Kalpataru Ltd. IPO review (May apply)

•    The company is one of the leading real estate developers engaging in all key activities associated with realty developments.
•    It posted bumper top line for FY23 following a special land parcel deal arrived at.
•    The group enjoys a niche place as realty developer in MMR region.
•    It issued equity shares worth Rs. 1440 cr. to promoters at a price of Rs. 517.25 in March 2025.
•    The company has turned the corner for 9M of FY25 and the management is confident of further improvements in its financial performance in coming years considering the projects on hand.
•    Well-informed investors may park funds for the long term. 

ABOUT COMPANY:
Kalpataru Ltd. (KL) is an integrated real estate development company involved in all key activities associated with real estate development, including the identification and acquisition of land (or development rights thereto), planning, designing, execution, sales, and marketing of projects. It is a prominent real estate developer in the Mumbai Metropolitan Region (“MMR”) in Maharashtra and is present across all micro-markets in the MMR (Source: Anarock Report). For the calendar year 2019 to December 31, 2024, the MMR was ranked first among the top seven Indian markets (MMR (Maharashtra), Pune (Maharashtra), Bengaluru (Karnataka), Hyderabad (Telangana), the National Capital Region, Chennai (Tamil Nadu) and Kolkata (West Bengal)) in terms of supply, absorption and average base selling price (Source: Anarock Report). It is the fifth largest developer in the MCGM area in Maharashtra and the seventh largest developer in Thane, Maharashtra in terms of units supplied from the calendar year 2019 to December 31, 2024 (Source: Anarock Report). 

As of December 31, 2024, KL (together with its Promoters) had a total of 120 Completed Projects aggregating to more than 25.87 msf of Developable Area within Mumbai, Thane, Panvel and Pune in Maharashtra, and Hyderabad, Indore, Bengaluru, and Jodhpur in the states of Telangana, Madhya Pradesh, Karnataka and Rajasthan, respectively. KL is a member of the Kalpataru group of companies, consisting of the Company, Kalpataru Projects International Limited, Property Solutions (India) Private Limited, Shree Shubham Logistics Limited, and their respective subsidiaries, among others (collectively, the “Kalpataru Group”). The Group has a legacy of 55 years. The Kalpataru Group has a multi-national presence and has operations in EPC contracting for power transmission and distribution, oil and gas, railways, civil infrastructure projects, warehousing and logistics, and facility management. Further, Kalpataru Projects International Limited is listed on the NSE and BSE. As of December 31, 2024, the Kalpataru Group had more than 29,000 employees globally and a footprint in 75 countries. We benefit from the Kalpataru Group’s reputation and expertise in the construction and infrastructure sector, and its end-to-end-execution capabilities and innovation are strengthened by such affiliation. The company also believes that it derives synergies from the Kalpataru Group’s expertise and experience in adjacent offerings such as EPC, civil infrastructure construction, and facility management, among others.

The strength of the “Kalpataru” brand and its association with trust, quality, and reliability is driven by its track record of delivering quality projects. It has a customer-centric approach and seek to address customers’ requirements and preferences, which in turn enhances its brand recognition. The “Kalpataru” brand name is used by it pursuant to an intellectual property license agreement dated July 1, 2022 with Kalpataru Business Solutions Private Limited, one of our Group Companies.

It focuses on the development of luxury, premium, and mid-income residential, commercial, and retail projects, integrated townships, lifestyle gated communities, and redevelopments. For its residential developments, the company builds and sells a wide range of properties including villas, duplexes, apartments, and plots of varying sizes, with a primary focus on luxury, premium, and mid-income residential real estate. As of December 31, 2024, 68.31% of the Developable Area of the residential projects within its Development Portfolio were located within the MMR, aggregating to 33.45 msf of Developable Area. For commercial developments, it adopts a model of developing, leasing and/or selling commercial units. In retail developments, it develops, manages and leases units within shopping malls. Its integrated township developments and lifestyle gated community projects typically consist of the development, sale or lease and management of residential, commercial and retail developments. Further, as of December 31, 2024, it had five Land Reserves aggregating to 1,886.10 acres. KL’s Land Reserves comprises land (or rights thereto) that has been acquired, including through purchase or acquisition of development rights, on which there are currently no Ongoing Projects, Forthcoming Projects or Planned Projects.

 In addition to acquiring freehold and leasehold interests in land for development, it also adopts an “asset-light” development model by entering into redevelopment, JDA and JV projects with other landowners to develop their land. As of December 31, 2024, it had five, two, and six projects in Development Portfolio under the redevelopment, JV, and JDA models, respectively, with Developable Area amounting to 2.38 msf, 3.56 msf, and 6.53 msf, respectively, which collectively comprise 4.87%, 7.26% and 13.33% of the total Developable Area for its Ongoing Projects, Forthcoming Projects and Planned Projects, respectively.

