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

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

The issue consists of a new issue of shares worth Rs 560 crore and an offer to sell worth Rs 75 crore remaining. The price range is set at Rs 514-541 per share.

The company, a major property developer in the Mumbai Metropolitan Region (MMR), sells properties under the “Rustomjee” brand.

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

The company mainly focuses on residential real estate projects in the affordable, medium and mass, ambitious, premium and super premium categories.

In FY20-22, its revenue and EBITDA grew at a CAGR of 2% and 15% respectively, while EBITDA margin grew from 11.2% in the fiscal year 20 to 14.1% in fiscal year 22.

It also recorded a CAGR of 208% in reported PAT at Rs 135 crore during FY22, driven by lower interest charges, as this declined from a high of Rs 230 crore during of FY21.

Main risks: Rise in interest rates, economic slowdown, risk of geographic concentration of activities, competition.

Here is what brokers recommend:

Reliance Securities | SUBSCRIBE

Although the company has been inconsistent with its results over the past few years, we believe the rising real estate sector and easing inflationary pressures bode well for Keystone. Given its leading position in the Mumbai real estate market, a strong pipeline of 35 million sq.ft. of salable area, a strong balance sheet and an attractive valuation, we recommend “SUBSCRIBE” to the broadcast.


The reputation and brand of the promoter are key factors contributing to the sale of projects in this micro-market. The company has aggressively reduced its debt and reduced its net debt to equity ratio from 7.7x in fiscal year 2020 to 1.1x as of June 30, 2022.

On the margin front, the company has ample potential for expansion as current margins include few one-time expenses. The real estate sector is expected to see a healthy increase in redevelopment projects and strong demand for residential projects, especially in metropolitan areas, which will be a huge opportunity for organized and branded players such as Rustomjee.

On the upper price range, the P/E ratio is 38.8x. Current value is attractive from a long-term perspective given the industry average P/E of 96.5x, according to the company.


In terms of absorption, it is one of the leading real estate developers in MMR’s micromarkets. Based on absorption levels between 2017 and 2021, it has a market share of 28% in Khar, 23% in Juhu, 11% in Bandra (East), 14% in Virar. In addition, the company’s customer base allows it to obtain a price premium of more than 50% in the markets of Juhu, Bandra (East) and Khar.

We estimate a 15.5% increase in pre-sale collections during fiscal years 22-24E. Revenue is expected to increase by 23.5% CAGR to Rs 1,936.5 cr in FY24E.

But given its 76.6% sequential drop in pre-sale activity (compared to an average 3% increase in peer activity), we suggest “Subscribe with caution.”


The company operates under an asset-light model by entering into joint development agreements, redevelopment agreements with landowners or developers, or corporations, and slum upgrading projects, which require lower initial capital investment to that of the direct acquisition of plots of land.

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

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