New Delhi: The investment trust of India’s fourth largest listed developer Indiabulls Real Estate Ltd, Indiabulls Property Investment Trust, slid 10% on its debut on the Singapore Stock Exchange, trailing the movement of the exchange’s benchmark index and mirroring weak investor appetite for real estate stocks.
The stock of the real estate investment trust (Reit) closed at 90 Singapore cents (Rs28.23) on Wednesday, less than the offer price of S$1, which was anyway at the lower end of the offer price band. The Straits Times Index ended the day up by less than 0.5% and closed at 3,046.77 points.
The initial public offering (IPO) of Indiabulls’ Reit closed last week after being extended for a day because it failed to attract the 1,000 retail investors required for an Reit listing in Singapore. “If Indiabulls faced difficulty in their Reit listing, it is a sign of tough times ahead for developers,” said Shailesh Kanani, an analyst with Angel Broking. “In the next six months or so, it is not likely that we will see Indian developers going in for an Reit listing though they are waiting for an opportunity to raise money.”
Getting private equity funding will also be a tough task because investors are sceptical about the buoyancy in the Indian real estate market. Developers have been nearly cut-off from bank borrowings after the Reserve Bank of India, India’s central bank, cautioned against excessive lending to the sector and interest rates scaled up to between 14% and 18% for such borrowers. “Most funding routes are either blocked or are unviable for developers,” Kanani said.
According to a banker involved in the deal, who isn’t authorized to speak publicly, 70% of the offering was subscribed to by long-term investors and the rest by hedge funds. “Real estate...is out of favour with investors. Given the challenging background, it was a tough deal,” the banker said, and added, “Developers would need to reconcile to a lower valuation.”
Indiabulls raised S$262 million from its offering—less than the S$285 million it sought, at a price band of between S$1 and S$1.10 a share. Before the IPO, billionaire L.N. Mittal, chief executive officer of ArcelorMittal, the top global steel firm, had acquired 91 million shares in the trust as an anchor investor, helping Indiabulls Real Estate raise a total of S$353.5 million from the listing.
“Getting (enough) investors will be next to impossible,” an analyst with an international financial services company said. “And even if it does happen, the listing will be at a big discount to the actual valuation and large developers such as DLF Ltd would not want that because then their land valuations will come down.”
Deutsche Bank AG and Merrill Lynch (Singapore) Pte Ltd arranged the share sale.