Real Estate, as a sector, offers huge potential in terms of returns for investors. Still, the sector hasn’t moved much. There have been quite a few IPOs and QIP’s in the past amid much excitement. Much of this fund-raising was channelized into acquiring land. This time round, we again see a few IPOs in offering. The developers coming out with IPOs are aiming at execution of plans i.e. delivering assets on the land already acquired.
One such IPO on the list is by South India based real estate company Prestige Estates Projects. The group has over two decades of experience in real estate development and is one of the leading real estate development companies with operations spread across tier II and tier III cities in southern India besides Bangalore. The company having a diversified portfolio of real estate development projects, projects in the residential, commercial, hospitality and retail (including shopping malls) segments, has completed more than 140 real estate projects of approximately 27 million sq. ft. Its subsidiaries currently hold development rights for 57.36 million sq ft area, including 28.43 million sq ft of saleable area and 11.04 million sq ft leasable area. The company reported PAT of Rs 129.44 crore for the fiscal 2011 with total revenue of Rs 1,086 crore. The revenue for the quarter ended 30June’10 was Rs 309.45 crore.
The promoters are looking forward to dilute 16% of their shares which comes out to around Rs.1200 crore. The issue proceeds are proposed to be used for financing ongoing projects and projects under development; retail ongoing and retail projects under development undertaken by subsidiaries; acquisition of land; and for repaying certain loans. Around 15-20% of the funds raised will be used to repay debt and 65% to fund ongoing developments - in hospitality, retail and commercial and the remaining for general corporate purposes.
The IPO will open for subscription on 12th October’10 and will close on 14th October’10 with a price band at Rs.172-183 per share. The shares are proposed to be listed on both NSE and BSE.
Inspite of its strong execution track record and a diversified portfolio, cautious view of investors towards this sector is likely to affect the market. Further at upper price band of Rs 183 the stock appears aggressively valued as compared to its peers.
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