Bangalore-based realty firm Prestige Estates is looking at a market capitalisation of around Rs 5,900 crore ($ 1.3 billion) at the upper end of the price band (Rs 172-183 per share) of the public issue. This will make it the sixth most valued realty firm in the country.

The firm is in the process to raise 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 own 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 appears to be asking for a price earnings multiple of almost 40 times last years profit, that appears rich.

The issue could well ride through given the optimism and liquidity-driven rally in the secondary market with the benchmark indices just less than 5% short of all time peak. One of the large realty companies of Mumbai, Oberoi Realty, saw its IPO subscribed 12 times.

Besides expectations of further upper movement of the local stock market valuation in the near term, investors could also 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.

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