Realty and hotel companies line up to tap equity markets
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 expectedtofetch anotherRs1,250 crore. BesidesLodha, Bengalurubased Shriram Properties Pvt. Ltd and Mumbai-based Puranik Builders, too, have started work on their respective initial share sales. Lastweek, OberoiDevelopers hadraisedRs1,200crorefrom institutional investors througha so-called qualified institutional placement (QIP) offering.
Privatesector real estate firms hadlasthittheprimarymarketin 2010 withDBRealtyLtd, Prestige Estates Projects Ltd, Oberoi Realty Ltd, Nitesh Estates Ltd and Man Infraconstruction Ltd floating their IPOs. Accordingto investment bankingexperts, the revival of these sectors in the IPO market is a sign of changing fortunes of the real estate industry as well as the broaderinfrastructure sector. “After several years, weareseeinginfra comingtothe market. It is not just real estate, butbroaderinfrastructure, too, is meaningfully comingtothemarketafteralongtime. Mostofthese 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 SubhrajitRoy, executivedirector and head—equity capital markets origination, Kotak Investment Banking. Roy added that these sectors would have come earlier to the marketifdemonetisation, goods and services tax (GST) and real estate regulation anddevelopmentact(RERA) had nothappened. Realestatecompanies have performed relatively wellinthelastcoupleofyearsand the government’s push for housing schemeshaveprovidedadditional 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, andRERAalsohasbenefited the bigger, branded players,” said Roy.
Expertssaidinvestorinterestin the sector too has revived. Although, they cautioned that investors are selective and only strongnameswillbeabletotapthe marketstoraisefunds.“Mostcompaniesthatarecomingtothemarket are relatively well off companies, these are not companies that you have seen go through stress. Themoneyisnotavailabletoanyone and everyone. Investors are selective, they are looking at cash flows, the certainty of those cash flows, inventory sold etc,” said MunishAggarwal, directoratEquirusCapital. Hospitalitycompanies too are lining up to tap the capital marketsonthebackofarevivalin thesector. Earlierthisyear, Lemon Tree Hotels had raised around Rs 1,000crorethroughitsinitialpublic offering, whichwaswellreceivedby investors. Severalhospitalitycompanies such as K Raheja Group’s ChaletHospitality, TheLalitowner Bharat Hotels and Delhi-based VatikaHotelshavebeenreportedto belookingatIPOsin2018.
“Hospitality has taken off significantly, occupancy has improved dramatically over the last twoyears. All that hasabearing on the way companies in the sector are looking at avenues for growthcapital anddeleveraging, andthewayinvestorsarelooking at these companies,” said Aggarwal of Equirus.