What you must know about V R Infraspace IPO?

V R Infraspace Ltd was incorporated in the year 2015 as a real estate development company. The company’s predominant operations base is in and around the industrial city of Vadodara in Gujarat. V R Infraspace Ltd is engaged in the construction and development of residential and commercial projects in Vadodara region. The company currently offers a gamut of luxurious, yet affordable residential buildings with different types of accommodations. Each building has security systems, recreational facilities, play areas, and electricity backups. Some of the marquee projects completed by V R Infraspace Ltd in the residential construction space include VR Celebrity Luxuria and VR Imperia; as well as a commercial project named VR One Commercial Business Centre. Even the registered office of V R Infraspace Ltd is located in Vadodara in the state of Gujarat. The company runs a small operation an employs around 9 people.

Key terms of the SME IPO of V R Infraspace IPO (SME)

Here are some of the highlights of the V R Infraspace IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 04th March 2024 and closes for subscription on 06th March 2024; both days inclusive.
   
• The stock of the company has a face value of ₹10 per share and it is a fixed price issue. The price for the IPO has been set at ₹85 per share. Being a fixed price IPO, there is no question of any price discovery in this case.
   
• V R Infraspace IPO has only a fresh issue component and no offer for sale (OFS) portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
   
• As part of the fresh issue portion of the, V R Infraspace IPO will issue a total of 24,00,000 shares (24.00 lakh shares), which at the fixed IPO price of ₹85 per share aggregates to fresh fund raising of ₹20.40 crore.
   
• Since there is no offer for sale (OFS) portion, the fresh issue size will also double up as the overall IPO size. Therefore, the overall IPO size will also comprise of the issue of 24,00,000 shares (24.00 lakh shares) which at the fixed IPO price of ₹85 per share will aggregate to overall IPO size of ₹20.40 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 1,21,600 shares. Spread X Securities Private Ltd will be the market maker to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing.
   
• The company has been promoted by Vipul Devchand Rupareliya and Mrs. Sumitaben Vipulbhai Rupareliya. The promoter holding in the company currently stands at 100.00%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 72.97%.
   
• The fresh issue funds will be used by the company to invest in its subsidiary, Narayanan Enterprises Ltd and to meet working capital expenses. Part of the proceeds will also be used to fund general corporate expenses.
   
• Beeline Capital Advisors Private Ltd will be the lead manager to the issue, and Link Intime India Private Ltd will be the registrar to the issue. The market maker for the issue is Spread X Securities Private Ltd.

IPO allocation and minimum lot size for investment

V R Infraspace IPO has already announced the market maker allocation at 1,21,600 shares as inventory for market making. Spread X Securities Private Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the retail investors and the HNI / NII investors. The breakdown of the overall IPO of V R Infraspace Ltd in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 1,600 shares. Thus, retail investors can invest a minimum of ₹136,000 (1,600 x ₹85 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 3,200 shares and having a minimum lot value of ₹272,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of in the V R Infraspace IPO (SME)

V R Infraspace IPO SME opens on Monday, 04th March 2024 and closes on Wednesday, 06th March 2024. The V R Infraspace Ltd IPO bid date is from 04th March 2024 at 10.00 AM to 06th March 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 06th March 2024.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on March 11th 2024, will be visible to investors under the ISIN Code – (INE0QQM01017).

Financial highlights of V R Infraspace Ltd

The table below captures the key financials of V R Infraspace Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

• The revenues have grown at a modest pace in the last 2 years and hence the latest year revenue data shows a secular growth trend, which is a positive signal. Hence CAGR growth over two years is also robust at double digits. The PAT margins are very attractive at 14.62%, although it is the sustainable margins that will matter.
   
• Apart from net margins at over 14%, the ROE at 21.71% has also been robust as has the return on assets (ROA) at 6.22%. The ROE and ROA have shown a sharp improvement in the latest year, with the ROE nearly tripling in the current fiscal.
   
• The asset turnover ratio or the sweating ratio has been low at below 0.5 and that is because the real estate business tends to be inventory intensive. Once the sales also pick up, this ratio should also pick up, although the ROA should be a consolation.

The company has latest year EPS of ₹4.04 and even through previous data may not really be comparable, the weighted average EPS of last 3 years stand at ₹2.59. The latest year earnings are being discounted by the IPO price of ₹85 per share at 20-21 times P/E ratio. However, the real story is that the narrative becomes a lot more enticing once the economies of scale start to reflect on the bottom line numbers. That is likely to take some time, but this is an area that is worth betting on. Investors with a higher risk appetite and a longer time frame can look at this IPO.