Sri Lotus Developers IPO review (Neutral)

•    The company enjoys numero uno status in ultra-luxury/luxury residential/commercial complexes in and around western suburbs of Mumbai region.
•    The company posted spectacular performances from FY24 onwards.
•    Many Bollywood entities have parked funds in SLDRL’s Pre-IPO placement.
•    Based on recent financial data, the issue appears fully priced.
•    Well-informed investors may park funds for medium to long term.

ABOUT COMPANY:
Sri Lotus Developers & Realty Ltd. (SLDRL) (erstwhile known as AKP Holdings Ltd.) is a developer of residential and commercial premises in Mumbai, Maharashtra, with a focus in Redevelopment Projects in the Ultra Luxury Segment and Luxury Segment in the western suburbs. Since its establishment, the company has aimed at building a brand centred around customer satisfaction, by creating environments that enhance customers’ lifestyles. SLDRL’s operations are strategically located in Mumbai, one of the biggest real estate markets in India. For the calendar years 2019 to 2023, the MMR was ranked first among the top seven Indian residential real estate markets (namely, 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). The company acquired land for operations in the western suburbs of Mumbai in 2017, focusing on the Ultra-luxury and Luxury residential properties market. Its growth can be attributed to understanding of the real estate market, design and execution capabilities, sales ability and the “Lotus Developers” brand.

Its projects can be bifurcated into three (3) categories, namely i. Greenfield Projects: Projects that have been constructed on parcels of undeveloped land with no previously constructed infrastructure. It undertakes these projects on land acquired by it. ii. Redevelopment Projects: Projects that are reconstructed by virtue of development agreements with housing societies, commercial unit holders or others. iii. Joint Development Projects: Projects where it enters into a development agreement with the holder (s) of the land parcel(s) (including holding long term leasehold rights in land from owner society) sought to be developed and developing the project jointly with such land holder. 

The company is, typically, entitled to a share in the developed property, or a share of the revenue or profits generated from the sale of the developed property, or a combination of both entitlements. As of June 30, 2025, it has completed developable area of 0.93 million square feet consisting of both residential and commercial properties. It structurally defines price ranges for the higher income housing market segment based on strategic research. The company provides “ultra-luxury and luxury homes” with designs and amenities. The demand for luxury housing, particularly in the > ₹ 2.5 Cr segment, has seen significant growth, more than quadrupling from 3% in 2021 to 22% in Q1 2025. (Source: Anarock Report). 

According to the Anarock Report, The Lotus Developers commands a premium of approximately 22% on its quoted prices compared to the average quoted prices in the Juhu market. The probable factors for this premium include good brand recall, construction quality, timely execution, and customer satisfaction. Moreover, the current market situation in the Juhu reflects a limited new supply coupled with continued robust demand, which has led to recent price appreciation and increased premiums. In addition, when the Juhu market’s average quoted price is compared to Lotus Developers recent average transacted value of Rs. 61,304 per sq. ft. on carpet area, it reflects a premium of approximately 10% over the average quoted market price in Juhu.
It seeks to enhance the value of projects by creating a better living environment through the provision of comprehensive community facilities and by engaging experts in various specialized fields. As of June 30, 2025, it has 4 Completed Projects, 5 Ongoing Projects and 11 Upcoming Projects. As of the said date, it had 146 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO worth Rs. 792.00 cr. (approx. 52800000 equity shares at the upper cap). The company has announced a price band of Rs. 140 – Rs. 150 per equity shares of Re. 1 each. The issue opens for subscription on July 30, 2025, and will close on August 01, 2025. The minimum application to be made is for 100 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 10.80% of the post-IPO paid-up equity capital. From the net proceeds of the fresh equity issue, the company will utilize Rs. 550.00 cr. for investment in subsidiaries, and the rest for general corporate purposes.

The company has reserved equity shares worth Rs. 2.00 cr. (approx. 133333 equity shares at the upper cap) for its eligible employees and offering them a discount of Rs. 14 per share, from the rest, it has allocated not more than 50% for QIBs, not less than 15% for HNIs, and not less than 35% for Retail investors.

The joint Book Running Lead Managers (BRLMs) to this issue are Monarch Networth Capital Ltd., and Motilal Oswal Investment Advisors Ltd., while KFin Technologies Ltd. is the registrar to the issue. Monarch Networth Capital Ltd., and Motilal Oswal Financial Services Ltd. are the syndicate members.

After issuing initial equity shares at par, the company issued further equity shares in the price range of Rs. 150 – Rs. 300 per share (on the basis of Re. 1 FV) between September 2024, and December 2024. It has also issued bonus shares in the ratio of 1 for 1 in November 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.57, Rs. 149.70, and Rs. 150.00 per share. 

Post-IPO, its current paid-up equity capital of Rs. 43.59 cr. will stand enhanced to Rs. 48.87 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 7330.65 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, of Rs. 169.95 cr. / Rs. 16.80 cr. (FY23), Rs. 466.19 cr. / Rs. 119.14 cr. (FY24), Rs. 569.28 cr. / Rs. 227.89 cr. (FY25). Its debt free status and asset light model brought higher margins in its operations from ultra-luxury constructions for redevelopments of hi-fi societies in western suburbs.

For the last three fiscals, the company has posted an average EPS of Rs. 3.83 and an average RoNW of 41.49%. The issue is priced at a P/BV of 7.01 based on its NAV of Rs. 21.39 as of March 31, 2025, and at a P/BV of 7.86 based on its post-IPO NAV of Rs. 19.08 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 32.19. Based on FY24 earnings, the P/E stands at 61.48. Thus, the issue appears aggressively priced.

The company has posted PAT margins of 9.76 % (FY23), 25.96% (FY24), 41.46% (FY25), RoCE margins of 5.29%, 26.28%, 27.22%, respectively for the referred periods.

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

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Arkade Developers, Keystone Realtors, Suraj Estate, Sunteck Realty, Mahindra Lifespaces, and Hubtown, as their listed peers. They are trading at a P/E of 23.6, 45.8, 16.6, 38.2, 79.0, and 93.3 (as of July 25, 2025). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
The two BRLMs associated with the offer has handled 20 pubic issues in the past three fiscals, out of which 04 issues closed below the offer price on listing date.