Oberoi, Emmar MGF pare IPO size for smooth sail BY Lalatendu Mishra Mumbai Real estate companies could finally be ready to take the plunge. Given the improved market sentiment, at least two realty firms waiting in the wings are venturing into the capital market to raise funds. But taking no chances, they have slashed the size of their initial public offering (IPO). Take Delhi-based realty Emmar MGF Land Ltd. The company, a joint venture between Emaar Properties PJSC of Dubai and India's MGF Development Ltd, had initially planned a massive Rs 7,000 crore IPO 2008, but pulled out. Then in September 2009 it filed its draft red herring prospectus, and got approval for a smaller, 3,850 crore share sale from market regulator Securities and Exchange Board of India (SEBI).
This too was put off. In its third attempt, Emaar MGF has whittled the issue size down to Rs 1,600 crore, on advice from its merchant bankers. "We have filed a revised proposal with SEBI and expect approval soon. The size has been brought down," said a company official, asking not to be named. The company has debts of over Rs 3,000 crore. Then there is Mumbai-based Oberoi Realty Ltd, which on Friday announced plans to launch its IPO next week. The company is expecting a substantial premium as it operates in the high-end market, has delivered 32 prime residential and commercial projects on time and has zero debt on its balance sheet.
Despite its strong balance sheet, however, the company had cut down the issue size by Rs 300 crore to find buyers, people aware of the matter said. The company now plans to raise Rs 1,200 crore instead of the original Rs 1,500 crore. The IPO will remain open for three days starting October 6. Incidentally, Oberoi Realty has nothing to do with the family that runs the Oberoi chain of hotels, though it owns a five-star hotel in Mumbai called Westin. Financial institution Morgan Stanley has a 10.8% stake in the company and the promoters' stake will be diluted by 12% after the IPO. "The price band would be announced later and anchor investors could be roped in," said a merchant banker handling the issue, who did not want to be identified. The proceeds would be invested in construction and land acquisition, he added. But these two instances do not mean that the realty sector is entering the capital market en masse.
Several firms such as Lodha Developers Ltd, Ambiance Ltd, BPTP Ltd, Sahara Prime City Ltd, Prestige Group, Kumar Urban Development Ltd and Neptune Developers Ltd shelved their IPO plans after announcing them, given the market conditions. In late September, SEBI chairman CB Bhave had lambasted investment bankers for fleecing investors by pricing IPOs at exorbitantly high rates to benefit promoters and to swell their own coffers. He said such an unhealthy practice would alienate investors from the equity market. Of late, retail investors have been shying away from the market due to the high pricing of issues. "The valuation (pricing of stocks) needs to be right. Only developers with a good track record would be able to successfully tap the market," said Anuj Puri, chairman and country head of Jones Lang LaSalle Meghraj, a firm dealing in real estate
Tehelka sourced by HT Media Ltd