The Jerry Rao-promoted VBHC
Value Homes has deferred its initial public offering
(IPO, of equity) plan to the next financial year. The earlier plan was to do this in the current one.
“After demonetisation, GST
(the new goods and services tax) and Rera (the under-enforcement law to regulator the real estate sector), it (IPO
this year) seems difficult. Actually, we wanted to see the March 2018 (quarter) numbers and take a call. But, April-May 2018 seems more logical,” said Jaithirth (‘Jerry’) Rao, chairman at VBHC.
The company was set up in 2008 by two former Citi Bank seniors, Rao and P S Jayakumar, who is now managing director at government-owned Bank of Baroda. The aim was to offer affordable homes.
The capital markets have seen a boom in IPOs, with a record $11 billion (Rs 71,300 crore) raised so far this year. However, higher valuations have led to weak secondary market debuts, a Reuters report says. On Wednesday, ace investor Rakesh Jhunjhunwala said there was a lot of froth in the IPO
market and investors should stay away.
“After demonetisation, investors have disappeared. Only some are investing now, in the hope of capital appreciation. In Bengaluru, it is mostly end-users. After Rera, the wait and watch is ending and people have more confidence to buy. In GST, there is still some confusion left but I hope that will be cleared soon,” Rao said. He added they were in talks with US-based Overseas Private Insurance Corporation to raise Rs 200-300 crore. Britain-based CDC has also shown interest in investing in some projects.
Asked if earlier investors in the company wanted to exit, Rao said: “The funds of a couple of investors in VBHC
will be ending in 2019. We have to see. There is no pressure from investors for an exit.” Carlyle, IFC, HDFC and Daiwa House were among those to have invested.
Experts say it is a prudent decision to defer the IPO.
“Real estate is passing through a tough time and the sector is not investor-friendly. Sales are booked on the completion method and due to slow progress on projects, sales and profit of most real estate companies
are badly affected. Hence, investors are staying away from realty stocks,” said Ajay Jain, joint managing director at Sun Capital Advisory.
Rao said the company was looking at multiple projects, some of these closer to cities. “We believe 2-BHK (two bedrooms, hall, kitchen) is the sweet spot and will concentrate on that. While Bengaluru and Mumbai remain the largest markets available to us, we are also considering smaller projects in other locations,” he added.
has also ventured into mid-income housing and done some apartments in the Rs 40-50 lakh bracket in Bengaluru, and is also looking to do that in Powai, Mumbai. The company has developed projects in Mumbai, Bengaluru and Chennai and is developing new ones in Bengaluru and Mumbai.
initially planned to develop 15 projects but has only developed or is developing half of that.
“We are definitely behind our plans for a variety of reasons. The biggest one being that till 2014, there was no interest from the government,” contends Rao. Even now, he said, there was a lack of clarity from the states. Till around 18 months earlier, there was no difference between luxury and affordable projects in terms of approvals required, time taken for approvals and so on. There was no incentive to do affordable housing, says Rao.
Despite the Union government according infrastructure status to affordable housing, banks have not treated this as priority sector lending and reduced the rates for loans on such projects, he explained.