Management

• Mofatraj P. Munot (Non-Executive Chairman)
• Bhavik Parag M. Munot (Managing Director)
• Narendra Kumar Lodha (Executive Director)
• Imtiaz I. Kanga (Non-Executive Director)
• Anjali Seth (Independent Director)
• Narayan K. Seshadri (Independent Director)
• Sunil R. Chandiramani (Independent Director)
• Satish R. Bhujbal (Independent Director)
• Abhishek Thareja (Company Secretary and Compliance Officer) and Chandrashekhar
• Joglekar (Chief Financial Officer).

Use of Proceeds

The total issue size is Rs.1590 cr, which comprises entirely of fresh issue of Rs. 1590cr. with no offer for sale (OFS) component. The company intends to utilize a portion of the Net Proceeds towards Repayment / prepayment, in full or part, of certain outstanding borrowings availed by the Company (~Rs 332.26 cr), the subsidiaries (859.24 cr), and general corporate purposes

Industry

Growing Income Levels and Demographic Advantage India is undergoing a significant economic transformation, with the World Economic Forum projecting that over 100 million households will shift into the Upper Mid and Higher Income brackets by 2030. This change is expected to drive a decade-long housing demand surpassing 100 million units. Alongside rising incomes, India is experiencing a favorable demographic shift. As per the United Nations Population Fund (UNFPA), the working-age population (15–59 years) is expected to peak at 65% around 2036, up from 61% in 2011. This has led to a declining dependency ratio, marking India's entry into the demographic dividend phase. The economic boost from such a demographic shift has been demonstrated in countries like Japan, China, and South Korea. In India, this younger, urbanizing population is expected to significantly influence real estate demand across residential and other asset classes. The growing workforce and increased urban migration are foundational to the country’s long-term housing market expansion.

Government and Regulatory Support Boosting Real Estate Despite rising mortgage rates, housing demand in India remains robust. The RBI's 25 bps repo rate cut to 6.25%— its first in five years—signals intent to stimulate economic growth. Government and regulatory support have also been instrumental in sustaining the real estate sector post-pandemic. Key measures include loan restructuring, extended repayment periods for developers, and targeted liquidity support via a Rs 50,000 cr LTRO window and Rs 10,000 cr funding to the National Housing Bank. The Maharashtra government further supported the sector through stamp duty reductions and property tax waivers. Schemes like Pradhan Mantri Awas Yojana-Urban 2.0 aim to assist 1 cr families with financial help of up to Rs 2.5 lakh per unit. The SWAMIH fund has already infused over Rs 13,200 cr into stalled projects, supporting 87,000 homebuyers. Regulatory moves like RERA, GST, and the Benami Act have increased transparency, reduced unorganized activity, and driven consolidation. Branded developers now dominate new launches, with their share rising from 41% in 2015 to over 56% in 2018.

Regional Growth Centers: MMR and Pune The Mumbai Metropolitan Region (MMR) remains India’s most significant real estate market. As the country’s financial capital, Mumbai contributes over 6% to India’s GDP and one-third of its tax revenue. The city is home to major institutions like RBI, NSE, BSE, and conglomerates such as Tata and Reliance. The metro, monorail, Mumbai Trans Harbour Link (Atal Setu), Navi Mumbai Airport, Coastal Road, and Goregaon-Mulund Link Road are transforming connectivity and spurring real estate growth. Key demand drivers include employment generation, top-tier social infrastructure, and increasing disposable incomes. Similarly, Pune’s real estate market thrives due to its robust industrial and IT ecosystem. With over 800 IT companies in Hinjewadi alone and major manufacturing and engineering hubs in Chakan and Talegaon, Pune is also witnessing rapid demand in its northern suburbs. Pune ranked second in India for live ability in the 2020 Ease of Living Index, highlighting its importance as a fast-growing, high-potential residential real estate market.

