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Nexus Select Trust IPO: Looking to invest? Here are the pros and cons to consider before investing

Nexus Select Trust IPO: On the first day of the issue, the Blackstone-backed IPO subscribed by 28% against the offered size. Bidding is available till May 11th. There are a host of competitive strengths and risks that can be considered before investing in this public offer.

Wynford Investments which is a portfolio company of Blackstone funds is the sponsor of Nexus Select Trust. (Shutterstock)Premium
Wynford Investments which is a portfolio company of Blackstone funds is the sponsor of Nexus Select Trust. (Shutterstock)

India's first retail-focused REIT IPO has stepped into the market. Blackstone-backed Nexus Select Trust has launched its 3,200 crore public offer on May 9th and will be available for bidding till May 11. On the first day, the issue received a 28% subscription against the total offering size. Nexus is expected to be the first publicly listed consumption centre REIT in India upon the listing of units on the stock exchanges.

On May 9th, as per Axis Capital data at the upper price band, the non-QIB portion (NII, HNIs, retail, and corporate) in Nexus IPO was subscribed to 42%, and Qualified Institutional Buyers (QIB) portion was subscribed to 17%.

The price band for the IPO is fixed at 95 per unit and 100 per unit. Of the total IPO size of 3,200 crore, 1,400 crore will be the fresh issuance of units, and the remaining 1,800 crore will be an offer for sale (OFS) of units.

Read here: Nexus Select Trust REIT IPO: Issue subscribed 28% on Day 1; Non Institutional Investors steal the show; check details

In the IPO, bids can be made for a minimum of 150 units and in multiples of 150 units thereafter by bidders other than anchor investors.

ICICI Direct has highlighted key competitive strengths and risks in Nexus Select Trust IPO. These are:

Competitive strength:

1. Renowned sponsor (Blackstone Real estate fund with global real estate AUM of $326 billion spread across 1,475 msf of leasable area with global expertise and local knowledge (15 years operating experience in India).

2. Highly occupied by a diversified tenant base of renowned national and international brands.

3. Well-positioned for strong organic growth through a combination of contractual rent escalations, increased tenant sales leading to higher turnover rentals, re-leasing at higher market rents & lease-up of vacant area.

4. Strategically located in prime in-fill locations with high barriers to entry.

Risks:

1. A decline in footfalls in its urban consumption centres has in the past, and may in the future, adversely affect its revenues

2. A significant portion of the company’s revenues are derived from a limited number of large tenants. Any conditions that impact these tenants, properties, or markets may adversely affect its business

3. The trust may utilise a significant amount of debt in the operation of its business and its cash flows and operating results could be adversely affected by required repayments or related interest and other risks of its debt financing.

Read here: Nexus Select IPO: 10 things to know about India's first retail REIT IPO

Is the IPO worth subscribing to?

On Nexus' GMP, Yadhu Ramachandran, Research analyst at Geojit Financial Services said, "The NST is well-positioned to capitalize on the consumption market, through its solid business model and diverse portfolio base. They have a healthy projected net operating income and a current dividend yield of 8%, which is higher than the fixed deposit & G-sec rates. Its high occupancy rate, increased tenant sales, and contractual rent increases will help it grow organically. The chances for capital appreciation, as well as a stable balance sheet with a lower Loan to Value (LTV) ratio, will help to fund inorganic expansion through asset additions."

Further, ICICI Direct's note said, "Nexus Select is a quasi-play on consumption through its high-quality retail assets. At the upper band of 100/unit (the market cap of 15150 crore), the issue is at a Price/NAV of 0.78x (December 2022 NAV at 127.7/unit). It is offering pre-tax yield of ~8% in FY24, at the upper price band (refer to Trust’s NDCF projection and implied yield on page 13)."

Giving a 'Subscribe' recommendation, the brokerage's note said, it is on the back of “a) healthy yield potential, b) organic growth opportunities on rent escalation/repricing/releasing and tenant sales, and c) potential inorganic growth through assets addition."

In its note, Geojit said, "Considering the strong growth story in consumption space, healthy projected net operating income (NOI) growth of ~17% over FY24-26E, capital appreciation prospects, and healthy balance sheet with lower LTV ratio, we assign a “Subscribe" rating on a long term basis."

Wynford Investments which is a portfolio company of Blackstone funds is the sponsor of Nexus Select Trust. While Nexus Select Mall Management is the manager. Axis Trustee Services is the trustee in the IPO.

Also, the book-running lead managers are --- BofA Securities India, Axis Capital, Citigroup Global Markets India, HSBC Securities and Capital Markets (India), IIFL Securities, JM Financial, J.P. Morgan India, Kotak Mahindra Capital, Morgan Stanley India Company, and SBI Capital Markets.

 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

 

 

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Updated: 10 May 2023, 08:31 AM IST
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