Dominic Whiting, Reuters
Mumbai: Developer Omaxe Ltd, which has applied with regulators to launch an IPO, expects its sales to grow at faster than 30% annually over the next five years, partly because of its investments in sought-after retail properties.
The firm was originally slated to raise up to $339 million (Rs1,387 crore) in its Mumbai IPO when papers were filed in December, but recent media reports have put the figure at closer to $200 million because of a stock market slide and investor unease over developers’ land valuations.
Omaxe Chief Executive Arvind Parakh declined to say how much the company expected to raise from the sale of 10% to 11% of its equity, adding only that the environment had changed since late December.
But he predicted that Omaxe, with sales of around $400 million last year, would expand faster than the 30% annual growth projected for the country’s $15 billion property development industry.
“We’re confident of growing faster than these numbers,” Parakh told Reuters on the sidelines of a property conference. “The biggest growth of all will be in retail, because organised retail makes up just 3% of the market.”
The nation of family shopkeepers is predicted to see more large-scale retailers in coming years, with some of India’s top corporate houses such as Reliance, Birla and Tata starting to focus on the business.
Organised retail will grow by at least 30% annually to reach $24 billion by 2010, according to consultants KSA Technopak. Reliance Retail alone has set itself a target of $20 billion of turnover over the next four years.
However, some property professionals believe many of the shopping centres Indian developers are building are badly designed and could fail to attract quality tenants.
Around a quarter of Omaxe’s projects are in the retail arena, mostly inside its integrated township developments, but also including giant shopping malls in New Delhi and Noida, a suburb of the Indian capital.
The company has a land bank of around 1,200 hectares (3,000 acres) in 30 cities.
Indian property firms have faced a backlash over the practice of pricing themselves based on the values of their land banks — which have soared over the past three years — and not by conventional discounted cash flow valuations.
Shares in Dev Property Development, which raised $267 million on London’s Alternative Investment Market in January, and Mumbai-based Akruti Nirman Ltd, which listed in February, both trade below their issue prices.
Parakh said he welcomed tighter scrutiny of land valuations by the Securities and Exchange Board of India (SEBI).
“It’s good for the industry that SEBI and the AIM (alternative investment market) have taken steps to improve disclosure and valuation requirements,” he said.
“You must have clarity. The biggest risk is title, ownership. You may have raised money on bought land, but if the title is not clear, the entire plans could go haywire.”
Parakh said he was “keeping fingers crossed” that regulators would approve Omaxe’s IPO, which is being arranged by Citigroup, Merrill Lynch and JM Morgan Stanley.