Bangalore-based realty firm Prestige Estates listed with a 3.8% premium to its issue price of Rs 183 a share and in early hours is trading at Rs 202.5, up 10% to the IPO price. At this price, the company commands a market capitalisation of around Rs 6,600 crore ($1.4 billion), making it the seventh most valued realty firm in the country.
The firm raised Rs 1,200 crore through fresh sale of equity shares to finance projects besides purchasing land and retiring debt. Pre-issue, the three co-promoters Irfan Razack, Rezwan Razack and Noaman Razack and their family members owned 33% each in the company.
For the year ended March’10, the company had a total income of Rs 1,086 crore with net profit of Rs 145 crore. With an expanded equity base, the company was asking for a price earnings multiple of almost 40 times last years profit, that appeared rich but not a deterrant for investors.
The issue rode through given the optimism and liquidity-driven rally in the secondary market with the benchmark indices just around 4% short of all time peak. Last week, another large realty firm Mumbai-based Oberoi Realty, also listed with a similar show after seeing its IPO subscribed 12 times.
Besides expectations of further upside to the local stock market valuation in the near term, investors appear to be banking on revival in property market. While residential segment has seen a clear recovery with prices in many markets coming close to pre-financial crisis levels, lately there has been some revival in the office space rentals as well.
A large part of Prestige’s saleable area is in the residential space besides exposure in retail, commercial buildings and hospitality. Prestige has an existing joint venture with an associate firm of CapitaMalls (a large developer and operator of malls in Asia) to develop retail projects in south India in cities such as Bangalore, Mysore, Mangalore, Hyderabad and Cochin. It also entered into a JV with CapitaMalls to manage the retail malls developed by the joint venture.