Business Profile of the Casagrand Premier Builder Limited

Established in 2003, Casagrand Premier Builder is the largest residential developer in Chennai, India. The reality company has a market share of approx 24% in launches and 20% in demand from 2017 to FY24. The company offers a variety of projects under the Casagrand brand, including mid-end and luxury apartments. The company operates in South India, including Bengaluru, Hyderabad, and Coimbatore.

As of May 31, 2024, the company had 101 completed projects, 42 ongoing projects, and 17 future projects. The company focuses on delivering quality, product-driven solutions within committed timelines and understanding contemporary lifestyle needs. The company's core competencies include monitoring the project development lifecycle efficiently and executing projects efficiently. The company has received several awards and recognitions for its commitment to quality projects.

Casagrand Premier Builder Limited IPO Objective

As per the draft red hearing prospects, the IPO issue consists only of offer for sale.

• The OFS consists of up to XXXX equity shares aggregating up to Rs. 100 crores. Nothing from those proceeds of OFS will be allotted to company.
• Casagrand Premier Builder IPO offer only has fresh issue of Rs. 1, 000 crores. The company aims to utilize around Rs. 150 crores in paying down of some of its existing liability, Rs. 650 crores will be used for payment of certain liabilities of its subsidiary to step subsidiary and rest of the remaining amount will be used for General corporate purposes.

IPO Details of Casagrand Premier Builder Limited:

Issue Price & Size: Casagrand Premier Builder Limited IPO

The issue price of Casagrand Premier Builder Limited hasn’t been released yet. Upon releasing the dates, the investors can bid between those price ranges. The company has both fresh issue of Rs. 1000 crores as well as offer for sale of Rs. 100 crores.

Launch Date of Casagrand Premier Builder Limited IPO

The IPO opening date of Casagrand Premier Builder hasn’t been officially announced yet, upon the declaration of dates investor can bid for IPO.

Casagrand Premier Builder Limited Financial Statements

Casagrand Premier Builder Limited Promoters & Shareholding

As of date, there are two promoters of the company, including corporate and individual.

The promoter in aggregate collectively holds 99.99% of the paid-up share capital of company, on a fully diluted basis.

Should You Subscribe to Casagrand Premier Builder Limited IPO or Not

While investing or subscribing to any IPO, consider the investment rationales related to the company. Hence, here you can find out the strength of the company that will be its growth factors. And also check the risk factors that can affect the growth and operational efficiency of the company.

Competitive Strengths of Casagrand Premier Builder Limited:

Largest residential reality developer in Chennai, Tamil Nadu

The company through successful project completion and serving client across the variant has helped it to grow its presence over the past five years.  Hence, Casagrand has become largest residential developer in Chennai, Tamil Nadu, with a market share of approx 24% in launching new projects and 20% in customer demand.

The company's brand, its experienced management and industry experience with strong execution capabilities have allowed it to attain premier leadership position in the market.

As per the draft, the company had 81 completed projects, 29 ongoing projects, and 13 future projects as of May 2024. In previous three fiscals, the company achieved pre-sales volumes of 5.46 million square feet, 3.96 million square feet, and 3.39 million square feet.

Well established brand with quality product

Casagrand is a fast-growing residential brand in Chennai. The company focuses on delivering quality and distinctive projects within committed timelines. They have developed over 80 projects, including apartments and independent villas with lifestyle amenities like swimming pools, gymnasiums, party halls, business centers, and many more.

The brand focuses on understanding modern living preferences and incorporating best practices while considering budgetary constraints. Presence and exposure comes up with prizes. The brand because of its precedence has received several awards, including the 'Prestigious Brand' award, and the 'Best Real Estate Company of Tamil Nadu – Times Business Awards 2020' award, etc.

End-to-end in-house execution

The company has developed in-house capabilities for every stage of the project development life-cycle. The company's in-house capabilities include land identification and acquisition, design and planning, regulatory approvals, construction and execution, marketing and sales, and customer relationship management.

The company has concerned people to look after every stage of project from land acquisition to verification of records. A dedicated team for designing and planning of functionality and feasibility of project. Once the project has started its journey, the sales and marketing department jumps in undertakes advertising and promotional activities by employing various professional agencies to position the brand and increase property awareness.

