VR Infraspace
- VR Infraspace is coming out with an initial public offering (IPO) of 24,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 85 per equity share.
- The issue will open for subscription on March 04, 2024 and will close on March 06, 2024.
- The shares will be listed on NSE SME Platform.
- The share is priced at 8.50 times higher to its face value of Rs 10.
- Book running lead manager to the issue is Beeline Capital Advisors.
- Compliance Officer for the issue is Riya Bonnykumar Aswani.
Profile of the company
VR Infraspace is a construction and real estate development company, focused primarily on construction and development of residential and commercial projects, in and around Vadodara, Gujarat. It has been serving people of Vadodara with its best residential projects and commercial projects. The company has been a credible and recognized name of the real estate market in Vadodara.
It has developed projects catering to the middle income and high-income group. Its residential apartment portfolio consists of various types of accommodation of varying sizes. It has concentrated on developing luxury, yet affordable, housing in the residential segment. Its residential buildings are designed with a variety of amenities such as security systems, sports and recreational facilities, play areas and electricity back-up. As on date of this Prospectus, all of its Projects are constructed and proposed to constructed are on own land of Company.
The company’s customer-centric business model focuses on designing and developing its products to address consumer needs across price points. It has 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. 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. It partners with top architects and design team which uses customer insights to conceptualize and design products that are best suited for the current location and target a variety of customer groups. Its construction management and procurement teams focus on realizing efficiencies in procurement, vendor selection and construction. It currently offers its residential and commercial projects under the name “VR”.
Proceed is being used for:
- Investment into its subsidiary namely M/s Daxon Realty (Formerly known as Narnarayan Enterprise)
- Meeting working capital requirement.
- 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 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. In FY23, India’s residential property market witnessed with the value of home sales reaching an all-time high of Rs 3.47 lakh crore ($42 billion), marking a robust 48% year-on-year increase. The volume of sales also exhibited a strong growth trajectory, with a 36% rise to 379,095 units sold. India’s real estate sector saw over 1,700 acres of land deals in top eight cities in the first nine months of FY22. Foreign investments in the commercial real estate sector were at $10.3 billion from 2017-2021. As of February 2022, Developers expect demand for office spaces in SEZs to shoot up after the replacement of the existing SEZs act.
The Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform, which will allow all kind of investors to invest in the Indian real estate market. It would create an opportunity worth Rs 1.25 trillion ($19.65 billion) in the Indian market in the coming years. Responding to an increasingly well-informed consumer base and bearing in mind the aspect of globalisation, Indian real estate developers have shifted gears and accepted fresh challenges. The most marked change has been the shift from family-owned businesses to that of professionally managed ones. Real estate developers, in meeting the growing need for managing multiple projects across cities, are also investing in centralised processes to source material and organise manpower and hiring qualified professionals in areas like project management, architecture and engineering. The current shortage of housing in urban areas is estimated to be 10 million units. An additional 25 million units of affordable housing are required by 2030 to meet the growth in the country’s urban population.
Pros and strengths
Established brand and reputation: Its Group brand ‘VR Group’ is a recognizable brand in Vadodara region and is a differentiating factor for its customers, which helps establish customer confidence. Its established brand and reputation have 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 at Vadodara, Gujarat which provides it with significant competitive advantages.
Operation methodology: The company focuses 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 constrain: The company’s completed project, ongoing and upcoming project are situated in Vadodara, 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 Vadodara, heightens its exposure to adverse developments related to competition, as well as changes in the supply and demand for properties comparable to those it develops, 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. Also, any localized social unrest, natural disaster or breakdown of services and utilities in and around Vadodara could have material adverse effect on its business, financial position and results of operation.
Substantial amount of outstanding indebtedness: As of March 31, 2023, the company’s long term borrowings were Rs 884.20 lakh & short term borrowings were Rs 87.67 lakh and it will continue to incur additional indebtedness in the future. Its level of indebtedness has important consequences to the company, such as: increasing its vulnerability to general adverse economic, industry and competitive conditions; limiting its ability to borrow additional amounts in the future; affecting its capital adequacy requirements; and increasing its finance costs. In the event it breaches any financial or other covenants contained in any of its financing arrangements or in the event it had breached any terms in the past which is noticed in the future, it may be required to immediately repay its borrowings either in whole or in part, together with any related costs. If the lenders of a material amount of the outstanding loans declare an event of default simultaneously, the company may be unable to pay its debts when they fall due.
Promoters are first generation entrepreneurs: The company’s present Promoters are first generation entrepreneurs. Their experience in managing and being instrumental in the growth of the company is limited to the extent of their knowledge and experience and it cannot assure that this will not affect its business growth. Although its Promoters Vipul Devchand Rupareliya and Sumitaben Vipulbhai Rupareliya have vast experience of around 09 years and 08 years respectively.
Outlook
VR Infraspace is a real estate development company primarily focused on constructing and developing residential and commercial projects in and around Vadodara, Gujarat. The company offers a range of luxurious, affordable residential buildings with various types of accommodations. Each building has security systems, sports and recreational facilities, play areas, and electricity backups. The company provides residential and commercial projects under the brand name 'VR'. It has completed residential projects named VR Celebrity Luxuria and VR Imperia and a commercial project named VR One Commercial Business Center. On the concern side, the present promoters of the company are first generation entrepreneurs. Moreover, the company generates its entire sales from its operations in geographical regions of Vadodara, Gujarat and any adverse development affecting its operations in these regions could have an adverse impact on its revenue and results of operations.
The company is coming out with an IPO of 24,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 85 per equity share to mobilize Rs 20.40 crore. On performance front, revenue from operations had increased by 30.26% from Rs 1374.44 lakh in Fiscal 2022 to Rs 1790.29 lakh in Fiscal 2023. The change was primarily due to increase in sales of Residential & Commercial Complexes. Moreover, the company reported a net profit of Rs 261.76 lakh in Fiscal 2023 as compared to a net profit of Rs 75.28 lakh in Fiscal 2022.
The company’s projects have been currently located in Vadodara region in Gujarat. Going forward it plans to establish its presence in the other regions in Gujarat and it intends to execute projects in other major cities. Its emphasis is on expanding the scale of its operations as well as growing its geographical presence, which will provide attractive opportunities to grow its business and revenues. Moreover, 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. Going forward, the company will continue to focus on maximizing returns from each of its projects.
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