Competitive Strengths

Prominent Real Estate Company in MMR with Diversified Portfolio Kalpataru Limited is a well-established real estate developer with a strong presence across all micro-markets in the Mumbai Metropolitan Region (MMR) and Pune, Maharashtra. The company’s portfolio spans various price points, catering to ultra-luxury, luxury, high-end, and mid-income segments. As of December 31, 2024, it had 73 Completed Projects in MMR and Pune, covering 15.03 million square feet (msf), which is 93.63% of the total completed developable area. In addition, it had 23 Ongoing Projects (23.21 msf), 5 Forthcoming Projects (15.43 msf), and 5 Planned Projects (7.81 msf), contributing to 94.84% of its total development portfolio. The company believes its strength lies in its ability to design high-quality, well-differentiated projects across these diverse micro-markets. Backed by effective branding and marketing strategies tailored to each segment, Kalpataru has built a diverse and resilient development pipeline aligned with regional demand. The company believes that its ability to design high-quality and differentiated projects and position them to the target segment through an appropriate marketing and branding strategy has enabled the company to deliver projects across diverse micro-markets.

Strong Brand Enabling Premium Pricing and Construction Phase Sales Kalpataru believes its brand equity is one of its most valuable assets, influencing customer preferences and enabling premium pricing in the sub-markets where it operates. According to the Anarock Report, Kalpataru’s projects have achieved pricing above average market rates. The company generally aims to sell over 80% of its Saleable Area during the construction phase itself. It strategically leverages its trusted brand to accelerate sales within the first year of project launch and well before the receipt of the occupation certificate. This model significantly enhances operating cash flows during construction and reduces inventory risks. The brand’s credibility, built through consistent execution and project quality, fosters customer confidence, making early sales more achievable. In a market where cash flow timing is crucial, this ability to generate revenue early in the project lifecycle supports financial stability and enables more efficient capital deployment for new developments.

Strong Project Pipeline with Visibility of Near-Term Cash Flows The company’s Ongoing Projects and the pipeline of Forthcoming Projects and their ability to sell throughout the construction phase, provide the company with visibility on near-term cash flows. As of December 31, 2024, the company had 25 Ongoing Projects, 6 Forthcoming Projects, and 5 Planned Projects, providing continuity in execution. The forthcoming projects, covering approximately 16.33 msf of developable area, are slated to launch in phased manners over FY2025, FY2026, and FY2027. We believe that ongoing Projects and the pipeline of Forthcoming Projects present a significant competitive advantage for the company and allows them to maintain notable position.

End-to-End Execution Capabilities and ability to deliver projects in timely manner Kalpataru follows an integrated real estate development model encompassing land acquisition, planning, design, execution, marketing, and sales. The company has built strong in-house capabilities across all key functions, enabling timely and quality project delivery. This superior execution allows Kalpataru to offer a diversified project mix, including multi-storey residential buildings, townships, lifestyle gated communities, office buildings, IT parks, shopping malls, and retail outlets. Its broad portfolio allows the company to address multiple customer segments, enhancing market reach and revenue diversification. The company's operational strength lies in its ability to align architectural design, material sourcing, and construction scheduling to market needs. Kalpataru’s emphasis on timely completion has built credibility with customers and investors alike. This holistic execution strategy not only reduces dependency on external contractors but also supports efficiency, cost control, and design consistency—critical success factors in competitive urban real estate markets. The company believes that its execution capability comprising strong in-house operations consisting of design, EPC monitoring and quality control teams, is a critical factor that has contributed to its notable position.

Pioneer in Green and Sustainable Development Practices Kalpataru is a recognized leader in sustainable real estate development, promoting green building principles across its project portfolio. It is one of the founding members of the Indian Green Building Council (IGBC) and is deeply committed to environmental sustainability. The company incorporates energy-efficient designs, water conservation systems, healthy indoor environments, and the use of eco-friendly materials in its projects. These initiatives result in lower operational costs and reduced water and energy consumption, benefiting both the developer and the end-user. The green certifications and practices also enhance the marketability and long-term reputation of Kalpataru’s developments. By embedding sustainability into its design philosophy, the company aligns itself with growing consumer demand for responsible living and regulatory trends favouring eco-compliant developments. This focus on green construction further differentiates Kalpataru in an increasingly environmentally conscious marketplace and contributes positively to both brand value and long-term asset performance.

