Arkade Developers IPO Subscribed 16 times on Day 2; Ipo Gmp Stand at 85 (66.41%)

Mumbai-based real estate developer Arkade Developers IPO, which has seen strong investor demand. The IPO was oversubscribed 16.2 times by the end of the second day, with 38.5 crore shares bid against the 2.4 crore shares offered, according to provisional exchange data. The IPO opened with significant interest and was fully subscribed on the first day itself. The strong demand indicates positive sentiment toward the company’s business model and growth potential.

Subscription Status by Investor Category

• Qualified Institutional Buyers (QIBs): Subscribed 44% of their reserved quota, reflecting moderate interest from institutional investors.
• Non-Institutional Investors (NIIs): The NII portion saw a significant 28.3 times oversubscription, indicating strong demand from high-net-worth individuals and corporates.
• Retail Investors: The retail segment was highly oversubscribed at 20 times, showcasing strong demand from individual investors.
• Employees: The portion reserved for employees saw 19.25 times subscription, indicating confidence from those closely associated with the company.

This level of subscription suggests a high level of interest across all investor categories, with NIIs and retail investors showing particularly strong enthusiasm.

Anchor Investment and Proceeds

Ahead of the IPO opening, Arkade Developers raised ₹122.4 crore from anchor investors. This pre-IPO fundraising set the tone for a successful offering. The total IPO consists of a fresh issue worth ₹410 crore, which will be used to fund the company’s growth strategies, including purchasing new land and completing ongoing projects. Notably, the company does not intend to use the funds to pay down debt, focusing instead on expansion and development.

Analyst Recommendations and Key Insights

Zee Business Executive Editor Anil Singhvi recommended subscribing to the Arkade Developers IPO for both short-term gains and listing benefits. Singhvi highlighted the company’s experienced management team, track record of on-time project delivery, strong financials, and attractive valuation as key reasons to invest. However, he noted two limitations: the company’s focus on the western suburbs of Mumbai and the high level of competition in the real estate sector.

SBI Securities also gave a positive recommendation for the IPO, citing the potential for listing profits as well as long-term investment value. They mentioned the P/E multiple of 19.3x based on FY24 earnings, suggesting the IPO is reasonably priced, especially considering the company’s track record and future growth potential.

Company Overview: Arkade Developers

Arkade Developers focuses on premium residential properties in Mumbai. The company has developed 2.2 million square feet of residential space and has a solid reputation for on-time project completion. From 2017 to Q1 2023, Arkade Developers launched 1,040 residential units and sold 792 units in the Mumbai Metropolitan Region (MMR), further proving its ability to execute and sell high-demand properties.

Arkade’s business model involves both new housing projects and the redevelopment of existing properties, making it well-positioned in the ever-growing real estate market of Mumbai.

IPO Details and Valuation

• Price Band: ₹121-₹128 per share
• Fresh Issue Size: ₹410 crore
• Total Issue Size: ₹410 crore
• Number of Shares Offered: 3,20,31,250 – 3,38,84,298 shares
• Face Value: ₹10 per share
• Post-Issue Market Capitalization: ₹2,269 crore to ₹2,376 crore
• Lot Size: 110 shares per lot
• Investor Quota:
  • QIBs: 50%
  • Retail Investors: 35%
  • NIIs: 15%

The company’s market capitalization post-issue is estimated to range between ₹2,269 crore and ₹2,376 crore, and the price band of ₹121-₹128 per share offers an attractive valuation considering the company’s growth prospects.

Strategic Use of Proceeds

The ₹410 crore raised through the fresh issue will be primarily used for:

• Purchasing new land for future developments.
• Completing existing projects currently underway.

Arkade Developers does not intend to use the IPO proceeds for debt repayment, signaling a focus on expansion rather than addressing liabilities. This strategic move is expected to help the company strengthen its market position, especially in Mumbai’s competitive real estate sector.

Conclusion

The Arkade Developers IPO has garnered strong interest from retail investors, NIIs, and institutional investors alike, with oversubscription rates reflecting confidence in the company’s future. The company’s experienced management team, solid financial performance, and attractive valuation make it a compelling investment. However, investors should consider the risks of high competition and the company’s focus on a specific region (western suburbs of Mumbai). For those seeking both short-term listing gains and long-term growth, Arkade Developers presents a promising opportunity