Realtors bring back IPOs from the cold storage

Oberoi and Prestige plan to tap capital markets next month.

After an almost six-month lull, real estate developers like Oberoi Realty and Prestige Estates are planning to tap capital markets next month with Initial Public Offer (IPO) issues.

The exuberance in stock markets have prompted the developers, say bankers and analysts tracking realty companies. The last IPO in the real estate sector was in April this year, by Bangalore-based Nitesh Estates.

While Mumbai-based Oberoi Realty is planning to raise around Rs 1,100 crore through the IPO by diluting about 12 per cent, Bangalore-based Prestige is planning to raise Rs 1,200 crore and dilute higher equity in the public issue, said bankers involved.

“Stock markets are in good shape now, and hence developers are trying to bring out their public offers,’’ says Param Desai, an analyst with Angel Broking. The mega public issue by Coal India, estimated at Rs 14,000 crore and expected to hit the market in mid-October, has also prompted real estate developers to hasten the process.

“Our bankers have advised us to bring out the IPO before Coal India comes out with an IPO, as it could raise a big amount from investors,’’ said a senior executive from a realty firm, who did not want to be named.

At least a dozen real estate IPOs worth over Rs 12,000 crore are in the pipeline, with about half of theses, like those of Emaar MGF, BPTP, Lodha and Kumar Urban having already got the Sebi nod. There was also talk about some of these slashing the IPO size, but nothing has happened yet.

With most of these in the ‘wait and watch’ mode, given the earlier volatility in the markets, the success of Oberoi and Prestige could prompt others to hit the markets, said bankers.

“But valuation issues are critical in the coming issues. You should also observe that realty stocks have not done very well in the last two months,’’ says Desai of Angel Broking. Such realty stocks as DB Realty and Nitesh Estates, both listed this year, are trading below their listing price.

But developers and analysts are hopeful of the coming issues sailing through. “Though there are issues about valuation and overhang of property stocks, they are inconsequential compared to liquidity flowing in. Though retail participation could be weak, institutions’ money will come in,’’ says Ambar Maheshwari, director, investments, at property consultancy DTZ.

Adds Vikas Oberoi, managing director, Oberoi Realty: “We have zero debt and good cash flows. We are confident of good response for our issue,’’ he adds.