Arkade Developers IPO: The ₹410 crore initial public offering (IPO) of Arkade Developers, which opened for subscription on Monday, September 16, witnessed a healthy subscription of over six times on the first day of subscription. Meanwhile, the company raised around ₹122.40 crore from anchor investors ahead of its IPO. According to the exchange filing, the company has allocated 95,62,500 or 95.62 lakh equity shares to its anchor investors at an allocation price of ₹128 per share to nine anchor investors at face value of ₹10 per share.
Investors appear bullish on the issue as the grey market premium (GMP) of the Arkade Developers IPO has increased to ₹86 from ₹70 before the bidding for the issue started. The last GMP of the Arkade Developers IPO is ₹86, according to investorgain.com.
Considering the upper price band of the IPO and the current grey market premium, the estimated listing price for Arkade Developers shares is ₹214, reflecting a 67.19 per cent premium over the issue price of ₹128.
GMP indicated investors' willingness to buy the stock at a premium to the issue price.
Till 4:05 pm on day 2, the issue had been subscribed 14.38 times, the retail portion of the public issue had been booked 18.55 times, and the NII segment had seen a subscription of 23.20 times. The segment reserved for the QIB had received bids 0.37 times.
Experts are positive about the issue as they observe valuation comfort and healthy growth prospects for the firms.
Sagar Shetty, a research analyst at StoxBox, underscored that Arkade Developers is a rapidly expanding real estate developer in the Mumbai region, and being one of the leading developers in Mumbai’s micro markets, the company presents a compelling investment opportunity.
He underscored that Arkade Developers has demonstrated substantial financial growth, with a revenue CAGR of 66.5 per cent from FY22 to FY24. The company's profit after tax (PAT) increased impressively from ₹508.4 million in FY23 to ₹1,228.1 million in FY24. Its return on capital employed (RoCE) also rose significantly from 24.3 per cent in FY23 to 47.3 per cent in FY24, highlighting the company's efficient capital utilization to drive growth and enhance profitability.
"Arkade Developers is working towards becoming debt-free, which enhances its attractiveness to investors by ensuring that funds are not diverted towards debt repayment. The company plans to expand into the eastern region of the Mumbai Metropolitan Region (MMR), Maharashtra, with a mix of commercial and residential developments," said Shetty.
"The current issue is priced at a P/E ratio of 15.8 times on the upper price band based on FY24 earnings, which is relatively lower than its peers. Therefore, we recommend a 'subscribe' rating for this issue from a medium- to long-term investment perspective," said Shetty.
Anshul Jain, the head of research at Lakshmishree Investment and Securities, considers the issue a solid long-term investment.
"Arkade Developers' IPO presents a compelling opportunity for long-term investors. The company's strong financial performance, coupled with its strategic focus on redevelopment, positions it well to capitalize on the growing housing demand in India.
With a P/E and P/B ratio of around 19 and 3, respectively, the company's valuation appears attractive," said Jain.
"Despite its concentration in Mumbai, Arkade Developers' expertise in timely project execution and its ability to navigate complex redevelopment processes are key strengths. While the real estate sector is cyclical, the government's increased focus on infrastructure development and the rising demand for housing is expected to drive prices, benefiting Arkade Developers. For investors seeking long-term value, this IPO offers a promising investment opportunity," Jain added.
Arkade Developers IPO is a fresh issue of 3.2 crore shares to raise ₹410 crore. With a price band of ₹121 to ₹128 per share, the issue opened for subscription on Monday, September 16, and will conclude on Thursday, September 19, whereas the allotment of shares is expected to be finalised on Friday, September 20, and the stock may be listed on Tuesday, September 24. The company intends to use the net proceeds from the issue to fund ongoing projects, acquire land for real estate projects and general corporate purposes.
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