IGI Logo

Modi's Navnirman

• Modi's Navnirman is coming out with an initial public offering (IPO) of 1260000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 180 per equity share.

• The issue will open on June 23, 2022 and will close on June 28, 2022.

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

• The share is priced 18 times higher to its face value of Rs 10.

• Book running lead manager to the issue is Aryaman Financial Services.

• Compliance Officer for the issue is Nishi Modi.  

Profile of the company

Modi’s Navnirman was originally incorporated as a Limited Liability Partnership in the name and style of Modi’s Navnirman LLP on December 31,2015 and was subsequently converted into a Public Limited on March 04, 2022 with a view to corporatize the group’s activities in the real estate sector. Since inception, it has been focused on the mid-market and affordable housing categories as its target segment within the residential housing market. Historically, it has sought to develop its projects either through development agreements (DA) with Co-operative Housing Society (Society) / landowners of the proposed projects. It is transitioning to a real estate development model with a shift towards an asset light business strategy by doing Development Agreements.

The company’s customer-centric business model focuses on designing and developing its products to address consumer needs across price points. It has capabilities to deliver a project from conceptualization to completion with fast turnaround time from acquisition to launch to completion, which focuses on de-risking and improving its return on investment. It streamline its supply chain and construction processes with an aim to develop high quality products consistently and in a timely and cost efficient manner. It partner with top architects and design team which uses customer insights to conceptualize and design products that are best suited for the current location and target a variety of customer groups. Its construction management and procurement teams focus on realizing efficiencies in procurement, vendor selection and construction. Its in-house sales team is supported by a well skilled execution team which delivers precisely designed products and amenities to its customers.

Proceed is being used for:

• Investment in subsidiary company - SMNPL for Repayment of its outstanding unsecured loans.

• General Corporate Purpose.

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. By 2040, real estate market will grow to Rs 65,000 crore ($9.30 billion) from Rs 12,000 crore ($1.72 billion) in 2019. Real estate sector in India is expected to reach $1 trillion in market size by 2030, up from $200 billion in 2021 and contribute 13% to the country’s GDP by 2025. Retail, hospitality, and commercial real estate are also growing significantly, providing the much-needed infrastructure for India's growing needs.

India’s real estate sector saw over 1,700 acres of land deals in the top 7 cities in 1 year. Foreign investments in the commercial real estate sector were at $10.3 billion from 2017-21. As of February 2022, Developers expect demand for office spaces in SEZs to shoot up after the replacement of the existing SEZs act. Government of India along with the governments of respective States has taken several initiatives to encourage development in the sector. The Smart City Project, with a plan to build 100 smart cities, is a prime opportunity for real estate companies. The residential sector is expected to grow significantly, with the central government aiming to build 20 million affordable houses in urban areas across the country by 2022, under the ambitious Pradhan Mantri Awas Yojana (PMAY) scheme of the Union Ministry of Housing and Urban Affairs. Expected growth in the number of housing units in urban areas will increase the demand for commercial and retail office space.

Pros and strengths

Established brand and reputation: All of the company’s Completed, Ongoing and Upcoming projects are located in Mumbai. Further most of its project names begin with the word “Rashmi” (such as “Rashmi Sadhna”, “Rashmi Sheela” “Rashmi Terrace”, etc) which differentiates its projects from the projects of the other developers in Mumbai. The term 'Rashmi', has become Synonymous with the Company. Over the years through successful completion and timely delivery of the projects it has been able to establish and strengthen the “Rashmi” brand will enable it to get a positive support for future projects using the same brand in the form of advance bookings, revenue share deals, development rights, government approvals, etc.

Proven execution capabilities: The company is a knowledge-based organisation and it undertake research for its projects prior to making any decisions to acquire, develop or sell its properties. Its projects span different segments of the real estate market, such as residential and commercial and this diversity will allow it to better weather market cycles. It has also demonstrated its ability to develop projects in diverse market conditions. Its track record of successful developments is due primarily to its Promoter Dineshkumar Modi who has an established reputation in the industry and has completed a significant number of projects. Its Group has successfully completed and delivered 7 residential projects and commercial projects.

