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HomeNewsHere's why analysts are positive on Keystone Realtors' Rs 635 crore-IPO

Here’s why analysts are positive on Keystone Realtors’ Rs 635 crore-IPO


Keystone Realtors’ (Keystone) Rs 635 crore initial public offer (IPO) opened for subscription on Monday and will close on Wednesday.

The issue consists of a fresh issue of shares worth Rs 560 crore and an offer-for-sale worth the remaining Rs 75 crore. The price band is fixed at Rs 514-541 per share.

The company, a major real estate developer in the Mumbai Metropolitan Region (MMR), sells properties under the brand name ‘Rustomjee’.

Analysts are positive on the company’s given its asset-light model, strong brand, decent financials and attractive valuation.

The company is primarily focused on residential real estate projects across affordable, mid and mass, aspirational, premium and super premium categories.

During FY20-22, its revenue and EBITDA grew at a CAGR of 2 per cent and 15 per cent respectively, while the EBITDA margin expanded from 11.2 per cent in FY20 to 14.1 per cent in FY22.

It also clocked a 208 per cent CAGR in reported PAT at Rs 135 crore in FY22, led by lower interest cost, while this declined from a high of Rs 230 crore in FY21.

Key risks: Rise in interest rates, economic slowdown, geographical business concentration risk, competition.

Here’s what brokerages recommend:

Reliance Securities | SUBSCRIBE

While the company had been inconsistent with its top and bottom lines for the past few years, we believe that the uptick in the real estate sector and softening of inflationary pressure augurs well for Keystone. Given its leading position in the Mumbai Real estate market, a strong pipeline of 35 mn square feet of saleable area, a strong track record and attractive valuation, we recommend ‘SUBSCRIBE’ to the issue.


The developer’s reputation and brand name are key factors contributing towards the sale of projects in this micro-market. The company has been aggressively reducing debt and has bought down its net debt-to-equity ratio from 7.7x in FY20 to 1.1x as of June 30, 2022.

On the margins front, the company has ample scope for expansion as the current margins include few one-off expenses. The realty industry is expected to see a healthy uptick in redevelopment projects and a strong demand for residential projects, especially in metropolitan areas, which will be a massive opportunity for organized and branded players such as Rustomjee.

On the upper price band, the P/E ratio is 38.8x. The current value is appealing from a long-term view given the average industry P/E of 96.5x, according to the company.


In terms of absorption, it is one of the prominent real estate developers in the micro of MMR. Based on the absorption levels between 2017-21, it has a market share of 28 per cent in Khar, 23 per cent share in Juhu, 11 per cent in Bandra (East), 14 per cent in Virar. Moreover, the company’s customer goodwill helps it command over 50 per cent price premium in the of Juhu, Bandra (East) and Khar.

We estimate a 15.5 per cent rise in pre-sales collections over FY22-24E. Top-line is expected to grow 23.5 per cent CAGR to Rs 1,936.5 cr in FY24E.

But considering its 76.6 per cent sequential fall in pre-sales business (compared to a 3 per cent average increase in the peer’s business), we suggest “Subscribe with Caution”.


The company operates in an asset-light model by entering into joint development agreements, redevelopment agreements with landowners or developers, or societies, and slum rehabilitation projects, which require lower upfront capital investment compared to the direct acquisition of land parcels.

This approach ensures that its capital allocation is balanced and calibrated, allowing it to generate revenue with lower initial investments.


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