Pune-based real estate developer Paranjape Schemes (Construction) Ltd is looking to raise up to 650 crore through an initial public offer (IPO) and is in the final stages of preparing the draft IPO papers, according to three people aware of the development.

The firm, established in 1987, is looking to file the papers with market regulator Securities and Exchange Board of India (Sebi) as early as the first half of next month, said the first person cited above, requesting anonymity as he is not authorized to speak to the media.

“They have hired two domestic investment banks to manage the process and the work of preparing the draft papers is in the final stages," he said, adding that the firm is looking to raise between 600 crore and 650 crore through the IPO.

At a stake dilution of around 15%, the firm is looking to raise the money at a valuation of little a under 4,000 crore, he added.

The IPO will be an entirely fresh sale of shares and the firm intends to utilize the funds to invest in its upcoming projects and for debt repayment, said the second person cited above, also requesting anonymity.

According to Registrar of Companies (RoC) data, as on 31 March 2014, Paranjape Schemes had long-term borrowings of 178.2 crore, down from 214.5 crore at the end of the previous financial year.

On a standalone basis, the firm reported revenues of 313.5 crore in the financial year 2014, as compared to 116.6 crore a year ago. The company reported a profit of 25 crore in financial year 2014, compared to a loss of 10.3 crore in the previous year.

“Although real estate might not be the most attractive investment theme right now from an equity capital markets perspective, Paranjape is into niche segments of the industry such as senior living housing and that will be an attractive argument for investors," said the second person mentioned above.

The firm said none of its spokespersons was available to comment on the questionnaire sent by Mint.

The last time a private real estate company came to the primary market was in 2010, when several firms such as DB Realty Ltd, Prestige Estates Projects Ltd, Oberoi Realty Ltd, Nitesh Estates Ltd and Man Infraconstruction Ltd collectively raised around 4,275 crore.

Apart from Paranjape, affordable housing developer Value Budget Housing Corp. Pvt. Ltd (VBHC) is also looking at tapping the primary market. On 9 February, Mint reported that VBHC is in talks with investment banks to raise 500 crore through an IPO.

Starting with residential projects in the city of Pune in the late 1980s, Paranjape Schemes has over the years expanded into various other segments such as commercial real estate and hospitality. The company has built over 9,000 houses across western Maharashtra, in over 150 projects.

Paranjape developed its first senior living project, Athashri, in Pune and is currently developing one at Vadodara in Gujarat. According to the firm’s RoC filings it plans to raise approximately 250 crore for its projects for senior citizens and 200 crore for affordable housing around Pune and Mumbai. The senior living segment represents a key opportunity as such homes are in short supply in the country.

According to a 11 June note by real estate consulting firm Jones Lang LaSalle India, there are approximately 30-35 senior living projects in the country. “Unfortunately, this represents a major shortfall—they accommodate only 0.0001% of the target segment (India’s senior citizens) as compared to 10% in the US and approximately 4% in Australia. India currently contributes less than 1% to the global senior living industry, highlighting the huge demand and supply gap of the sector—and its implied growth potential," the note said.

“Over the last couple of years, IPOs generally, and not just those of real estate companies, have dried out. Also the real estate market slowed down in the last few years. However, IPOs will come back when the real estate sentiment improves," said Anshuman Magazine, chairman and managing director of CBRE South Asia, a global real estate services firm, adding that for sentiment to improve the economy needs to pick up and more liquidity has to be made available.

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