IVRCL Infrastructures & Projects Ltd, the Hyderabad-based infrastructure company, plans to go in for an initial public offering (IPO) for its real estate subsidiary IVR Prime Urban Developers Ltd to raise Rs2,000 crore, in continuation of a trend of real estate firms tapping the capital market—DLF Ltd’s Rs9,187 crore IPO, in early June, was oversubscribed 3.5 times. Another developer, Housing Development and Infrastructure Ltd, is seeking to raise Rs1,485 crore through an IPO that is already oversubscribed and which closes on Tuesday.
“We plan to raise around Rs2,000 crore. It will be through book-building,” said S. Ramachandran, deputy director of development and corporate strategy, IVRCL.
IVR Prime is in the business of constructing urban infrastructure, typically residential apartments and hotels. “We have certain plans for our real estate arm. In order to realize those plans, we have to raise money,” added Ramachandran. IVRCL Infrastructures, which has an 80% stake in IVR Prime, plans to dilute 20% of its holding in the IPO; the balance 20% is held by the family of the company’s promoter, Sudhir Reddy. Foreign institutional investors such as Citigroup, HSBC, Merrill Lynch, Goldman Sachs and UBS Securities together hold a majority 87.5% stake in IVRCL Infrastructures.
“The dilution of 20% stake held by IVRCL in IVR Prime Urban will help unlock part of the value of IVR Prime Urban for IVRCL shareholders. Given the promoter background and the fact that real estate IPOs are getting sold easily again, the IPO could perform well,” said Nitin A. Khandkar, senior vice-president (research) at the Mumbai-based Keynote Capitals Ltd.
He added that IVR Prime “is a smaller player compared with the likes of DLF or Unitech, with a land bank of just 2,298 acres and a saleable area of 56.63 million sq. ft, located in five cities.” IVRCL ended 2006-07 with revenues of Rs2,518 crore and a net profit of Rs168.90 crore. “We plan to become a $1 billion (Rs4,100 crore) company by 2007-08,” said Ramachandran.
In an unrelated development, IVRCL proposes to erect power transmission lines in Algeria and Sudan. “In (the) power sector, we basically implement contracts in transmission lines, substations and rural electrification. We are now looking at setting up power transmission line projects in West Asia,” said Ramachandran.
It is also considering setting up a new subsidiary company called IVRCL Power in order to take care of its power business, taking the total number of subsidiary companies to five.
IVRCL has already set up a power transmission tower manufacturing plant in Nagpur at an investment of Rs16 crore and hopes to commission it by August this year.
IVRCL’s shares closed at a high of Rs381.30 per share on the Bombay Stock Exchange on Monday, gaining 6.32% over the previous day’s close. The exchange’s benchmark 30-stock index Sensex rose 0.09% to 14,664.26 points.