Samor Reality
Samor Reality is coming out with an initial public offering (IPO) of 1300000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 62 per equity share.
The issue will open for subscription on September 30, 2021 and will close on October 5, 2021.
The shares will be listed on SME Platform of BSE.
The share is priced 6.20 times higher to its face value of Rs 10.
Book running lead manager to the issue is Beeline Broking.
Compliance Officer for the issue is Pooja Aidasani.
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 Ahmedabad, Gujarat. It has established a successful track record in the real estate industry in Ahmedabad, Gujarat by developing versatile projects through its focus on innovative architecture, strong project execution and quality construction.
Incorporated in the year 2014 as a partnership firm, the company belongs to Ahmedabad based Samor Group. In this dynamic and extremely competitive business environment, it has developed projects catering to the middle income and high income group. Currently, its business focuses on residential apartments developments. Its residential apartment portfolio consists of various types of accommodation of varying sizes. Its residential buildings are designed with a variety of amenities such as security systems, sports and recreational facilities, play areas and electricity back-up.
The company has demonstrated a prominent presence in execution of real estate projects and has developed significant expertise and competencies in this field. The company aim to leverage on its strength and continue expansion into sector which will put the company to desired growth trajectory. Since the year 2014 the company has demonstrated strong vision and its ability to capitalize and identify real estate opportunity. Further the company is currently focusing on opportunities to build a brand in real estate sector. 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.
Proceed is being used for:
Investment into company’s subsidiary namely Samor & Motherland LLP (SML).
General corporate purpose.
Meeting the issue 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. 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. Retail, hospitality, and commercial real estate are also growing significantly, providing the much needed infrastructure for India's growing needs. Indian real estate increased by 19.5% CAGR from 2017 to 2028. Office space has been driven mostly by growth in ITeS/IT, BFSI, consulting and manufacturing sectors. During 2019, the office leasing space reached 60.6 msf across eight major cities, registering a growth of 27% y-o-y. In 2019, office sector demand with commercial leasing activity reached 69.4 msf. Co-working space across top seven cities increased to reach 12 sq ft by end of 2019.
Indian real estate sector has witnessed high growth in the recent times with rise in demand for office as well as residential spaces. Real estate attracted around Rs 43,780 crore ($6.26 billion) in investment in 2019. The retail segment attracted PE (Private Equity) investment of around $1 billion in 2019. Institutional investment in the sector stood at $712 million during the quarter ended March 2020. Real estate attracted around $ 14 billion from foreign PE between 2015 and Q32019.
Pros and strengths
Operation methodology: The company focus on the overall management of its projects, including land acquisition, project conceptualization and marketing. It work with service providers which enable it to access third party design, project management and construction expertise. It also associate 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.
Quality assurance and standards: The company is providing its customers the best possible service by constructing flats of better quality. Quality standards followed right from the beginning were stringent, and adhere during the process of construction of projects. It is very particular from usage of right quality of material for construction. Its dedicated efforts towards the quality of material have helped it gain a competitive advantage over others. Its quality construction has earned it goodwill from its customers.
Risks and concerns
Generate entire sales from operations in certain geographical regions: The company’s entire revenues have been derived from trading of building and construction materials in Ahmedabad, Gujarat for the year 2020-21. Also, its future planned projects are situated in Ahmedabad, 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 Ahmedabad, 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.
Rely on independent third party service providers, contractors: 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 require 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. If this occurs, it may be required to incur additional cost or time to develop the property to appropriate quality standards in a manner consistent with its development objective, which could result in reduced profits or, in some cases, significant penalties and losses which it may not be able to recover from the relevant service provider or independent contractor.
Dependent on success in residential real estate business: The company’s primary focus is on the development of luxurious and comfortable residential real estate projects for sale. It rely on its ability to understand the preferences of its residential customers and to develop projects that suit their needs. It aims to create aspirational developments that have distinctive eco-friendly designs and functionalities with quality construction and development, as this enhances its brand and reputation, and enables it to sell its units quickly and at a premium to other competing developments. Its inability to provide customers with distinctive designs or functionalities and quality construction or its failure to continually anticipate and respond to customer needs may affect its business and prospects and could lead to some of its customers switching to its competitors, which could, in turn, materially and adversely affect its business prospects, financial condition and results of operations.
Outlook
Incorporated in the year 2014, Samor Reality is engaged in the construction and development of residential and commercial projects, in and around Ahmedabad, Gujarat. The company has developed versatile projects by focussing on innovative architecture, strong project execution, and quality construction. The company intends to exploit the opportunities that are available in the Real Estate Sector and its operations may cover all aspects of real estate development. The company may also enter into project-specific joint ventures or partnerships with other companies to enhance its credentials. The company has demonstrated a prominent presence in execution of real estate projects and has developed significant expertise and competencies in this field. The company aim to leverage on its strength and continue expansion into sector which will put the company to desired growth trajectory. On the concern side, the company’s business could suffer damage from fire, natural calamities, misappropriation / burglary or other causes, resulting in losses, which may not be compensated by insurance as it has not taken any insurance. Real estate developments typically require substantial capital outlay during the acquisition of land or development rights and/or construction phases and it may take a year or more before income or positive cash flows may be generated through sales of a real estate Projects.
The company is coming out with a maiden IPO of 1300000 equity shares of Rs 10 each at a fixed price of Rs 62 per equity share to mobilize Rs 8.06 crore. On the performance front, revenue from operations had increased by 814.00% from Rs 105.50 lakh in Fiscal 2020 to Rs 964.27 lakh in Fiscal 2021. The change was primarily due to increase in sale of goods. After accounting for taxes at applicable rates, the company reported a net profit of Rs 10.46 lakh in Fiscal 2021 as compared to a net loss of Rs 8.73 lakh in Fiscal 2020, primarily due to increase in revenue during the financial year. The company intends to further improve its operational efficiencies by designing its projects in a cost-efficient manner to ensure faster execution. It intends to bring in efficiencies in construction by simplifying construction structures and maintaining standardized floor layouts within the same building. The company will continue to focus on maximizing returns from each of its projects. In order to improve performance and enhance returns from its residential and commercial projects.
