Single-Location Presence and Elevated Valuation

• Suraj Estate Developers primarily engages in the redevelopment of buildings and the construction of luxury 2, 3 & 4 BHK flats in South Central Mumbai. The company has witnessed substantial growth in both topline and bottom-line figures over the last two years.
• However, the company faces several concerns. Firstly, its apartment locations are concentrated in South Central Mumbai, lacking diversification. This concentration leaves them susceptible to potential competitors entering these locations and offering superior housing options.
• Another concern arises from the company's allocation of most proceeds to pay off its subsidiaries' debt, indicating a limited productive use of investor funds. This practice is likely to discourage many investors from participating in the IPO.
• Additionally, the company carries a substantial debt of Rs 599 crore as of June 2023, a significant amount considering its FY23 revenue of Rs 308 crore. This financial burden raises questions about the company's financial health and sustainability. Addressing these concerns is essential for maintaining investor confidence and ensuring long-term success in the market.

Valuations

• The company is asking for a PE of 49x and market cap-to-sales of 5.2x which seems very expensive and considering the drawbacks of the company, we recommend avoiding to this IPO.​