Strong project pipeline: The company has a strong project pipeline, which provides cash flow visibility. It currently have 5 Ongoing and 5 Upcoming projects, which it expect to provide a total Carpet Area of approximately 5.88 lakhs square feet. These include 2 Ongoing and 2 upcoming residential projects with approximately 1.86 Lakhs square feet of estimated Carpet Area, 3 Ongoing and 3 upcoming Residential-cum-Commercial projects with approximately 4.02 Lakhs square feet of estimated Carpet Area.

Risks and concerns

Geographical concentration: The company’s entire revenues have been derived from projects situated in Western Suburb of Mumbai, Maharashtra. Also, its on-going projects and currently upcoming projects are situated in Western Suburb area of Mumbai, and thus any of its future revenues are also based on the development and market in this geographical location. Such geographical concentration of its real estate business in Western Suburb area of Mumbai, heightens its exposure to adverse developments related to competition, as well as changes in the supply and demand for properties comparable to those it develop, changes in the applicable governmental regulations, economic conditions, demographic trends, employment and income levels and interest rates in these regions which may affect its business prospects, financial conditions and results of operations.

Rely on independent third party service providers: The company utilize various independent service providers and contractors to execute its projects. Also, many of its regulatory requirements and approvals are outsourced to third party consultancy firms who liaison with various government authorities on its behalf. Further, it constantly require labour for its construction work and the same are procured on contractual basis including contacting for electrical, plumbing and other such tasks. If a service provider or contractor fails to perform its obligations satisfactorily or within the prescribed time periods with regard to a project, or terminates its arrangement with it, it may be unable to develop the project with its intended quality, within the intended timeframe and at the pre-estimated cost.

Significantly dependent on availability of real estate financing in India: The company’s business is capital intensive, requiring substantial capital to develop and market its projects, on-goimg and planned. The actual amount and timing of its future capital requirements may also differ from estimates as a result of, among other things, unforeseen delays or cost overruns in developing its projects, changes in business plans due to prevailing economic conditions, unanticipated expenses, regulatory changes, and engineering design changes. To the extent its planned expenditure requirements exceed its available resources, it will be required to seek debt or equity financing. Debt financing, if available, could increase its interest cost and require it to comply with additional restrictive covenants in its financing agreements. Equity funding requires its promoters to dilute their current shareholding and also comply with various regulations and guidelines.

Outlook

Incorporated in 2015, Modi's Navnirman is a real estate company. The company is engaged in construction services. Its business model focuses on designing and developing products to address consumer needs across price points. Currently, the company has 2 Ongoing and 2 upcoming residential projects and 3 Ongoing and 3 upcoming Residential-cum-Commercial projects. The company’s all the completed, ongoing and upcoming projects are located in Mumbai. The company's project names begin with the word 'Rashmi' (such as 'Rashmi Sadhna', 'Rashmi Sheela' 'Rashmi Terrace', etc). Its customer-centric business model focuses on designing and developing its products to address consumer needs across price points. It has capabilities to deliver a project from conceptualization to completion with fast turnaround time from acquisition to launch to completion, which focuses on de-risking and improving its return on investment. On the concern side, the company require several statutory and regulatory permits, licenses and approvals to operate its business. Many of these approvals are granted for fixed periods of time and need renewal from time to time. Besides, it cannot assure that it will always finish the construction or development of its projects in accordance with the requisite specifications or that the construction of its projects will be free from any and all defects. If the work is unsatisfactory, the work has to be redone as per the designs and / or as per the instructions of project incharge which will entail additional costs.

The company is coming out with a maiden IPO of 1260000 equity shares of Rs 10 each at a fixed price of Rs 180 per share to mobilize around Rs 22.68 crore. On performance front, in fiscal 2022, the company’s Revenue from Operations decreased by Rs 196.86 lakhs or 14.89%, from Rs 1,321.75 lakhs in fiscal 2021 to Rs 1,124.89 lakhs in fiscal 2022. The company’s Profit after Tax reduced by Rs 94.88 lakh or 250.83 %, from Rs 37.83 lakh in fiscal 2021 to Rs 132.70 lakhs in fiscal 2022. Going forward the company plan to establish its presence in the other regions in Mumbai and it intend 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. It will consistently put efforts among its group of experienced employees to transform them into an outstanding team of empowered professionals which helps in further accelerating the wheels of development of the Organization.