Key details investors should know before investing in the VR Infraspace IPO

VR Infraspace Limited, a construction and real estate development company based in Vadodara, Gujarat, is going public with its initial public offering (IPO) on the NSE SME platform. The IPO will be up for subscriptions on March 4, 2024, and close on March 6, 2024. The company aims to raise Rs 20.4 crore through the IPO and use the net proceeds for its working capital requirements and investment in its subsidiary, Daxon Realty.

Company Profile: VR Infraspace was founded in 2011 and specializes in the construction and development of residential and commercial developments in and around Vadodara. The company has completed eleven projects with a total built-up area of 2.17 lakh sq. ft. and has four ongoing projects with a total built-up area of 1.83 lakh sq. ft. The company also has a subsidiary, Daxon Realty, which participates in the development of a residential project in Vadodara. The company's promoter and managing director is Vipul Devchand Rupareliya, who has nine years of experience in the real estate industry.

IPO Details: The VR Infraspace IPO consists of a fresh issue of 24 lakh equity shares of face value of Rs 10 each, aggregating to Rs 20.4 crore. The issue price is fixed at Rs 85 per share, which implies a price-to-earnings (PE) ratio of 8.5 based on the FY20 earnings. The issue size represents 26.67% of the post-issue paid-up equity share capital of the company. The minimum lot size is 1,600 shares and the maximum lot size is 16,000 shares. The IPO will be listed on the NSE SME platform, which is a dedicated platform for small and medium enterprises (SMEs) to raise capital and access the capital markets.

Financial Performance: VR Infraspace has shown consistent revenue growth in the last five years, from Rs 9.64 crore in FY16 to Rs 28.62 crore in FY20, at a compound annual growth rate (CAGR) of 30.9%. The company's profit after tax (PAT) has also increased from Rs 0.62 crore in FY16 to Rs 2.51 crore in FY20, at a CAGR of 41.4%. The company's return on net worth (RONW) was 19.8% in FY20, while its earnings per share (EPS) was Rs 10.05. The company's debt-to-equity ratio was 0.65 as of September 30, 2020, which indicates a moderate leverage level.

Strengths and Risks: Some of the strengths of VR Infraspace are its established presence and brand recognition in the Vadodara real estate market, its diversified portfolio of residential and commercial projects, its customer-centric business model and quality standards, and its experienced management team and skilled workforce. Some of the risks and challenges that the company faces are the cyclical and competitive nature of the real estate industry, the regulatory and environmental uncertainties and compliances, the dependence on subcontractors and suppliers, and the impact of the COVID-19 pandemic on the demand and supply of real estate.

Peer Comparison and Valuation: VR Infraspace does not have any listed peers in the same segment and region. However, some of the comparable listed companies in the real estate sector are Sunteck Realty, Kolte-Patil Developers, Ashiana Housing, and Puravankara. The average PE ratio of these peers is 23.8, which is higher than the PE ratio of VR Infraspace at 8.5. This indicates that the VR Infraspace IPO is attractively priced and offers a valuation discount to the investors. However, investors should also consider the growth prospects, profitability, and return ratios of the company before investing.