Realty and ho­tel com­pa­nies line up to tap eq­uity mar­kets

HT Estates - - HTESTATES - 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 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.

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