (CLSS) offers subsidised interest on home loans for affordable and middle-income housing. The extension of subsidised interest rates should offer comfort to those homebuyers who are on the fence about home purchasing. In addition, the RBI has cut the repo rate to 4.0% to mitigate economic risks, with certain banks such as State Bank of India offering lower home loan rates to consumers. Extending the commencement of commercial operations (DCCO), to which the repayment schedule of an entity is linked, should provide a lifeline for developers in terms of financial stress and help them manage cash flows better. With rapid urbanization, the demand and requirements of a home is continuously increasing. In order to tap the changing needs of home buyers, developers and real-estate players are coming up with new and innovative projects in the country.
Pros and strengths
Focus on and experience in the low-income affordable housing segment: The company’s focus on and extensive experience in the low-income affordable housing segment, within the Palghar District presents significant opportunities. As its projects address a customer segment with relative budget constraints, the company has typically focused on developing compact sized units in theme-based projects with additional amenities. In addition, with effect from April 1, 2019, the rate of GST as applicable to affordable residential apartments have been reduced from 8% to 1% (excluding input tax credit), subject to meeting certain criteria including with respect to carpet area and sales value. As of March 31, 2020, most of its ongoing projects are eligible for concessional rate of GST applicable for affordable housing projects. This will drive sales in the affordable housing segment.
Location advantage: Most of the company’s projects are located in the District of Palghar. While selecting locality for purchasing the home, people check the availability of public transport systems. Proximity to the railway station is very important decision-making factor. Most of its projects are in close vicinity of the railway station in Umroli, Boisor and Nala Sopara. It gives the company a huge locational advantage as compared to other projects in the area, which are far from the public transport.
Promoters’ experience: The company’s Promoters have significant experience in the Real estate sector and auxiliary services to the real estate industries, which enables it to effectively manage the projects and helps it in identifying suitable projects for developments. Mr Vijay Vagjibhai Bhanshali, its Managing Director, has over 15 years of experience in various aspects of real estate business. Other members of the Board, Mr. Vinod Jain, and Mr. Abhishek Jain also have experience in the business.
Risks and concerns
Geographical constrain: The company’s real estate development activities are primarily focused in and around Vasai- Virar and Palghar which may perform differently from, and may be subject to market conditions and regulatory developments that are different from, real estate markets in other parts of India or the world. The real estate market in the Vasai- Virar and Palghar may be affected by various factors outside its control, including prevailing local and economic conditions, 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, among other factors. These factors may contribute to fluctuations in real estate prices, rate of sales and the availability of land in the Vasai-Virar and Palghar and could also adversely affect the demand for and valuation of its ongoing and planned projects. Consequently, the company’s business, results of operations, cash flows and financial condition have been and will continue to be heavily dependent on the performance of, and the prevailing conditions affecting, the real estate market in the Vasai- Virar and Palghar.
Limited supply of land: Due to increased demand for land for development of residential properties as well as properties available for redevelopment, the company is experiencing increasing competition in acquiring land as well as redevelopment projects in various geographies where it operates or propose to operate. In addition, the unavailability or shortage of suitable parcels of land for development leads to an escalation in land prices. Any such escalation in the price of developable land could materially and adversely affect its business, prospects, financial condition and results of operations. Additionally, the availability of land, its use and development, is subject to regulations by various governmental authorities. The company’s business growth is dependent on its ability to replenish its land reserves and therefore inability to replenish its land reserves by acquiring suitable lands or entering into arrangement for development of suitable land at locations which have potential for growth may adversely affect its business, prospects, financial condition and results of operations.
Various operating risks: The company’s business operations are subject to operating risks, such as breakdown or failure of equipments 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 significantly affect its operating results, and the slowdown / shutdown of business operations may have a material adverse effect on its business operations and financial conditions.
Outlook
Incorporated in 2012, Veer Global Infraconstruction is a real-estate developer company that primarily engaged in developing residential projects in the affordable housing segment. One of the reasons for the company’s success in recent years has been its ability to identify suitable and upcoming location for people across low-income groups. The company’s understanding of the relevant micro real estate market, perception of its customers, innovative design and personalised marketing strategy enable it to attract customers. On the concern side, the company's activities are labour intensive and depend on availability of skilled and unskilled labourers in large numbers. In case of unavailability of such labourers and / or inability to retain such personnel or occurrence of any work stoppages, its business operations could be affected.
The company is coming out with an IPO of 17,56,000 equity shares of Rs 10 each at a fixed price of Rs 28 per equity share to mobilize Rs 4.92 crore. On the performance front, the company’s profit stood at Rs 17.58 lakh in FY20 as against the profit of Rs 12.86 lakh for the FY19. The company’s total income for fiscal 2020 was Rs 862.58 lakh, a decrease in 15.09% over the total income of Rs 1,007.50 lakh in fiscal 2019. The EBITDA and PAT margin of the company in Fiscal 2020 was 3.52% and 2.04% as compared to 2.19% and 1.28% in fiscal 2019. The company has over the years conceptualized, developed and executed specialized projects for lower income group. The company develops and operates its projects, which are designed and developed specifically for and cater to the housing requirements of lower income families in NalaSopara, Umroli (Palghar) and Boisar. The increasing supply-demand mismatch in the affordable housing segment provides significant potential in other geographies as well. However, in near future, the company is likely to keep its focus in the adjoining areas of Mumbai and Palghar.
