Real estate developer Puravankara Projects Ltd that is selling 21.5 million equity shares said 25% of its shares were bought at the end of the first day of its initial public offer (IPO).
The company, which joins several other Indian real estate firms raising money in the capital markets this year, aims to raise over Rs1,000 crore from the issue.
Puravankara, which primarily develops residential projects in Bangalore, Kochi, Chennai, Coimbatore, Hyderabad and Mysore, received bids for a total of 5.44 million shares at the end of the opening day.
Institutional buyers bid for more than 99% of the shares, according to information posted on the National Stock Exchange website. Foreign institutional buyers put in applications for 3.52 million shares, while domestic financial institutions have applied for 1.904 million shares. Retail investors placed bids for 11,690 shares. There is a total allocation of 6.44 million shares set apart for retail investors who typically wait until the last day to put in their bids.
“The slow offtake by retail investors can be attributed to a glut of realty IPOs”, said Lovaii Navlakhi, CEO, International Money Matters, a financial planning and investment advisory firm, who added his retail clients have not evinced much interest in the issue so far.
Star projects: The Puravankara project’s deputy MD Girish Puravankara says the company plans to enter the hospitality sector with two five-star hotel projects, in partnership with global hospitality brands.
Since the mega IPO of DLF Ltd, India’s largest real estate development company that raised more than Rs9,000 crore in a public issue in early July, smaller realty outfits such as Omaxe Ltd , Housing Development and Infrastructure Ltd and IVR Prime Urban Developers Ltd have all raised money on Indian bourses.
Prime Database, a Delhi-based primary market research firm, estimates that realty companies could raise between Rs15,000 crore and Rs25,000 crore on the stock markets this year.
Three-fourths of Puravankara’s development projects are around Bangalore. That “opens the company to higher risk from land price volatility in a single region”, Navlakhi added.
The issue, which closes on 3 August, will constitute 10.05% of the fully diluted post-issue paid up capital of the company.
Puravankara Projects has a land bank of 116 .24 million sq. ft, of which 13.99 million sq. ft is under construction. Some 80% of this, totalling 102 million sq. ft, is devoted to residential projects. In Sriperumbudur, outside Chennai, the firm is due to set up an integrated township at a project cost of Rs373 crore.
“We will enter the hospitality sector with two 5-star hotel projects, one in Kochi and the other in Bangalore, in partnership with global hospitality brands”, said Girish Puravankara, deputy managing director, Purvanakara, in an interview prior to the start of the IPO process.
The company also has a joint venture with international property developer Keppel, among the first few foreign direct investments in the realty sector in India. Puravankara Projects owns 49% of the shares of Keppel Puravankara Development Pvt. Ltd, a tie-up through which it is working on three projects, two in Bangalore and one in Kolkata.
At the end of March, Puravankara had revenues of Rs417 crore and a profit after tax of Rs130 crore.