Omaxe IPO: At your discretion
Omaxe is a real estate development and construction company with operations in 30 cities and nine states in India. The company is involved in residential and commercial real estate development projects, which include developing integrated townships, group housing, retail, commercial properties, hotels, information technology and biotech parks. It follows the build-and-sell revenue model, which entails identification, acquisition, execution and selling.
The company intends to use around Rs 200 crore for repayment of debts, Rs 150 crore for the construction of projects, Rs 325 crore for future projects and repayment of land liabilities. The company currently has a land bank of 3,255 acres, of which on 3,096 acres there are projects up and running and the remaining is still to be used. Also, in the 3,096 acres on which projects are ongoing, the company owns 100% development rights of 2,645 acres. In addition to this, in 2645 acres, in 451 acres the company has 74% economic interest.
Concerns: Conflict of interests due to promoter's presence in the same line of business cannot be ruled out.
It is concentrated more in the National Central Region (NCR), in which it derives almost 73% revenues leading to concentration risks. Also, sustaining the growth rate will be a key issue going forward, as it has been in this business for just five odd years.
The projects for which the funds are to be utilised come with high gestation period of 3-5 years.
On the valuation front, considering the post-issue equity capital on a fully diluted basis including the green-shoe option, the company quotes a P/E of 19.80(x) and 23.17(x) at the lower and higher end of the price band respectively. This is an attractive proposition however buyer beware.
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