As of May 31, 2024, the company has delivered 101 completed projects, with an aggregate Saleable Area of 21.45 million square feet.  If we set aside Covid era abnormalities, companies ‘average time taken from land acquisition to completion certificate usually took 2 years and 4 month.

Led by experienced management

The company has a experienced management team led by Arun MN (Chairman and Managing Director), with over 19 years of experience in the real estate industry and provides guidance on overall operations and strategy. The board of directors includes Executive Director and head-sales, CG Sathish, and Whole-Time Director Sumanth Krishna Raghunathan.

The company aims to leverage their experience to grow its business and strategically target new opportunities.

We continue to leverage the experience and understanding of our Individual Promoter, Directors, Key Managerial Personnel and Senior Management team to further grow our business and strategically target new opportunities

Risk Factors of Casagrand Premier Builder Limited:

Geographically concentration

As can be seen form data presented in table below, the company has generated significant revenue from residential projects in Chennai, Tamil Nadu, over the past three years. On average revenue from operations from real estate development and joint development agreements in Chennai, Tamil Nadu, represented more than three-froth of their total revenue.

The company also reported a significant pre-sales volume and value in Chennai, Tamil Nadu, with a percentage of 75.33%.

However, the real estate market in Chennai is influenced by factors such as changes in supply & demand with demographic trends, governmental regulations, financing availability, and employment and income levels. The company's business, financial condition, and results are heavily reliant on the real estate market's performance.

Inability to complete projects on time

As of May 31, 2024, the company had 42 Ongoing Projects with a Saleable Area of 33.60 million square feet and 17 Forthcoming Projects with an Estimated Saleable Area of 13.15 million square feet. The average time period required for completion of the Completed Projects was 2 years and 10 months.

The company has experienced delays in construction of certain projects from their initial estimated date prior to FY22 but not in last three fiscal years. Going forward, the company may face risks of completing ongoing projects and forthcoming projects, including challenges to land titles, collaboration with third parties, changes in regulations, shortage of labor, disruption in the supply chain of raw materials, availability of adequate financing arrangements, and delays in securing necessary approvals.

Inability to anticipate consumer preferences

The company categorizes its residential projects into luxury, mid-end, and affordable. The company relies on understanding customer preferences in each category. India's rising income levels may impact customers' buying behavior and demand for upscale offerings, which may impact the demand for mid-end residential projects.

Disruption in supply and increases in prices

The construction materials used in projects include cement, sand, steel, brick, ready-mix concrete, wood, and aluminium. The prices and supply of these materials depend on factors beyond company’s control, such as economic conditions, production levels, transportation costs, and government taxes.

The availability of adequate and timely supply of quality construction materials within estimated budget is essential for company’s ability to complete projects profitably and within pre-decided timeframes. The company cannot guarantee that such instances will not occur in the future, and if suppliers do not provide quality materials, it may lead to safety hazards and compromise the durability and reliability of our projects.

Ability to identify and acquire land parcels

The land acquisition process involves risks, including identifying land with a clean title and at locations keeping in mind target customer preference. The ability to identify and acquire suitable land parcels is crucial for growing the business and is dependent on several factors, some of which may be beyond our control.

These factors include willingness of land owners to sell land or assign development rights, ability to acquire land parcels along with its funding, government directives on use of land, and consents and approvals for land acquisition and development. The company may face difficulties due to increased land prices, competition among existing builders in getting prime location to cater demand, shortage of land for residential.

Joint development arrangements with landowners

The company enters into joint development arrangements (JDAs) with landowners to develop and execute projects on their land. The company requires the cooperation and consent of its joint development partners, which may not always be forthcoming. Risks associated with operating with JDAs include potential conflicts of interest, veto rights, disagreements, unacceptable actions, and financial difficulties. JDAs may impose monetary penalties for non-compliance with obligations, such as project completion within a specified timeline.

Disputes between the company and its joint development partners can cause delays in project completion, suspension, or abandonment, potentially affecting the company's business, financial condition, and cash flows.

As can be seen from data, the company has completed 58 development projects where land is fully owned by us and 48 projects in partnership. In both ongoing an forthcoming projects, company has more development on its own land and very few on join partnership with other.

