Mumbai: Close on the heels of the mega public issue of Delhi-based realtor DLF Ltd, Housing Development and Infrastructure Ltd (HDIL), a group company of the Mumbai-based mortgage firm Dewan Housing Finance Ltd, plans to enter the capital market with a public issue of around Rs2,000 crore early July. Another Delhi-based realtor, Omaxe Developers Ltd, is also expected to hit the market around the same time
Analysts who have been crunching HDIL’s numbers in the run-up to the public issue said that the valuation and expected pricing will be comparable to DLF. Shailesh Kanani, analyst at Angel Broking said, “The expected price band of Rs460-500 for a Rs10 share will leave a lot on the table for retail investors, compared with DLF’s Rs525 for a Rs2 share.”
HDIL has around 45.5 million sq. ft under construction and an additional 66.6 million sq. ft in various stages of planning. Much of this developable area has come from the firm’s slum rehabilitation activities, under which a builder gets to build additional space in return for the free housing given to slum dwellers. The firm has undertaken nearly 40% of the slum rehabilitation projects in Mumbai city.
HDIL’s land bank of 2,500 acres spread across Mumbai, Kochi and Hyderabad has been valued at Rs21,500 crore. The valuation was done by real estate consulting firms Knight Frank India and Cushman Wakefield India.
DLF, which raised Rs9,187 crore from the market (17.5 millions shares at Rs525 per share) through its recent public issue, has a land bank of 10,522 acres and a developable area of 574 million sq. ft.
DLF, however, did not put a value to its land bank in the red herring prospectus submitted to the capital market regulator for its equity issue.
Compared with DLF’s 29 million sq. ft of residential and commercial developments, HDIL has developed 37.6 million sq. ft of residential and commercial spaces as well as 5.5 million sq. ft in slum rehabilitation. It has a total of 45.5 million sq. ft of residential and commercial spaces under development, compared with DLF’s 44 million.
However, while DLF has 37 million sq. ft of commercial and 7 million sq. ft in residential space, HDIL has 31.2 million sq. ft of residential and 7.9 million sq. ft of commercial space under development. It also 6.4 million sq. ft slumrehabilitation project under development.
“Our valuation is comparatively higher as 82% of the land bank is located in and around Mumbai city where land valuations are much higher,” said HDIL managing director Sarang Wadhwan.
HDIL has development rights to nearly one million sq. ft in Mumbai’s Bandra Kurla complex, in lieu of the slum clearance work it undertook in the area. HDIL had sold part of this space to Gujarat’s Adani Group in May 2006 at Rs2,250 crore, making this India’s biggest land deal. The company also has an additional million sq. ft of commercial development coming up at Versova, verging on the proposed metro rail’s depot. It had also acquired a 35-acre industrial estate in Bhandup in north Mumbai last year and is now developing a 16-tower residential complex along with a one million sq. ft mall.
HDIL plans to enter the hospitality space through a joint venture for a seven-star hotel on Mumbai’s Juhu beach.
Currently, 50.7% of HDIL’s business comes from infrastructure development business, while the residential complexes segment contributes 18.4% and commercial business 5.9%, with 4% coming from the retail segment. Slum redevelopment activities account for the rest.
Wadhwan does not see any change in the company’s business mix after the public offer. He said HDIL would undertake slum redevelopment projects in other cities such as Pune and Nagpur as and when opportunities arise.
According to Wadhwan, Bennett, Coleman & Co. Ltd, publisher of The Times of India and The Economic Times, has already taken a less than 1% stake in the company for an undisclosed amount in a pre-IPO placement.
According to Delhi-based Prime Database, a primary market data provider, 46 real estate companies have lined up public issues. These include Dubai-based real estate major Emaar MGF (Rs13,000 crore), Omaxe (Rs1,400crore), Bangalore’s Purvankara Developers Ltd (Rs1,300crore), and Sahara Infrastructure and Housing Ltd, the real estate arm of the Sahara group.