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Kesar India

• Kesar India is coming out with an initial public offering (IPO) of 9,30,400 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 170 per equity share.

• The issue will open on June 30, 2022 and will close on July 04, 2022.

• The shares will be listed on SME Platform of BSE.

• The share is priced 17 times higher to its face value of Rs 10.

• Book running lead managers to the issue are Fedex Securities and Hem Securities.

• Compliance Officer for the issue is Twinkle Sharma.

Profile of the company

The company was originally incorporated as a Private Company in name and style of Kesar Impex (India) Private Limited under the provisions of the Companies Act, 1956 vide Certificate of Incorporation dated November 05, 2003. Further, the name of the company was changed to “Kesar India Private Limited” vide Certificate of Incorporation pursuant to change of name dated November 10, 2021 issued by Registrar of Companies, Maharashtra, Mumbai. Subsequently, the company was converted into a Public Limited Company pursuant to Special Resolution passed by the shareholders at the Extraordinary General Meeting dated November 19, 2021 and the name of the company was changed to “Kesar India Limited” to reflect the legal status of the company pursuant to conversion, a fresh certificate of incorporation was granted by the Registrar of Companies, Mumbai, Maharashtra dated December 15, 2021.

Main object of the company is to undertake real estate development & construction, primarily in the business of developing and constructing of Projects such as Residential & Commercial Plotting, residential, commercial and industrial buildings, colonies, mills and factory's buildings, workshop's building, etc.

The company is a flagship Company of Kesar Group, which markets its projects under the brand name of “Kesar Lands” or carries a prefix “Kesar”. It is primarily operating in Nagpur focused on development of Plot, Residential & Commercial Projects. Further, the company is currently focusing on opportunities to build a brand in real estate sector. The company intends to take advantage of the opportunities that are available in the Real Estate Sector and upcoming projects would include plotted developments, houses and apartments of varying sizes, development and sale of certain commercial properties including those that are integral to the residential developments they are attached to. The company’s operations will cover all aspects of real estate development, from the identification and acquisition of land, the planning, execution and marketing of its projects, maintenance and management of its completed developments etc. The company may also enter into project specific joint ventures or partnerships with other companies to grow it business.

Proceed is being used for:

• Financing development expenses of its projects & upcoming projects.

• Acquisition of land or land development right.

• General corporate purposes.

Industry Overview

Real estate sector is one of the most globally recognized sectors. It comprises of four sub sectors - housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodations. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. In India, the real estate sector is the second-highest employment generator, after the agriculture sector. It is also expected that this sector will incur more non-resident Indian (NRI) investment, both in the short term and the long term. Bengaluru is expected to be the most favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.

Indian real estate sector has witnessed high growth in the recent times with rise in demand for office as well as residential spaces. According to Colliers India, a property consultant, institutional investments in the Indian real estate sector are expected to increase by 4% to reach Rs. 36,500 crore ($5 billion) in 2021, driven by rising interest of investors towards capturing attractive valuations amid the pandemic. According to a recent report by Colliers India, private equity investments in Indian real estate reached $2.9 billion in the first half of 2021, which was a >2x increase from the first half in 2020.

The Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform, which will allow all kind of investors to invest in the Indian real estate market. It would create an opportunity worth Rs. 1.25 trillion (US$ 19.65 billion) in the Indian market in the coming years. Responding to an increasingly well-informed consumer base and bearing in mind the aspect of globalisation, Indian real estate developers have shifted gears and accepted fresh challenges. The growing flow of FDI in Indian real estate is encouraging increased transparency. Developers, in order to attract funding, have revamped their accounting and management systems to meet due diligence standards. Indian real estate is expected to attract a substantial amount of FDI in the next two years.

Pros and strengths

Operation methodology: The company focuses on the overall management of its projects, including land acquisition, project conceptualization and marketing. It works with service providers which enable it to access third party design, project management and construction expertise. It also associate with other third-party architects, project management consultants, contractors and international property consultants. 

Quality assurance and standards: The company is providing its customers the best possible service of better quality. Quality standards followed right from the beginning were stringent, and adhere during the process of construction of projects. It is very particular from usage of right quality of material for construction. Its dedicated efforts towards the quality of material have helped it to gain a competitive advantage over others. The company’s quality construction has earned it goodwill from its customers.