Agreement to acquire lands

As of May 31, 2024, the company entered into an agreement to acquire 14 land parcels totaling 11.24 million square feet. The company has paid Rs. 277.2 crores with the balance of Rs. 1245.16 crores yet to be paid.

The agreements stipulate that all or a part of the advance monies paid to third parties may be forfeited if the acquisition process is not completed due to non-satisfaction of conditions. Failure to successfully complete these transactions could result in losing a portion or the entire advance. The aging of these advances could also negatively impact the company's business and cash flows.

The company cannot guarantee the successful closure of these transactions due to various factors, including insufficient funds, changes in economic conditions, political conditions, or social infrastructures. Additionally, the company could be liable to the sellers for losses suffered by them.

History of losses of Subsidiary

The company has experienced losses in its subsidiaries due to factors such as its accounting policy Ind AS 115 on revenue recognition. The standard states that revenue is recognized when the control of the asset is transferred to the customer.

The company has provided corporate guarantees on behalf of its subsidiaries, with outstanding balances of loans for which corporate guarantees have been provided. If the subsidiaries are unable to repay their debt in a timely manner, the company may be required to repay their lenders as the corporate guarantor.

The company has not made provisions for additional costs to be incurred to complete projects post issuance of a completion certificate at the time of revenue recognition. These costs are instead expensed in the income statement as and when they are incurred in subsequent financial years.

Unsold inventory

As of May 31, 2024, there were unsold residential project units in completed projects and ongoing projects. If these units are not sold at acceptable prices and in a timely manner, it could have negative implication on company growth, its future outlook and financials. The company aims to sell a portion of these units within six months of project launch. However, the company cannot guarantee effective marketing and sales in the future, and construction costs may affect the company's results.

Borrowing from lenders affiliated of Book Running Lead Manager

The Company and its subsidiaries have borrowed from several lenders affiliated with the Book Running Lead Manager. As of June 30, 2024, the company had unsecured loans of Rs. 347.8 crores with Rs. 60.5 crores for general corporate purposes.

Several financing agreements provide for borrowings at floating rates, which could increase borrowing costs and negatively affect the company's business, results of operations, and it’s financial. As of FY24, Rs. 18218 million of the total outstanding borrowings had floating or variable interest rates, which constitute 50.14% of the total outstanding borrowings. Upward fluctuations in interest rates due to any default or credit risk could increase the cost of both existing and new debt.

Acquiring Asset through corporate insolvency resolution process

Nuvoco Vistas Corporation Limited filed a resolution plan for a proposed takeover/revival of Ambojini, a subsidiary of CG Regale. The plan involved infusing Rs. 81.5 crores into Ambojini through equity infusion, debt, and Rs. 70 crores through fresh equity. The resolution plan also proposed a re-organization of Ambojini's capital structure by canceling 100% of its equity shares and subscription of fresh equity.

The resolution plan was approved by the NCLT. However, the monitoring committee of Ambojini approved the induction of CG Regale and Arun MN as shareholders, but the equity shares of Ambojini have not been allotted to CG Regale or the company. The company's ability to realize the anticipated benefits of the acquisition depends on its ability to integrate its business, which is a complex, costly, and time-consuming process.

Casagrand Premier Builder Limited Grey Market premium

Grey market premium is the premium quoted over the IPO issue price. GMP shows that investors are ready to pay above the upper band of the IPO issue price. GMP is determined in the grey market as per the demand and supply of the shares in the primary market. A grey market is that unofficial ecosystem of unlisted companies' stocks that start trading even before the launch of the IPO to the date of its listing.

Also Read: What is Grey Market Premium in IPO: How is GMP Calculated & Reliable

However, GMP is not a reliable factor, as it keeps fluctuating as per the demand and supply of shares in the primary market. There are numerous factors that affect the stock market in India and individual stock prices of different companies that are already listed and trading in the secondary market. However, for an IPO-bounded company, you can consider the GMP as the speculative listing price of the share

According to various online sources, the Grey Market Premium or GMP of the Casagrand Premier Builder Limited is trading around Rs XX in the grey market. It means shares are trading at the upper band issue price of Rs XX with a premium in the grey market and may list around the same price.