Century Real Estate raises Rs165 crore
The realty firm has deferred its plans to raise Rs1,000 crore through an IPO
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Century Real Estate has borrowed Rs.165 crore by selling non-convertible debentures (NCDs) and deferred its plans to raise Rs.1,000 crore through an initial public offering (IPO), two people familiar with the development said.
Bengaluru-based Century, which has one of the largest land banks in south India, will use the money to develop two projects in the city—Century Ethos, a residential development at Bellary Road, and Century Eden, a plotted development at Doddaballapur. Ethos homes cost Rs.2.5 crore onwards, while Eden plots are priced at Rs.17 lakh onwards.
A spokesman for Edelweiss Financial Services Ltd, whose non-banking financial company ECL Finance lent the money, said the money was given as working capital for a couple of projects. A spokesman for Century confirmed the deal, but didn’t give more details.
“Given the current scenario, when property sales are low, developers are looking to raise cheaper debt or quasi debt through such structured transactions,” said Chintan Patel, partner, transactions and restructuring, real estate and hospitality, KPMG India. NCDs, which offer flexibility and freedom, are a preferred route for developers to raise money, Patel added.
Last year, Century had spoken of plans to raise Rs.1,000 crore through an IPO, of which Rs.500 crore would be used to retire debt, while the rest would be used for growth. The company had started the process of appointing bankers, but did not finalise any. This would be the second time Century is postponing its IPO plan, after the initial attempt in 2007, when many developers went public. Century executive director (finance and accounts) Mahesh Prabhu had said in an interview in July last year that the time wasn’t right for the company in 2007, and that there was a lot of consolidation that remained to be done.
That seems to be the problem this time around as well.
“Century has decided to postpone the plan to go for an IPO plan at least by a year, after discussions with bankers and advisers. Meanwhile, the company will raise money through NCDs,” said one of the people mentioned above who didn’t wish to be named.
Unlike the IPOs of 2007, when bankers attached much value to land banks, this isn’t the case any more. “Bankers’ view is to not give much value to land assets but to project cash flows instead. Projects that will bring cashflows within a five-year horizon are considered valuable in terms of IPO valuation, but not beyond that timeframe,” the person cited above said. “Century has decided to focus on project launches over the next year so that good sales come in and then the company is ready for an IPO.”