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Keystone Realtors IPO  Fundamental Analysis

KEYSTONE Realtors (Rustomjee IPO)

Incepted in the year 1995, Rustomjee is one of the prominent real estate developers in the micro markets. Keystone commands a market share of 28% in Khar, 23% market in Juhu, 11% in Bandra East, 14% in Virar, 3% in Thane and 5% in Bhandup in terms of absorption (in units) from 2017 to 2021. As of June 30, 2022, there were 32 Completed Projects, 12 Ongoing Projects and 21 Forthcoming Projects across the Mumbai Metropolitan Region that includes a comprehensive range of projects under the affordable, mid and mass, aspirational, premium and super premium categories, all under Rustomjee brand.

As part of its business model, the Issuer focuses on entering into joint development agreements, redevelopment agreements with landowners or developers or societies, and slum rehabilitation projects, which requires lower upfront capital investment compared to direct acquisition of land parcels.

As of June 30, 2022, Rustomjee developed 20.22 million square feet of high-value and affordable residential buildings, premium gated estates, townships, corporate parks, retail spaces, schools, iconic landmarks and various other real estate projects.

It has a diversified suite of projects across a wide range of price points, and presence in several micro markets. The Issuer is experienced in developing lifestyle projects, high value standalone buildings, gated communities and fully integrated townships, re-developments and stalled projects.

Some of the notable projects include Rustomjee Elements, a large gated community in Upper Juhu, Mumbai; Rustomjee Paramount, a signature complex in Khar, Mumbai; Rustomjee Seasons, a 3.82 acres gated community in Bandra Annexe, Mumbai; Rustomjee Crown, a 5.75 acres land parcel for high-end development at Prabhadevi, South Mumbai, consisting of three high-rise towers.

Financial Review

Keystone posted total revenues of Rs 175.99 crore for Q1FY23 and PAT of Rs 4.22 crore for the same period. During FY22, the revenue from operation increased by 50% to 1269.37 crore from Rs 848.72 crore in FY21. However PAT reduced to Rs 135.83 crore from Rs 231.82 crore in FY21 mainly due to the increase in construction costs. EBITDA margins have remained stable at 16-17% margins since the last three fiscals but the margin for Q1FY23 is 6.85%. Net margins are showing a volatile trend over the last three fiscals as can be seen from the table.

Debt to equity ratio is high being 1.62 for FY22 and 1.36x for Q1FY23 respectively.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Particulars Q1FY2023 Q1FY2022 FY2022 FY2021 FY2020
Total revenue 175.99 91.4 1302.97 1177.27 1268.6
Rev from operations 168.56 83.74 1269.37 848.72 1211.47
PAT> 4.22 -0.97 135.83 231.82 14.49
EBITDA  11.54 9.13 210.74  149.45 193.43
Total Assets 3910.15 3676.24 3876.84 3654.1 4415.31






EBITDA Margin 6.85%> 10.90% 16.60% 17.61% 15.97%
Net Margin 2.50% -1.16% 10.70%> 27.31% 1.20%

Valuation and peer comparison

The IPO is valued at 276.02x times with annualized EPS of 1.96 for Q1FY23 calculated at the upper price band of Rs 541. However, as per the management, Q1 earnings shall not be indicative of the annual earnings. The Issue is valued at 38.75x with FY22 earnings of 13.96 per share. Industry peer average is 96.97x. Its listed peers Godrej, Oberoi and Sunteck Realty are trading at P/E of 89.18x, 23.01x and 121.90x respectively. The Issue appears to be attractively valued than the majority of its peers when we compare the P/E.

P/BV is 5.18x with NAV of Rs 93.24 calculated at the upper price band. Return on net worth is highest amongst the listed peers.

In the highlighted part of the peer comparison table one can compare the listing related information of the real estate credits listed so far and their respective returns in the short as well as long run.

Listed Peer Comparison




Particulars Macrotech Godrej Oberoi Sunteck Realty Keystone
Face Value per share 10 5 10 1 10
Total Income for FY22 (INR Crores) 9579.17 2585.69 2752.42 534.02 1302.97
EPS 26.28 12.68 28.8 1.79 13.96
NAV per share 255.11 312.09 286.47 198.77 93.24
Return on net worth 10.30% 4.06% 10.05% 0.90% 14.97%
P/E (FY22) NA 89.18 23.01 121.9 NA
Debt to equity ratio (in times) 0.89 0.6 0.27 0.28 1.62
P/BV 3.78 4.14 3.14 2.05 NA
CMP 956.5 1294.8 900 391.3 NA
IPO Price 483-486 490-530 253-260 NA 514-541
Listing price 439 510 280 NA NA
Listing Year Apr-21 Dec-09 Oct-10 NA Nov-22

Issue Details

Keystone Developers (Rustomjee) IPO (Rs 635 crore) opens on 14th Nov- 16th Nov 2022 with a price band of 514-541 per share. Retail quota is 35% and investors can apply with minimum bid of 27 shares (Rs 14,607). Maximum lot size is 13 with 351 shares (Rs 1,89,891).The issue is both fresh issue (Rs 560 crore) an offer for sale (Rs 75 crore) by promoter shareholders, Mr. Boman Irani, Mr. Percy Sorabji Chowdury and Mr. Chandresh Dinesh Mehta. Net proceeds would be used to repay certain borrowings (Rs 341.60 crore) and rest towards funding future acquisitions for real estate projects and corporate purposes. The Issue is expected to list on 24th Nov 2022.

Conclusion and Investment Strategy

Rustomjee is a well-known real estate brand in Mumbai metropolitan region (MMR) and they are present in Juhu, Bandra, Thane, Virar, Bhandup to name a few. The Issuer is able to garner premium pricing in the MMR micro-markets. It offers a comprehensive range of projects under the affordable, mid and mass, aspirational, premium, and super premium categories.

The Issuer is also the prominent developer in the redevelopment segment and its asset light business model of joint development projects and redevelopment projects has led to stable financial performance since the last three fiscals. The management said that it would continue to deliver stronger margins in the future as well. With repayment of debt, leverage ratio could further come down benefiting the capital structure. The limitation that real estate sector faces are the rising construction costs and interest costs that may put a pressure on sectors margins overall. Hence looking at all the above factors one may Subscribe for Long term to the IPO.

Reviewer recommends May Apply to the issue.

Review By CA Priyanka Choudhary on 8th Nov 2022

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.



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