New Delhi: The initial public offering (IPO) of Pune-based real estate developer Kolte Patil Developers Ltd has been oversubscribed 45 times on the closing day of the issue, which suggests that investors still have a large appetite for real estate stocks, even though their values have softened in the last six months because of rising interest rates.
According to PTI, the issue received bids for 857.6 million shares, against 19 million shares on offer as of 8.30pm on Thursday. The offer opened for subscription on 19 November and closed on 22 November.
The company entered the capital market with a public issue at a price band between Rs125 and Rs145 per equity share.
The issue makes up 25.25% of the post issue paid-up equity capital of Kolte Patil. The company will use the money to finance the acquisition of development rights, finance the construction and development costs for some of the proposed projects, and fund expenditure for general corporate purposes. Kolte Patil develops residential and commercial properties, a majority of them in Pune and Bangalore.
As of 30 September, Kolte Patil developed and constructed 25 projects, including 22 in Pune and three in Bangalore.
Promoted by Rajesh Patil and Milind Kolte, the firm has been in the real estate development business since 1991. As of 30 September, the company has a land bank of 32.88 million sq. ft.
It plans to expand its footprint into Hyderabad, Chennai, Nashik, Goa, Nagpur, Aurangabad and Mysore. Analysts, who were willing to be quoted on the record, could not be reached for this story. However, they said the price band was very reasonable and would attract investors.
The downside is that Kolte Patil’s projects are concentrated only in a few cities compared with developers with larger scale and property in markets in various stages of maturity in terms of development. Kolte Patil’s IPO comes before the proposed public offer of real estate developer Emaar MGF Land Ltd. Emaar MGF, a joint venture of Dubai-based property developer Emaar Properties PJSC and India’s MGF Developments Ltd, recently filed its draft red herring prospectus with the Securities and Exchange Board of India for its IPO of 117 million shares.
According to investment bankers close to the issue, Emaar MGF could raise Rs4,000-6,000 crore from the issue, which would make it the second largest real estate offering after that of DLF Ltd, which mopped up about Rs9,000 crore earlier this year.
This year, several real estate developers such as Omaxe Ltd, and Puravankara Projects Ltd raised money from the capital markets as traditional sources of funding, such as bank loans, have dried up.
Not all firms have had issues that were greeted with overwhelming interest from a majority of investors. Puravankara Projects had to revise the terms of its issue after it failed to find enough takers for the offer.
Still, real estate developers have been queuing up to raise money from selling equity., after India’s central bank, the Reserve Bank of India, asked banks to go slow on lending to the realty sector on fears that easy availability of funds will lead to a bubble in the real estate sector.