Mumbai-based Lodha Developers Ltd, India’s largest real estate company by residential sales, is facing regulatory hurdles for its proposed initial public offering with the Securities and Exchange Board of India (SEBI) temporarily suspending the share sale.
In its weekly updates, SEBI said it has “kept (Lodha Developers' IPO) in abeyance for examination of past violations”. It didn’t disclose any details.
Email queries sent to SEBI for details about the violations and options to resolve the regulatory matter did not yield a response.
Lodha Developers had filed its draft red herring prospectus on 26 April for an IPO worth an estimated Rs 5,000-5,350 crore ($750-800 million).
The company had highlighted certain regulatory matters as “risks” to its proposed offering at the time of filing the draft prospectus. In one such case, Lodha said its subsidiary Roselabs Finance Ltd was penalised by SEBI for alleged irregularities in trading of its shares in 2003. While Roselabs was acquired in 2010, the company had filed an appeal challenging the SEBI order.
"In relation to certain proceedings related to actions undertaken by Roselabs Finance Ltd in 2003 when we were not connected with the said company in any manner, SEBI had kept its final observations on the DRHP for our proposed IPO in abeyance," a Lodha spokesperson told VCCircle on Monday. "The said abeyance period ended around 10th June 2018 and we now expect to proceed ahead with our IPO as per regular timelines."
In a separate case, subsidiaries Sanathnagar Enterprises Ltd and National Standard (India) Ltd were suspended from trading on stock exchanges in India due to certain non-compliances with the listing requirements as per a SEBI order in June 2013. While the suspensions have been revoked by the BSE, the company is yet to comply with the said requirements.
The Mumbai-based developer plans to issue fresh shares worth Rs 3,750 crore and also make an offer for sale of 18 million shares by the promoters. The issue will result in roughly 14-15% stake dilution and may value the company at around Rs 37,000-38,000 crore ($5.5-5.7 billion), VCCircle estimates show.
The company also aims to raise about Rs 750 crore out of the proposed issue via a pre-IPO placement of 9.5 million fresh shares, Lodha said in its draft documents.
A successful IPO may see Lodha becoming the most-valued listed real estate firm in India, overtaking DLF Ltd, which commands a market capitalisation of about Rs 35,075 crore.
Lodha, which is finishing construction of World One, touted as the world’s tallest residential tower at 442 metres high, had earlier attempted to go public in 2010 and had even received regulatory clearance. However, the plan for the $437 million IPO was shelved owing to unfavourable market conditions.
If all goes according to plan this time, Lodha’s IPO will be the first major real estate IPO in nearly eight years.
Oberoi Realty Ltd, owned by Vikas Oberoi, went public in October 2010 with a Rs 1,028 crore IPO. Its shares now command a market value of Rs 17,586 crore.
Godrej Properties went public with a Rs 500-crore IPO in December 2009. City development and management firm Lavasa Corp, a wholly owned subsidiary of Hindustan Construction Co Ltd, twice deferred its plan to go public in 2015-2016 citing weak demand and a valuation mismatch.
Pune-based developer Paranjape Schemes (Construction) Ltd shelved IPO plans despite having SEBI approval for its IPO in December 2015. The company was looking to raise Rs 600 crore through the public offering.
Kotak Mahindra Capital Co is the lead merchant bank managing Lodha’s planned IPO. Citic CLSA, JM Financial and Morgan Stanley are the global merchant bankers.
Other merchant banks include Edelweiss Financial Services, HDFC Securities, ICICI Securities, Yes Securities, IIFL Holdings, UBS Securities (India) and BOB Capital Markets.
Lodha Developers was founded in September 1995 as a private entity by Mangal Prabhat Lodha. The company began operations by developing affordable housing projects in the city’s suburbs. It later diversified to other segments and regions in the Mumbai Metropolitan Region.
The company develops both residential and commercial projects in Mumbai, Pune and London.
Lodha claims to be the largest developer in India by residential sales for the nine months ended December 2017 and financial year 2016-17. It had completed projects with developable area of 50.49 million square feet as of December 2017.