Real estate company promoters in India are waiting for the right time to cash-in on their holdings. While the government is selling its stake in large public sector undertakings (PSUs) at a substantial discount to the market price to comply with minimum public shareholding norms, promoters of these companies have chosen to go for fresh equity issuances. They are opting for the institutional placement programme (IPP) over the much-preferred offer for sale (OFS).
Under OFS, promoters auction their existing shares to bring down their holding in a company. The equity base of a company widens if fresh equity is issued and promoter holding falls in percentage terms. This way, promoters do not have to sell their stake if they choose the IPP route and money raised through it.
Among major real-estate companies, the promoters of Godrej Properties choose the IPP route to bring their holding below 75 per cent. Godrej Properties raised Rs 500 crore by issuing 8.2 million fresh shares to bring down promoter holding. DLF has said it will sell nearly 81 million shares or 4.7 per cent stake worth about Rs 2,000 crore through the IPP route.
| HIGH STAKES About seven realty firms have promoter holding of more than 75% | ||
| Promoter holding (%) | M-cap (Rs cr) | |
| Puravankara Projects | 89.96 | 2,139 |
| Omaxe | 89.14 | 2,902 |
| Marathon Nextgen | 89.14 | 272 |
| Hubtown | 82.49 | 1,373 |
| Prestige Estates | 80.01 | 6,105 |
| DLF | 78.58 | 39,959 |
| Oberoi Realty | 78.49 | 10,011 |
| Source: Capital Line Data complied by BS Research Bureau | ||
There are at least seven real estate firms with promoter holding of more than 75 per cent. These companies will have to sell shares worth nearly Rs 3,000 crore before June to meet the minimum public holding norms. According to sources, Oberoi Realty and Prestige Estates are among the companies that could also go for IPP.
Investment bankers, in talks with these companies for share-sales, say promoters are wary of selling their shares at current prices as they believe valuations are very low. Most bankers said either real estate companies would play the waiting game for a few months or issue fresh shares under IPP.
“Unlike most companies where promoters are selling shares, real estate firms want to take the IPP route as promoters don’t want to sell their shares at these prices. Also, a fresh issue will infuse much-needed liquidity in the company,” said an investment banking head with a foreign bank, who didn’t wish to be named.
CRISIL Research expects real estate developers’ earnings and return on equity (RoE) to improve next year.