Peer Comparison

Key Risks & Concerns

Losses and Profitability Risk: Kalpataru reported losses in FY22, FY23, and FY24, mainly due to revenue recognition under Ind AS 115, where revenue is booked only after receiving occupancy certificates, while costs are incurred upfront. Subsidiaries like Kalpataru Magnus and Elitus have also recorded lifecycle losses. As operational costs are expected to rise with business expansion, failure to grow revenue proportionally may lead to continued losses, impacting cash flows and the stock’s market performance.

Geographical Concentration in MMR and Pune: As of December 31, 2024, 94.84% of Kalpataru’s Developable Area was in MMR and Pune, exposing it to region-specific risks like local economic downturns, land scarcity, or regulatory changes. Any adverse developments in these regions could significantly impact sales, project execution, and overall business performance.

Negative Cash Flows: The company has reported negative cash flows from investing and financing activities over the past three years, mainly due to capital deployments and debt repayments. Ongoing negative cash flows could affect liquidity, disrupt operations, and limit investment in future growth.

Fluctuation in key raw material prices: Disruption or fluctuation in supply or prices of key building materials like steel, cement, ready mix concrete, flooring products, hardware, bitumen, sand and aggregates, doors and windows, bathroom fixtures and other interior fittings could affect estimated construction cost and timelines resulting in cost and time overruns, thereby adversely affecting results of operations and financial condition.

Outlook and Valuation

Kalpataru Limited’s strong presence in MMR and Pune, coupled with a diversified portfolio across price segments, positions it to capitalize on India’s growing housing demand. With 48.97 msf of developable area and over 1,800 acres of land reserves across strategic regions, the company holds significant monetization potential. It has 25 ongoing, 6 forthcoming, and 5 planned projects that provide strong revenue visibility. Its expansion strategy includes entering new high-growth cities like Hyderabad, Noida, and Nagpur. The company’s balanced development approach—leveraging in-house, JV, JDA, and redevelopment models—helps mitigate risk and improve capital efficiency. The planned use of IPO proceeds to reduce debt is a positive step toward deleveraging the balance sheet and enhancing financial stability. Coupled with its established brand, operational synergy from the Kalpataru Group, and a customer-centric design approach, Kalpataru is poised for scalable, sustainable growth in India's real estate sector.

Kalpataru’s strategy of focused regional dominance, especially in high-barrier markets like MMR and Pune, supports pricing power and margin stability. The company’s shift toward asset-light models (JDA/JVs), and planned monetization of land reserves, aim to unlock value and reduce capital intensity. Its development portfolio, with over 95% in residential projects, aligns with India’s demographic tailwinds—rising incomes, growing urban population, and improving home loan penetration. Kalpataru is also integrating green, sustainable, and premium construction practices to enhance customer experience and product differentiation. Its emphasis on timely execution and expansion into commercial and mixed-use spaces adds a layer of revenue diversification. Backed by seasoned leadership, long-standing brand equity, and a robust project pipeline, Kalpataru is well-positioned to benefit from consolidation in India’s real estate sector post-RERA and GST reforms. Continued deleveraging and strong execution could drive further re-rating of the company’s fundamentals and market valuation over the medium term.

While Kalpataru benefits from a robust brand, established regional footprint, and a scalable project pipeline, there are critical concerns. The company posted losses for three consecutive years before turning marginally profitable in 9MFY25. Revenue trends have been inconsistent, with volatility in reported income due to accounting treatments under Ind AS 115. Kalpataru also operates with the lowest EBITDA margins among peers and has posted very low return on equity (ROE), raising questions on operating efficiency. Additionally, the issue is priced at a high P/E multiple, despite its recent profitability being limited to just one nine-month period. These valuations appear stretched, especially when benchmarked against more consistently profitable peers. The company also faces significant geographical concentration risk, with over 94% of its portfolio in MMR and Pune. At the upper end of the price band, the issue is valued at 668x 9MFY25 earnings, which appears expensive given the company’s poor track record of growth, profitability and elevated risk profile. Given the fragile earnings profile, high valuations, and operating risks, we recommend AVOID rating to the issue.