The loan scam and regulatory issues in real estate sector may force over a dozen players to postpone their fundraising through IPOs for a few months. According to experts, the high volatility of the market and the poor investor sentiments will not be in favour of an IPO this time.
“They will definitely postpone IPOs as it is not a good time,” said Anuj Puri, Chairman and Country Head of real estate consulting firm Jones Lang Lasalle Meghraj (JLLM).
“The market sentiments are currently not the best, especially after the loan scam. Moreover, the holiday season is going to start which will push any IPOs beyond January,” Puri told VCCircle.
Close to a dozen real estate companies are looking for listing in the stock market this time, including Lavasa Corporation, Kumar Urban Development, Lodha Developers, Neptune Group with a total target of fund raising close to Rs 10,000 crore.
But it is just a temporary phase, says experts. According to Pankaj Jaju, Executive Director, Investment Banking at Enam Securities, it is a sector which is evolving from Public Market perspective and hence volatility is expected.
“Real estate opportunity in India are large and real, and will attract investors. A year ago, we had many pending issues which looked difficult. But since then many realty IPOs have gone through well,” Jaju said.
These crisis may present an interesting opportunity for private equity players looking for value buys. According to Puri, there are three ways for the crisis-ridden real estate players to overcome the liquidity crunch. One is to rope in private equity players, and the second is to approach NBFCs and the last one is aggressive selling of space/flats.
“Now the demand is high in housing sector, so no extra discount is needed for aggressive selling,” Puri said.
Some PE players are also viewing this as an opportunity. “This is a really good opportunity for PE funds to invest more in this sector,” said Balaji Rao, Founder of Indic Capital.
“But it remains to see how the realty players will take on this issue. If they are interested in giving right valuations, PE funds will be interested. But the realty players may keep waiting for some more time, taking this as a temporary aberration,” he said.
There have been 37 private equity deals with disclosed value of $1,182 million in the real estate sector till November 30 this financial year, according to VCCEdge. This is compared to 24 deals worth $606 million during the same period last year.
Lavasa’s plans are again hit by the allegation of the violation of environmental guidelines. The environment ministry under the ‘tough’ Jairam Ramesh, had issued a notice to Lavasa to explain why the Government should not order demolition of construction that has been carried out in violation of the Environment Protection Act, 1986.
Before getting the notice from the ministry, the corporation’s name was already cropped up in the loan scam, when 8 people including those from PSU Banks and LIC HF were arrested.
Lavasa Corporation, in which Hindustan Construction Company (HCC) holds a 65% stake, was recently given the green signal for a Rs. 2,000-crore initial public offer by SEBI. The spokesperson of the company could not be contacted.
Names of other companies like Kumar Urban Developers also cropped up during the loan scam, but the company clarified that it was related to another builder with the same name. The company plans to raise Rs 450 crore via IPO.
There are indications that Lodha Developers plans to raise Rs 2,500 crore, BPTP Rs 1500 crore and Delhi-based Ambience Rs 1300 crore while Mumbai based Neptune Builders targets to raise Rs 495 crore. Nayan Bheda, Managing Director of Neptune Builders didn’t respond to phone
calls or email.
Abhisheck Lodha, Managing Director of Lodha Group didn’t pick up calls from VCCircle. But an official of the company, on condition of anonymity, told VCCircle that the company will take a final decision on IPO after January.
Emaar MGF, which is making its second attempt to list after its IPO plan to raise about Rs 6,500 crore in 2008 failed to take off on poor investor response, has slashed its IPO size to near half.
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