scorecardresearchNew IPO: Should you subscribe Keystone Realtors IPO? Here's what analysts

New IPO: Should you subscribe Keystone Realtors IPO? Here's what analysts say

Updated: 15 Nov 2022, 08:29 AM IST

Most brokerages advise subscribing to Keystone Realtors IPO due to a strong track record and pipeline, decent financials, and attractive valuation.

Most brokerages advise subscribing to the issue due to a strong track record and pipeline, decent financials, and attractive valuation.

Most brokerages advise subscribing to the issue due to a strong track record and pipeline, decent financials, and attractive valuation.

The 635 crore initial public offering (IPO) of Mumbai-based realty firm Keystone Realtors opened for subscription today, November 14. The company sells properties under the brand 'Rustomjee'.

The price band has been fixed at 514-541 per share and the issue will conclude on November 16.

According to the Red Herring Prospectus (RHP), the company's IPO size of the IPO has been reduced from 850 crore earlier to 635 currently.

About the IPO

The issue consists of a fresh issue of equity shares aggregating up to 560 crore and an Offer-For-Sale (OFS) worth 75 crore by promoters.

As part of the OFS, promoter Boman Rustom Irani will sell shares worth up to 37.5 crore, while shares worth 18.75 crore each will be offloaded by Percy Sorabji Chowdhry and Chandresh Dinesh Mehta.

Objective of the issue

The company intends to utilise the net proceeds towards funding the repayment/prepayment of borrowings to the tune of 341.6 crore. The proceeds will also be used to fund the acquisition of future real estate projects and general corporate purposes.

Anchor investors

The firm has already raised over 190 crore from anchor investors. It has allotted 35.21 lakh equity shares to 16 anchor investors at 541 apiece. Abu Dhabi Investment Authority (ADIA), Morgan Stanley and Saint Capital accounted for nearly 35 percent of the anchor investor portion.

Domestic mutual funds such as Aditya Birla Mutual Fund, IDFC Mutual Fund, Tata Mutual Fund and Quant Mutual Fund also participated in the anchor investor portion. SBI Life Insurance and HDFC Life Insurance Company too were among the anchor investors.


Half of the issue size has been reserved for qualified institutional investors, 35 percent for retail investors and the remaining 15 percent for non-institutional investors.


Investors can bid for a minimum of 27 equity shares and in multiples thereof. At the higher end of the price band, one lot of 27 shares will cost investors 14,607.

About the firm

Founded in 1995, Keystone Realtors has 32 completed projects, 12 ongoing projects and 19 forthcoming projects across the Mumbai Metropolitan Region (MMR).

The realty firm has developed 20.05 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 as of March 2022.


The realtor posted a revenue and EBITDA growth of 2 percent and 15 percent, respectively, over FY20-22. Its EBITDA margin expanded to 14.1 percent in FY22 from 11.2 percent in FY20.

It reported a 208 percent growth in its profit at 135 crore in FY22, led by lower interest costs. For the June quarter, it reported revenue of 170 crore, an EBITDA margin of 2.2 percent and a PAT of 4.2 crore.

What brokerages say:

Most brokerages advise subscribing to the issue due to a strong track record and pipeline, decent financials, and attractive valuation.

Reliance Securities

"Based on FY22 earnings, the company is valued at 45.4x P/E, 41.7x EV/EBITDA and 5.9x EV/ Sales. Keystone is a prominent player in the real estate space. While the company had been inconsistent with its top and bottom lines for the past few years, we believe that the uptick in the real estate sector and softening of inflationary pressure augured well for Keystone. In the view leading position in Mumbai Real estate market, a strong pipeline of ~35mn sq. ft. of saleable area, strong track record with decent financials, and attractive valuation, we recommend ‘subscribe' to the issue," said Reliance Securities.


As per the brokerage, the realtor has been aggressively reducing debt and is looking to partially utilise the IPO fund to reduce the debt on the books further while balancing its new projects in the pipeline. The leverage ratio is expected to remain stable at 1.1 times going ahead, it said.

On the margins front, the company has ample scope for expansion as the current margins include few one-off expenses, which impacted the margins, thus, the management is confident to deliver competitive margins in the coming years, noted the brokerage. Keystone has reported a growth of 61.7 percent CAGR over FY20-22 in pre-sales.

"Keystone, under its brand name Rustomjee is a strong player; the company will benefit from the opportunities available supported by its joint partners. With changing lifestyles and increasing importance to the quality of living, the real estate sector is witnessing a strong demand for residential projects, especially in metropolitan areas, which will be a massive opportunity for the organized and branded players, one of which is Rustomjee we believe," noted the brokerage. With a strong brand and upcoming construction opportunities, the brokerage believes it is well placed, and as a result, recommends that Keystone Realtors Ltd IPO be rated 'SUBSCRIBE'.

Choice Broking

Choice Broking, on the other hand, has recommended a subscribe with caution rating to the issue.

“At the higher price band, KRL is demanding an EV/TTM pre-sales multiple of 2.6x, which seems to be a discount to the peer average. Thus the issue seems to be attractively priced. However, considering its 76.6 percent sequential fall in pre-sales business (compared to a 3 percent average increase in the peer’s business), we assign a Subscribe with caution rating," said the brokerage

Choice Broking is expecting Keystone Realtors to report a 15.5 percent rise in pre-sales collections over FY22-24E. Top-line is expected to increase 23.5 percent CAGR to 1,936.5 crore in FY24E, it said. That said, higher operating expenditures are likely to lower Ebitda and PAT margin by 378 basis points and 438 basis points, respectively, it added. RoE is estimated at 6.9 percent in FY24E compared with 8.5 percent in FY22.

An IPO is the process by which a private company can go public by offering its stock to the general public for the first time.
First Published: 15 Nov 2022, 08:29 AM IST