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Are Real Estate IPOs back?
This month saw two real estate developers successfully completing their initial
public offer, raising over $500mn while three listed developers raised over
$350mn through secondary offerings. Does this mean more developers would be
able to tap the market? We believe market will continue to be very selective and
only quality developers with good brand, execution capability and strong cash
flow visibility over next 3-5 years will succeed. As per the SEBI filings around 11
developers are lined up for IPOs looking to raise over $4bn from the markets.
Impact on listed developers
If all the developers decide to tap the market in short span of 3-4 months, it could
put pressure on the listed developers but we believe this scenario is highly
unlikely and only 30-40% of the planned fund raising may materialize over next
6-9 months. Rather, the performance of the listed developers will determine how
soon the developers who plan to raise funds could launch their issue.
Fund raising by property developers
Property developers have been very active in the capital market in last 3-4 years
to fund their growth and meet construction expenses and more recently to repair
their balance sheet. In last 4 years the property developers have raised ~$8.7bn
from the capital markets. Chart 1 gives the details of fund raising by developers
since 2006. This year we have already seen $1.85bn of capital raising in a mix of
initial offerings and QIPs.
IPOs lined up for listing
We have seen 6 developers successfully raising funds in the IPOs till date in
2010, while another 11 developers have filed the prospectus with the regulators
looking to raise ~$4bn. While in the last cycle most of the developers were
looking to raise funds to buy land, the current list of developers largely plan to
utilize the funds for construction of their ongoing projects and repayment of debt.
| · Sahara Prime City |
| · Lodha Developers |
| · Embassy Property |
| · Lavasa Corp Ltd |
| · Emaar MGF |
| · BPTP |
| · Ambience Ltd |
| · Kalpataru Ltd |
| · Raheja Universal |
| · Kumar Urban Development |
| · Neptune Developers Ltd |
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