IPOs feel the heat of crisis in India

As many as nine realty companies, including Emmar MGF, have filed their draft red herring prospectus (DRHP) with the market regulator Sebi aiming to raise about Rs 15,000 crore. “It will not be surprising if some realty companies defer their share sale plan. The Dubai debt crisis will not give any positive signal to investors in realty companies and IPOs of companies like Emmar MGF will face huge challenge,” SMC Capitals Equity Head Jagannadham Thunuguntla said.

As per DRHP filed with the Sebi, nine relators are planning to raise an estimated Rs 15,000 crore through the initial public offers (IPOs). This includes Emmar MGF’s Rs 4,000 crore issue, followed by Sahara Prime City (Rs 3,400 crore), Lodha Developers (Rs 2,700 crore), BPTP (Rs 2,000 crore), and Godrej Properties (Rs 500 crore).

Trading at discount

“The realty IPOs will find it tough to sail through. Although investor confidence in the secondary markets have revived in the past six months, the primary markets are yet to witness such revival,” Unicon Financial Chief Executive Gajendra Nagpal said.

Analysts say leading realty companies, like DLF and Parsvanath, which hit the market during real estate boom in 2007, are now trading at about 70 per cent discount.
DLF, Parsvanath, Omaxe, Sobha Developers and HDIL had cashed in on the real estate boom going public. Anlaysts feel the companies which plan to tap the capital markets with IPOs should not go in for an aggressive pricing as that may pour more cold water onto the already dampened investor sentiment.

Price judiciously

“The companies should price their IPOs judiciously. Nervousness in the market may bring a halt to the primary market revival signals that we saw in the four big issues in the past nine months,” Thunuguntla cautioned. Following the Dubai World debt crisis, Emaar MGF, a joint venture between the Dubai-based Emaar Properties and the domestic relator MGF Development, had on Saturday said its operations were only in the country and the developments in Dubai would not have any impact on it.

Others planning IPO include DB Realty (Rs 1,600 crore), Ambience (Rs 1,100 crore), Sriram Properties (Rs 600 crore), and Kumar Developers (Rs 500 crore). However, Angel Broking chairman and managing director Dinesh Thakkar said the crisis “is unlikely to deter the liquidity flows into the domestic bourses.”