Experienced management team: The company’s management team is experienced in the industry in which it is operating and has been responsible for the growth of its operations and financial performance. The company’s Promoter, Gopal FatehChand Gupta led the company with his vision. He is having an adequate experience in the line of the business undertaken by the Company and look after the strategic as well as day to day business operations. The strength and entrepreneurial vision of the Promoter and management have been instrumental in driving the company’s growth and implementing its strategies. The experience of management team and there in depth understanding of the real estate market in the region will enable the company to continue to take advantage of both current and future market opportunities.

Risks and concerns 

Significant number of unsold units among its projects: As of December 31, 2021, the company had Projects with a Developable Area of 21,24,654 sq.ft which remain unsold. There is a lag between the time it acquires land and the time it construct and develop a project and sell its inventories. Given that the market for properties is relatively illiquid, there may be little or insufficient demand for properties at the expected sale price. The risk of owning unsold inventories can be substantial and the market value of the same can fluctuate significantly as a result of changing economic and market conditions. If the company unable to sell its unsold inventory currently held, its business, results of operation and financial condition may be adversely affected.

Capital intensive business: Development of real estate projects involves significant expenses, a large part of which it fund through unsecured loan. As it intends to pursue a strategy of continued investment in its development activities, it will incur additional expenditure in the current and future fiscal periods. The company’s ability to borrow and the terms of its borrowings will depend on its financial condition, the stability of its cash flows and its capacity to service debt in a rising interest rate environment. If it does not have access to additional capital, it may be required to delay, postpone or abandon some or all of its projects or reduce capital expenditures and the size of its operations, any of which may adversely affect its business, financial conditions and results of operations.

Inability to complete projects by expected completion dates: As of December 31, 2021, the company’s projects had an aggregate carpet area for sale of 21,24,654 sq.ft. Its ability to complete projects within the estimated time or at all is subject to a number of risks and unforeseen events, including, without limitation, clear title to the relevant plot of land, any changes in applicable regulations, availability of adequate financing arrangements on commercially viable terms, and an inability or delay in securing necessary statutory or regulatory approvals for such projects. If any of the foregoing risks materialize, it may not be able to complete its projects or develop its projects in the manner it currently contemplate, which could have a material adverse effect on its business, results of operations and financial condition. Accordingly, any such delay or cancellation resulting in payments by it may have an adverse effect on its business, financial condition and results of operation.

Outlook

Kesar India is engaged in the business of developing and constructing residential and commercial projects, industrial buildings, factory buildings, workshop buildings, etc. All the projects are marketed under the brand name -- Kesar Lands. The company has successfully completed many projects such as Kesar Vihar, Kesar Shree, Kesar Garden, and Kesar Signature projects. Kesar Gateway is its ongoing project while Kesar Forest, Kesar Exotica, Kesar Tower, Kesar Hills, and Kesar Imperial are some of the upcoming projects. On the concern side, the company has incurred substantial indebtedness which exposes it to various risks which may have an adverse effect on its business and results of operations. Moreover, inability to complete projects by their respective expected completion dates or at all could have a material adverse effect on its business, results of operations and financial condition.

The company is coming out with a maiden IPO of 9,30,400 equity shares of Rs 10 each at a fixed price of Rs 170 per share to mobilize Rs 15.82 crore. On performance front, the total income from operations for the FY21 was Rs 116.03 lakh and it was Rs 48.27 lakh during the FY20. The revenue of the company has increased in FY21 by 140.37% due to sale of plots. However, PAT was decreased from Rs 3.73 lakh in FY20 to Rs 1.19 lakh in FY21. The profit after tax decreased by 68.08% as compared to FY20 on account of increase in expenses. Meanwhile, the company’s projects have been currently located in Central India in Maharashtra. Going forward, it plans to establish its presence in the other regions In India and it intends to execute projects in other major cities. Its emphasis is on expanding the scale of its operations as well as growing its geographical presence, which will provide attractive opportunities to grow its business and revenues.