Realty and ho­tel com­pa­nies line up to tap eq­uity mar­kets

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Swaraj Singh Dhan­jal swaraj.d@lhtlive.com

MUM­BAI: Af­ter a gap of sev­eral years, the In­dian eq­uity cap­i­tal mar­ket is see­ing real es­tate and hos­pi­tal­ity com­pa­nies lin­ing up to raise cap­i­tal in sig­nif­i­cant num­bers. In April, Mum­baibased real es­tate de­vel­oper Lodha De­vel­op­ers Ltd filed its draft prospec­tus for an ini­tial pub­lic of­fer­ing (IPO), which will see the com­pany raise Rs 3,750 crore in pri­mary cap­i­tal, and an of­fer for sale by pro­mot­ers is ex­pected to fetch another Rs 1,250 cr ore. Be­sides Lodha, Ben­galu­rubased Shri­ram Prop­er­ties Pvt. Ltd and Mum­bai-based Pu­ranik Builders, too, have started work on their re­spec­tive ini­tial share sales. Last week, O be roi De­vel­op­ers had raised Rs 1,200 cr ore from in­sti­tu­tional in­vestors through a so-called qual­i­fied in­sti­tu­tional place­ment (QIP) of­fer­ing.

Pri­vate sec­tor real es­tate firms had last hit the pri­mary mar­ket in 2010 with DB Realty Ltd, Pres­tige Es­tates Projects Ltd, Oberoi Realty Ltd, Nitesh Es­tates Ltd and Man Inf ra con­struc­tion Ltd float­ing their IPOs. Ac­cord­ing to in­vest­ment bank­ing ex­perts, the re­vival of these sec­tors in the I PO mar­ket is a sign of chang­ing for­tunes of the real es­tate in­dus­try as well as the broader in­fra­struc­ture sec­tor. “Af­ter sev­eral years, we are see­ing inf ra com­ing to the mar­ket. It is not just real es­tate, but broader in­fra­struc­ture, too, is mean­ing fully com­ing to the mar­ket af­ter along time. Most of these com­pa­nies have gone through their delever­ag­ing cy­cle. Lot of the growth was get­ting stunted either due to lever­age or just be­cause of slow take up,” said Sub hr aj it Roy, ex­ec­u­tive direc­tor and head—eq­uity cap­i­tal mar­kets orig­i­na­tion, Ko­tak In­vest­ment Bank­ing. Roy added that these sec­tors would have come ear­lier to the mar­ket if demo net isat ion, goods and ser­vices tax (GST) and real es­tate reg­u­la­tion and de­vel­op­ment act( RE RA) had not hap­pened. Real es­tate com­pa­nies have per­formed rel­a­tively well in the last cou­ple of years and the gov­ern­ment’ s push for hous­ing schemes have pro­vided ad­di­tional tail-winds for the sec­tor, said ex­perts. “In the last two fi­nan­cial years, cash flows have been good for larger play­ers in real es­tate ex­cept some in­terim im­pact caused by de­mon­eti­sa­tion. Then there have been ad­di­tional sops around af­ford­able hous­ing, and R ERA also has ben­e­fited the big­ger, branded play­ers ,” said Roy.

Ex­perts said in­vestor in­ter­est in the sec­tor too has re­vived. Al­though, they cau­tioned that in­vestors are se­lec­tive and only strong names will be able to tap the mar­kets to raise funds .“Most com­pa­nies that are com­ing to the mar­ket are rel­a­tively well off com­pa­nies, these are not com­pa­nies that you have seen go through stress. The money is not avail­able to any­one and every­one. In­vestors are se­lec­tive, they are look­ing at cash flows, the cer­tainty of those cash flows, in­ven­tory sold etc,” said Mun is h Ag garw al, direc­tor at Equirus Cap­i­tal. Hos­pi­tal­ity com­pa­nies too are lin­ing up to tap the cap­i­tal mar­ket son the back of a re­vival in the sec­tor. Ear­lier this year, Lemon Tree Ho­tels had raised around Rs 1,000 cr ore through its ini­tial pub­lic of­fer­ing, which was well re­ceived by in­vestors. Sev­eral hos­pi­tal­ity com­pa­nies such as K Ra­heja Group’ s Chalet Hos­pi­tal­ity, The La lit owner Bharat Ho­tels and Delhi-based Vatika Ho­tels have been re­ported to be look­ing at IPOs in 2018.

“Hos­pi­tal­ity has taken off sig­nif­i­cantly, oc­cu­pancy has im­proved dra­mat­i­cally over the last two years. All that has a bear­ing on the way com­pa­nies in the sec­tor are look­ing at av­enues for growth cap­i­tal and de lever­ag­ing, and the way in­vestors are look­ing at these com­pa­nies,” said Ag­gar­wal of Equirus

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