As of December 31, 2024, its Ongoing Projects comprised approximately 24.83 msf of Developable Area. Further, as of December 31, 2024, its Forthcoming Projects comprised approximately 16.33 msf of Developable Area, and are expected to launch across the Financial Years 2025, 2026 and 2027 in various phases. KL’s Ongoing Projects and the pipeline of Forthcoming Projects offers a significant competitive advantage to it. While a majority of its projects and Land Reserves are located in the MMR and Pune, Maharashtra, it has two Ongoing Projects in Hyderabad, Telangana and Noida, Uttar Pradesh; one Forthcoming Project in Nagpur, Maharashtra; and three pieces of land comprising Land Reserves in Surat, Gujarat; Nagpur, Maharashtra; and Udaipur, Rajasthan. As of December 31, 2024, it had 1274 employees on its payroll (including 26 fixed term contracts and 9 retainers on contract).

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of fresh equity shares issue worth Rs. 1590.00 cr. (approx. 38405808 equity shares at the upper cap). The company has announced a price band of Rs. 387 – Rs. 414 per equity shares of Rs. 10 each. The issue opens for subscription on June 24, 2025, and will close on June 26, 2025. The minimum application to be made is for 36 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 18.65% of the post-IPO paid-up equity capital. From the net proceeds of the fresh equity issue, the company will utilize Rs. 1192.50 cr. for repayment/prepayment of certain borrowings, and the rest for general corporate purposes. 

The company has reserved shares worth Rs. 15.90 cr. for its eligible employees and offering them a discount of Rs. 38 per share. From the rest, it has allocated not less than 75% for QIBs, not more than 15% for HNIs and not more than 10% for Retail investors.

The three Book Running Lead Managers (BRLMs) to this issue are ICICI Securities Ltd., J M Financial Ltd., and Nomura Financial Advisory and Securities (India) Pvt. Ltd., while MUFG Intime India Pvt. Ltd. is the registrar to the issue. J M Financial Services Ltd., is a syndicate member.

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 70 – Rs. 517.25 per share (based on Rs. 10 FV), between May 2004, and March 2025. It has also issued bonus shares in the ratio of 132 for 1 in September 2010. The average cost of acquisition of shares by the promoters is Rs. 0.62, and Rs. 197.26 per share. The company made pre-IPO placement of shares worth Rs. 1440 cr. at a price of Rs. 517.25 per share to promoters.

Post-IPO, its current paid-up equity capital of Rs. 167.49 cr. will stand enhanced to Rs. 205.90 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 8524.07 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit/ - (loss) of Rs. 1248.55 cr. / Rs. – (125.36) cr. (FY22), Rs. 3716.61 cr. / Rs. – (229.43) cr. (FY23), and Rs. 2029.94 cr. / Rs. – (116.51) cr. (FY24). For 9M of FY25 ended on December 31, 2024, it earned a net profit of Rs. 5.51 cr. on a total income of Rs. 1699.49 cr. 

According to the management, jump in top line for FY23 is attributed to one time income of selling of its land parcel and commensurate adjustments of overheads etc. resulted in higher loss. The company owns over 90% land parcel as it has parked borrowed funds in such acquisitions. Its current township projects at Kolshet – Thane will result in higher top line based on completion of its ongoing projects phase-by-phase, and will result in debt reduction translating into higher net.

For the last three fiscals, the company has posted an average EPS of Rs. – (10.05) and an average RoNW of – (12.11) %. The issue is priced at a P/BV of 3.66 based on its NAV of Rs. 113.11 as of December 31, 2024, and at a P/BV of 2.33 based on its post-IPO NAV of Rs. 177.97 per share (at the upper cap). 

If we attribute FY25 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 1150. Based on FY24 earnings, the P/E stands negative. Thus, the issue is aggressively priced. 

The company has not reported PAT margins and RoCE margins for the referred periods due to negative earnings.

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It has already adopted a dividend policy in August 2024, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Oberoi Realty, Macrotech Developers, Godrej Properties, Sunteck Realty, Mahindra Lifespace, Keystone Realtors, and Prestige Estates, as their listed peers. They are trading at a P/E of 32.1, 53.6, 52.7, 42.9, 124.0, 40.5, and 158 (as of June 20, 2025). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:
The three BRLMs associated with the issue have handled 74 public issues in the past three financial years, out of which 16 issues closed below the issue price as on listing date.