What you must know about the SignatureGlobal IPO?

SignatureGlobal (India) Ltd is a well-established brand with a strong presence in Delhi-NCR region, and is known for innovative construction technologies, amenities & affordable prices. SignatureGlobal (India) Ltd commenced operations in 2014 with the launch of Solera project in Gurugram, Haryana. Since then, the company has already sold 27,965 residential and commercial units in Delhi NCR region. Its focus is predominantly on the affordable housing and middle-income housing segment. It provides value homes with attractive designs and amenities via community facilities. SignatureGlobal (India) Ltd has adopted an integrated real estate development model, handling the project from concept to completion. Its control over multiple process pegs, including centralized raw material procurement system, has resulted in cost efficiencies.

Most of its properties developed are also environmentally responsible projects. For example, its projects enhance green cover through sustainable practices like common area lighting with solar panels, LED lights, high-performance glass with light transmission that ensure better cooling and energy savings. SignatureGlobal (India) Ltd has broadly replicated its business model across the micro-markets in Delhi-NCR, with focus on Gurugram. In order to ensure rapid growth and scalability, the company relies on standardized design, technical specifications, and layout plans. A focus on the mid-market means that the company has maintained its business growth even amidst tough market conditions. The issue will be lead managed by ICICI Securities, Axis Capital, and Kotak Mahindra Capital. Link Intime India Private Ltd will be the registrar to the issue.

Highlights of the SignatureGlobal IPO issue

Here are some of the key highlights to the public issue of  SignatureGlobal IPO.

• SignatureGlobal (India) IPO has a face value of ₹1 per share while the price band for the book building IPO has been set in the band of ₹366 to ₹385 per share. The final price will be discovered within this band, through the process of book building.
   
• The IPO of  SignatureGlobal (India) Ltd will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion comprises the issue of 1,56,62,338 shares (156.62 lakh shares approximately), which at the upper price band of ₹385 per share will translate into fresh issue size of ₹603 crore.
   
• The offer for sale (OFS) portion of the IPO comprises the issue of 32,98,701 shares (32.99 lakh shares approximately), which at the upper price band of ₹385 per share will translate into an offer for sale (OFS) size of ₹127 crore. The sold selling shareholder in the OFS is International Finance Corporation (IFC).
   
• Therefore, the overall IPO portion will comprise of the issue of 1,89,61,039 shares (1.90 crore shares approximately), which at the upper price band of ₹385 per share will translate into a total IPO issue size of ₹730 crore.

While the fresh issue will be capital and EPS dilutive, the offer for sale portion will only result in transfer of ownership. The entire OFS size of 32.99 lakh shares approximately will be offered by International Finance Corporation (IFC), one of the early investors in the company. The proceeds of the fresh issue portion will be used to repay / prepay some of its loans, infuse funds into subsidiaries, and inorganic growth through acquisitions. A small part of the funds raised will also be used for general corporate purposes.

Promoter holdings and investor quota allocation quota

The company was promoted by Pradeep Kumar Aggarwal, Lalit Kumar Aggarwal, Ravi Aggarwal, Devender Aggarwal, Pradeep Kumar Aggarwal HUF, Lalit Kumar Aggarwal HUF, Ravi Aggarwal HUF, Devender Aggarwal HUF and Sarvpriya Securities Private Ltd. Currently the promoters hold 78.36% of the company, which will get diluted post the IPO to 69.63%. As per the terms of the offer, 75% of the net offer is reserved for the qualified institutional buyers (QIBs), while just 10% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The stock of  SignatureGlobal (India) Ltd will be listed on the NSE and on the BSE. The table below captures the gist of the allocation to various categories.

Lot sizes for investing in the SignatureGlobal (India) IPO

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of SignatureGlobal IPO, the minimum lot size is 38 shares with upper band indicative value of ₹14,630. The table below captures the minimum and maximum lot sizes applicable for different categories of investors in the IPO of  SignatureGlobal (India) Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for SignatureGlobal (India) Ltd IPO and how to apply?

The issue opens for subscription on 20th September 2023 and closes for subscription on 22nd September 2023 (both days inclusive). The basis of allotment will be finalized on 27th September 2023 and the refunds will be initiated on 29th September 2023. In addition, the demat credits are expected to happen on 03rd October 2023 and the stock will list on 04th October 2023 on the NSE and the BSE.  SignatureGlobal (India) Ltd offers a very unique combination. It has an established and tested business model with a niche focus on the low cost housing segment as well as a strong franchise in the Delhi-NCR region. Let us now turn to the more practical issue of how to apply for the IPO of  SignatureGlobal (India) Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of SignatureGlobal (India) Ltd

The table below captures the key financials of SignatureGlobal (India) Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (All ₹ figures are in crores)

There are few key takeaways from the financials of  SignatureGlobal (India) Ltd which can be enumerated as under

1. In the last 2 years, post the pandemic impact, the revenues growth has been robust. However, the challenge for the company is that the sales traction is still not translating into bottom line growth. The company continues to make losses even in the latest year and it is only in the current year that the net worth of the company has turned positive. Hence most of the traditional valuation measures like net margins, ROE and P/E ratio may not be too meaningful in this context.
    
2. One way to look at the company would be based on the market cap to sales ratio. On revenues of ₹1,586 crore, the market cap post listing translates into ₹5,410 crore, implying a market cap to sales multiple of around 3.5X. It is tough to fathom why investors would pay such a high multiple.
    
3. The company has held a very low level of asset sweating as evidenced by the asset turnover ratio. However, that is understandable as costs tend to be front-ended in this business.

While pricing of the IPO does matter here, what is more critical is the eventual PAT margins that will sustain and the ROE that can be held by the company. For now, it still remains a loss making company, so the IPO has to be seen as a bet on the future of affordable housing in the Delhi / NCR region. It is a high risk call and investors must take a call accordingly.