Emerging heavyweight
Signature Global (SGIL) has built up a robust pre-sales momentum (TTM bookings up ~7.6x over FY21–9mFY25), notable presence in the supply-constrained Gurugram market (unsold inventory only about ten months) and a capital-efficient business model (among lowest capital employed/unit of pre-sales). It is on track to achieve a net cash status aided by robust cash flow and minimal working capital needs. The ongoing realty upcycle and SGIL’s successful transition to the premium housing segment shall help it clock a pre-sales CAGR of 21% over FY25–27E. Potential entry into Noida/Delhi shall be a re-rating trigger in our view. Initiate at ‘BUY’ with a TP of INR1,436 (at 20% premium to NAV). Slowdown in the Gurugram market is a key risk.
Premier developer with track record of execution excellence
A Gurugram-based realty developer, SGIL has cemented its position as one of the largest in the NCR within a short span of a decade. The company began its journey with affordable housing, wherein it demonstrated its capabilities of a quick turnaround between land acquisition and project launch, not to mention timely delivery to customers. SGIL has transitioned well to premium housing post-covid, which propelled its sales bookings (TTM basis) 7.6x over FY21–9mFY25.
Low-cost land bank in attractive Gurugram market
Gurugram has been among the best-performing realty markets in India post-covid on the back of robust demand (CY24 demand > 3.7x CY22 demand), low inventory levels (~ten months) and fast price appreciation. Ongoing and planned infra projects shall further reinforce the fundamentals of the Gurugram market. SGIL has managed to acquire a substantial land bank (> 21msf forthcoming projects with INR350bn-plus sales potential) in attractive micro-markets such as the Southern Peripheral Road (SPR), Dwarka Expressway and Sohna. Judicious land acquisition has ensured its land cost is merely 10–15% of pre-sales value. Hence, its cash operating margins are at a healthy 35% level, and can potentially reach ~40%.
Strong margins + rapid sales velocity = high capital efficiency
Tier-1 developers in Gurugram such as SGIL boast high sales velocity (due to factors such as constrained supply and customers preferring developers with proven track record), resulting in minimal working capital needs. Healthy collections (TTM collections up 5.4x over FY21–9mFY25) and margins mean SGIL has among the lowest capital needs per unit of pre-sales. Consequently, it has been able to amass a sizeable land bank while keeping its leverage low.
On its way to achieving net-cash status
SGIL’s net debt/TTM operating surplus was ~0.5x at end-Q3FY25. Given the company’s bookings are likely to surpass INR100bn in FY25E, we believe it shall have to step up its land capex to replenish its land bank. Nevertheless, a rising collections trajectory and improving profitability imply that free cash flow shall continue to rise. We reckon SGIL is poised to achieve a net-cash status by FY27E.
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