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Nitesh IPO Turns An Institutional Investor Play

27 April, 2010

The Rs 405-crore initial public offering of realty developer Nitesh Estates is turning out to be a favourite with the intitutional investors.

Blackrock, Nomura and HSBC-backed entities are understood to have come up with Rs 250-crore buy order in the IPO on the closing day, Tuesday. Blackrock has offered to buy shares worth $20 million (Rs 88.6 crore) while Nomura and HSBC have bid for around $18 million (Rs 79 crore) worth of shares each, sources said. Goldman Sachs AMC has also pitched in with around Rs 20 crore worth of shares.

The high institutional interest may perk up the issue prospects, industry watchers say.

The issue, which aims to raise around Rs 405 crore, is understood to be subscribed 1.1 times while the QIP portion has been subscribed 2.5 times (hours ahead of issue closing).

Incidentally, today’s participation by Nomura and HSBC is in addition to their role as anchor investors where they along with HDFC MF and SBI MF committed Rs 60 crore ahead of the IPO opening last week.

The entry of two marquee global investors and two of India’s largest domestic MFs as anchor investors was a welcome participation for Nitesh whose IPO is priced Rs 54-56, significantly lower than the original plan of pricing it at over Rs 115 per share.

The lukewarm investor appetite for realty IPOs and a rather long pipeline of public issues from this sector had made it a tight-rope walk for Nitesh Estates.

The realty player intends to use the IPO proceeds for developing 19 million sqft of real estate assets that is projected to rake in over Rs 800 crore of net income in the next 4-5 years. This is apart from the yielding assets such as India’s first Ritz Carlton Hotel and large retail developments planned in Bangalore and Chennai. The new generation developer spearheaded by the 32-year-old Nitesh Shetty will pump in the cash raised through the IPO into various ongoing and planned projects and for repaying some debt.

ICICI Securities, Kotak Mahindra Capital Co and Enam Securities are the lead managers for the issue.

The company is expected to attract a post-money valuation of around Rs 1,000 crore with the promoter holding at under 50%. Going into the issue, the promoter held 85% stake, with private erquity player Och-Ziff holding the remaining 15%. Och-Ziff will also make a part exit through the IPO.

The company had reported a turnover of Rs 87 crore with a net of Rs 2.5 crore in FY09. The topline is closer to Rs 100 crore in the just ended FY10, with a net profit estyinmates of Rs 8 crore. The latest fiscal numbers are not confirmed as they are still under audit.


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Nitesh IPO Turns An Institutional Investor Play

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