IPO filings by real estate firms signal recovery

IPO filings by real estate firms signal recovery

New Delhi: India’s real estate business is celebrating a revival of fortunes after plumbing the depths during the economic slowdown with a tentative return to the initial public offerings (IPO) market.

Taking the plunge are Emaar MGF Land Ltd, Lodha Developers Ltd and Sahara Prime City, all of which filed their draft red herring prospectuses on Tuesday with the stock market regulator, Securities and Exchange board of India (Sebi), to raise a total of around Rs9,800 crore. They follow Gurgaon-based developer Ambience Ltd, which filed a draft prospectus with the market regulator on 25 September to raise around Rs1,125 crore, the company said in a release. The IPO filings come after the revival in the residential market, which had taken a severe beating during the slowdown.

Sales had declined by almost half during the slowdown that started around September last year. In a bid to revive sales, developers slashed prices and launched new residential projects at lower rates, bringing buyers back into the market. Developers have also been successful in raising equity through the qualified institutional placement (QIP) route.

“The investor interest for real estate IPOs is quite high from both domestic institutional investors and foreign institutional investors," said Aashiesh Agarwaal, an analyst with brokerage firm, Edelweiss Securities. “Investors are going to look for stocks where there is value.

More real estate IPOs can be expected this year, he said. “There is a clear revival in real estate IPOs," he said.

The largest of the proposed IPOs is by Delhi-based real estate developer, Emaar MGF Land Ltd, which plans to raise around Rs3,850 crore, sharply reduced from the Rs6,400 crore it planned to collect last year.

This is the second time the company has filed its prospectus with the market regulator after it called off what would have been India’s third largest share offer in February 2008 because of a falling stock market. Last year, Emaar MGF tried to coax reluctant investors with two rounds of price cuts and a deadline extension for its IPO but still failed to attract investors.

The bankers to the current issue are Kotak Mahindra Capital, Deutsche Equities India Pvt. Ltd, UBS Securities India, Credit Suisse Securities, HSBC Securities, ICICI Securities and RBS Equities, according to a company release.

Companies that have raised money through the QIP route include Unitech Ltd, Indiabulls Real Estate Ltd, Housing Development and Infrastructure Ltd, Sobha Developers Ltd and Orbit Corp. Ltd.

Emaar MGF declined to comment on the dilution of the promoters’ stake this time around. In its first IPO attempt, the company was looking to dilute 10.4% of the promoters’ stake in the firm.

Sahara Prime City has filed its draft prospectus for a Rs3,450 crore public issue. Mumbai-based Lodha Developers has filed a draft prospectus to raise around Rs2,500 crore, said a company official who didn’t want to be named. Enam Securities Pvt. Ltd, Citigroup Global Markets India Pvt. Ltd and JPMorgan India Pvt. Ltd are the bankers for the IPO.

PTI contributed to this story.