Last Monday, prospectus was filed according to which the Embassy Property Developers, an Indian real estate firm is planning to raise an amount of 513 million dollars through an IPO (Initial Public Offering) of shares.
As per the prospectus, a pre-IPO placement of around 57.5 million shares for up to 11.75 billion rupees is being considered by Embassy Property. However, it is expected that they will provide a discount of 5% to the retail investors.
The IPO time line is not yet set.
According to the data collected by Thomson Reuters, in 2009, there was a raise of $16 billion from 87 offerings, while in mid June of this year; a total raise of about $11 billion from 56 issues took place.
Since now days, land is the most promising resource, the developers are ready to pay any price just to get into the realty business.
Here are some of the major deals in the field of land:
1. The Lodha developers had a deal of Rs 4,053cr for a plot of 25,000 sq mts. The sq per mtr cost is about Rs 81,818.
2. Next closest deal was by Sunteck India. It was a deal of Rs 3,465 crore. Following Sunteck was Indiabulls Real Estate at Rs 3,327 cr which was backed by Gaurhari Estate at Rs 2,251 cr.
3. In 2008, BPTP, a Delhi based builder had a deal of Rs. 5000 cr for a 95 acre plot in Noida. Unfortunately the deal could not get through.
Lodha Developers plan to launch a 650 million dollar IPO in the end of this year. Also, they plan to build a residential building worth Rs. 10,500 cr in the center of Mumbai.
Real estate could be the lynchpin for the equity markets and a failure of a large IPO could start a correction in the market.
Mr Deepak Parekh, Chairman-HDFC Bank, said, “If a large real estate IPO fails, it could have a serious repercussion on the market”.
Mr Parekh stated that many of the recent IPOs have been overpriced and the markets are looking expensive.
Further he added, “Companies raising money need to leave money on the table for investors”.
Indian realtors recently made a trend to raise money through IPOs, with at least five major real estate companies like Emaar MGF Land, Lodha Developers, Sahara Prime City, Ambience Ltd and DB Realty are looking to raise over tweleve thousand five hundred crore rupees.
Sahara Prime City, which aims to raise Rs 3,450 crore from an IPO, will utilize Rs 2,668 crore in the next 3 years to part-fund development of about nineteen thousand housing units across the country.
At present, Sahara Prime City is developing nine integrated townships and one residential complex in cities such as Lucknow, Indore, Nagpur, Ahmedabad, Jaipur, Solapur and Cochin. The group’s ambitious Ambey Valley project is not a part of Sahara Prime City.
Sahara Prime City plans to develop 16 more integrated townships and would pump in another Rs 1426.83 crore from the proceeds of the IPO.
The DRHP said it would develop 13.41 million square feet of residential space in the upcoming projects across the country, including Bangalore, Chandigarh, Jabalpur, Jodhpur, Porbandar, Haridwar and Pune.
Realty industry is all set to be lift up this Diwali. At least 12 public offerings, a slew of new projects and the return of private equity funds that had turned away proposals due to the global slowdown last year.
‘After weathering the worst funds crisis for one and half year, the realty sector has now started seeing inflow of capital and funds,’ said Anuj Puri, the country head of leading global realty brokerage firm Jones Lang LaSalle-Meghraj.
Mr. Puri further said, ‘Sales are improving and private equity funds are coming back. With market sentiments getting bullish, prospects of fund-raising are even brighter. You can now see how every company is taking the QIP route to raise funds,’.
QIP is a tool to raise capital whereby a listed company issues equity shares, fully or partly convertible debentures or securities, instead of warrants, to institutional buyers.
After losing almost 75% of its stock valuation last year, India’s realty sector has raised about $15 billion (Rs.750 billion/Rs.75,000 crore) through routes like QIP in the past six months.
Among the developers who have started mopping up funds over the past few months are the largest player in the industry, DLF Ltd, with $780 million, Unitech with $325 million and Indiabulls Real Estate with $550 million.
Real estate firm Oberoi Constructions plans to launch its IPO early next year.
The IPO may happen in the first quarter of next financial year.
The Mumbai-based developer has “delivered” four million square feet of property and plans to add another four million square feet in the near future.
The share offering would be utilized to “fund growth” in the company. They already have a very decent land bank. They will use the cash for business and further land acquisition.
Amrapali Group has announced plans to invest Rs.15,000 crore in coming 5 years to develop various projects across the country.
It is also considering coming out with IPO within this financial year if the global market scenario improves.
Amrapali group announced the launch of a 400-unit housing project in Ghaziabad with an investment of Rs.125 crore.
Besides the National Capital Region, the group has presence in 27 cities.
Emaar MGF, Godrej Properties, Lodha Developers, Sahara Prime City, Nitesh Estates and Sriram Properties will all hit the capital markets in the current year, declaring that the worst may be over for an industry that virtually cratered in the global economic storm last year.
With market conditions still tight, it will be tough for these issuers to demand substantial premium from investors. Looking at the present volatile market, it would be really difficult to predict the premium.
The last to be listed, Mahindra Holidays and Resorts, debuted on BSE 7 percent higher than its issue price. Godrej Properties, the real estate arm of the Godrej Group, plans to sell around 10 percent through its maiden public issue. Before that, the company will place a 3.5 percent equity with select institutions.
The IPO is expected to fetch the company anywhere between 450 crore and 600 crore rupees. It will use the proceeds for building low-cost housing. ICICI Securities and Kotak Mahindra Capital are the merchant bankers to the issue.